April 20, 2019

Tenth Circuit: Significant Evidence of Monopolization Precluded Summary Judgment Against Plaintiff

The Tenth Circuit Court of Appeals issued its opinion in Lenox Maclaren Surgical Corp. v. Medtronic, Inc. on Tuesday, August 5, 2014.

Lenox Maclaren Surgical Corp. manufactures bone mills, a type of instrument used in spinal fusion surgery. In 2000, Lenox began to sell bone mills to a Medtronic entity, but that Medtronic entity initiated a recall of Lenox’s products and began selling bone mills produced by a different Medtronic entity. Lenox sued the Medtronic entities for monopolization and attempted monopolization from 2007 through 2010. The district court granted summary judgment to Medtronic, and Lenox appealed on five issues: (1) foreclosure of issues due to res judicata; (2) definition of the product market; (3) Medtronic’s monopoly power; (4) Medtronic’s acquisition of monopoly power through exclusionary practices; and (5) harm to competition from Medtronic’s monopoly powers.

The Tenth Circuit first addressed Medtronic’s claim that Lenox’s suit was barred by the doctrine of res judicata, since Lenox could have raised these issues when the parties engaged in arbitration prior to the district court’s grant of summary judgment. In that binding arbitration, a panel found that Medtronic had insufficient proof to justify its recall of the Lenox bone mills and the company had taken action to clear Lenox from the market. In the action before the district court, Medtronic moved for dismissal based on res judicata, but the district court denied the motion. Medtronic did not raise the res judicata claim in its motion for summary judgment. The Tenth Circuit ruled that Lenox had no need to confront an argument not raised in the motion and declined to address the issue.

Turning to the monopolization issue, the Tenth Circuit disagreed with the district court’s grant of summary judgment, ruling that there were genuine issues of disputed fact which precluded summary judgment. In order to prevail on the monopolization claim, Lenox had to prove (1) monopoly power in the relevant market, (2) willful acquisition of this power through exclusionary conduct, and (3) harm to competition. The district court ruled that Lenox had not created a triable issue of fact on the relevant product market, monopoly power, willful acquisition, or harm, but the Tenth Circuit disagreed.

The Tenth Circuit first identified the relevant product market as the market for other bone mills, despite the fact that hand tools can be used to mill bone, because Lenox presented expert testimony regarding surgeons’ preference for bone mills, a substantial price difference exists between bone mills and hand tools, and Medtronic’s market literature identifies its competition as other bone mills. Because of potential factual disputes on this issue, summary judgment is precluded.

Next, the Tenth Circuit addressed Medtronic’s monopoly power in the bone mill market and determined that Lenox showed sufficient evidence of market share and barriers to entrance to infer that Medtronic had monopoly power in the market. Medtronic’s own literature showed that it had a majority share of the bone mill market during the years in question, with its lowest market share at 65% and its highest at 97-98%. Lenox’s expert testified as to barriers to market entrance. The evidence on market share and barriers created reasonable disputes of material fact and precluded summary judgment.

The Tenth Circuit then turned to the issue of Medtronic’s anticompetitive conduct and found that Lenox presented significant evidence from which a fact-finder could infer anticompetitive conduct. Applying the more stringent 6-factor disparagement test, the Tenth Circuit found that Lenox had alleged facts sufficient to infer anticompetitive conduct, including Medtronic’s reasonless recall of Lenox’s products and Medtronic’s statements to hospitals about the recalls, thus inducing consumers to avoid the Lenox product and causing harm to Lenox.

The Tenth Circuit ruled that Lenox presented significant evidence to support a finding on each element of its claim for actual monopolization, and this evidence precluded summary judgment to Medtronic. The district court’s judgment was reversed and the case was remanded for additional proceedings.

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