Stanislaus Food Prods. Co. v. United Statess-Posco Indus.

• Decision Date: 13 October 2015
• Docket Number: No. 13–15475.,13–15475.
• Citation: 803 F.3d 1084
• Parties: STANISLAUS FOOD PRODUCTS COMPANY, a California corporation, Plaintiff–Appellant, v. USS–POSCO INDUSTRIES, a California partnership; Pitcal, Inc., a Delaware corporation; POSCO–California Corporation, a Delaware corporation; United States Steel Corporation, a Delaware corporation; POSCO American Steel Corporation, a Delaware corporation, Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

803 F.3d 1084

STANISLAUS FOOD PRODUCTS COMPANY, a California corporation, Plaintiff–Appellant

v.USS–POSCO INDUSTRIES, a California partnership; Pitcal, Inc., a Delaware corporation; POSCO–California Corporation, a Delaware corporation; United States Steel Corporation, a Delaware corporation; POSCO American Steel Corporation, a Delaware corporation, Defendants–Appellees.

No. 13–15475.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 9, 2015.

Filed Oct. 13, 2015.

William Bernstein, Eric B. Fastiff (argued), Dean M. Harvey, and Marc A. Pilotin, Lieff, Cabraser, Heimann & Bernstein, LLP, San Francisco, CA, for Plaintiff–Appellant.

James C. Martin (argued), P. Gavin Eastgate, and Michelle A. Mantine, Reed Smith, Pittsburgh, PA; Daniel I. Booker and Alexander Y. Thomas, Reed Smith LLP, Washington, D.C.; J. Michael Jarboe, United States Steel Corporation, Pittsburgh, PA; Allan Steyer, D. Scott Macrae, and Gabriel D. Zeldin, Steyer Lowenthal Boodrookas Alvarez & Smith, San Francisco, CA; Rex S. Heinke and Reginald D. Steer, Akin Gump Strauss Hauer & Feld LLP, San Francisco, CA; and Steven M. Pesner and Nicholas Adams, Akin Gump Strauss Hauer & Feld LLP, New York, N.Y., for Defendants–Appellees.

Appeal from the United States District Court for the Eastern District of California, Lawrence J. O'Neill, District Judge, Presiding. D.C. No. 1:09–cv–00560–LJO–BAM.

Before: M. MARGARET McKEOWN, MARY H. MURGUIA, and MICHELLE T. FRIEDLAND, Circuit Judges.

OPINION

McKEOWN, Circuit Judge:

This appeal, which centers on tin mill products used to make the tin cans commonly used to package food, teaches that there's no substitute for concrete evidence. Stanislaus Food Products Company claims that it pays artificially high prices as the result of an illegal market allocation agreement among the nation's leading tin manufacturers who agreed to cede the tin mill products market in the western United States to a single company, USS–POSCO Industries (“UPI”).

Although echoes of price-fixing permeate the appeal, only a market allocation theory is at issue. But the market-allocation claim relies on a shaky economic theory, as the purported arrangement would not be rational in light of the circumstances. Even after extensive discovery, the evidence does not tend to exclude the possibility that the alleged conspirators were acting independently. We conclude that Stanislaus has failed to establish specific facts supporting a market allocation conspiracy and affirm summary judgment for the tin manufacturers.

Background

Stanislaus, a tomato cannery located in Modesto, California, purchases its tin cans exclusively from Silgan, one of three major American tin can manufacturers. These purchases occur under long-term contract.

Silgan, in turn, purchases tin mill products from multiple suppliers, including United States Steel Corporation (“U.S. Steel”) and UPI. U.S. Steel manufactures and sells tin mill products as well as hot band steel, which is a component of tin mill products. U.S. Steel has nationwide supply contracts with Silgan and the other major tin can manufacturers. UPI is a joint venture equally owned by U.S. Steel and POSCO America Steel Corporation (“POSCO America”).¹ As part of the joint venture, U.S. Steel and POSCO America supply UPI with hot band steel. UPI's tin mill product prices are set by a six-person management team that includes three appointees each from U.S. Steel and POSCO America.

Stanislaus initiated suit in California state court, where it first alleged price fixing claims against UPI, Silgan, and other unnamed conspirators in violation of state and federal antitrust law. The case features a complicated procedural history that we need not recount in full here. Stanislaus's third amended federal complaint, which excludes Silgan as a defendant,² asserts that U.S. Steel agreed to exit the market and eliminate certain discounts to Silgan to allow UPI to charge monopolistic prices for tin mill products. Stanislaus described three 2006 UPI management committee meetings as the setting for the agreement. The district court granted in part and denied in part a motion to dismiss the third amended complaint. Dismissing a separate conspiracy to monopolize claim, the court left only the market allocation conspiracy claim to go forward. The “linchpin” of the market allocation agreement, according to the district court, would be proof of U.S. Steel's exit of the market.

After extensive discovery, the defendants moved for summary judgment. The briefing prompted the district court to observe that “the parties ha[d] sharply different views on what this case is about.”

Stanislaus pursued two distinct antitrust theories. The first was an “exit theory” of the conspiracy, which turned on U.S. Steel's exit from the market for tin mill products in the western United States—an approach that mapped to the surviving complaint allegations. Stanislaus's second theory was a new “partial allocation theory,” not raised in the complaint, under which Stanislaus claimed that U.S. Steel did not aggressively compete on price. Under this theory, “[b]ecause UPI was left unchallenged, U.S. Steel effectively ‘allocated’ to UPI a dominant, but not complete, position in the market.”

Evaluating both theories, the district court granted the defendants' motion for summary judgment. The court began by considering whether there was a plausible economic motive for either alleged agreement. The court concluded that either type of conspiracy would be rational for UPI and POSCO, which both stood to gain from any supra-competitive pricing charged by UPI, but irrational for U.S. Steel, which competes with UPI by selling tin mill products through national supply contracts under which its customers elect the delivery destination. U.S. Steel thus “lacks the ability to unilaterally price discriminate against the western United States market”; this market structure did not make the prospect of forfeiting competitiveness on a national level rational for U.S. Steel, even taking into account that U.S. Steel's 50% ownership in UPI meant that it would benefit to some extent from UPI's profits. Against this backdrop, and “proceed[ing] with caution,” the court concluded that Stanislaus's circumstantial evidence was insufficient to support an inference of conspiracy.

Analysis

Section 1 of the Sherman Antitrust Act renders illegal “[e]very contract, combination ..., or conspiracy, in restraint of trade or commerce.” 15 U.S.C. § 1. This case involves an alleged illegal agreement to allocate territory to UPI in order to reduce competition in the market for tin mill products. See Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49, 111 S.Ct. 401, 112 L.Ed.2d 349 (1990) (per curiam) (citing United States v. Topco Assocs., Inc., 405 U.S. 596, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972) ).

Before considering the evidence, we review the basic principles of summary judgment that guide this appeal. Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). We view the facts and draw factual inferences in favor of Stanislaus, the non-moving party. T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir.1987). Still, to survive summary judgment, Stanislaus must establish a “genuine” factual dispute, which involves “more than ... some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ; Fed.R.Civ.P. 56(a).

An agreement to restrain trade may be established by direct or by circumstantial evidence. See 7–Up Bottling Co. v. Archer Daniels Midland Co., Inc. (In re Citric Acid Litig. ), 191 F.3d 1090, 1093 (9th Cir.1999). Stanislaus relies upon circumstantial evidence to establish such an agreement here.

In Matsushita, the seminal case applying these principles to antitrust claims, the Supreme Court explained that to survive summary judgment on the basis of circumstantial evidence, “a plaintiff seeking damages for a violation of § 1 must present evidence ‘that tends to exclude the possibility’ that the alleged conspirators acted independently.” 475 U.S. at 588, 106 S.Ct. 1348 (quoting Monsanto Co. v. Spray–Rite Serv. Corp.,

465 U.S. 752, 764, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984) ). In other words, to establish the requisite factual dispute, Stanislaus “must show that the inference of conspiracy is reasonable in light of the competing inferences of independent action or collusive action that could not have harmed [Stanislaus].” Id.

Matsushita underscores that in making this determination, context is key. As the Supreme Court put it, “if the factual context renders [Stanislaus's] claim implausible—if the claim is one that simply makes no economic sense—[Stanislaus] must come forward with more persuasive evidence to support [its] claim than would otherwise be necessary.” Id. at 587, 106 S.Ct. 1348.

As we proceed, we are mindful that “courts should not permit factfinders to infer conspiracies when such inferences are implausible.” Id. at 593, 106 S.Ct. 1348 (citing Monsanto, 465 U.S. at 762–64, 104 S.Ct. 1464 ). The Supreme Court has observed that “mistaken inferences” are “especially costly” in cases that bear the risk of “chill[ing] the very conduct the antitrust laws are designed to protect.” Id. at 594, 106 S.Ct. 1348 (citing Monsanto, 465 U.S. at 763–64, 104 S.Ct. 1464 ).

Because this case hinges on circumstantial evidence, our inquiry into whether Stanislaus's showing is sufficient to establish an agreement proceeds in two steps:

First, the defendant can rebut an allegation of conspiracy by showing a plausible and justifiable reason for its conduct that is consistent with proper business practice. The burden then shifts back to the plaintiff to provide specific evidence tending to show that the defendant was not engaging in permissible competitive behavior.

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