Viazis v. American Ass'n of Orthodontists

• Decision Date: 11 December 2002
• Docket Number: No. 01-41298.,01-41298.
• Parties: Anthony D. VIAZIS, et al., Plaintiffs, Anthony D. Viazis, Plaintiff-Appellant, v. AMERICAN ASSOCIATION OF ORTHODONTISTS, et al., Defendants, American Association of Orthodontists, Southwestern Society of Orthodontists, GAC International, Inc., and Leo A. Dohn, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

314 F.3d 758

Anthony D. VIAZIS, et al., Plaintiffs, Anthony D. Viazis, Plaintiff-Appellant, v. AMERICAN ASSOCIATION OF ORTHODONTISTS, et al., Defendants, American Association of Orthodontists, Southwestern Society of Orthodontists, GAC International, Inc., and Leo A. Dohn, Defendants-Appellees.

No. 01-41298.

United States Court of Appeals, Fifth Circuit.

December 11, 2002.

COPYRIGHT MATERIAL OMITTED

Braden Wheeler Sparks (argued), Dallas, TX, Clark C. Havighurst (argued), Duke University, Durham, NC, for Plaintiff-Appellant.

David Paul Blanke (argued), Vinson & Elkins, Austin, TX, Brian Edward Robison, Vinson & Elkins, Dallas, TX, for American Ass'n of Orthodontists and Southwestern Society of Orthodontists.

Margaret M. Zwisler (argued), Howrey, Simon, Arnold & White, Washington, DC, for GAC Intern. Inc. and Dohn.

Appeal from the United States District Court for the Eastern District of Texas.

Before KING, Chief Judge, and SMITH and EMILIO M. GARZA, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Anthony Viazis appeals a judgment as a matter of law ("j.m.l.") in favor of the American Association of Orthodontists ("AAO"), the Southwestern Society of Orthodontists ("SWSO"), GAC International, Inc. ("GAC"), and Leo A. Dohn. Finding no reversible error, we affirm.

I.

Viazis, an orthodontist practicing in the Dallas area, designed and patented a triangular orthodontic bracket in 1991.¹ He contends that his bracket is more effective than other designs in that it decreases the amount of time braces must be worn. In 1992, Viazis entered into a contract with GAC, a manufacturer of orthodontic devices, to market and distribute his bracket.

In April 1996, Viazis sent an advertising mailer to the parents of school age children in the Plano, Texas, area near Dallas, claiming that braces made using the Viazis bracket were faster, less expensive, and potentially safer than other products. In May of that year, Viazis held a seminar promoting his brackets directly to these parents. A member of the Greater Dallas Association of Orthodontists ("GDAO") and the AAO forwarded a complaint regarding Viazis's advertisements to the AAO, indicating that Viazis's conduct might violate provisions of that organization's Code of Professional Responsibility.

Viazis alleged that the resulting controversy surrounding his advertisements resulted in the termination of the marketing aspect of his agreement with GAC. There was an adverse impact on the relationship between Viazis and GAC, and their arrangement was restructured in mid-1997. GAC continued to manufacture the Viazis bracket but ceased all marketing activities.

In December 1997, the AAO advised Viazis that he could be subject to disciplinary action as a result of the claims of faster, safer, and more effective treatment made in his advertisements. In December 1999, after a hearing and appeal, the AAO suspended Viazis's membership in the organization.

Meanwhile, in August 1998, Viazis filed this action against the AAO, the SWSO, the GDAO, and various individuals who are no longer defendants. Viazis subsequently added Dohn and GAC as defendants. By the time of trial, Viazis's only remaining claim was that the AAO, SWSO, GAC, and Dohn had conspired to exclude his brackets from the market for orthodontic devices in violation of § 1 of the Sherman Act. At the conclusion of Viazis's case-in-chief at trial, the court granted defendants' motion for j.m.l.

II.

We review a j.m.l. de novo. Casarez v. Burlington N./Santa Fe Co., 193 F.3d 334, 336 (5th Cir.1999). To defeat a motion for j.m.l., the nonmovant must present "substantial evidence opposed to the motion[]."² In other words, the nonmovant must present evidence that is "of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions." Id.

Section 1 of the Sherman Act does not proscribe independent conduct. Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984). So, to establish a § 1 violation, a plaintiff must demonstrate concerted action. Id. Further, although in ruling on a motion for j.m.l. the court must consider all the evidence offered by either party "in the light and with all reasonable inferences in favor of" the party opposed to the motion, Giles v. Gen. Elec. Co., 245 F.3d 474, 481 (5th Cir.2001) (internal quotation marks omitted), in this case the range of permissible inferences is limited by particular principles of antitrust law, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Accordingly, evidence of conduct that is "as consistent with permissible competition as with illegal conspiracy" cannot support an inference of conspiracy. Id. In essence, an antitrust plaintiff who is unable to present direct evidence of a conspiracy must introduce circumstantial evidence that "tends to exclude the possibility of independent action." Monsanto, 465 U.S. at 768, 104 S.Ct. 1464.

Viazis contends that he introduced sufficient evidence of concerted action to avoid j.m.l. He alleges that GAC terminated the marketing agreement in response to threats made by AAO and its regional affiliates. He also contends that the decision of an AAO disciplinary committee to suspend him for one year was the result of unlawful concerted action. Viazis failed to introduce sufficient evidence to prove either allegation.

A.

Direct evidence of a conspiracy is that which "explicitly refer[s] to an understanding" between the alleged conspirators. See Southway Theatres, Inc. v. Ga. Theatre Co., 672 F.2d 485, 493 n. 8 (5th Cir.1982). The letter written by Leo Dohn, then-CEO of GAC, which constitutes Viazis's primary evidence bearing on the existence of a conspiracy between the AAO and GAC, contains no explicit reference to an agreement between GAC and any party. Each of the statements from the letter offered by Viazis as evidence of a conspiracy depends on additional inferences.³ Therefore, the letter is, at most, circumstantial evidence of a conspiracy.⁴

As discussed above, in the absence of direct evidence of a conspiracy, an antitrust plaintiff must present evidence tending to exclude the possibility of independent conduct. Monsanto, 465 U.S. at 768, 104 S.Ct. 1464. To do so, Viazis was required to demonstrate that GAC and AAO "had a conscious commitment to a common scheme designed to achieve an unlawful objective." Id. Although the Dohn letter contains evidence of complaints received by GAC from accounts in the Dallas area, such complaints are insufficient evidence of concerted action, because "[d]ealer-initiated contact fails to establish that a manufacturer has imposed restrictions collusively, not based on its independent business judgment."⁵ In Culberson, this court specifically held that a manufacturer's action in the face of customer complaints is not a sufficient basis for a finding of conspiracy.⁶

Viazis argues, however, that GAC was faced with more than mere dealer complaints. Instead, he maintains, the AAO itself threatened a nationwide boycott to coerce GAC to end its marketing efforts on behalf of Viazis, and GAC acceded to AAO's demands. Such an inference of conspiracy is appropriate only if Viazis presented evidence tending to exclude the possibility of independent conduct on the part of AAO and GAC. To meet this standard, Viazis needed to show both that the AAO threatened a boycott and that GAC's decision to cease marketing the Viazis bracket was inconsistent with its independent self-interest. He failed to do so.

A corporate entity such as the AAO can act only through its agents. Consequently, in the absence of evidence of formal decisionmaking, an antitrust plaintiff must prove an association's conduct by demonstrating that the action was taken by individuals having apparent authority to act for the association. Am. Soc'y of Mech. Eng'rs, Inc. v. Hydrolevel Corp., 456 U.S. 556, 556-67, 102 S.Ct. 1935, 72 L.Ed.2d 330 (1982).

The Dohn letter contains no indication that any of the referenced complaints was initiated by individuals having either actual or apparent authority to speak for the AAO. Viazis introduced no evidence of a membership vote or other formal decisionmaking process through which the AAO acted to threaten GAC or authorized its agents to do so. Nor did he produce evidence that the unnamed Dallas accounts referred to in the Dohn letter had apparent authority to speak for the AAO on such a matter. Viazis has introduced no evidence that the AAO itself, as opposed to some of its individual members, took action with respect to GAC.

Moreover, evidence that a manufacturer took certain actions does not tend to exclude the possibility of independent conduct if the actions were in the manufacturer's independent self-interest.⁷ In other words, even if Viazis proved that the AAO or its regional affiliates threatened GAC, he must also show that GAC decided to end its relationship in response to those threats. If GAC ignored the threats but ended the relationship with Viazis based on an independent evaluation of its best interests, GAC acted independently, and there was no conspiracy. See Matrix Essentials, 988 F.2d at 594; Lovett, 998 F.2d at 579-81. Viazis failed to demonstrate that GAC's decision to alter its relationship with Viazis was contrary to its own interests.

Viazis introduced statements made by GAC regarding the enormous potential market for his bracket and argued that GAC could not have been acting in its own interests when it abandoned its marketing rights. This argument fails, because GAC could have determined that the potential benefits from its marketing agreement with Viazis would be outweighed by the loss of business that would result from its continued association with him.⁸ Therefore, GAC's decision to alter its relationship with Viazis is not evidence tending to exclude the possibility of independent behavior.

B.

Although...