Concord Boat Corp. v. Brunswick Corp.

• Decision Date: 20 August 1998
• Docket Number: No. LR-C-95-781.,LR-C-95-781.
• Citation: 21 F.Supp.2d 923
• Parties: CONCORD BOAT CORPORATION, et al., Plaintiffs, v. BRUNSWICK CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Arkansas

21 F.Supp.2d 923

CONCORD BOAT CORPORATION, et al., Plaintiffs, v. BRUNSWICK CORPORATION, Defendant.

No. LR-C-95-781.

United States District Court, E.D. Arkansas, Western Division.

August 20, 1998.

K. Craig Wildfang, Brooks F. Poley, Christopher W. Madel, Winthrop & Weinstine, Minneapolis, MN, Jerry C. Jones, Amy Lee Stewart, Rose Law Firm, Little Rock, AR, for plaintiffs.

Robert F. Finke, Mark McLaughlin, Andrew S. Marovitz, Mayer, Brown & Platt, Chicago, IL, William H. Sutton, James M. Simpson, Jr., Friday, Eldredge & Clark, Little Rock, AR, for defendant.

ORDER

MOODY, District Judge.

Before the Court are Defendant Brunswick Corporation's Renewed Motion for Judgment as a Matter of Law Pursuant to Rule 50(b) of the Federal Rules of Civil Procedure and separate Motion for a New Trial. For the reasons set forth herein, the motions will be DENIED.

I.

Plaintiffs, a group of twenty-one boat manufacturers and their buying cooperative, Independent Boat Builders Incorporated ("IBBI"), brought this action against Brunswick Corporation ("Brunswick") alleging that Brunswick engaged in a variety of anticompetitive conduct with respect to the market for stern drive and inboard marine engines.¹

Plaintiffs alleged violations of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act. Specifically, Plaintiffs claimed that Brunswick engaged in a multifaceted anticompetitive scheme that included the following unlawful practices: (1) the use of various exclusionary discount programs in the sale of stern drive and inboard marine engines to boat manufacturers; (2) the use of various exclusionary discount programs in the sale of stern drive and inboard marine engines to boat dealers; (3) the use of long-term contracts in the sale of stern drive and inboard marine engines; (4) the acquisitions of the boat manufacturers Ray Industries (Sea Ray), U.S. Marine (Bayliner), and Baja; and (5) the acquisitions of the engine manufacturers BMW Marine Diesel, Kiekhaefer Aeromarine and Force. Plaintiffs also alleged that Brunswick fraudulently concealed its anticompetitive acts.

Brunswick counterclaimed against the Plaintiffs who purchased stern drive engines, alleging that those Plaintiffs engaged in an unlawful group boycott. Brunswick alleged that Plaintiffs conspired to boycott MerCruiser stern drive engines at industry boat shows and conspired to price MerCruiser engines at a disadvantage to MerCruiser's competitors. Brunswick also brought three state law counterclaims against Plaintiffs G.W. Invader and KCS International relating to the alleged submission of falsified market share affidavits.

The trial commenced on April 13, 1998 and lasted ten weeks. The jury returned a verdict on June 19, 1998, after a day-and-a half of deliberations. The verdict defined the relevant market as the market for stern drive and inboard marine engines. The jury found for Plaintiffs on all three of the antitrust claims, finding that Brunswick had monopolized the market for stern drive and inboard marine engines; that Brunswick engaged in unreasonable restraints of trade in violation of Section 1 of the Sherman Act; and that Brunswick engaged in acquisitions in violation of Section 7 of the Clayton Act. The jury awarded damages of $44.4 Million on the antitrust claims.² In addition, the jury returned a verdict for Plaintiffs on Brunswick's antitrust counterclaim and for G.W. Invader and KCS International on the three state law counterclaims.

II.

A motion for judgment as a matter of law under Federal Rule of Civil Procedure 50(b) poses the legal question as to whether sufficient evidence was presented to support a jury verdict. Gray v. Bicknell, 86 F.3d 1472, 1478 (8th Cir.1996). The motion is properly granted only if the nonmoving party has not offered sufficient evidence to support a jury verdict in its favor. Parrish v. Immanuel Med. Ctr., 92 F.3d 727, 731 (8th Cir.1996); Gray, 86 F.3d at 1478; Abbott v. Crocker, Mo., 30 F.3d 994, 997 (8th Cir.1994). Before ruling on such a motion, a court must (a) resolve direct factual conflicts in favor of the nonmovant; (b) assume as true all facts supporting the nonmovant that the evidence tended to prove; (c) give the nonmovant the benefit of all reasonable inferences; and (d) deny the motion if the evidence would allow reasonable jurors to differ as to the conclusions that could be drawn. Parrish, 92 F.3d at 731; Gray, 86 F.3d at 1478; Sherlock v. Quality Control Equip. Co., 79 F.3d 731, 735 (8th Cir.1996). "Judgment as a matter of law is appropriate only when all of the evidence points one way and is susceptible to no reasonable inference sustaining the position of the nonmoving party." Kehoe v. Anheuser-Busch, Inc., 96 F.3d 1095, 1100 (8th Cir. 1996) (quoting Tidwell v. Meyer's Bakeries, Inc., 93 F.3d 490, 494 (8th Cir.1996)).

III.

Brunswick argues that Plaintiffs are seeking damages for conduct which is not anticompetitive or has been excluded from the case. This "disaggregation" argument is based upon the well-settled principle that an antitrust plaintiff is not entitled to recover for losses due to factors other than the defendant's anticompetitive acts. Amerinet Inc. v. Xerox Corp., 972 F.2d 1483 (8th Cir. 1992).

In order to place Brunswick's disaggregation argument in context, some explanation of Plaintiffs' damage model is necessary. Plaintiffs' expert, Dr. Robert Hall, provided the damage testimony for Plaintiffs at trial. Following his discussion of the alleged anti-competitive conduct, Dr. Hall testified that in order to quantify damages, he had to consider "what the market would have looked like without the conduct." Tr. at 1256. This analysis, commonly termed a "but for" analysis, required Dr. Hall to opine on the structure of the market and the market share of the participants in the absence of the conduct alleged to be anticompetitive. As a prelude to his damages testimony, Dr. Hall described the hypothetical "but for" market:

These are my conclusions as an economist about how the market would be different. We'll be talking more about how I reached these conclusions, but the conclusions are: today Brunswick's share of sterndrive market is around 80 percent — 75 to 80 percent. In this market without exclusionary acts, I believe that market share would be about 50 percent. It's not that Brunswick would not be in the market. Its role in the market would be smaller. Other rivals would be there, at least one other, taking up the other half the market there to give a good deal to compete against Brunswick.

Tr. at 1258. Thus, Dr. Hall essentially opined that in the "but for" market, Brunswick and at least one other engine manufacturer would each have approximately 50 percent of the relevant market.

Another key component to Dr. Hall's damage model is the economic model Dr. Hall used to derive his damage opinion, the Cournot model. In the Cournot model, competition is based on changing levels of output; each firm assumes that its rivals will produce a certain quantity of output and then selects its own profit-maximizing level of output. The Cournot model predicts that as the number of firms competing in a market increases, the relative concentration of the market decreases and the equilibrium price falls towards the competitive level.

Dr. Hall used the Cournot model to determine the average price in a competitive market for stern drive and inboard engines and then subtracted that price from an average actual price to determine an average overcharge per engine. One of the primary inputs into the Cournot model is market share. Consistent with Dr. Hall's opinion of the hypothetical market, if a market share of 50% is inserted into the formula, the model predicts no overcharge. However, as actual market share rises above 50%, the model predicts an overcharge, and the amount of the overcharge correspondingly increases the higher the share rises.

Brunswick contends that the damage model is fundamentally flawed for two reasons. First, according to Brunswick, events occurred in the actual market (the "real market") which were completely unrelated to any anticompetitive activity and resulted in market share gains for MerCruiser. Because Dr. Hall's model (the "hypothetical market") does not specifically account for these market share gains, Brunswick contends that the model inherently penalizes Brunswick for market share gains from lawful activity. Second, Brunswick points out that Dr. Hall's initial damage opinion at trial was identical to the opinion from his pre-trial report, even though the Court, prior to trial, had excluded from the jury's consideration two alleged anticompetitive acts which formed the basis of the damage opinion in the report.

A.

With respect to Brunswick's first argument, evidence was introduced at trial that two "events" in the real market, unrelated to the conduct of Brunswick, accrued to Brunswick's benefit and most likely resulted in some degree of market share gain for MerCruiser. The first event, the Outboard Marine Corporation ("OMC") Cobra recall, received quite a bit of attention throughout the trial. OMC was one of Brunswick's principal competitors in the stern drive business in the 1980's and early 1990's. In 1986, OMC's stern drive engine, the "Cobra," developed a problem with a shift cable which controlled whether the drive unit was in or out of gear. The testimony at trial was that the problem lingered about for some time, and that OMC initially blamed its dealers for the problem. Finally in 1989, OMC was forced to issue a voluntary recall of all of its Cobra engines produced from 1986 through 1989. Dr. Hall agreed that the Cobra problem cost OMC engine sales and resulted in market share gains by MerCruiser.

The second event involved the alleged confusion and mismanagement relating to the joint venture between OMC and Volvo Penta of the Americas ("Volvo"). There was evidence that several boat manufacturers were skeptical of the joint venture in...