Coastal Fuels of PR v. Caribbean Petroleum
Case Date: 03/12/1996
Court: United States Court of Appeals
Docket No: 95-1460
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UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT ____________________ No. 95-1460 COASTAL FUELS OF PUERTO RICO, INC., Plaintiff - Appellee, v. CARIBBEAN PETROLEUM CORPORATION, Defendant - Appellant. ____________________ APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO [Hon. Juan M. P rez-Gim nez, U.S. District Judge] ___________________ ____________________ Before Torruella, Chief Judge, ___________ Watson,* Senior Judge, ____________ and Lynch, Circuit Judge. _____________ _____________________ William L. Patton, with whom Thomas B. Smith, Kenneth A. __________________ ________________ ___________ Galton, Ropes & Gray, Rub n T. Nigaglioni and Ledesma, Palou & ______ _____________ ____________________ _________________ Miranda were on brief for appellant. _______ Michael S. Yauch, with whom Neil O. Bowman, Roberto Boneta ________________ ______________ _______________ and Mu oz Boneta Gonz lez Arbona Ben tez & Peral were on brief ______________________________________________ for appellee. ____________________ March 12, 1996 ____________________ ____________________ * Of the United States Court of International Trade. TORRUELLA, Chief Judge. This appeal involves claims of TORRUELLA, Chief Judge. ___________ price discrimination, 15 U.S.C. 13(a) (1994); 10 L.P.R.A. 263 (1976), monopolization, 15 U.S.C. 2 (1994); 10 L.P.R.A. 260 (1976), and Puerto Rico law tort, 31 L.P.R.A. 5141 (1976), brought against appellant Caribbean Petroleum Corp. by appellee Coastal Fuels of Puerto Rico, Inc. After a jury trial, the district court entered judgment for $5,000,000 -- $1.5 million in antitrust damages trebled plus $500,000 in tort damages. CAPECO seeks that the judgment of the district court be reversed and judgment be granted to CAPECO on all counts, or alternatively, that the judgment be reversed and the case remanded for a new trial. We affirm the price discrimination and Puerto Rico law tort verdicts, as well as the tort damage verdict. However, we reverse the monopolization verdict, vacate the antitrust damages verdict, and accordingly remand for further proceedings on price discrimination damages. BACKGROUND BACKGROUND __________ We relate the evidentiary background in the light most favorable to the jury verdicts. See Kerr-Selgas v. American ___ ___________ ________ Airlines, Inc., 69 F.3d 1205, 1206 (1st Cir. 1995). ______________ Coastal Fuels of Puerto Rico, Inc. ("Coastal") was formed in 1989 as a wholly-owned subsidiary of Coastal Fuels Marketing, Inc. ("CFMI"), a company that ran marine fuel operations in numerous ports using a staff of sales agents in Miami, Florida. Caribbean Petroleum Corp. ("CAPECO") owns and operates a refinery in Bayam n, Puerto Rico, which produces a -2- -2- number of fuel products, as well as residual fuel. A principal use of residual fuel is in the production of "bunker fuel," which is used by cruise ships and other ocean-going vessels outfitted with internal combustion or steam engines. At trial, Coastal introduced testimony and letters showing that CAPECO had committed to supply Coastal on the same terms and conditions as other resellers in San Juan, Puerto Rico, in 1990, but Coastal deferred the start of its operations because of uncertainty due to the Gulf War. Eventually, Coastal began business operations in Puerto Rico in October 1991, buying bunker fuel in San Juan and reselling it to ocean-going liners at berth in San Juan Harbor. Based on CFMI's experience and reputation, Coastal produced a business plan which shows that it expected to reach a sales volume of 100,000 barrels a month, approximately 25-30% of the sales volume in San Juan Harbor. The plan also shows that Coastal assumed it could obtain an average gross margin (sales revenues less product costs) of $1.65 a barrel. In September 1991, CAPECO agreed to charge Coastal prices based on a formula involving the previous Thursday/Friday New York market postings, minus discounts that varied by volume. These prices were to cover the six month period from October 1991 to March 1992. Unknown to Coastal, CAPECO was almost simultaneously offering Coastal's two competitors in San Juan Harbor, Caribbean Fuel Oil Trading, Inc. ("Caribbean") and Harbor Fuel Services, Inc. ("Harbor"), new contracts that gave Caribbean -3- -3- and Harbor bigger discounts from the formula price than Coastal received.1 Trial evidence introduced by CAPECO's own expert witness quantified the total price discrimination in favor of Caribbean and Harbor as $682,451.78 for the period from October 1991 to April 1992. Coastal filed this suit in May of 1992 when it learned of CAPECO's price discrimination against it. This court affirmed the district court's denial of a preliminary injunction requiring that CAPECO end its price discrimination. See Coastal Fuels of ___ ________________ Puerto Rico, Inc. v. Caribbean Petroleum Corp., 990 F.2d 25, 26 _________________ _________________________ (1st Cir. 1993). After Coastal filed suit, CAPECO proposed a new price formula to Coastal. According to trial testimony introduced by Coastal, CAPECO basically made a "take it or leave it" offer, which Coastal took. Expert testimony Coastal offered at trial contended that competitively significant price discrimination continued until Spring of 1993, when CAPECO cut Coastal off entirely. Additionally, Coastal presented evidence that, while throughout this period CAPECO would from time to time inform Coastal that it had no fuel available, in fact, CAPECO had available fuel. Coastal also presented evidence that it was ____________________ 1 CAPECO tried to argue below and again argues here, that the contracts it executed with Caribbean and Harbor were qualitatively different in their non-price terms and conditions from CAPECO's arrangement with Coastal, justifying the discounts. Coastal responds that it was never offered the terms and conditions that Caribbean and Harbor received. In light of the jury's verdict for Coastal on the price discrimination claim, from conflicting evidence such as this, we draw the (reasonable) conclusion in Coastal's favor. -4- -4- discriminated against in terms of the quality of fuel that it received from CAPECO. Finally, on March 31, 1993, CAPECO informed Coastal in writing that it would not sell any more product to Coastal, and shortly thereafter, Coastal went out of business. The case was tried to a jury on claims (1) that CAPECO discriminated in price in violation of Section 2(a) of the Clayton Act, 38 Stat. 730 (1914) (current version at 15 U.S.C. 13(a)), as amended by the Robinson-Patman Act, 49 Stat. 1526 (1936), and in violation of Section 263(a) of Title 10 of the Laws of Puerto Rico; (2) that CAPECO monopolized trade or commerce in violation of Section 2 of the Sherman Act and Section 260 of Title 10 of the Laws of Puerto Rico; (3) that CAPECO violated Section 5141 of Title 31 of the Puerto Rico Civil Code by engaging in tortious conduct that injured Coastal; and (4) that CAPECO committed a breach of contract in violation of Sections 3371 et seq. of Title 31 of the Puerto Rico Civil Code. __ ____ As reflected in the jury's answers to the Special Interrogatories, the jury found for Coastal on the first three of these claims, but found for CAPECO on the breach of contract claim. The jury awarded damages of $1,500,000 for the antitrust violations combined and $500,000 for the Puerto Rico tort violation. The antitrust damages were trebled, see 15 U.S.C. ___ 15(a), bringing the total award to $5,000,000. DISCUSSION DISCUSSION __________ -5- -5- CAPECO argues for a reversal of the district court's judgment, or alternatively, for a new trial. We address the arguments for reversal first. -6- -6- I. Arguments for Reversal I. Arguments for Reversal The first set of issues involves the district court's denial of CAPECO's motions for judgment as a matter of law under Fed. R. Civ. P. 50. With respect to matters of law, our review is de novo. Sandy River Nursing Care v. Aetna Casualty, 985 F.2d __ ____ ________________________ ______________ 1138, 1141 (1st Cir. 1993). Seeking judgment as a matter of law, CAPECO has raised a set of issues on appeal that concern the application of federal and Puerto Rico law on price discrimination and monopoly, as well as Puerto Rico tort law, to the facts of this case. With respect to these issues, we review the court's decision de novo, using __ ____ the same stringent decisional standards that controlled the district court. See Sullivan v. National Football League, 34 ___ ________ _________________________ F.3d 1091, 1096 (1st Cir. 1994); Gallagher v. Wilton Enterprises, _________ ___________________ Inc., 962 F.2d 120, 125 (1st Cir. 1992). Under these standards, ____ judgment for CAPECO can only be ordered if the evidence, viewed in the light most favorable to Coastal, points so strongly and overwhelmingly in favor of CAPECO, that a reasonable jury could not have arrived at a verdict for Coastal. See Sullivan, 34 F.3d ___ ________ at 1096; Gallagher, 962 F.2d at 124-25. _________ A. Price Discrimination A. Price Discrimination Section 2(a) of the Clayton Act, amended in 1936 by the Robinson-Patman Act, makes it unlawful for any person . . . to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, . . . where the effect -7- -7- of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination . . . . 15 U.S.C. 13(a). A pair of sales at different prices makes out a prima facie case. See Falls City Indus., Inc. v. Vanco _____ _____ ___ _________________________ _____ Beverage, Inc., 460 U.S. 428, 444 n.10 (1983); FTC v. Anheuser- ______________ ___ _________ Busch, Inc., 363 U.S. 536, 549 (1960) ("[A] price discrimination ___________ within the meaning of [the statute] is merely a price difference."). Section 2(a) includes two offenses that differ substantially, but are covered by the same statutory language. A "primary-line" violation occurs where the discriminating seller's price discrimination adversely impacts competition with the seller's direct competitors. See, e.g., Brooke Group Ltd. v. ___ ____ __________________ Brown & Williamson Tobacco Corp., ___ U.S. ___, 113 S. Ct. 2578, ________________________________ 2586, reh'g denied, 114 S. Ct. 13 (1993). See generally Herbert ____________ _____________ Hovenkamp, Federal Antitrust Policy: The Law of Competition and ______________________________________________________ its Practice 8.8 (1994). In contrast, a "secondary-line" _____________ violation occurs where the discriminating seller's price discrimination injures competition among his customers, that is, purchasers from the seller. See, e.g., FTC v. Sun Oil Co., 371 ___ ____ ___ ___________ U.S. 505, 519 (1963); Caribe BMW, Inc. v. Bayerische Motoren _________________ ___________________ Werke, A.G., 19 F.3d 745, 748 (1st Cir. 1994); J.F. Feeser, Inc. ___________ _________________ v. Serv-A-Portion, Inc., 909 F.2d 1524, 1535-38 (3d Cir. 1990), ____________________ cert. denied, 499 U.S. 921 (1991). See generally Hovenkamp ____________ _____________ -8- -8- 14.6. The theory of injury is generally that the defendant's lower price sales to the plaintiff's competitor (the favored purchaser) placed the plaintiff at a competitive disadvantage and caused it to lose business. Id. ___ We address first CAPECO's contention that the district court erred in treating this case as one of secondary-line price discrimination rather than primary-line price discrimination. Specifically, CAPECO protests the district court's instruction to the jury that injury to competition among competing purchaser- resellers may be inferred from proof of substantial price discrimination by a producer among competing purchaser-resellers, an inference appropriate to secondary-line discrimination. See ___ FTC v. Morton Salt Co., 334 U.S. 37, 50-51 (1948). CAPECO argues ___ _______________ that Coastal is affiliated with an organization that competes with CAPECO, and therefore this was a primary-line case; as a result, the Morton Salt inference would not apply. ___________ We do not consider the argument that this is a primary- line case, because CAPECO has chosen to make this argument for the first time on appeal. While CAPECO did object to the Morton ______ Salt instruction at the district court, that objection was ____ directed at the use of the word "infer" couched in a generalized attack on the instruction as suggesting a presumption not borne out by case law.2 We have noted before that "Rule 513 means what ____________________ 2 We address this distinct argument below. 3 Fed. R. Civ. P. 51 states, in pertinent part, that -9- -9- it says: the grounds for objection must be stated 'distinctly' after the charge to give the judge an opportunity to correct his [or her] error." Linn v. Andover Newton Theological School, ____ ____________________________________ Inc., 874 F.2d 1, 5 (1st Cir. 1989); see also Jordan v. United ____ ________ ______ ______ States Lines, Inc., 738 F.2d 48, 51 (1st Cir. 1984). Leaving __________________ aside whether the district court in fact erred in making the questioned instruction, it seems clear that CAPECO did not set forth the argument it now advances when it objected to the instruction at issue. And if CAPECO did intend to express this argument, it neither advised the district court judge of this problem in a manner that would allow him to make a correction, nor informed him what a satisfactory cure would be. Linn, 874 ____ F.2d at 5. Because the argument was thus not preserved, we will reverse or award a new trial only if the error "resulted in a miscarriage of justice or 'seriously affected the fairness, integrity or public reputation of the judicial proceedings.'" Scarfo v. Cabletron Systems, Inc., 54 F.3d 931, 945 (1st Cir. ______ ________________________ 1995) (quoting Lash v. Cutts, 943 F.2d 147, 152 (1st Cir. 1991)). ____ _____ We fail to find such concerns of judicial propriety implicated here.4 ____________________ [n]o party shall assign as error the giving or the failure to give an instruction unless that party objects thereto before the jury retires to consider its verdict, stating distinctly the matter objected to and the grounds of the objection. 4 While this court has admitted "occasional" exceptions to the "raise-or-waive" principle, see National Assoc. of Social Workers ___ _________________________________ v. Harwood, 69 F.3d at 627-28, the concerns that justify an _______ -10- -10- As a result, we analyze this case as one of secondary- line discrimination. Thus, the theory of injury is that CAPECO sold bunker fuel to Coastal at an unfavorable price relative to Harbor and Caribbean, and consequently, competition between Coastal, Harbor and Caribbean was thereby injured. On appeal, CAPECO makes three arguments based on what it purports to be required elements for Coastal's price discrimination damages claim: first, that the sales in question were not "in commerce" and so section 2(a)'s prohibitions do not apply; second, that Coastal failed to make the requisite showing of competitive injury to prevail; and third, that Coastal failed to carry its burden of proving actual injury in order to be entitled to an award of money damages. 1. "In Commerce" 1. "In Commerce" CAPECO argues, correctly we conclude, that section 2(a) of the Clayton Act does not apply because in the instant case, neither of the two transactions which evidence the alleged price discrimination crossed a state line. Gulf Oil Corp. v. Copp _______________ ____ Paving Co., 419 U.S. 186, 200-201, 200 n.17 (1974). For a __________ transaction to qualify, the product at issue must physically cross a state boundary in either the sale to the favored buyer or the sale to the buyer allegedly discriminated against. See, ___ e.g., Misco, Inc. v. United States Steel Corp., 784 F.2d 198, 202 ____ ___________ _________________________ ____________________ exception are not implicated here, see id., 69 F.3d at 627-28 ___ ___ (finding exception given certain circumstances including the fact that failure to raise issue did not deprive court of appeals of useful factfinding, and the fact that the issue in question raises constitutional concerns). -11- -11- (6th Cir. 1986); Black Gold Ltd. v. Rockwool Industries, Inc., ________________ __________________________ 729 F.2d 676, 683 (10th Cir.), cert. denied, 469 U.S. 854 (1984); ____________ William Inglis & Sons Baking Co. v. ITT Continental Baking Co., _________________________________ ___________________________ 668 F.2d 1014, 1043-44 (9th Cir. 1981), cert. denied, 459 U.S. ____________ 825 (1982); S&M Materials Co. v. Southern Stone Co., 612 F.2d __________________ ___________________ 198, 200 (5th Cir.), cert. denied, 449 U.S. 832 (1980); Rio Vista ____________ _________ Oil, Ltd. v. Southland Corp., 667 F. Supp. 757, 763 (D. Utah _________ ________________ 1987). However, this issue is not dispositive, because the jury found that CAPECO violated the Puerto Rico price discrimination statute, which is identical to Section 2(a) except that it contains no interstate commerce requirement.5 CAPECO has not challenged the district court's supplemental jurisdiction stemming from Coastal's Sherman Act claims. The relevant statute states that "in any civil action over which the district courts ____________________ 5 The relevant language is as follows: It shall be unlawful for any person, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where such commodities are sold for use, consumption, or resale in Puerto Rico, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce in Puerto Rico, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them. 10 L.P.R.A. 263 (1976). Furthermore, Puerto Rico law includes a counterpart for the section 4 of the Clayton Act's authorization of treble damages. See 10 L.P.R.A. 268 (1976). ___ -12- -12- have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action . . . that they form part of the same case or controversy." 28 U.S.C. 1367 (1994). In application, "[i]f, considered without regard to their federal or state character, a plaintiff's claims are such that [it] would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole." United Mine ___________ Workers of America v. Gibbs, 383 U.S. 715, (1966); see Rodr guez __________________ _____ ___ _________ v. Doral Mortgage Corp., 57 F.3d 1168, 1175-76 (1st Cir. 1995) _____________________ (interpreting and applying 28 U.S.C. 1367). In the instant case, the price discrimination claims flow out of the same set of facts and require the same evidence as the Sherman Act claims. Because we uphold the district court's jurisdiction over the Sherman Act claims, see 15 U.S.C. 4 (1994) (investing "[t]he ___ several district courts of the United States . . . with jurisdiction to prevent and restrain violations of [Title 15] sections 1 to 7[,]" which includes the Sherman Act), we also must conclude that the district court properly exercised supplementary jurisdiction over the price discrimination claims. Thus, we conclude that the district court erred in applying section 2(a) of the Clayton Act to the conduct at issue, and accordingly reverse that part of its opinion. However, we find applicable section 263 of the Puerto Rico Anti-Monopoly Act, 10 L.P.R.A. 263. Because section 263 was patterned after and -13- -13- is almost identical to section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act, we look to the jurisprudence interpreting federal law as a guide in applying the statute.6 Given that the one key difference between the federal and Puerto Rico statutes is the lack of an "in commerce" requirement in the Puerto Rico analogue, we conclude that we should interpret section 263 as intended to extend the provisions of section 2(a) of the Clayton Act to price discrimination within Puerto Rico, the situation which we confront in the instant case. Given the relative lack of applicable section 263 case law and the well- developed jurisprudence concerning Clayton Act section 2(a), we will focus on the latter in assessing the price discrimination claims. 2. Injury to Competition 2. Injury to Competition CAPECO's second argument in support of reversing the price discrimination portion of the judgment is that Coastal failed to demonstrate injury to competition. As noted above, we analyze this case as one of secondary-line price discrimination, ____________________ 6 See Caribe BMW, Inc., 19 F.3d at 753 (1st Cir. 1994) ___ __________________ (interpreting "Puerto Rico's laws as essentially embodying the jurisprudence relevant to the parallel federal law," where antitrust plaintiff asserted claims under a Puerto Rico antitrust law that paralleled its federal antitrust law claim); Whirlpool _________ Corp. v. U.M.C.O. Int'l Corp., 748 F. Supp. 1557, 1565 n.4 (S.D. _____ ____________________ Fla. 1990) (noting that "federal precedents construing the [Clayton Act, as amended by the] Robinson-Patman Act are applicable to the interpretation of Section 263" of the Puerto Rico Anti-Monopoly Act); see also Diario de Sesiones, 1964, Vol. ________ 18, Part 4, pp. 1425-26, 1509, 1512, 1707-09; Arturo Estrella, Antitrust Law in Puerto Rico, 28 Rev. Jur. del Col. Ab. P.R. 615 ____________________________ (stating that interpretations of the Federal Robinson-Patman Act are to be looked to in construing section 263). -14- -14- and thus Coastal bears the burden of showing injury to competition between Coastal and its rival bunker fuel resellers, Harbor and Caribbean. Addressing the burden of the secondary- line plaintiff, the Supreme Court has stated that [i]t would greatly handicap effective enforcement of the Act to require testimony to show that which we believe to be self-evident, namely, that there is a "reasonable possibility" that competition may be adversely affected by a practice under which manufacturers and producers sell their goods to some customers substantially cheaper than they sell like goods to the competitors of these customers. Morton Salt Co., 334 U.S. at 50. As a result, the Supreme Court _______________ has held that "for the purposes of section 2(a), injury to competition is established prima facie by proof of a substantial price discrimination between competing purchasers over time." Falls City, 460 U.S. at 435 (citing Morton Salt, 334 U.S. at 46, __________ ___________ 50-51); see also Texaco, Inc. v. Hasbrouck, 496 U.S. 543, 559 _________ _____________ _________ (1990); Monahan's Marine, Inc. v. Boston Whaler, Inc., 866 F.2d _______________________ ____________________ 525, 528-529 (1st Cir. 1989) (noting lower burden for antitrust plaintiff under Clayton Act, as amended by the Robinson-Patman Act, than under Sherman Act); Boise Cascade Corp. v. FTC, 837 ____________________ ___ F.2d 1127, 1139 (D.C. Cir. 1988). CAPECO challenges the district court's finding of competitive injury in two ways, arguing that the Morton Salt rule ___________ is no longer good law, or alternatively, that the Morton Salt ___________ rule was incorrectly applied in this case. We first address CAPECO's direct challenge to the vitality of the Morton Salt ____________ -15- -15- rule, a challenge based on the Supreme Court's opinion in Brooke ______ Group, 113 S. Ct. 2578. In that case, the Supreme Court ruled _____ that, because primary-line price discrimination injury is of the "same general character" as predatory pricing schemes actionable under Sherman Act section 2, Brooke Group, ___ U.S. ___, 113 S. ____________ Ct. at 2587, a primary-line injury plaintiff bears the same substantive burden as under the Sherman Act, that is, the plaintiff must show that the predator stands some chance of recouping his losses, id. ___ U.S. at ___, 113 S. Ct. at 2588. ___ In so deciding, the Supreme Court implicitly overruled Utah Pie ________ Co. v. Continental Baking Co., 386 U.S. 685 (1967), in which the ___ ______________________ Supreme Court had set forth different standards for primary-line injury. Brooke Group, ___ U.S. at ___, 113 S. Ct. at 2587 _____________ (explaining that Utah Pie was merely an "early judicial __________ inquiry"). According to CAPECO, the Supreme Court's recent emphasis in Brooke Group on reconciling the area of price _____________ discrimination with other antitrust law requires that we find that the Morton Salt rule no longer is good law. CAPECO notes ____________ that both primary-line and secondary-line price discrimination are prohibited by the same language of section 2(a) as amended by the Robinson-Patman Act. Furthermore, CAPECO contends that the Supreme Court in Brooke Group apparently undercut any reliance on ____________ a principled distinction between the aims of section 2 of the Clayton Act and other antitrust laws' purported emphasis on protecting "competition, not competitors," Brooke Group, 113 S. ___________ ___________ ____________ -16- -16- Ct. at 2588 (emphasis in original) (citation omitted); see also ________ Monahan's Marine, Inc., 866 F.2d at 528-29 (not discussing the _______________________ Morton Salt rule, but noting that "unlike the Sherman Act, which ___________ protects 'competition not competitors,' . . . the [Robinson- ___________ ___________ Patman] Act protects those who compete with a favored seller, not _________________ just the overall competitive process." (emphasis in original)). Thus, according to CAPECO, precedent that pre-dates Brooke Group ____________ and applies the Morton Salt rule must be reexamined. See, e.g., ___________ ___ ____ 496 U.S. at 544; Falls City, 460 U.S. at 436; Boise Cascade v. __________ ______________ FTC, 837 F.2d 1127, 1153 (D.C. Cir. 1988). ___ While CAPECO's argument has merit, we join the two other circuits that have addressed competitive injury in secondary-line cases since Brooke Group in refusing to disregard ____________ the rule the Supreme Court formulated in Morton Salt, for three ____________ reasons.7 First, the statutory structure that prohibits primary- line price discrimination "stands on an entirely different footing" than the statutory scheme that proscribes secondary-line discrimination. See Rebel Oil Co., 51 F.3d at 1446. Congress ___ ______________ first forbade primary-line price discrimination with the Clayton ____________________ 7 See Stelwagon Manufacturing Co. v. Tarmac Roofing Systems, ___ ____________________________ ________________________ Inc., 63 F.3d 1267, 1271 (3d Cir. 1995) (applying Morton Salt ____ ___________ rule without discussion of Brooke Group); Rebel Oil Co. v. _____________ ______________ Atlantic Richfield Co., 51 F.3d 1421, 1446 (9th Cir. 1995) ________________________ (noting in dicta that "in holding that a primary-line plaintiff must demonstrate an injury flowing from an aspect of the defendant's conduct injurious to consumer welfare, we intend in no way to affect the standard for antitrust injury in secondary- line cases"). But see also Bob Nicholson Appliance, Inc. v. _____________ _______________________________ Maytag Co., 883 F. Supp. 321, 326 (S.D. Ind. 1994) (holding that __________ "we are persuaded that the Seventh Circuit would extend the reasoning of Brooke Group and require actual injury to _____________ competition"). -17- -17- Act of 1914, which originally condemned discrimination that might "substantially . . . lessen competition or tend to create a monopoly in any line of commerce." Clayton Antitrust Act, 38 Stat. 730 (1914) (codified as amended at 15 U.S.C. 13(a) (1994)). The statute was intended to prevent large corporations from invading markets of small firms and charging predatory prices for the purpose of destroying marketwide competition, and thus specifically applied only to primary-line injury. See H.R. ___ Rep. No. 627, 63rd Cong., 2d Sess. 8 (1914); E. Thomas Sullivan & Jeffrey L. Harrison, Understanding Antitrust and Its Economic __________________________________________ Implications 8.03 (1988). ____________ By contrast, secondary-line discrimination is forbidden by the Robinson-Patman Act, 49 Stat. 1526 (1936), 15 U.S.C. 13-13b, 21a (1988), which amended the original Clayton Act's price discrimination proscriptions. Congress clearly intended the Robinson-Patman Act's provision to apply only to secondary-line cases, not to primary-line cases. See H.R. Rep. ___ No. 2287, 74th Cong., 2d Sess. 8 (1936),8 cited in Rebel Oil ________ _________ Co., 51 F.3d at 1446. In contrast to the Sherman Act and the ___ Clayton Act, which were intended to proscribe only conduct that threatens consumer welfare, the Robinson-Patman Act's framers "intended to punish perceived economic evils not necessarily ____________________ 8 The Robinson-Patman Act "attaches to competitive relations between a given seller and his several customers. It concerns discrimination between customers of the same seller. It has nothing to do with . . . requir[ing] the maintenance of any relationship in prices charged by a competing seller." H.R. Rep. No. 2287, 74th Cong., 2d Sess. 8 (1936). -18- -18- threatening to consumer welfare per se." Rebel Oil Co., 51 F.3d _____________ at 1445. See generally Hovenkamp 2.1a. In particular, the _____________ Robinson-Patman Act's amendments to the Clayton Act stemmed from dissatisfaction with the original Clayton Act's inability to prevent large retail chains from obtaining volume discounts from big suppliers, at the disadvantage of small retailers who competed with the chains. See S. Rep. No. 1502, 74th Cong., 2d ___ Sess. 4 (1936); H.R. Rep. No. 2287, 74th Cong., 2d Sess. 3-4 (1936); see also Morton Salt, 334 U.S. at 49 ("Congress intended ________ ___________ to protect a merchant from competitive injury attributable to discriminatory prices"); Rebel Oil Co., 51 F.3d 1421, 1446; ______________ Monahan's Marine, Inc., 866 F.2d at 528-29. ______________________ Second, we are persuaded by the reasoning of the Ninth Circuit's opinion in Rebel Oil Co. that the amendment to the ______________ Clayton Act effected by the Robinson-Patman Act supports the continued vitality of the Morton Salt rule, even in the face of ___________ Brooke Group's alteration of standards for primary-line price _____________ discrimination. While the Clayton Act only proscribed conduct that may "substantially lessen competition or tend to create a monopoly[,]" the new law added the following passage: "or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them." See Rebel ___ _____ Oil Co., 51 F.3d at 1447. The purpose of this passage was to _______ relieve secondary-line plaintiffs -- small retailers who are disfavored by discriminating suppliers -- from having to prove -19- -19- harm to competition marketwide, allowing them instead to impose liability simply by proving effects on individual competitors. See id.; H.R. Rep. No. 2287, 74th Cong., 2d Sess. 8 (1936). ___ ___ Such legislative intent directly supports maintaining the Morton ______ Salt rule, which puts into practice Congress' concern with ____ placing the same burden on secondary-line plaintiffs that other antitrust plaintiffs face. Thus, the comparison that the Supreme Court drew between primary-line price discrimination and predatory pricing in Brooke Group stands on a different, and _____________ stronger, footing than any comparison that could be made between secondary-line price discrimination and other area of antitrust law, including, but not only, predatory pricing. Third, and finally, the holding of the Brooke Group _____________ opinion on its face applies only to primary-line cases, not secondary-line cases. As a result, given the legislative history and statutory language distinctions, we will not presume, without more guidance, that the Supreme Court intended in Brooke Group to ____________ alter the well-established rule that it adopted in Morton Salt.9 ____________ Thus, we hold that the Morton Salt rule continues to apply to ___________ secondary-line injury cases such as the present one. ____________________ 9 While concerns about overenforcement harming overall consumer welfare may be valid, the Supreme Court retains the option of speaking further on this issue. See generally Paul Larule, ______________ Robinson-Patman Act in the Twenty-First Century: Will the Morton _________________________________________________________________ Salt Rule Be Retired? 48 S.M.U. L. Rev. 1917, 1927 (1995) _______________________ (concluding that "[w]hen an appropriate case comes before it, the [Supreme] Court may well decide to make the final cut"); Hovenkamp 14.6a (arguing that, after Brooke Group, "a ______________ reinterpretation of Robinson-Patman so as to permit secondary- line injury only when competition itself is threatened is long overdue"). -20- -20- The Morton Salt rule provides that, for the purposes of ___________ secondary-line claims under section 2(a), "injury to competition is established prima facie by proof of a substantial price discrimination between competing purchasers over time." Falls _____ Cities Industries v. Vanco Beverage, Inc., 460 U.S. 428, 435 _________________ _____________________ (1983) (citing Morton Salt, 334 U.S. at 46, 50-51). If the ____________ plaintiff makes such a showing, then "[t]his inference may be overcome by evidence breaking the causal connection between a price differential and lost sales or profits." Falls City, 460 __________ U.S. at 435. Barring evidence breaking that connection, however, "for a[] plaintiff to prove competitive injury under Robinson- Patman, he [or she] need only show that a substantial price discrimination existed as between himself [or herself] and his [or her] competitors over a period of time." Hasbrouck v. _________ Texaco, Inc., 842 F.2d 1034, 1041 (9th Cir. 1987), aff'd, 496 ____________ _____ U.S. 543 (1990). Here the jury properly inferred prima facie injury to _____ _____ competition since Coastal produced sufficient evidence before the jury to conclude (1) that the discrimination in question was continuous and substantial and (2) that the discrimination occurred in a business where profit margins were low and competition was keen. 4 Von Kalinowski, Antitrust Laws and Trade ________________________ Regulation 31.04(1). First, the discrimination lasted all 18 __________ months that Coastal was in business, and always exceeded the five cents per barrel that witnesses testified was competitively significant. Additionally, there was ample testimony that the -21- -21- marine fuel oil business, in which Coastal competed against Caribbean and Harbor, was characterized by thin margins and intense competition. At any rate, on appeal, CAPECO does not make the argument that Coastal failed to produce evidence required for a prima facie showing of injury to competition under _____ _____ the Morton Salt rule. ___________ However, CAPECO argues that the Morton Salt inference ____________ was undercut by evidence "breaking the causal connection" between CAPECO's price discrimination and Coastal's lost sales or profits, Falls City, 460 U.S. at 435, and showing an absence of __________ competitive injury, Boise Cascade Corp. v. FTC, 837 F.2d 1144, ___________________ ___ 1146 (D.C. Cir. 1988). According to CAPECO, overall market forces depressed the price for bunker fuel more than 30 percent between late 1991 and early 1992, and it was this fact, rather than CAPECO's price discrimination, that led to Coastal's demise. CAPECO points to the admission of Coastal's CEO that Coastal's sales agents based their price quotes to ships on the prices being charged by competitors in San Juan and other ports, often without even knowing the cost of the fuel that was to be delivered. According to CAPECO, if prices were set when costs were unknown, then discounts from CAPECO could not have been a material factor in setting prices. We reject the argument that this evidence rebuts Coastal's prima facie showing of price discrimination. In _____ _____ reviewing the jury verdict, "[w]e are compelled . . . even in a close case, to uphold the verdict unless the facts and -22- -22- inferences, when viewed in a light most favorable to the party for whom the jury held, point so strongly and overwhelmingly in favor of the movant that a reasonable jury could not have arrived at this conclusion." Chedd-Angier Production Co. v. Omni _____________________________ ____ Publications Int'l Ltd., 756 F.2d 930, 934 (1st Cir. 1985); see _______________________ ___ also Rodr guez v. Montalvo, 871 F.2d 163, 165 (1st Cir. 1989); ____ _________ ________ Castro v. Stanley Works, 864 F.2d 961, 963 (1st Cir. 1989); Brown ______ _____________ _____ v. Freedman Baking Co., 810 F.2d 6, 12 (1st Cir. 1987). Thus, in ___________________ this case, the appellants must "persuade us that the facts of this case so conclusively point to a verdict in [their] favor that fair-minded people could not disagree about the outcome." Chedd-Angier Production Co., 756 F.2d at 934. ___________________________ Here, neither section 2(a), section 263, nor their attendant case law, requires that the price discrimination in question be directly factored into the prices that favored and disfavored purchaser-resellers offered to their customers. Presumably, regardless of whether these costs were factored directly into the prices that Coastal offered, or were later calculated into Coastal's bottom line, these costs affected Coastal's pricing. Certainly, no argument can be made from this evidence alone that bunker fuel costs, no matter when accounted for, were not causally connected to Coastal's lost profits. See, ___ e.g., Hasbrouck v. Texaco, Inc., 842 F.2d 1034, 1039-41 (9th Cir. ____ _________ ____________ 1987), aff'd, 496 U.S. 543 (1990) (finding that evidence that _____ "some portion" of small extra discounts of 2 -5 on gasoline was passed on by favored customers sufficient, particularly when -23- -23- retail gasoline market was "strongly price sensitive"). Additionally, the fact that Coastal's sales agents operated without complete knowledge of the prices at which other Coastal agents were purchasing the bunker fuel that would later be delivered does not, without more, show an absence of competitive injury. 3. Actual Injury 3. Actual Injury CAPECO also contends that Coastal failed to present adequate evidence of actual injury to support the verdict. On appeal, CAPECO does not complain that the court's instructions to the jury on the actual injury requirement were erroneous. Thus, the only question regarding this issue is whether the evidence that Coastal presented to the jury was adequate to permit a reasonable inference of actual injury. Although we have concluded that Coastal has proved competitive injury under Title 10, Section 263 of the Laws of Puerto Rico, in order to collect damages as a private plaintiff, Coastal must show that CAPECO's offense was a "material cause" of injury. See Zenith Radio Corp. v. Hazeltine Research, 395 U.S. ___ __________________ ___________________ 100, 114 n.9 (1969); Hasbrouck, 842 F.2d at 1042; Allen Pen Co. _________ _____________ v. Springfield Photo Mount Co., 653 F.2d 17, 21-22 (1st Cir. ______________________ |