GAF Corp. v. Eastman Kodak Co.

• Decision Date: 03 August 1981
• Docket Number: No. 73 Civ. 1893 (LWP).,73 Civ. 1893 (LWP).
• Citation: 519 F. Supp. 1203
• Parties: GAF CORPORATION, Plaintiff, v. EASTMAN KODAK COMPANY, Defendant.
• Court: U.S. District Court — Southern District of New York

519 F. Supp. 1203

GAF CORPORATION, Plaintiff, v. EASTMAN KODAK COMPANY, Defendant.

No. 73 Civ. 1893 (LWP).

United States District Court, S. D. New York.

August 3, 1981.

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Stephen M. Axinn, Henry P. Wasserstein, Dennis J. Drebsky, Jonathan J. Lerner, Irene A. Sullivan, Finbarr J. O'Neill, Sandra D. Thorn, Joseph C. Petillo, Joan M. Secofsky, Georgene M. Vairo, Skadden, Arps, Slate, Meagher & Flom, New York City, for plaintiff.

Robert MacGrate, Richard E. Carlton, John L. Warden, Jerrold J. Ganzfried, Philip K. Howard, Jeffrey S. Parker, William Farris, William C. Lucas, Mark C. Rosenblum, Sullivan & Cromwell, Helmut F. Furth, New York City, of counsel, for defendant.

OPINION AND ORDER

PIERCE, District Judge.

This action arises in a context in which it is asserted that for years the defendant Eastman Kodak Company ("Kodak") has dominated the amateur photographic industry, developing, manufacturing, and selling cameras, film, photofinishing equipment, supplies, and other related products, and providing photofinishing services. Until July 1977, when it ceased its production of film, chemicals, print paper, and slide and movie projectors, and ceased its sales of amateur still and movie cameras, and later, in April 1978, when it sold its photofinishing service organization, GAF Corporation ("GAF") competed with Kodak in many markets within the amateur photographic industry.

By this lawsuit, commenced in 1973, GAF seeks treble damages and equitable relief for Kodak's alleged violations of the federal antitrust laws. GAF presently alleges¹ that Kodak combined and conspired with two flash manufacturers, in violation of ? 1 of the Sherman Act, 15 U.S.C. ? 1, to unlawfully restrain trade in the nationwide market for amateur conventional still cameras. Further, GAF alleges that Kodak monopolized and attempted to monopolize, in violation of ? 2 of the Sherman Act, 15 U.S.C. ? 2, five nationwide markets or submarkets, including the markets for amateur conventional still film, amateur movie film, amateur movie cameras, amateur photofinishing equipment and services, and photographic chemicals for the amateur photofinishing industry.

Now before the Court are five motions for partial summary judgment ?€” one filed by the plaintiff and four filed by the defendant.

I. Collateral Estoppel Effect of Berkey

On January 29, 1973, Berkey Photo, Inc. ("Berkey") instituted an antitrust action against Kodak ?€” an action then Chief Judge Kaufman of the Second Circuit was later to describe as "one of the largest and most significant private antitrust suits in history." Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 267 (2d Cir. 1979), cert. denied, 444 U.S. 1093, 100 S.Ct. 1061, 62 L.Ed.2d 783 (1980). Approximately three months later, on April 30, 1973, GAF filed the present action against Kodak, an action apparently broader in its scope than Berkey. Identified as related cases, both were assigned to Judge Frankel. In 1976, after discovery and pretrial proceedings (which were jointly coordinated to some degree), Judge Frankel, over Kodak's objection, ordered a prior and separate trial of the Berkey case. Berkey Photo, Inc. v. Eastman Kodak Co., 73 Civ. 424, Memorandum dated October 22, 1976 (appended as Exhibit 2 to Kodak's Memorandum in Opposition to GAF's Motion for Partial Summary Judgment Based On Collateral Estoppel).

The jury trial of the Berkey action was bifurcated. A liability trial, commencing on July 13, 1977 and ending on January 21, 1978, consumed 109 trial days. A month later, trial was resumed for eight days on the issue of damages, and resulted in a jury verdict of over $37 million in favor of Berkey before trebling. After trial, Kodak's motion for judgment notwithstanding the verdict was granted on certain of Berkey's claims, portions of the damage award were set aside, and certain equitable relief was granted. 457 F.Supp. 404 (S.D.N.Y.1978). On July 3, 1978, a final judgment in excess of $87 million was entered in Berkey's favor.

Thereafter, both sides appealed and on June 25, 1979, a unanimous panel filed its opinion. 603 F.2d 263. Rather than attempt to summarize the Second Circuit's detailed opinion, the disposition of the appeals will be discussed below. Berkey petitioned for certiorari, and Kodak filed a conditional cross-petition for certiorari, to be considered only in the event that Berkey's petition was granted. On March 19, 1980, the Supreme Court denied certiorari, with three Justices dissenting. 444 U.S. 1093, 100 S.Ct. 1061, 62 L.Ed.2d 783 (1980).

GAF now seeks, by motion for partial summary judgment, an order based upon the doctrine of offensive collateral estoppel² precluding Kodak from relitigating or denying material facts which it contends were necessarily and conclusively determined in Berkey.³ In essence, GAF claims that, with respect to its claims under ? 2 of the Sherman Act, Kodak should be precluded from litigating or denying (1) the definition of three relevant product markets: conventional amateur cameras, amateur film, and color paper, and (2) that it had monopoly power in those three markets.⁴ Similarly, with regard to its claims that Kodak violated ? 1 of the Sherman Act, GAF contends that Kodak should be precluded from denying or litigating that it engaged in illegal conspiracies with both Sylvania and General Electric in connection with the development of flash devices.⁵

The issues presented by GAF's motion are (1) whether a private plaintiff in a treble damages action may, under the doctrine of offensive collateral estoppel, avail itself of the benefits of rulings adverse to the same defendant in a prior private antitrust action, and (2) if so, whether offensive collateral estoppel should be applied to the facts of this case. The first issue, and accordingly the second issue, are questions of first impression in this Circuit.

Before beginning its discussion, the Court notes that the Supreme Court has instructed that "the trial court has broad discretion to determine when offensive collateral estoppel should be applied." Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979).

A. Offensive Collateral Estoppel in Antitrust Actions

Kodak contends that according to ? 5(a) of the Clayton Act, 15 U.S.C. ? 16, and the general enforcement scheme of the federal antitrust laws, offensive collateral estoppel can never be applied in an antitrust case. Kodak points to ? 5(a) of the Clayton Act, which, prior to its amendment in September 1980, provided that an adverse final judgment or decree in a prior civil or criminal antitrust action brought by the government could be no more than prima facie evidence of a violation by the same defendant in a subsequent action brought by a private plaintiff. Kodak reasoned that since the statute barred the use of preclusive offensive collateral estoppel from a prior government action, it would be anomalous to allow a prior private action to be given full preclusive effect. This reasoning was founded on the premise that Congress intended government suits, both civil and criminal, to be the mainstays of federal antitrust law enforcement, with private actions playing a secondary role.

Although this argument requires an acceptance of the proposition that Congress proscribed by implication the use of offensive collateral estoppel based on a prior private action, the argument nonetheless has some appeal. There is compelling evidence that Congress intended government suits, presumably brought in the public interest, to be the foundation of federal antitrust enforcement. See Note, Section 5(a) of the Clayton Act and Offensive Collateral Estoppel in Antitrust Damage Actions, 85 Yale L.J. 541, 555-563 (1976) (collecting authorities); see also II P. Areeda & D. Turner, Antitrust Law, ? 327, at 131 (1978); but see Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 139, 88 S.Ct. 1981, 1984, 20 L.Ed.2d 982 (1968) ("private suits are bulwark of antitrust enforcement").

Kodak's argument, however, was undercut by the enactment of the Antitrust Procedural Improvements Act of 1980, Pub.L. 96-349, on September 12, 1980. The Act amended, inter alia, ? 5(a) of the Clayton Act to permit full preclusive effect to be given to prior government actions. Pub.L. 96-349 at ? 5, amending 15 U.S.C. ? 16(a). The avowed purpose of the amendment was to "permit application of the collateral estoppel doctrine to eliminate wasteful retrying of issues and reduce the costs of complex antitrust litigation to the courts and parties." H.R.Rep.No. 96-874, 96th Cong., 2d Sess. at 3 (1980), reprinted in 1980 U.S. Code Cong. & Ad.News 2716, 2752, 2753; see also H.R.Rep.No. 96-1234, 96th Cong., 2d Sess. at 9 (1980), reprinted in 1980 U.S. Code Cong. & Ad.News 2781, 2783; National Commission for the Review of Antitrust Law and Procedures, Report to the President and the Attorney General (Jan. 22, 1979), reprinted in 897 Antitrust & Trade Reg.Rep. (BNA) (Special Supp.) at 29-31.⁶ Now, given the amended language of ? 5(a), the grant of collateral estoppel effect from a prior private action to another private action would not, in this Court's view, relegate government suits to a secondary role.

Thus, the Court concludes that offensive collateral estoppel effect may be given to a prior private antitrust action in a subsequent private antitrust suit.

B. Application of Collateral Estoppel to the Case at Bar

The next issue presented is whether offensive collateral estoppel is properly applicable to the case at bar. Briefly stated, the following are preconditions to the application of collateral estoppel: (1) the party against whom collateral estoppel is asserted must have been a party, or in privity with a party, to the prior action; (2) there must have been a final determination of the merits of the issues sought to be collaterally...