Arthur S. Langenderfer, Inc. v. S.E. Johnson Co.

• Decision Date: 23 January 1991
• Docket Number: 88-3435,88-3126,87-3882,88-3127,87-3577,87-3881,Nos. 87-3543,88-3574 and 88-3651,s. 87-3543
• Citation: 917 F.2d 1413
• Parties: 1990-2 Trade Cases 69,230 ARTHUR S. LANGENDERFER, INC.; Northern Ohio Asphalt Paving Co.; MacRitchie Materials, Inc.; M & B Asphalt Co., Inc. and G.M. Sader Excavating & Paving, Inc., Plaintiffs- Appellees, Cross-Appellants, v. S.E. JOHNSON CO.; Ohio Engineering Co.; Price Brothers, Inc.; Fred Creager & Sons, Inc.; Matco Asphaltic Concrete Products Co.; OAMCO; C.P. Calaway, Inc.; Maumee Stone Co.; Michigan Stone Co.; Wolcottville Sand & Gravel Corp.; Stoneco, Inc.; Saxton Development Co. and J.T. Kirby, Defendants-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1413

917 F.2d 1413

1990-2 Trade Cases 69,230

ARTHUR S. LANGENDERFER, INC.; Northern Ohio Asphalt Paving

Co.; MacRitchie Materials, Inc.; M & B Asphalt

Co., Inc. and G.M. Sader Excavating &

Paving, Inc., Plaintiffs- Appellees, Cross-Appellants, v. S.E. JOHNSON CO.; Ohio Engineering Co.; Price Brothers,

Inc.; Fred Creager & Sons, Inc.; Matco Asphaltic Concrete

Products Co.; OAMCO; C.P. Calaway, Inc.; Maumee Stone

Co.; Michigan Stone Co.; Wolcottville Sand & Gravel Corp.;

Stoneco, Inc.; Saxton Development Co. and J.T. Kirby,

Defendants-Appellants, Cross-Appellees.

Nos. 87-3543, 87-3577, 87-3881, 87-3882, 88-3126, 88-3127,

88-3435, 88-3574 and 88-3651.

United States Court of Appeals, Sixth Circuit.

Argued Jan. 18, 1990.

Decided Oct. 29, 1990.

Rehearing and Rehearing En Banc

Denied Jan. 23, 1991.

James M. Porter, Squire, Sanders & Dempsey, Walter J. Rekstis, Virginia A. Seger, Cleveland, Ohio, Thomas Zraik, Reiser & Zraik, Toledo, Ohio, for plaintiffs-appellants cross-appellees.

Thomas E. Kauper, Ann Arbor, Mich., John M. Curphey, Jack Zouhary, Robison, Curphey & O'Connell, Toledo, Ohio, M. Neal Rains, Paul H. Friedman, Irene C. Keyse-Walker, Arter & Hadden, Cleveland, Ohio, for defendants-appellees cross appellants.

Doreen C. Johnson, Columbus, Ohio, for amicus curiae, State of Ohio.

Before MARTIN and WELLFORD, Circuit Judges, and LIVELY, Senior Circuit Judge.

WELLFORD, Circuit Judge.

The parties in this antitrust controversy are, or were at one time, involved in businesses related to road and highway construction in northwestern Ohio. Plaintiff Arthur S. Langenderfer, Inc. (Langenderfer) was an asphalt paving contractor that ceased operations in 1978, allegedly due to defendants' antitrust violations. Northern Ohio Asphalt Paving Co. (NOAP), a sister company of Langenderfer, is an asphalt producer. Langenderfer and NOAP were the original plaintiffs in a related case, Langenderfer v. S.E. Johnson Co., 729 F.2d 1050 (6th Cir.), cert. denied, 469 U.S. 1036, 105 S.Ct. 510, 83 L.Ed.2d 401 (1984) (Langenderfer I ), a case in which this court vacated judgment based on a verdict in favor of plaintiffs and remanded for a new trial.

I. GENERAL BACKGROUND

While the Langenderfer I appeal was pending, the original plaintiffs were joined by other plaintiffs in a companion case, and when Langenderfer I was decided and a remand effectuated, the separate actions were consolidated. One of the "new" plaintiffs is MacRitchie Materials, Inc. (MacRitchie), a limestone supplier and sister company of Langenderfer and NOAP that was denied leave to intervene in Langenderfer I. See 729 F.2d at 1060. The other new plaintiffs are M & B Asphalt Co., Inc. (M & B), an asphalt producer, paving contractor, and limestone quarry operator, and G.M. Sader Excavating & Paving Co., Inc. (Sader), an asphalt paving and excavating contractor. The defendant companies (which shall be referred to collectively as "Johnson") are commonly owned, and are involved in various aspects of the road construction business. Defendant John T. Kirkby is the president of Johnson and chief executive officer of the Johnson entities.

In the Langenderfer I trial, plaintiffs relied largely on evidence of alleged predatory pricing in bidding on public road projects. Plaintiff introduced no evidence to indicate that defendants' bids were less than defendants' total average costs, and we held that the trial court did not instruct the jury properly on the legal standard for a predatory pricing antitrust violation. Because the predatory pricing claim could not stand separately as a matter of law, and because it was unclear whether the jury verdict was based on predatory pricing or on other alleged anticompetitive behavior, we vacated the judgment in favor of plaintiffs in Langenderfer I, and remanded for a new trial. We noted that in order to prevail on a claim of monopolization or attempt to monopolize, plaintiff must "establish that Johnson engaged in some type of prohibited anticompetitive conduct." 729 F.2d at 1054-55.

Plaintiffs in the current action allege that the defendants violated Sec. 2 of the Sherman Act by monopolizing and attempting to monopolize "the production and supply of highway construction materials and in the bidding, construction and repair of asphalt highways" in a thirteen-county area of northwest Ohio. These highway projects were administered on a competitive bidding basis by the Ohio Department of Transportation (ODOT) and/or the Ohio Turnpike Commission (OTC). Defendants assert once again in defense of the charges that Johnson's success relative to the plaintiffs was the result of better foresight and management, which led to diversification, improved efficiency, and lower costs.

The allegations of plaintiff Sader differed significantly from those of the other plaintiffs, because Sader was not an actual competitor in ODOT/OTC work. Instead, Sader did mostly private paving work, but alleged that it relied on Johnson for raw materials, and that Johnson terminated Sader's credit in retaliation for the testimony of Sader's president, Gregory Sader, in Langenderfer I. Johnson maintained, on the other hand, that the credit cut-off was for legitimate business reasons. We shall deal with the claims of each of the plaintiffs independently.

The jury made the following findings, after submission of special interrogatories:

1. As to all plaintiffs except Sader, relevant product markets included limestone, sand, and asphalt used in ODOT and OTC paving contracts, as well as the ODOT and OTC paving contracts themselves.

2. The relevant geographic market for all plaintiffs was the thirteen-county area.

3. Defendants possessed monopoly power, defined as "the power to control prices or exclude competition," in all of the relevant product markets, and that power was willfully acquired, maintained, or used through anticompetitive conduct. Asked to describe one or more types of anticompetitive conduct, the jury replied, "The acquisitions were all made to exclude and/or injure competition and increase Johnson's power which he succeeded in doing." ¹

4. Defendants' monopolization caused injury to all of the plaintiffs (including Sader).

5. Defendants possessed the specific intent to achieve a monopoly in all of the relevant markets, engaged in anticompetitive conduct toward that end, and there was a dangerous probability that they would achieve a monopoly.

6. Defendants' attempt to monopolize caused injury to all of the plaintiffs (including Sader).

7. Damages (before trebling) were $1,675,000 for Langenderfer and NOAP; $200,000 for MacRitchie; $350,000 for M & B; and $250,000 for Sader.

The trial court entered judgment in accord with the verdict, trebling the damages found by the jury, and allowing payment of interest at the annual rate of 5.79 percent until paid.

On appeal, defendants contend that as a matter of law, no monopoly power may be found in the supply of sand, limestone, asphalt, or in bidding and performance of state and turnpike jobs.

In addition, defendants maintain that plaintiffs failed to support allegations of anticompetitive conduct, relying instead on evidence of Johnson's above-cost bids, contrary to the holding of Langenderfer I. In addition, Johnson asserts that the thirteen-county area cannot represent the relevant market for M & B, which performs most of its work in only two counties and has never actually worked in the majority of the thirteen counties found to be the relevant market. Johnson makes a similar contention as to Sader. As an affirmative defense, Johnson claims that MacRitchie lacks antitrust standing, and that Sader may not recover under Sec. 2 of the Sherman Act based on Johnson's revocation of Sader's credit privileges.

The original Johnson Company was founded in 1929 by Sherman Johnson, who died in 1956. The company then owned three stone quarries and three hot-mix plants, and was the largest asphalt paving contractor in northwest Ohio. Following Mr. Johnson's death, defendant Kirkby became the principal operating officer in 1957. At that time, plaintiff Langenderfer was the second largest asphalt paver in the area. Beginning in 1961, Kirkby, as principal officer on behalf of defendants, embarked on a series of acquisitions, described by this court in Langenderfer I. 729 F.2d at 1053-54.

We vacated and remanded the first judgment because the proper legal standards were not applied, particularly as to predatory pricing. We stated, however, that there was "[s]ubstantial evidence indicat[ing] that Kirkby, both individually and as chief officer of Johnson, intended to eliminate competition and dominate the market." Langenderfer I at 1054. Furthermore, in the first appeal, we noted that there was expert testimony by economists to the effect that Johnson's acquisitions created "significantly increased market concentration," and therefore had a tendency to create a "monopolistic market structure." Id. at 1054.

After remand by this court, plaintiffs amended their complaint asserting that Langenderfer was a general paving contractor until "forced out of business by the defendants ² in 1978." NOAP asserted that it was in the business of purchasing sand and stone, mixing these at asphalt plants, and selling the resulting materials to Langenderfer, asphalt pavers, and others. These plaintiffs asserted that Johnson, Ohio Engineering, and Creager were competitors in constructing and repairing highways and roads in northwestern Ohio with Langenderfer, and that "business is generally performed ... after competitive bidding by the governmental authorities." Langenderfer alleged that it "customarily carried on its procurement of materials through plaintiff NOAP." Plaintiffs averred that to minimize costs, "the paving contractor normally purchases highway construction materials for the quarry or asphalt plant located closest to the job site."

Defendants were charged with "unlawfully combining in restraint of...