Nestle Food Co. v. Abbott Laboratories, 95-56273

Decision Date09 January 1997
Docket NumberNo. 95-56273,95-56273
Citation105 F.3d 665
Parties1997-1 Trade Cases P 71,770 NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel. NESTLE FOOD CO., Plaintiff-Appellant, v. ABBOTT LABORATORIES; American Academy of Pediatrics, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Before: PREGERSON, D.W. NELSON, and O'SCANNLAIN, Circuit Judges.

MEMORANDUM *

Nestle Food Company, ("Nestle") appeals the district court's judgment, following a jury trial, in favor of Abbott Laboratories ("Abbott") and the American Academy of Pediatrics ("AAP"). Nestle alleges that Abbott conspired with its competitors and with the AAP to restrict competition in the infant formula market by enforcing a policy against direct-to-consumer advertising. Nestle claims that a variety of errors at trial tainted the jury's verdict in favor of Abbott and the AAP. Although the jury reached only the threshold question of the existence of a conspiracy, Nestle argues that the district court's instruction on conspiracy incorporated an incorrect instruction on the "restraint" element of an antitrust claim. Nestle also maintains that the district court improperly rejected its requested instructions on the anticompetitive effects of restrictions on advertising and on the irrelevance of good motives. Further, Nestle contends that the district court erred in allowing the AAP to introduce a "public health" defense through the expert testimony of a consumer psychologist and in excluding two sentences from a document produced by Bristol-Myers, one of Abbott's competitors. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

I. Jury Instructions

We review the formulation of jury instructions for an abuse of discretion. Masson v. New Yorker Magazine, Inc., 85 F.3d 1394, 1397 (9th Cir.1996). The district court has wide latitude to frame jury instructions, and they should not be disturbed unless the instructions as a whole are misleading or did not adequately guide the jury in its deliberations. Id. Even if we find error, we need not reverse unless the error was more probably than not harmless. Jenkins v. Union Pac. R.R. Co., 22 F.3d 206, 210 (9th Cir.1994).

A. Waiver of Challenge to the District Court's Instruction on Conspiracy

The district court instructed the jury that Nestle was required to prove, by a preponderance of the evidence: "(1) that defendants Abbott and the Academy knowingly entered into a combination or conspiracy; (2) that the conspiracy unreasonably restrained competition in the relevant market; and (3) that [Nestle] suffered injury to its business or property as the proximate result of the conspiracy." These instructions adequately reflect the elements of a rule of reason case. See Morgan, Strand, Wheeler & Biggs v. Radiology, Ltd., 924 F.2d 1484, 1488 (9th Cir.1991) (stating that a rule of reason plaintiff must demonstrate "(1) an agreement or conspiracy among two or more persons or distinct business entities; (2) by which the persons or entities intend to harm or restrain competition; and (3) which actually restrain competition") (citing Thurman Indus., Inc. v. Pay 'N Pak Stores, Inc., 875 F.2d 1369, 1373 (9th Cir.1989)).

The special verdict form submitted to the jury parallels the district court's instructions. The first interrogatory asks whether Nestle proved the alleged conspiracy. The district court defined a conspiracy as "a combination of two or more persons to accomplish, by concerted action, some unlawful purpose, or to accomplish some lawful purpose by unlawful means."

Nestle did not object to the district court's definition of conspiracy or to the special verdict form. Nestle did file an objection to Instruction No. 23, which defined restraint. On appeal, Nestle challenges the verdict on the basis of alleged errors in this instruction.

In rendering its verdict, however, the jury responded only to the first interrogatory regarding the existence of a conspiracy; it never formally reached the issue of restraint. Nestle argues that the jury could not consider the issue of conspiracy in isolation from the district court's other instructions. According to Nestle's reasoning, in order to consider the existence of an antitrust conspiracy, the jury had to take unlawfulness into account. Nestle maintains that the inquiry into unlawfulness was guided by the district court's instruction on restraint.

We reject Nestle's argument that the jury "must have" considered a question on which it did not render a decision. 1 We conclude that Nestle's objection to the district court's explanation of restraint does not constitute an objection to the instruction defining conspiracy as well. Therefore, we find that Nestle has waived its objection to the conspiracy instruction.

Rule 51 clearly states that "[n]o party may 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." Fed.R.Civ.P. 51; see also 9A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2554 (1995) ("[A]n objection to one part of the charge [will not] permit a party to assert error later in a different part of the charge."). In Hammer v. Gross, we made it clear that the Ninth Circuit "enjoyed a reputation as the strictest enforcer of Rule 51." 932 F.2d 842, 847 (9th Cir.), cert. denied, 502 U.S. 980 (1991). We see no reason not to enforce the rule against Nestle in this case.

Furthermore, because the jury never reached the issue of restraint, we note that any error in the district court's instructions was harmless.

B. Requested Instruction on Inherent Anticompetitiveness

The district court elected not to direct the jury that a restraint on advertising is anticompetitive as a matter of law. Nestle argues that it was entitled to the instruction that an agreement to restrict advertising is inherently anticompetitive under Bhan v. NME Hospitals, Inc., 929 F.2d 1404 (9th Cir.), cert. denied, 502 U.S. 994 (1991).

Even in a rule of reason case, an agreement may be found anticompetitive on its face. Bhan states that a "full-blown market analysis is not necessary" to establish that a practice is an unreasonable restraint of trade. Id. at 1413. However, Bhan also requires plaintiffs to make some showing that "the restraint has actually produced significant anti-competitive effects, such as a reduction in output." Id.; see also Federal Trade Comm'n v. Indiana Fed'n of Dentists, 476 U.S. 447, 461 (1986) (finding an elaborate market analysis unnecessary where there were "actual, sustained adverse effects on competition").

In this case, the parties disputed both the force and the effect of the AAP's ban on advertising. In support of the instruction, Nestle points to testimony of AAP officials indicating their interest in limiting the output of infant formula, but Nestle did not demonstrate that the AAP achieved that goal through its policy against advertising. Moreover, Abbott and the AAP challenged the extent to which the AAP's policy affected Nestle's choices. As Abbott and the AAP point out, Nestle advertised Good Nature on television until March 1989, and began advertisements for both Good Start and Good Nature in 1991. In addition, Mead Johnson began advertising the Gerber brand in 1989. Given the disputed factual issues, the district court properly left it to the jury to determine whether the AAP's policy against advertising was an unreasonable restraint on competition.

Moreover, the refusal to instruct that a restraint on advertising is inherently anticompetitive was more probably than not harmless. See Jenkins, 22 F.3d at 210. The jury decided this case on the threshold question of whether an agreement to restrain trade existed; it did not reach questions concerning the effect of that agreement on competition.

C. Requested Instruction on Good Motives

Nestle also requested that the court instruct the jurors that: "It is not necessary for [Nestle] to prove that the defendants were motivated by evil intentions, and likewise good motives or good intentions cannot excuse conduct which is otherwise a violation of the antitrust laws." The district court ultimately instructed the jury that: "The focus of concern in an antitrust case is whether the practice or conduct being challenged has restrained trade. Under the antitrust laws, a practice that restrains trade cannot be justified by showing that the practice serves some other social goal, such as the goal of advancing public health."

The court's instruction closely tracks the language of National Soc'y of Prof'l Eng'rs v. United States, in which the Supreme Court rejected the defendants' claim that a restriction was justified because "bidding on engineering services is inherently imprecise, would lead to deceptively low bids, and would thereby tempt individual engineers to do inferior work with consequent risk to public safety and public health." 435 U.S. 679, 692 (1978). After Professional Engineers, it is clear that the purpose of an analysis under the antitrust laws "is to form a judgment about the competitive significance of the restraint; it is not to decide whether a policy favoring competition is in the public interest, or in the interest of the members of an industry. Subject to exceptions defined by statute, that policy decision has been made by Congress." Id.

Although the district court did not specifically state that "good motives are not a defense," Nestle identifies no meaningful distinction between the requested instruction and the instruction given. The good motive at issue in this case is the goal of advancing public health. "There is no error...

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