In re Publ'n Paper Antitrust Litig.

• Decision Date: 06 August 2012
• Docket Number: Docket No. 11–101–cv.
• Parties: In re PUBLICATION PAPER ANTITRUST LITIGATION.
• Court: U.S. Court of Appeals — Second Circuit

690 F.3d 51

2012-2 Trade Cases P 78,000

In re PUBLICATION PAPER ANTITRUST LITIGATION.

Docket No. 11–101–cv.

United States Court of Appeals, Second Circuit.

Argued: Dec. 21, 2011.

Decided: Aug. 6, 2012.

Daniel A. Small, Cohen Milstein Sellers & Toll PLLC, Washington, DC (Kathleen M. Konopka, Cohen Milstein Sellers & Toll PLLC, Washington, DC; David R. Schaefer, Brian P. Daniels, Brenner, Saltzman & Wallman LLP, New Haven, CT; Gary Specks, Kaplan Fox & Kilsheimer LLP, Highland Park, IL; Vincent J. Esades, Heins Mills & Olson, PLC, Minneapolis, MN; Steven J. Greenfogel, Daniel B. Allanoff, Meredith Cohen Greenfogel & Skirnick, PC, Philadelphia, PA; Mark R. Rosen, Jeffrey Gittleman, Barrack, Rodos & Bacine, Philadelphia, PA, on the brief), for Plaintiffs–Appellants.

David Marx, Jr., McDermott Will & Emery LLP, Chicago, IL (Amy J. Carletti, McDermott Will & Emery LLP, Chicago, IL; James T. Shearin, Pullman & Comley, LLC, Bridgeport, CT; Nicole L. Castle, McDermott Will & Emery LLP, Washington,DC, on the brief), for Defendants–Appellees.

Before: CALABRESI, RAGGI, and CARNEY, Circuit Judges.

SUSAN L. CARNEY, Circuit Judge:

Plaintiffs appeal from an award of summary judgment to defendants in an antitrust class action alleging a conspiracy to fix prices in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. Defendants Stora Enso North America Corporation (“SENA”) and Stora Enso Oyj (“SEO”) and former defendants UPM–Kymmene Corporation and UPM–Kymmene, Inc. (together, “UPM”) are manufacturers and sellers of “publication paper,” a type of paper used in preparing printed material of various types. Plaintiffs—a certified class consisting of direct purchasers of defendants' paper products—contend that, in the relevant period, they paid higher prices for publication paper than they would have in the absence of the alleged price-fixing agreement.

Plaintiffs' theory of conspiracy is relatively simple. In August and November 2002, and again in February 2003, SENA and UPM—as well as several other publication paper manufacturers—raised their list prices for certain types of publication paper. The price hikes mirrored each other in amount and occurred in close succession. Plaintiffs maintain that SENA and UPM instituted these three price increases pursuant to an agreement, rather than independently. Plaintiffs also contend that, in the same time frame, SENA and UPM coordinated the closure of paper mills in order to reduce the supply of publication paper, and that SEO played a material role in the overall price-fixing scheme. The U.S. District Court for the District of Connecticut (Stefan R. Underhill, J.) concluded that defendants were entitled to summary judgment on all counts because, in its view, and in light of the standards articulated by the Supreme Court in Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), plaintiffs “failed to offer sufficient evidence to dispel the possibility that SENA and UPM acted independently.” In re Publication Paper Antitrust Litig., No. 3:04–md–1631, 2010 WL 5253364, at *13 (D.Conn. Dec. 14, 2010).

We hold that the district court erred in granting summary judgment to SENA because a jury could reasonably find that SENA and UPM entered into an agreement to raise the price of publication paper, and that, as implemented, this agreement damaged plaintiffs. SENA was thus not entitled to judgment as a matter of law. As to SEO, however, we conclude that the district court properly awarded it summary judgment because plaintiffs failed to offer sufficient evidence from which a jury could reasonably conclude that SEO had any direct involvement in decisions regarding SENA's marketing, sale, or pricing of publication paper in the United States. Accordingly, we vacate the district court's judgment in part, affirm it in part, and remand the case for further proceedings consistent with this opinion.

I. BACKGROUND

Unless otherwise noted, the following facts are not disputed by the parties.

A. The Parties

SEO is a pulp and paper manufacturer headquartered in Helsinki, Finland. In August 2000, SEO acquired Consolidated Papers, Inc., an American paper manufacturer located in Wisconsin. Thereafter, Consolidated Papers—renamed SENA—operated as a subsidiary of SEO. From August 2000 until May 2003, Kai Korhonen was President of SENA. Under Korhonen'sleadership, SENA's sales and marketing team would recommend to him whether SENA should initiate a price increase or follow a price increase previously announced by a competitor. As President, Korhonen had the “final say” over SENA's pricing strategy and decisions. Trial Tr. at 262.¹

UPM is also a pulp and paper manufacturer headquartered in Helsinki. In January 2002, Markku Tynkkynen became President of UPM's Magazine Paper Division. In this role, Tynkkynen had responsibility for, and “final authority” over, UPM's pricing of publication paper in the United States. Dep. of Markku Tynkkynen, Jan. 22, 2009, at 18.

B. The Publication Paper Industry

“Commercial paper” is a type of publication paper that is used for printing and advertising. Manufactured in several different grades, some of which are numbered 1 through 5, its quality ranges from “fine” (the most expensive type) to “supercalendered” (the least expensive). Fine paper—categorized in the industry as including grades 1, 2, and 3—is typically used for high-end publications. Magazine paper—comprised of grades 4 and 5—is generally used in ordinary magazines and store catalogues. Supercalendered paper—which is not assigned grade numbers—is often used to print the advertising inserts found in newspapers.

The present action involves “publication paper,” which, for purposes of this litigation, is defined as grades 3, 4, and 5 of “coated” commercial paper. ² The publication paper that plaintiffs purchased thus includes the coated products of some fine, and all magazine, paper. Publication paper is commonly considered a commodity product—i.e., a product that is uniform rather than differentiated across sellers. The publication paper market in North America is an oligopoly.

In 2002 and 2003, when the price-fixing agreement is alleged to have been made and implemented, International Paper (“IP”), SENA, and UPM ranked first, second, and third, respectively, in volume of production of publication paper in North America. Each had a market share of between 17% and 21%; their combined market shares totaled approximately 60%.³ During the same two-year period, publication paper was selling at historically low prices, and the industry suffered from excess capacity and low demand.⁴ Despite these unfavorable conditions, in August 2002, IP and MeadWestvaco (“Mead”), another publication paper manufacturer, both announced price increases; in November 2002, Mead announced a price increase; and in February 2003, IP announced a price increase. Both in the timing of the announcements and the amount of the increases, SENA and UPM's price increases in August and November 2002 and in February 2003 closely followed those of their competitors.

C. The Alleged Conspiracy

The conspiracy alleged in this action centers around certain private meetings and phone calls between Korhonen and Tynkkynen that undisputedly occurred soon before each of these three price increase announcements.

The two men originally met in Finland in the late 1970s, when both were working as production engineers for Ahlström Company. During the approximately five years that they worked together, they were also neighbors, and became close friends. Tynkkynen left Ahlström Company in 1982; Korhonen, however, remained at the firm, which was later acquired by a predecessor company to SEO. Over the twenty years following Tynkkynen's departure, despite their earlier close friendship, Korhonen and Tynkkynen saw each other only on occasion, their interactions typically limited to social settings and meetings of the Finnish Paper Engineers Association, of which they were both members.

1. The August 2002 Price Increase

In August 2002, soon after he became President of UPM's Magazine Paper Division and twenty years after they last worked as colleagues, Tynkkynen invited Korhonen, who by then had become President of SENA, to lunch. As he later testified at SENA's criminal trial, Tynkkynen wanted Korhonen to provide him with insight into operating in the North American market, a market with which Tynkkynen was unfamiliar. Tynkkynen also sought to determine whether SENA had sufficient market power to lead a price increase in the United States.

In response to Tynkkynen's invitation, Tynkkynen and Korhonen met for approximately 90 minutes on August 8 in a private executive lunchroom at UPM's headquarters in Helsinki. During the meeting, Korhonen expressed his opinion that, contrary to Tynkkynen's view, SENA was not a market leader for coated grade 5 or supercalendered paper. Tynkkynen and Korhonen estimated that together SENA and UPM likely would have a combined 40% market share for coated grade 5 paper. Tynkkynen advised Korhonen, “UPM has been a follower and will be a follower”—meaning that UPM would follow price increases announced by any major competitor and would also try to implement those increases consistently with its customers.⁵ Trial Tr. at 177, 104. No one else was present during the meeting, and Korhonen did not disclose to anyone at SENA that he met with Tynkkynen or mention the substance of their discussion.

The following day, on August 9, IP and Mead announced a $2 per hundredweight (“cwt.”) price increase for publication paper grades 2 through 4 effective October 1, 2002. Four days later, on August 13, SENA issued an identical announcement as to price, paper grades, and effective date. On August 21, UPM announced its $2 per cwt. price increase for publication paper grades 3 and 4, on the same schedule. (According to plaintiffs, UPM sold little or no grade 2 publication paper in the United States at...