August 19, 2019

Tenth Circuit: Summary Judgment Affirmed Where No Evidence Presented of Conspiracy to Monopolize

The Tenth Circuit Court of Appeals issued its opinion in Buccaneer Energy (USA) Inc., v. Gunnison Energy Corporation; SG Interests I, LTD.; SG Interests VII, LTD. on February 3, 2017.

Buccaneer Energy (USA) Inc. (Buccaneer) sued SG Interests I, Ltd.., SG Interests VII, Ltd. (together, SG), and Gunnison Energy Corporation (GEC) (collectively, Defendants) alleging that Defendants had conspired in restraint of trade in violation of § 1 of the Sherman Act and that Defendants had conspired to monopolize in violation of § 2 of the Sherman Act. The district court granted summary judgment for the Defendants and the Tenth Circuit affirmed due to Buccaneer’s failure to present sufficient evidence to create a genuine issue of fact on one or more elements of each of its claims.

Defendants each granted each other the option to participate equally in the construction and ownership of any pipeline initiated by the other party. GEC exercised this option to participate in the Bull Mountain Pipeline, which traveled from the Ragged Mountain Area (RM Area) located in Delta and Gunnison Counties, Colorado, to the Questar Interstate pipeline. GEC and SG also equally had ultimate control over the Ragged Mountain Gathering System (RM System), which transported natural gas from the RM Area to the Rocky Mountain natural Gas Pipeline (Rocky Mountain Pipeline).

Buccaneer acquired the Riviera Drilling and Exploration Company’s (Riviera) leases in the RM Area. Buccaneer pursued a means for transporting its expected gas production from GEC on the RM System. GEC offered a rate of $1.52 per MMBtu for interruptible service. Buccaneer countered, revising the interruptible service language but keeping the rate the same. GEC responded raising the rate to $3.92 per MMBtu, and reinserting the interruptible service provisions. Buccaneer did not counteroffer again. Buccaneer failed to secure a transportation agreement and Riviera terminated the Lease Agreement.

Buccaneer filed this case on June 21, 2012 and alleged that the “RM System was essential to effective competition for production rights and the sale of natural gas from the Ragged Mountain Area.” It further claimed that because Defendants refused to provide Buccaneer with access to the RM System, Defendants violated §§ 1 and 2 of the Sherman Act by engaging in a conspiracy in restraint of trade and a conspiracy to monopolize.

The district court granted summary judgment for Defendants on both of Buccaneer’s antitrust claims because Buccaneer did not present evidence to show that Defendants caused, or could cause, injury to competition in a defined market. Buccaneer also did not demonstrate its own preparedness to enter the market. The Tenth Court affirmed, concluding that Buccaneer failed to present sufficient evidence to survive summary judgment on either of its claims.

Section 1 of the Sherman Act prohibits “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States.” 15 U.S.C. § 1. This provision has been construed to forbid only restraints of trade that are unreasonable. The Tenth Circuit analyzed the Defendants’ conduct under the rule of reason because Buccaneer did not allege a per se rule violation.

First, the Tenth Circuit dismissed Buccaneer’s allegation that the Defendants unreasonably denied it access to the RM System, which was Buccaneer claimed was “essential” to Buccaneer’s ability to compete. Buccaneer failed to prove the second element of the “essential facilities doctrine,” a competitor’s inability to duplicate the facility. Here, the relevant facility is the RM System, and while it may be difficult to duplicate, Buccaneer did not present any evidence on the matter. Buccaneer focused on the Bull Mountain Pipeline, which was not at issue in this case.

Next, the Tenth Circuit held that Buccaneer did not adequately establish its claim under the rule of reason. Under the rule of reason, the plaintiff has the initial burden of showing an agreement had a substantially adverse effect on competition. The burden then shifts to the defendant to show pro-competitive virtues of such conduct. Then the plaintiff must show that such conduct was not reasonably necessary to achieve the legitimate objectives.  A court must then weigh the harms and benefits of such conduct to determine if it is reasonable.

A plaintiff must show an adverse effect on competition in general, not just that the conduct adversely affected the plaintiff’s business. Buccaneer failed to meets its burden of showing that the challenged conduct had anticompetitive effects. Buccaneer did not present any evidence of actual anticompetitive effect; such as fewer production rights being acquired in the RM Area or that Defendants’ position allowed them to pay less than competitive prices.

The Tenth Circuit next addressed whether Buccaneer had shown harm to competition by Defendants’ possession of market power in the relevant market. The “relevant market” consists of both the product area and the geographic area. The product market consists of products that are sufficiently substitutable with each other based on the purpose for which they are produced, as well as their price, use, and quantities. The geographic market encompasses the area in which competition occurs. Once the relevant market has been identified, a plaintiff must show market power by demonstrating that the defendants had either the power to control price or the power to exclude competition.

Buccaneer asserted that the first relevant product was “production rights” and the relevant geographic market was the RM Area. The Tenth Circuit held that Buccaneer did not adequately define either market. Buccaneer did not offer its own definition of the product market for “production rights,” for which it bore the burden of defining. Buccaneer also failed to establish the relevant geographic market with any precision; it simply stated the area and did not define its boarders. Therefore, the Tenth Circuit held that Buccaneer failed to meet its burden of establishing either the product or the geographic market. The district court therefore did not err when it dismissed the claim for failure to allege a legally sufficient market.

Further, even if Buccaneer did define a relevant market, it did not establish that Defendants possessed market power. Market share, or size, is not enough to establish market power, and the absence of market share creates a presumption that market power does not exist. Buccaneer did not present evidence to demonstrate Defendants’ market share. It did not allege what percentage of the “production rights” market that Defendants possessed. Additionally, Buccaneer did not present evidence that that Defendants created any barriers of entry into the relevant market for competitors. Therefore, Buccaneer failed to satisfy its burden of showing market power and also failed to establish any anticompetitive effect in the alleged market for production rights.

Buccaneer next alleged that the second relevant product was natural gas, which was undisputed. The Tenth Circuit held that Buccaneer’s defined relevant market, which was “the market for downstream sales of gas,” was insufficient to address that market for considerations relevant under the rule of reason analysis. Buccaneer also failed to show that the Defendants possessed market power in any relevant market. The Tenth Circuit held that Buccaneer did not set forth facts from which a jury could find that the Defendants possessed market power in that market.

Finally, the Tenth Circuit quickly dismissed Buccaneer’s § 2 conspiracy claim because such a claim requires proof of a relevant antitrust market. As with Buccaneer’s § 1 claim, it did not establish a relevant market, so its § 2 claim fails for the same reasons as its § 1 claim.

In conclusion, the Tenth Circuit held that, because Buccaneer failed to present evidence from which a jury could conclude that Defendants’ conduct actually or potentially harmed competition in a relevant antitrust market, both its § 1 and § 2 Sherman Act claims fail. The Tenth Circuit affirmed the district court’s order granting summary judgment in favor of Defendants on that basis.

Tenth Circuit: Class Certification Appropriate where Class-Wide Impact Prevails Over Individual Issues

The Tenth Circuit Court of Appeals issued its opinion in In re Urethane Antitrust Litigation: Dow Chemical Co. v. Seegott Holdings, Inc. on Monday, September 29, 2014.

A class of plaintiffs brought suit against Dow Chemical Company and other manufacturers of polyurethane products, alleging price fixing in violation of the Sherman Antitrust Act and the Clayton Antitrust Act. A jury returned a verdict against Dow for $400,049,039. The district court entered judgment for the plaintiffs, denying Dow’s motions for decertification of the class and judgment as a matter of law. Dow appealed, arguing (1) class certification was improper because common questions did not predominate over individualized questions; (2) the district court should have excluded the testimony of the plaintiffs’ expert witness on statistics; (3) the evidence on liability was insufficient; and (4) the damages award lacked an evidentiary basis and the resulting judgment violated the Seventh Amendment. The Tenth Circuit addressed each contention in turn.

Dow argued that it was entitled to show in individualized proceedings that certain class members could not have been injured by the price fixing. The Tenth Circuit conceded that some class members could have avoided the price fixes by negotiating lower prices or switching to substitute products, but found no error in the district court’s finding that class-wide issues predominated over individual issues, because the key elements of the price fixing claim raised common questions that were capable of class-wide proof. Dow also argued that the plaintiffs’ expert, Dr. McClave, used unacceptable regression and extrapolation models to prove class-wide impact and damages. The Tenth Circuit noted that Dr. McClave had not yet testified when the court certified the class, so it could not have relied on his opinions. Although Dr. McClave had testified by the time Dow moved to decertify, the Tenth Circuit found no error in the trial court’s denial of the decertification motion, noting it was filed late — on the day before trial — and also that liability was not proven through a sample of class members so Dr. McClave’s extrapolation methods to prove damages had no bearing on proof of liability.

Dow also contended the district court erred in allowing Dr. McClave’s testimony. The Tenth Circuit disagreed, finding that many of Dow’s complaints spoke to the weight of the evidence and not admissibility. Dow had numerous complaints about the methods Dr. McClave used to determine that price fixing had occurred and to calculate damages. Dow also contended that Dr. McClave skewed the results of his findings in favor of plaintiffs. However, the Tenth Circuit found no error in the district court’s decision to resolve that “swearing match” in favor of the plaintiffs.

Dow challenged the sufficiency of the evidence regarding liability, arguing the district court erred in denying its motion for judgment as a matter of law. The Tenth Circuit found the evidence, viewed in a light most favorable to plaintiffs, sufficed as to (1) implementation of the alleged price fixing agreement, (2) the conspiracy as to another polyurethane manufacturer, Lyondell, and (3) the jury’s consideration of Dr. McClave’s models. The Tenth Circuit first addressed the price fixing agreements, noting the plaintiffs introduced evidence of admissions by industry insiders, collusive behavior, susceptibility of the industry to collusion, and setting of prices at a supra-competitive level, in addition to showing parallel price increases. Regarding the participation of Lyondell, the plaintiffs did not need to prove its collusion because there was sufficient evidence to implicate Dow even without evidence of collusion with Lyondell. Next, Dow argued that because the jury found no injury for part of the period evaluated by Dr. McClave, his models were necessarily invalid. The Tenth Circuit disagreed, noting that Dow’s “series of inferences” did not allow it to disturb the jury’s verdict.

Finally, Dow contended that because the jury varied downward from Dr. McClave’s calculation of damages, the entire award had no evidentiary basis and violated the Seventh Amendment. The Tenth Circuit found many possible reasons for the jury’s variance, none of which required reversal. Dow claimed the district court’s decision to allocate the damages award based on Dr. McClave’s model took from the jury the question of liability and assessment of damages. However, this argument failed, because the cases on which Dow relied were inapposite.

The Tenth Circuit affirmed the judgment of the district court.

Tenth Circuit: Generalized Allusion to Confidential Information Insufficient to Justify Sealing Records

The Tenth Circuit Court of Appeals issued its opinion in JetAway Aviation, LLC v. Board of County Commissioners of the County of Montrose, Colorado on Monday, June 9, 2014.

JetAway is a commercial business that provides aircraft-related services such as hangaring, fueling, parking, and more, typically known as FBO. In 2006, the Montrose County Board of County Commissioners decided to privatize FBO services at the Montrose Regional Airport. The BOCC solicited bids and selected another provider, JCP, for the FBO services. JetAway sued, alleging violations of the Sherman Act from manipulation of the selection process. The district court granted summary judgment in favor of the governmental defendants, and JetAway appealed. The defendants cross-appealed on governmental immunity grounds.

In a per curiam opinion, the Tenth Circuit affirmed the grant of summary judgment, noting that JetAway failed to establish anti-trust injury. There was no need for the Tenth Circuit to reach the defendants’ governmental immunity cross-appeal. The Tenth Circuit also addressed two procedural matters – JetAway’s motion to seal Volume XVI of its appendix and Defendants’ motion to strike JetAway’s reliance on notes taken by a county commissioner. The Tenth Circuit denied JetAway’s motion to seal, noting that they failed to meet their heavy burden to show why sealing was required, and denied Defendants’ motion as moot.

The Tenth Circuit affirmed summary judgment against JetAway, dismissed as moot Defendants’ cross-appeal, denied JetAway’s motion to seal, and denied as moot Defendants’ motion to strike.

Tenth Circuit: Microsoft’s Conduct Did Not Violate The Sherman Act

The Tenth Circuit Court of Appeals published its opinion in Novell v. Microsoft on Monday, September 23, 2013.

Long since found liable for a rich diversity of antitrust misdeeds in the 1990s, this case called on the Tenth Circuit to decide whether Microsoft committed still another, as-yet undetected antitrust violation — this time at Novell’s expense. Novell produced WordPerfect.

By the mid-1990s, Microsoft had become the leading provider of personal computer operating systems. Microsoft’s relationship with independent software vendors (ISVs) proved a complicated one. On one hand, Microsoft had some incentive to cooperate with ISVs. ISVs wrote applications for Microsoft’s operating system, thereby increasing the number of applications that could run on Microsoft’s operating system. This meant increasing the utility of the operating system for users, and that meant more sales for Microsoft. On the other hand, Microsoft also competed with ISVs in the development and sale of applications for use on its Windows operating system. This case concerned the tensions inherent in Microsoft’s relationship with ISVs and Novell in particular, and how those tensions played out in Microsoft’s development of the Windows 95 operating system.

As it was planning to roll out its Windows 95 operating system, Microsoft faced the questions whether and to what degree it should share its intellectual property with ISVs. Should it share a prerelease development version of the new operating system? The firm was torn. Doing so would help the marketing of Windows 95. At first, Microsoft opted to share. After first choosing to share so much of its intellectual property with ISVs in June 1994, in October, Microsoft reversed course, indicating to ISVs that they could no longer rely on the previously published APIs (application programming interfaces) and that Microsoft would not guarantee the operability of the previously published APIs in the final version of Windows 95.

When Microsoft withdrew access, Novell contended its business suffered. Novell filed suit, alleging that Microsoft’s withdrawal not only helped Microsoft in the applications arena, Novell also alleged that the move helped Microsoft maintain its monopoly in the market for operating systems.

Novell’s suit finally found its way to trial in 2011 but the jury did not reach a verdict. Reviewing the record, the district court found Microsoft’s conduct did not offend section 2 of the Sherman Act pursuant to Fed. R. Civ. P. 50. Novell appealed.

Novell complained that Microsoft refused to share its intellectual property with rivals after first promising to do so. To prevail on a Sherman Act section 2 claim, a plaintiff must show the defendant possessed sufficient market power to raise prices substantially above a competitive level without losing so much business that the gambit becomes unprofitable. Then the plaintiff must show that the defendant achieved or maintained that market power through the use of anticompetitive conduct. Finally, a private plaintiff must show that its injuries were caused by the defendant’s anticompetitive conduct.

As to the first point, Microsoft did not dispute that in the 1990s a nationwide product market existed for personal computer operating systems, as Novell alleges.

Turning to the second question: Did Microsoft engage in anticompetitive conduct in violation of section 2 when it withdrew access to from Novell and other ISVs? Or was this legally permissible competition? Novell sought to impose section 2 liability on Microsoft for refusing to deal with its rivals pursuant to Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 600-01 (1985). But the antitrust laws rarely impose on firms — even dominant firms like Microsost — a duty to deal with their rivals. With respect to Novell, the Tenth Circuit held that Microsoft did nothing unlawful. Novell presented no evidence from which a reasonable jury could infer that Microsoft’s discontinuation of the arrangement suggested a willingness to sacrifice short-term profits, let alone in a manner that was irrational but for its tendency to harm competition.

Finally, the court held that the conduct Novell complained about was divorced from the conduct that allegedly caused harm to it and to consumers. Even if Microsoft had behaved just as Novell says it should have, the court concluded it would not have helped Novell.

The Tenth Circuit held that Microsoft’s conduct did not qualify as anticompetitive behavior within the meaning of section 2 of the The Sherman Act.


Tenth Circuit: Collateral Order Doctrine Does Not Apply to Denial of State Action Immunity

The Tenth Circuit published its opinion in Auraria Student Housing at the Regency, LLC v. Campus Village Apartments, LLC on Friday, January 4, 2013.

Defendant-Appellant Campus Village Apartments, LLC (“Campus Village”) appealed the denial of its motion to dismiss the complaint of Plaintiff-Appellee Auraria Student Housing at the Regency, LLC (“Regency”). Regency alleged Campus Village conspired with the University of Colorado (CU), Denver to monopolize the provision of student housing in violation of Section 2 of the Sherman Act. Most full-time CU students are required to live in the Campus Village Apartments for their first two semesters. Campus Village moved to dismiss on the basis that state action Parker immunity applied to it as a private party. The district court disagreed.

Regency moved to dismiss Campus Village’s appeal, arguing the Tenth Circuit lacked subject matter jurisdiction because the district court’s denial of Campus Village’s motion to dismiss was not a final order under 28 U.S.C. § 1291. Campus Village argued that the court had jurisdiction under the collateral order doctrine set forth in Cohen v. Beneficial Industrial Loan Corp. The collateral order doctrine allows interlocutory review in limited cases. The Tenth Circuit held that “[e]xtending the collateral order doctrine to private parties contesting an order denying Parker immunity does not serve a substantial public interest and would constitute precisely the type of expansion the doctrine discourages.” It therefore dismissed the appeal.