International Distribution Centers, Inc. v. Walsh Trucking Co., Inc., 1280

• Decision Date: 24 February 1987
• Docket Number: No. 1280,D,1280
• Citation: 812 F.2d 786
• Parties: 1987-1 Trade Cases 67,457 INTERNATIONAL DISTRIBUTION CENTERS, INC., Plaintiff-Appellee, v. WALSH TRUCKING CO., INC., Coastal Freight Lines, Inc., Hempstead Delivery Co., Inc., National Retail Transportation Inc., Francis J. Walsh, Jr., Kenneth B. Henning, Mark S. Tice, Raymond Weiss, Carmine Sabatini and Chuck Hannon, Defendants-Appellants. ocket 86-7122.
• Court: U.S. Court of Appeals — Second Circuit

Page 786

812 F.2d 786

1987-1 Trade Cases 67,457

INTERNATIONAL DISTRIBUTION CENTERS, INC., Plaintiff-Appellee, v. WALSH TRUCKING CO., INC., Coastal Freight Lines, Inc.,

Hempstead Delivery Co., Inc., National Retail Transportation

Inc., Francis J. Walsh, Jr., Kenneth B. Henning, Mark S.

Tice, Raymond Weiss, Carmine Sabatini and Chuck Hannon,

Defendants-Appellants.

No. 1280, Docket 86-7122.

United States Court of Appeals, Second Circuit.

Argued May 19, 1986.

Decided Feb. 24, 1987.

Stanley D. Robinson, New York City (Milton Handler, Gerald Sobel, Randolph S. Sherman, Alan F. Goott, John W. Schryber, Kaye, Scholer, Fierman, Hays & Handler, New York City, Marc L. Zoldessy, General Counsel, National Retail Systems, Inc., North Bergen, N.J., of counsel), for defendants-appellants.

Malcolm A. Hoffmann, New York City (Peter L. Altieri, Lisa A. Frey, New York City, George J. Hayward, General Counsel, Intern. Distribution Centers, Inc., North Bergen, N.J., of counsel), for plaintiff-appellee.

Before OAKES, MESKILL and MAHONEY, Circuit Judges.

MESKILL, Circuit Judge:

This is an appeal from the second amended judgment of the United States District Court for the Southern District of New York, Keenan, J., following a jury verdict for the plaintiff, International Distribution Centers, Inc. (IDC), the denial of a motion by National Retail Transportation, Inc. and other individual and corporate defendants (collectively referred to as NRT) for judgment notwithstanding the verdict and the court's entry of a permanent injunction and order for attorneys' fees. The judgment held that NRT had attempted to monopolize, conspired to monopolize and conspired to restrain trade in the market for the carriage of garments on hangers among garment manufacturers, suppliers, contractors and retailers "along the New York, New Jersey, Pennsylvania route," in violation of sections 1 and 2 of the Sherman Act. 15 U.S.C. Secs. 1, 2 (1982). Treble damages in the amount of $38,261,967 were awarded to IDC, 618 F.Supp. 98.

The principal issue on appeal is whether there can be a dangerous probability that a market will be monopolized where one firm in the market has the specific intent to drive a competitor from the market and has engaged in arguably tortious activity to achieve that objective but does not have significant market power and will not possess such power even if the competitor is driven out of business. We conclude for reasons set forth below that no such probability can exist in these circumstances. We decline to eliminate such probability as a prerequisite for the recovery of damages for attempted monopolization. We, therefore, reverse the judgment below and remand to the district court with instructions to enter judgment for NRT.

BACKGROUND

NRT and IDC are truckers operating in the less-than-truckload (LTL) segment of the garment transportation industry. ¹

They pick up quantities of goods from individual shippers, consolidate and sort the loads according to destination, carry the full loads to a distribution center, break the loads down and deliver the small lots to their final destination. IDC transports raw materials and garments on hangers between the garment district in New York City and contractors located primarily in eastern Pennsylvania. NRT also carries garments on hangers in this geographical market, which has been identified in this litigation as the "Pennsylvania Corridor."

The structure of the market for the carriage of garments on hangers in the Pennsylvania Corridor changed during the years preceding this litigation. In 1982, IDC estimated that it was carrying less than fifty percent of the garments that it had handled in 1975 and projected that there would be a continuing decline in the total volume of garments on hangers transported by truck into the Pennsylvania Corridor. For some reason the market improved somewhat in 1983 and IDC estimated that it had a fifty percent market share in the Pennsylvania Corridor in that year.

NRT, which was already operating in other markets, did not begin carrying garments on hangers in the Pennsylvania Corridor until January 1983. In order to expand its operations to include carrying garments on hangers in the Pennsylvania Corridor, NRT had to modify vans by installing metal bars or nylon ropes, lease terminals for its distribution network and train personnel in the rudimentary techniques of processing garments on hangers for carriage and distribution.

In late 1982, NRT's preparations to enter the Pennsylvania Corridor included the hiring of several disaffected IDC employees. IDC's president and chief executive officer, Gerald Eskow, was concerned enough about the incipient employee "raid" to request a meeting with Francis Walsh, his counterpart at NRT. At trial the two men gave dramatically different accounts of that meeting. We read both accounts in the light most favorable to upholding the jury's verdict. The meeting occurred in Walsh's office on November 3, 1982. Walsh confided at the meeting that "he was determined to completely obliterate IDC," that "he was particularly thrilled with the prospect of destroying Jerry Eskow" and that "he couldn't wait to mount [Eskow's] head on his wall." J.App. at 335-36.

Walsh told Eskow he had a plan for obliterating IDC and monopolizing the carriage of garments on hangers in the Pennsylvania Corridor. Walsh had first tried to buy out IDC. When that failed, he began hiring several of IDC's key employees to destroy its "credibility" and planned to start a price war to put IDC in a " 'no-win' situation." J.App. at 333-34.

In the wake of this declaration, IDC filed suit against NRT on December 29, 1982. IDC alleged, inter alia, that NRT had attempted to monopolize the carriage of garments on hangers, had conspired to monopolize the carriage of garments on hangers, had conspired to restrain trade and had wrongfully appropriated IDC's trade secrets. IDC obtained a preliminary injunction prohibiting NRT's further hiring of IDC employees and use of its trade secrets.

Trial of the case began in June 1984. IDC's theory of the case revolved around Walsh's purported plan to obliterate IDC. It attempted to prove the antitrust and trade secret claims in that context. NRT contended that it was only trying to promote competition. It argued that IDC was run by an incompetent president who was using the lawsuit to protect IDC's share of the Pennsylvania Corridor market.

NRT sought to defeat the antitrust claims by demonstrating that there was not a "dangerous probability" that NRT could successfully monopolize the Pennsylvania Corridor. See Northeastern Telephone Co. v. American Telephone & Telegraph Co., 651 F.2d 76, 85 (2d Cir.1981), cert.

denied, 455 U.S. 943, 102 S.Ct. 1438, 71 L.Ed.2d 654 (1982). It attempted to prove, for example, that several trucking firms had expanded into and were competing in the relevant market, that numerous firms could easily enter the market and thus that NRT would not be able either to control prices or to restrain competition even if IDC went out of business. NRT also attempted to prove that it lacked sufficient market power to make monopolization of the market probable.

After six weeks of trial and two days of deliberation, the jury returned a verdict for IDC on all three antitrust claims and a verdict for NRT on the trade secrets claim. NRT's motion for judgment notwithstanding the verdict was denied by the court in an opinion filed June 20, 1985. This appeal followed further proceedings that are not directly relevant here.

NRT frames its appeal as an attack on the sufficiency of the evidence to support the verdict against it. It claims that there was insufficient evidence that NRT (1) attempted to monopolize the market for the carriage of garments on hangers in the Pennsylvania Corridor, (2) conspired to restrain trade in that market, and (3) conspired to monopolize that market. We address these claims in order.

DISCUSSION

A. Attempt to Monopolize

Liability for attempted monopolization rests on proof of three elements: (1) anticompetitive or exclusionary conduct; (2) specific intent to monopolize; and (3) a "dangerous probability" that the attempt will succeed. Northeastern Telephone, 651 F.2d at 85; see also 3 P. Areeda & D. Turner, Antitrust Law, p 820 at 312 (1978). The heart of NRT's argument on this appeal is that there was not a dangerous probability that it would monopolize the market for the carriage of garments on hangers in the Pennsylvania Corridor. IDC responds by arguing not that there was sufficient evidence to demonstrate such a probability, but rather that when anticompetitive acts and specific intent to monopolize are "clearly proven" then "little more is needed to establish the offense." Br. of Plaintiff-Appellee at 15 (citations omitted).

For purposes of our analysis, we will presume that there was sufficient evidence to establish that NRT engaged in some form of anticompetitive conduct and had the specific intent to monopolize the Pennsylvania Corridor. ² The question remains whether even strong evidence of these two elements was sufficient to allow the jury to infer that there was a dangerous probability that the market would be monopolized by NRT.

IDC relies on a line of cases from the Ninth Circuit that allow the jury to infer the existence of such a dangerous probability from proof of the other two elements. See, e.g., Janich Brothers, Inc. v. American Distilling Co., 570 F.2d 848, 853 (9th Cir.1977), cert. denied, 439 U.S. 829, 99 S.Ct. 103, 58 L.Ed.2d 122 (1978); Lessig v. Tidewater Oil Co., 327 F.2d 459, 474 (9th Cir.), cert. denied, 377 U.S. 993, 84 S.Ct. 1920, 12 L.Ed.2d 1046 (1964). Lessig is the progenitor of this line and, as one academic has noted, it has had a "remarkably checkered career even in the Ninth Circuit." Cooper, Attempts and Monopolization: A Mildly Expansionary Answer to the Prophylactic Riddle of Section Two, 72 Mich.L.Rev. 373, 420 & nn. 168-74 (1974);...