Gulf States Reorganization Group v. Nucor Corp.

• Decision Date: 05 October 2006
• Docket Number: No. 05-15976.,05-15976.
• Citation: 466 F.3d 961
• Parties: GULF STATES REORGANIZATION GROUP, INC., Plaintiff-Appellant, v. NUCOR CORPORATION, Casey Equipment Corporation, Gadsden Industrial Park, LLC, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

466 F.3d 961

GULF STATES REORGANIZATION GROUP, INC., Plaintiff-Appellant, v. NUCOR CORPORATION, Casey Equipment Corporation, Gadsden Industrial Park, LLC, Defendants-Appellees.

No. 05-15976.

United States Court of Appeals, Eleventh Circuit.

October 5, 2006.

Philip Clark Jones, Bell, Boyd & Lloyd, PLLC, Washington, DC, Ralph Kenneth Strawn, Jr., Henslee, Robertson, Strawn & Knowles, L.L.C., Gadsden, AL, for Plaintiff-Appellant.

John B. Wyss, Bert W. Rein, David Mark Renaud, Wiley, Rein & Fielding, LLP, Washington, DC, Michael R. Borasky, Eckert, Seamans, Cherin & Mellott, LLC, Pittsburgh, PA, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Alabama.

Before ANDERSON, BARKETT and CUDAHY,^* Circuit Judges.

ANDERSON, Circuit Judge:

I. BACKGROUND

This case concerns the Southeastern retail market for hot rolled coil, a type of thin steel used for items such as highway railings and gas canisters. Appellant Gulf States Reorganization Group ("the Group") challenges Appellees' acquisition of steel mill assets in a bankruptcy auction as a violation of the antitrust laws. Appellee Nucor is the dominant producer of hot rolled coil for the relevant geographic market, the Southeast United States.

In 1999, Gulf States Steel, Inc. of Alabama ("Gulf States"), a competitor of Appellee, Nucor Corporation, filed for bankruptcy under Chapter 11, which was later converted to a Chapter 7 bankruptcy. It owned and operated a steel plant in Gadsden, Alabama. After Gulf States ceased operations, the Group was formed to purchase certain of its assets in the Gadsden mill that could be used to produce hot rolled coil ("the Assets"). In 1999, an independent assessor had put the total market value of the Assets at approximately $19.8 million. In May 2001, a bankruptcy auction was held and the Assets were unsold because neither the Group nor other potential bidders would meet the reserve price of $7.1 million.

During 2001 and 2002, the Group entered into private negotiations with the Bankruptcy Trustee for the purchase of the Assets. In 2002, in preparation for these negotiations, the Group determined that the Assets had a value of at least $13.3 million. In June 2002, the Group offered the Trustee $5 million for the Assets. The bankruptcy court then issued an order saying that the Assets would be sold to the Group unless another party made a higher bid, in which case a second bankruptcy auction would be held.

This order came to the attention of Appellee Casey Equipment Corporation and Appellee Nucor Corporation. The two companies have a long relationship of buying and selling used steel equipment. They agreed to form a third entity, Appellee Gadsden Industrial Park LLC ("Park") to bid for the Assets and to resell them. Nucor would fund the bid and Casey would manage the sale. Nucor would have an unilateral right to reject any sale of the Assets to domestic purchasers, but a more limited right with respect to foreign ones. They agreed that the highest bid they would make was $8 million.

On September 12, 2002, Park bid $5,250,000 for the Assets, triggering the auction. The Group contacted the Federal Trade Commission about Nucor's involvement but the Commission did not take any action. On September 16, 2002, the bankruptcy auction was held. Prior to the auction, the Group had received $5 million in additional support from the Gadsden Development Authority and $1.5 million from Jefferson Iron & Metal Brokerage, Inc., a scrap dealer. Park's final bid for the Assets was $6.3 million in cash. The Group submitted a part credit/part cash bid of $7 million, even though it had been advised that a credit bid would not be allowed.

The trustee rejected the Group's bid but gave it extra time to make a conforming bid. Although the Group could have made a cash bid of $8.1 million, it did not do so. Thus, Park's bid of $6.3 million was accepted by the bankruptcy trustee. After prevailing, Appellees resold most of the Assets in the Asian market for nearly three times the amount of their successful bid.

On October 23, 2002, the Group sued Appellees in the federal district court for the Northern District of Alabama, alleging violations of Sections 1 and 2 of the Sherman Act. On September 30, 2005, the district court granted Appellees summary judgment on all counts, dismissing the case with prejudice. The Group timely filed an appeal and this case is properly before us.

II. DISCUSSION

We review a district court's grant of summary judgment de novo. Morris Communications Corp. v. PGA Tour, Inc., 364 F.3d 1288 (11th Cir.2004).

Before the district court, the Group alleged that the Appellees violated Section 1 of the Sherman Act, prohibiting agreements to restrain trade, and that Nucor violated Section 2 of the Sherman Act, prohibiting monopolization. The district court granted the Appellees summary judgment for three reasons: (1) The Group lacked Article III standing because it did not show that the defendants had caused its injury; (2) the Group lacked "antitrust standing" because it failed to demonstrate "antitrust injury," that is to say injury of the sort that the antitrust laws are meant to redress; and (3) the defendants' actions could not constitute a violation of the antitrust laws because they increased competition in the bankruptcy auction. We conclude that to the contrary, the Group properly demonstrated both causation and antitrust injury and we remand this case to the district court to determine whether the challenged transaction violated the antitrust laws.

A. The Group Adduced Sufficient Evidence of Causation.

Because the Constitution limits the subject matter jurisdiction of federal courts to cases and controversies, a plaintiff must demonstrate "a causal connection between the injury and the conduct complained of" to have standing in a federal court. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351 (1992). In the instant case, the Group maintains that the injury it suffered was exclusion from the relevant market on account of its failure to purchase the Assets. The conduct complained of is Appellees' arrangement to have Nucor fund Park's bid. The Group alleges that Nucor enjoys a monopoly in the relevant market and therefore it could not have participated in the auction without violating the antitrust laws.

These assertions state a clear causal connection between the plaintiff's injury and the defendants' conduct. The bankruptcy court had previously told the Group that it could purchase the Assets unless a rival bidder offered a higher cash bid at the bankruptcy auction. At auction, the Appellees offered a higher cash bid. As there were only two bidders in the auction, it is clear that the Group would have purchased the Assets but for the Appellees' participation in the auction.

The district court held otherwise, concluding that the cause was the Group's decision to submit, not a higher cash bid, but instead a non-conforming part credit/part cash bid. However, the mere fact that the Group's own decisions played a role in its failure to win at auction does not obviate the causal connection between the defendants' conduct and the plaintiff's injury. Antitrust law does not require that the defendant be the exclusive cause of the plaintiff's injury but only a "material" one. Cable Holdings of Georgia, Inc. v. Home Video, Inc., 825 F.2d 1559, 1561-62 (11th Cir.1987) ("To recover under the antitrust laws, a plaintiff must prove that a defendant's illegal conduct materially contributed to his injury.") It is true that the Group could have prevailed had it submitted a higher cash bid. But the Group's need to make a higher bid was occasioned only by the participation of Nucor. If Nucor's participation were a violation of the antitrust laws — an issue that we do not decide today — then it would be improper to regard the Group's injury as entirely self-caused.

Thus, we conclude that the Group has satisfied the causation-in-fact requirement for standing in federal courts.

B. The Group Has Properly Alleged Antitrust Injury.

In addition to the general standing requirements that apply to all plaintiffs in federal court, plaintiffs challenging violations of the antitrust laws must also show that they have suffered "antitrust injury," or "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977). That is to say, even assuming that the Appellees did violate the antitrust laws, the Group must still show that its injury due to those violations was the sort that the antitrust laws were intended to prevent. We conclude that the Group has properly alleged antitrust injury.

We begin our antitrust injury inquiry by characterizing the precise violation asserted by the Group. We note that while the actual claims in the Complaint are violations of Sections 1 and 2 of the Sherman Act, the allegedly anticompetitive conduct on which the Group bases its claims is an asset acquisition, thus implicating Section 7 of the Clayton Act.¹ Section 7 of the Clayton Act prohibits corporations from asset acquisitions that will lessen competition or tend to create a monopoly. 15 U.S.C. § 18.² If an acquisition of assets of a competitor in the relevant market by a monopolist or dominant firm might otherwise substantially lessen competition, that acquisition may nonetheless be tolerated under the "failing company defense," which allows a dominant firm to purchase assets from a competitor that is about to leave the relevant market, as long as there exist no competitively preferable purchasers of those assets. Citizen Publishing Co. v. United States, 394 U.S. 131, 138, 89 S.Ct. 927, 931, 22 L.Ed.2d 148 (1969); see also, 4 Phillip E. Areeda et al., Antitrust Law ¶ 1954 (hereinafter, "Areeda"). If such a...