Champagne Metals v. Ken-Mac Metals, Inc.

Decision Date07 August 2006
Docket NumberNo. 04-6222.,No. 05-6139.,04-6222.,05-6139.
Citation458 F.3d 1073
PartiesCHAMPAGNE METALS, an Oklahoma Limited Liability Company, Plaintiff-Appellant, v. KEN-MAC METALS, INC., an Ohio corporation, Samuel, Son & Co., Limited, an Ontario, Canada corporation, Samuel Specialty Metals, Inc., a New Jersey corporation, Metalwest, L.L.C., an Alabama limited liability company, Integris Metals, Inc., a New York corporation, Earle M. Jorgensen Company, a Delaware corporation, and Ryerson Tull, Inc., an Illinois corporation, Defendants-Appellees.
CourtU.S. Court of Appeals — Tenth Circuit

Clyde A. Muchmore, Crowe & Dunlevy, Oklahoma City, OK, (D. Kent Meyers and Mark S. Grossman, Crowe & Dunlevy, Oklahoma City, OK, and Michael Burrage, Burrage Law Firm, Durant, OK, with him on the briefs), for Plaintiff-Appellant.

Jeffrey W. Sarles, Mayer, Brown, Rowe & Maw LLP, Chicago, IL (David A. Ettinger, Honigman Miller Schwartz & Cohn, LLP, Detroit, MI, M. Richard Mullins, McAfee & Taft, A Professional Corporation, Oklahoma City, OK, Mark McLaughlin and Susan Nystrom Ellis, Mayer, Brown, Rowe & Maw LLP, Chicago, IL, Drew Neville, B.J. Rothbaum, Charles E. Geister III, Hartzog, Conger, Carson & Neville, Oklahoma City, OK, William J. O'Shaughnessy, McCarter English, Newark, NJ, Murray E. Abowitz, Abowitz, Timberlake & Dahnke, Oklahoma City, OK, Timothy R. Beyer, Brownstein Hyatt & Farber P.C., Denver, CO, Michael A. Rubenstein, McKinney & Stringer, PC, Oklahoma City, OK, David L. Hashmall, Felhaber, Larson, Fenlon & Vogt, P.A., Minneapolis, MN, Glen D. Huff and Steven J. Johnson, Foliart Huff Ottaway & Bottom, P.C., Oklahoma City, OK, Allan B. Goldman and Charles M. Stern, Katten Muchin Zavis Rosenman, Los Angeles, CA, Alfred P. Murrah, Jr. and Fred A. Leibrock, Phillips McFall McCaffrey McVay & Murrah, P.C., Oklahoma City, OK, with him on the briefs), for Defendants-Appellees.

Before KELLY, SEYMOUR, and EBEL, Circuit Judges.

EBEL, Circuit Judge.

After working in the aluminum industry for years, Michael Champagne struck out on his own and formed Champagne Metals ("Champagne"), an aluminum distributor (or "service center"). Service centers operate as middlemen in the industry, buying aluminum from mills and selling that aluminum to end users. Claiming that there exists an understanding in the industry to exclude new competitors, Champagne brought suit against a slew of older, more established service centers alleging violations of federal and state antitrust laws and unlawful interference with business relationships. After extensive briefing, the district court excluded Champagne's economic expert, granted summary judgment for the defendants on all claims, and awarded costs to the defendants. Champagne challenges all three rulings on appeal. We find that the district court did not abuse its discretion in excluding Champagne's expert witness and therefore AFFIRM the district court's order on that issue. However, we disagree with portions of the district court's rulings as to the federal and state law claims and thus AFFIRM in part and REVERSE in part the district court's grant of summary judgment. Finally, as we are reversing the grant of summary judgment, we VACATE the district court's award of costs.1

BACKGROUND

Defendants-Appellees Ken-Mac Metals, Samuel, Son & Co., Samuel Specialty Metals, Metalwest, Integris Metals, Earle M. Jorgensen Co., and Ryerson Tull (collectively, the "Established Distributors") are all service centers in the aluminum industry, as is Champagne. Service centers compete both with other service centers and with mills for sales to end users; indeed, over half of sales to end users are made by the mills directly. In the region in which Champagne and the Established Distributors operate—an area encompassing Colorado, Kansas, Missouri, Illinois, New Mexico, Texas, Arkansas, and Louisiana—there are approximately forty service centers. Champagne contends that not all service centers compete on the same aluminum products and that only the Established Distributors are its day-to-day competitors.

There are six "leading" mills in North America: Alcan Aluminum Corporation; Alcoa, Inc.; Commonwealth Industries, Inc.; Kaiser Aluminum Corporation; Ormet Corporation; and Pechiney. These mills each specialize in one or more of five different types of aluminum: mill finish common alloy aluminum, heat-treated aluminum, common alloy tread, common alloy painted aluminum, and aluminum roof. The leading mills have select distribution systems—they specifically designate one or more service centers as "recognized distributors" through whom they sell their products.2 Each of the Established Distributors is recognized by at least two mills; none is recognized by all six.

Champagne was founded in 1996 by Michael Champagne, a former employee of Earle M. Jorgensen Co. Champagne's planned customer base was the horse trailer manufacturing industry, an industry with which Champagne's founder had well-established relationships and that Jorgensen was beginning to de-emphasize. Of the five types of aluminum produced by the mills, three are key to Champagne's business—tread, painted, and roof coil. As the aluminum products are not readily exchangeable, and because end users often prefer specific mills, Champagne contends that access to more than one mill is critical if it is to be able to compete effectively.

Commonwealth recognized Champagne as a distributor a few months after Champagne's founding, but did not always offer the same pricing rebates to Champagne as it offered to its other recognized distributors.3 Also, Commonwealth did not sell all of the aluminum products that Champagne required. Although no other mill designated Champagne a "recognized distributor," Champagne was able to buy certain products from Pechiney. And two other mills—Alcan and Kaiser—at least occasionally sold limited products to Champagne.

Champagne contends that the difficulties in establishing relationships with mills and in acquiring the necessary aluminum products stem from a conspiracy among the Established Distributors. Specifically, Champagne claims that the Established Distributors threatened to move their business from mills that agreed to deal with Champagne. According to Champagne, this conspiracy existed not only to force it out of business, but to deter other service centers generally from entering the market.

In 2002, Champagne filed a complaint with the district court, alleging that the Established Distributors engaged in a horizontal group boycott in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, unreasonably restrained trade in violation of the Oklahoma Antitrust Reform Act, Okla. Stat. tit. 79, § 203, and maliciously and wrongfully interfered with Champagne's business and contractual relationships. After substantial briefing, the Established Distributors moved for summary judgment, which the district court granted on all claims. In a separate order issued the same day, the district court also excluded the report and testimony of Champagne's economic expert.

The Established Distributors then filed motions to recover certain costs, including copying and imaging costs. After a hearing, the clerk of court awarded substantial copying and imaging costs to the Established Distributors, although the awards were less than requested. Champagne moved for the district court to review the costs awards, arguing that the Established Distributors had not met their statutory burden to show that the documents copied and imaged were "necessarily obtained" and that the imaging of certain documents was duplicative. The district court ruled that the clerk's "rule of thumb" that copying costs contracted to an outside vendor were recoverable while internally generated costs were not was reasonable and that the cost of imaging documents produced during discovery was recoverable.

Champagne timely appealed the district court's rulings on both the merits and on costs.

DISCUSSION

We review the grant of a motion for summary judgment de novo, applying the same legal standard as the district court. See, e.g., Welding v. Bios Corp., 353 F.3d 1214, 1217 (10th Cir.2004). "[S]ummary judgment is proper `if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Id. (quoting Fed.R.Civ.P. 56(c)). "When applying this standard, we `construe all facts and reasonable inferences in a light most favorable to the nonmoving party.'" Id. (quoting Pub. Serv. Co. of Colo. v. Cont'l Cas. Co., 26 F.3d 1508, 1513 (10th Cir.1994)) (alteration omitted).

I. Threshold Evidentiary Issues

Before turning to the merits of this appeal, we consider two evidentiary issues: whether the district court's exclusion of the report and testimony of Champagne's economic expert, Dr. Donald Murry, was proper; and whether the district court erred in excluding certain statements of representatives of the mills as hearsay.

A. Exclusion of Champagne's Economic Expert

The court excluded Dr. Murry's report and testimony on the grounds that his opinions failed to meet the reliability standards of Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). "Admission at trial of expert testimony is governed by Fed.R.Evid. 702, which imposes on the district court a gatekeeper function to `ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable.'" United States v. Gabaldon, 389 F.3d 1090, 1098 (10th Cir.2004) (quoting Daubert, 509 U.S. at 589, 113 S.Ct 2786). "This gatekeeper function requires the judge to assess the reasoning and methodology underlying the expert's opinion, and determine whether it is both scientifically valid and applicable to a particular set of facts." Dodge v. Cotter Corp., 328 F.3d 1212, 1221 (10th...

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