Confederated Tribes v. Weyerhaeuser Co.

• Decision Date: 31 May 2005
• Docket Number: No. 03-35984.,No. 03-35669.,03-35669.,03-35984.
• Citation: 411 F.3d 1030
• Parties: CONFEDERATED TRIBES OF SILETZ INDIANS OF OREGON; Smokey Point Hardwood, Inc., Plaintiffs, and Ross-Simmons Hardwood Lumber Company, Inc., Plaintiff-Appellee, v. WEYERHAEUSER COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

411 F.3d 1030

CONFEDERATED TRIBES OF SILETZ INDIANS OF OREGON; Smokey Point Hardwood, Inc., Plaintiffs, and Ross-Simmons Hardwood Lumber Company, Inc., Plaintiff-Appellee, v. WEYERHAEUSER COMPANY, Defendant-Appellant.

No. 03-35669.

No. 03-35984.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 6, 2004.

Filed May 31, 2005.

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Stephen V. Bomse, M. Laurence Popofsky and Heather N. Leal, Heller Ehrman White & McAuliffe LLP, San Francisco, CA, for the appellant.

Michael E. Haglund, Haglund, Kelley, Horngren & Jones, LLP, and Roy Pulvers, Lindsay, Hart, Neil & Weigler, LLP, Portland, OR, for the appellee.

Appeal from the United States District Court for the District of Oregon; Owen M. Panner, Senior District Judge, Presiding. D.C. No. CV-00-01693-OMP.

Before: T.G. NELSON and RAWLINSON, Circuit Judges, and SCHWARZER,^* Senior District Judge.

T.G. NELSON, Circuit Judge:

Ross-Simmons Hardwood Lumber Company brought this action against Weyerhaeuser Company for antitrust violations under Section 2 of the Sherman Act.¹ Ross-Simmons alleged that Weyerhaeuser monopolized and attempted to monopolize the Pacific Northwest input market for alder sawlogs through its purchases of sawlogs. Ross-Simmons prevailed in a jury trial on both its monopolization and attempted monopolization claims. After trebling the jury's damages award, the court entered judgment for Ross-Simmons and denied Weyerhaeuser's motion for judgment as a matter of law or for a new trial. The court also awarded attorneys' fees and costs to Ross-Simmons. Weyerhaeuser appeals the court's denial of its motion for judgment as a matter of law or for a new trial, and seeks reversal of the judgment. Weyerhaeuser also separately appeals the district court's award of attorneys' fees and costs to ensure that any reversal of the judgment or remand for a new trial would also result in reversal of the award of attorneys' fees and costs. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

I. BACKGROUND

The forests west of the Cascade Mountains in Oregon and Washington contain sufficient hardwood to support the only concentration of hardwood sawmills in the western United States. These mills are part of what is often called the "alder industry" after the area's predominant hardwood species, which accounts for 95% of the annual Pacific Northwest hardwood lumber production. The three principal players in the alder portion of the hardwood industry are: (1) timberland owners and loggers who supply alder sawlogs; (2) production facilities, including sawmills, that buy sawlogs and process them into finished alder lumber; and (3) purchasers who buy hardwood lumber from production facilities. Both parties in this case fall under the second category: they operate sawmills.

The plaintiff-appellee, Ross-Simmons Hardwood Lumber Company, was a pioneer in the alder lumber business, starting in 1962. It operated its mill in Longview, Washington continuously until it went out of business in 2001. From 1990 to 1997, Ross-Simmons experienced modest prosperity, but from 1998 to 2001, its production declined. From 1998 to 2001, sawlog prices increased while finished lumber prices decreased. This was unusual: historically, the price of alder sawlogs fluctuated with the price of finished lumber. Because its materials costs went up and its production went down, Ross-Simmons incurred losses totaling nearly $4.5 million, forcing it to shut down in 2001. Ross-Simmons blamed its failure on Weyerhaeuser.

The defendant-appellant, Weyerhaeuser Company, was established in 1900. In 1980, it acquired Northwest Hardwoods, Inc. (also "Weyerhaeuser"), and now owns six hardwood sawmills in the Pacific Northwest. Weyerhaeuser is one of the largest manufacturers of hardwood lumber in the world. From 1998 to 2001, the period in which Ross-Simmons's profits dropped, Weyerhaeuser's share of the Pacific Northwest market for alder sawlogs was approximately 65%.

Ross-Simmons alleged that Weyerhaeuser artificially increased sawlog prices to drive Ross-Simmons and other competitors out of business. At trial, Ross-Simmons offered testimony and other evidence to prove that Weyerhaeuser attempted to eliminate competitors by driving up sawlog prices and restricting access to sawlogs through: (1) predatory overbidding (i.e., paying a higher price for sawlogs than necessary); (2) overbuying (i.e., buying more sawlogs than it needed); (3) entering restrictive or exclusive agreements with sawlog suppliers; and (4) making misrepresentations to state officials in order to obtain sawlogs from state forests. Weyerhaeuser attributed Ross-Simmons's failure to substandard equipment, inefficient operations, poor management, and inadequate capital investment.

The court instructed the jury on the applicable law, including the elements of both monopoly and attempted monopoly, the law regarding anticompetitive conduct in the form of predatory overbidding, and the issue of damages. With respect to overbidding, the court instructed the jury that, if it found that Weyerhaeuser paid higher prices than necessary for sawlogs, the jury could regard that as an anticompetitive act. The jury found for Ross-Simmons on both the monopolization and attempted monopolization claims, and awarded damages of $26,256,406. After trebling the damages award, the court entered judgment in the amount of $78,769,218 against Weyerhaeuser. The court then denied Weyerhaeuser's motion for judgment as a matter of law or for a new trial, and awarded attorneys' fees and costs to Ross-Simmons.

Weyerhaeuser appeals the judgment, arguing that: (1) it is entitled to judgment as a matter of law because it had no market power in the alder sawlog market and the alleged anticompetitive acts were not actionable under § 2 of the Sherman Act, (2) it is entitled, in the alternative, to a new trial because the jury instructions misstated the law of predatory overbidding, and (3) it is entitled to reversal of the judgment because Ross-Simmons's damages theory was speculative. Weyerhaeuser also appeals the court's grant of attorneys' fees and costs to Ross-Simmons so that any reversal of the judgment or remand for a new trial would also result in reversal of the award of attorneys' fees and costs.

II. ANALYSIS

Weyerhaeuser's challenges to the court's denial of its motion for judgment as a matter of law or for a new trial present us with a legal question of first impression: whether the prerequisites set forth in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.² for establishing liability in sell-side predatory pricing cases apply in cases where a defendant engages in buy-side predatory bidding by raising the cost of inputs. We address this legal issue at the outset, applying a de novo standard of review.³ For the reasons discussed below, we conclude that Brooke Group does not control in the buy-side predatory bidding context at issue here.

Our conclusion that Brooke Group does not apply here disposes of Weyerhaeuser's challenge regarding a new trial due to erroneous jury instructions in its entirety. The court properly instructed the jury regarding predatory overbidding. Our holding that Brooke Group is inapplicable also partially resolves Weyerhaeuser's challenge regarding judgment as a matter of law. Because Weyerhaeuser further contends that the evidence was insufficient to support the jury's verdict, we must examine that contention, however. After doing so, we conclude that substantial evidence did support the jury's finding of attempted monopolization. Thus, we affirm the court's denial of Weyerhaeuser's motion for judgment as a matter of law or for a new trial.

Two issues remain unresolved after we address the issue related to Brooke Group. They are: (1) damages, and (2) attorneys' fees and costs. We resolve them as follows. First, we uphold the jury's award of damages because it was based upon an appropriate estimate of damages. Second we conclude that the court properly granted attorneys' fees and costs in favor of Ross-Simmons. Accordingly, we affirm.

A. ISSUES RELATED TO BROOKE GROUP

1. Inapplicability of Brooke Group

Monopoly power exercised on the buy-side of the market is called "monopsony" power, and can violate § 2 of the Sherman Act.⁴ Both sides of the market affect allocative efficiency, and hence consumer welfare.⁵ Antitrust laws are thus concerned with competition on the buy-side of the market as much as on the sell-side of the market.⁶

Weyerhaeuser argues that, regardless of whether a case involves sell-side predatory pricing or buy-side predatory bidding, the same standard of liability should apply. Weyerhaeuser invites the court to borrow the standard of liability set forth in Brooke Group, a sell-side predatory pricing case. In Brooke Group, the Court created a high standard of liability, holding that a plaintiff bringing a claim under § 2 of the Sherman Act based on predatory sell-side pricing must show that: (1) "the prices complained of are below an appropriate measure of its rival's costs," and (2) "a dangerous probability" existed that the rival would later "recoup[ ] its investment in below-cost prices" once it stopped such pricing.⁷ Thus, to establish liability under Brooke Group, a plaintiff had to show that its competitor operated at a loss and was likely to recoup its losses. Weyerhaeuser contends that the same standard should apply in buy-side predatory bidding cases. Specifically, Weyerhaeuser argues that the jury instructions were erroneous because the court did not instruct the jury that overbidding for sawlogs could be anticompetitive conduct only if Weyerhaeuser operated at a loss and a dangerous probability of its recoupment of losses existed.⁸ Similarly, Weyerhaeuser argues that, as a matter of law,⁹ the alleged predatory overbidding was not actionable anticompetitive conduct under the Sherman Act because Ross-Simmons did not...