Hdc Medical, Inc. v. Minntech Corp., 06-1638.

• Decision Date: 25 January 2007
• Docket Number: No. 06-1638.,06-1638.
• Parties: HDC MEDICAL, INC., Appellant, v. MINNTECH CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

474 F.3d 543

HDC MEDICAL, INC., Appellant, v. MINNTECH CORPORATION, Appellee.

No. 06-1638.

United States Court of Appeals, Eighth Circuit.

Submitted: October 19, 2006.

Filed: January 25, 2007.

COPYRIGHT MATERIAL OMITTED

James J. Long, argued, Minneapolis, MN, for Appellant.

Todd Wind, argued, Fredrikson & Byron, Minneapolis, MN, for Appellee.

Before SMITH, BOWMAN, and COLLOTON, Circuit Judges.

SMITH, Circuit Judge.

HDC Medical, Inc ("HDC") and Minntech Corporation ("Minntech") are competitors in a specialized medical-device market. HDC brought suit against Minntech alleging exclusionary and predatory conduct in violation of the Sherman Act. The district court¹ granted Minntech's motion for summary judgment. HDC appeals. We affirm.

I. Background

Both HDC and Minntech manufacture dialyzer reprocessing machines. Minntech manufactures a dialyzer reprocessing machine called "the Renatron," while HDC produces "the MAKY." Dialyzer reprocessing machines work in conjunction with dialyzers. Dialyzers, which filter blood waste products, serve as an artificial kidney in hemodialysis. Dialyzers come in two forms: single-use and multiple-use. Single-use dialyzers are disposable and can be used only once. Multiple-use dialyzers, on the other hand, can be used repeatedly if cleaned by a dialyzer-reprocessing machine. Dialyzer reprocessing machines sanitize multiple-use dialyzers using chemical mixtures called reprocessing solutions. Minntech produces a reprocessing solution marketed as Renalin. HDC Medical also produces a reprocessing solution marketed as Peracidin.

Beginning in 2000, Minntech began modifying the design of the Renatron. These modifications, HDC alleges, rendered HDC's reprocessing solution, Peracidin, incompatible with the Minntech dialyzer reprocessing machines, the Renatron. Additionally, these modifications, HDC alleges, were accompanied by Minntech warranty manipulations, slander of the HDC products and tying arrangements intended to push HDC out of the reprocessing solution market.

HDC sued Minntech, alleging that Minntech's actions violated the Sherman Act, 15 U.S.C. §§ 1, 2. Minntech successfully moved for summary judgment and the case was dismissed. The district court dismissed HDC's monopoly claim after determining no genuine issue of material fact existed regarding Minntech's power in the relevant market. The district court also dismissed HDC's attempted monopoly claim after determining that no genuine issue of material fact existed regarding Minntech's alleged anticompetitive conduct or Minntech's dangerous probability of success.

II. Discussion

"We review de novo a grant of summary judgment, considering the facts in the light most favorable to the nonmoving party. Summary judgment is proper when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law." Nat'l Am. Ins. Co. v. W & G, Inc., 439 F.3d 943, 945 (8th Cir.2006) (internal citations omitted). The courts should enter summary judgment on the merits in antitrust litigation sparingly. Lomar Wholesale Grocery, Inc. v. Dieter's Gourmet Foods, Inc., 824 F.2d 582, 585 (8th Cir.1987). However, where there has been ample opportunity for discovery, summary judgment is appropriate in antitrust cases, just as in any other litigation, upon a showing of an absence of any genuine issue of material fact. Willmar Poultry Co. v. Morton-Norwich Prods., Inc. 520 F.2d 289, 293 (8th Cir. 1975).

A. Monopolization Claim

A prima facie claim of monopolization under the Sherman Act requires a plaintiff to show that the defendant "possessed monopoly power in the relevant market" and "willfully acquired or maintained that power." Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483, 1490 (8th Cir. 1992). To establish that a defendant possesses the requisite market power required for monopolization liability, a plaintiff must establish that the defendant has a dominant market share in a well-defined relevant market. Morgenstern v. Wilson, 29 F.3d 1291, 1296 (8th Cir. 1994).

The relevant product market is a question of fact, which the plaintiff bears the burden of proving. Id. We have noted, "Antitrust claims often rise or fall on the definition of the relevant market." Bathke v. Casey's Gen. Stores, Inc., 64 F.3d 340, 345 (8th Cir.1995). The relevant market has two components—a product market and a geographic market. Id. Here, the parties dispute only the relevant product market. The district court found that single-use and multiple-use dialyzers are competitors in the same market and concluded that Minntech did not possess monopoly power in the relevant market. HDC, however, contends that single-use and multiple-use dialyzers do not compete in the same product market.

The boundaries of the product market can be determined by the reasonable interchangeability or cross-elasticity of demand between the product itself and possible substitutes for it. Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962); United States v. Archer-Daniels-Midland Co., 866 F.2d 242, 246 (8th Cir.1988) cert. denied; 493 U.S. 809, 110 S.Ct. 51, 107 L.Ed.2d 20 (1989). In other words, the product market can be determined by analyzing how "consumers will shift from one product to the other in response to changes in their relative costs." SuperTurf, Inc. v. Monsanto Co., 660 F.2d 1275, 1278 (8th Cir.1981). To conduct this inquiry, the courts must weigh several factors including, industry or public recognition of the products as a separate economic entity, the product's peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors. Brown Shoe Co., 370 U.S. at 325, 82 S.Ct. 1502.

The district court granted Minntech's motion for summary judgment after finding that multiple-use dialyzers and single-use dialyzers have identical uses. HDC does not dispute this finding but argues that the district court ignored case law suggesting that significant price differences between identical-use products can establish reasonable interchangeability, and thus support a jury's inference that two separate product markets exist. We disagree.

The Supreme Court has repeatedly held that a price differential alone is insufficient to infer two separate product markets. "[P]rice is only one factor in a user's choice between one [product] or the other. That there are price differentials between the two products . . . are relevant matters but not determinative of the product market issue." United States v. Cont'l Can Co., 378 U.S. 441, 455, 84 S.Ct. 1738, 12 L.Ed.2d 953 (1964); see also Brown Shoe Co., 370 U.S. at 326, 82 S.Ct. 1502. ("It would be unrealistic to accept Brown's contention that, for example, men's shoes selling below $8.99 are in a different product market from those selling above $9.00.")

HDC maintains that other cases from the Court and this circuit suggest that a substantial price differential between two products can, alone, justify the inference of two separate markets. To support this contention, HDC quotes language in United States v. Aluminum Co. of America, 377 U.S. 271, 84 S.Ct. 1283, 12 L.Ed.2d 314 (1964), and our holding in Archer-Daniels-Midland Co. Both cases are distinguishable.

In Aluminum Co. of America, the Supreme Court found two different product markets existed for insulated aluminum and insulated copper cable as used in overhead distribution. Although there were no quality differences between the two products, copper cable was more expensive. Aluminum Co. of America, 377 U.S. at 276, 84 S.Ct. 1283. HDC heavily relies upon the Court's statement that "to ignore price in determining the relevant line of commerce is to ignore the single, most important, practical factor in the business." Id.

However, the Court in Aluminum Co. of America used price as only a supporting factor in its ultimate determination that insulated aluminum and insulated copper cable were in different product markets. The Court found most persuasive the fact that insulated aluminum and insulated copper cable had two distinct end uses. "While the copper conductor does compete with aluminum conductor, each has developed distinctive end uses-aluminum as an overhead conductor and copper for underground and indoor wiring, applications in which aluminum's brittleness and larger size render it impractical. And, as we have seen, the price differential further sets them apart." Id. at 277, 84 S.Ct. 1283. Thus, the Court in Aluminum Co. of America reminds lower courts to consider price but also that price alone is not dispositive. Other factors should also be considered.

HDC's reliance upon our holding in Archer-Daniels-Midland Co. is also misplaced. In that case we created a narrow exception to the general prohibition against placing great weight on only price differentials to determine the relevant product market, stating:

While generally a price differential, even a substantial one, is irrelevant for purposes of determining reasonable interchangeability, a large price differential as a result of a government price support raising the price of one product, but not the other, to an artificially high level is a relevant factor. This is true because of the inability of the price supported product to constrain the price of the other product. The artificially high price of sugar does not constrain the price of HFCS; thus, the competition from sugar does not regulate HFCS producers' business behavior. Competition between HFCS producers may be necessary to accomplish this goal. The price differential between sugar and HFCS, at least as a result of government price supports, is sufficient to show that sugar is not reasonably interchangeable with HFCS and thus does not belong in the same relevant product market with HFCS.

866 F.2d at 246.

Here, HDC does not allege governmental interference with the natural function of the dialyzer market;...