Lantec, Inc. v. Novell, Inc.

• Decision Date: 09 April 2001
• Docket Number: No. 2:95CV97-ST.,2:95CV97-ST.
• Parties: LANTEC, INC., a Utah Corporation, Lancompany Informatica Ltda., a Brazil corporation, Plaintiffs, v. NOVELL, INC., a Delaware corporation, Defendant,
• Court: U.S. District Court — District of Utah

146 F.Supp.2d 1140

LANTEC, INC., a Utah Corporation, Lancompany Informatica Ltda., a Brazil corporation, Plaintiffs, v. NOVELL, INC., a Delaware corporation, Defendant,

No. 2:95CV97-ST.

United States District Court, D. Utah, Central Division.

April 9, 2001.

COPYRIGHT MATERIAL OMITTED

Stanford B. Owen, P. Bruce Badger, Fabian & Clendenin, Salt Lake City, UT, Evan A Schmutz, Hill Johnson & Schmutz LC, Provo, UT, for Lantec, Inc., Lancompany Informatica Ltda., Lantex Informatica Ltda. Lantraining Informatica Ltda. plaintiffs.

Stanley J. Preston, R. Brent Stephens, Rodney R. Parker, Ryan E. Tibbitts, Max D. Wheeler, Maralyn M. Reger, Snow Christensen & Martineau, Stephen J. Hill, Salt Lake City, UT, for Novell, Inc., a Delaware corporation, defendants.

DECISION AND ORDER GRANTING DEFENDANT'S RULE 50 MOTION FOR JUDGMENT AS A MATTER OF LAW AND DENYING MOTION TO ALTER OR AMEND ORDER EXCLUDING EXPERT TESTIMONY

STEWART, District Judge.

This matter came before the court on February 14, 2001, for hearing on Defendant Novell's Motion for Judgment as a Matter of Law pursuant to Fed.R.Civ.P. 50.

At the close of Plaintiffs' evidence Defendant moved for judgment as a matter of law. The court excused the jury for a day to hear the Rule 50 motion. At the close of the hearing, the court announced it would rule in favor of Defendant and would proceed to the next phase of the trial — Defendant's counterclaim against counterclaim defendant LanCompany. The parties stipulated to the withdrawing of the jury demand for the counterclaim portion of the trial and requested the court hear the counterclaim as a bench trial at a later date. Accordingly, the court dismissed the jury. This order sets forth the reasons the court granted Defendant's Motion for Judgment as a Matter of Law.

I. Standard for Judgment as a Matter of Law

Federal Rule Civil Procedure 50(a) provides,

If during a trial by jury a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue, the court may determine the issue against that party and may grant a motion for judgement as a matter of law against that party....

Id.

Motions under Rule 50 must "specify the judgment sought and the law and the facts on which the moving party is entitled to the judgment." Fed.R.Civ.P. 50(a)(2).

Under Rule 50, a court should render judgment as a matter of law when "a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue." Fed. Rule Civ. Proc. 50(a); see also Weisgram v Marley Co., 528 U.S. 440, 120 S.Ct. 1011, 1016-1018, 145 L.Ed.2d 958 (2000).

* * * * * *

[I]n entertaining a motion for judgment as a matter of law, the court should review all of the evidence in the record.

In doing so, however, the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence. Lytle v. Household Mfg., Inc., 494 U.S. 545, 554-555[, 110 S.Ct. 1331, 108 L.Ed.2d 504] (1990); [Anderson v.] Liberty Lobby, Inc., supra, at 254, 106 S.Ct. 2505; Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696, n. 6[, 82 S.Ct. 1404, 8 L.Ed.2d 777] (1962). "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Liberty Lobby, supra, at 255, 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202. Thus, although the court should review the record as a whole, it must disregard all evidence favorable to the moving party that the jury is not required to believe. See Wright & Miller 299. That is, the court should give credence to the evidence favoring the nonmovant as well as that "evidence supporting the moving party that is uncontradicted and unimpeached, at least to the extent that that evidence comes from disinterested witnesses." Id., at 300.

Reeves v. Sanderson Plumbing Prod., Inc., 530 U.S. 133, 120 S.Ct. 2097, 2110, 147 L.Ed.2d 105 (2000) (underlined emphasis added).

Thus, unless the evidence so overwhelmingly favors "the movant as to permit no other rational conclusion, judgment as a matter of law is improper." Greene v. Safeway Stores, Inc., 98 F.3d 554, 557 (10th Cir.1996). In challenging the sufficiency of the evidence in this context, Defendant must establish that no reasonable person could find the essential elements of the antitrust claims.

II. Contentions of the Parties

Defendant generally contends Plaintiffs lack standing to bring their antitrust claims because they have not properly defined a relevant market; the evidence does not establish they have suffered an antitrust injury; and, the evidence does not show a conspiracy or agreement with a separate and distinct entity to monopolize or restrain trade. In addition, Defendant contends that Plaintiffs' evidence fails to establish the other elements of each of the five federal antitrust claims and the two state antitrust claims.

Plaintiffs contend their evidence is sufficient to have the issues decided by the jury. Plaintiffs' position is made more difficult by the court's ruling excluding the testimony of their expert, Dr. John C. Beyer, for failure to meet the Daubert/Kuhmo standards for admissibility. Dr. Beyer's excluded testimony covered such key issues as the relevant market, market power, power to control prices and probability of success of monopolization. Nonetheless, Plaintiffs contend that, even without Dr. Beyer's testimony, the totality of the evidence at trial provides a sufficient basis from which a reasonable jury could find in their favor on each of their antitrust claims.

III. The Antitrust Claims

The jury heard evidence on Plaintiffs' five federal antitrust claims. The parties agree that the state law antitrust claims are duplicative of federal antitrust claims and therefore stipulated before trial that the state law antitrust claims not be included in the jury instructions or verdict form. Pretrial Order at 57.

Plaintiffs' First Claim for Relief alleges Defendant's acquisition of WordPerfect in 1994, was an unlawful vertical merger in violation of section 7 of the Clayton Act, 15 U.S.C. § 18, because the merger substantially lessened competition or tended to create a monopoly in the GroupWare for NetWare market.¹ The merger was announced on March 21, 1994, and completed by June 24, 1994.

[S]ection 7 of the Clayton Act requires a Court to assess the likely competitive effect of a vertical merger in specific product and geographic markets. To prove its case, a plaintiff must make a greater showing then simply that a vertical merger will result in a significant percentage of market foreclosure.... [A] plaintiff must demonstrate, in addition, some probable anticompetitive effect or impact. See 15 U.S.C. § 18; see also United States v. Marine Bancorporation, 418 U.S. 602, 623 n. 22[, 94 S.Ct. 2856, 41 L.Ed.2d 978] (1974) ("loss of competition").

Crouse-Hinds Co. v. InterNorth, Inc., 518 F.Supp. 416, 431 (N.D.N.Y.1980).

Although no precise formula exists for determining whether a vertical merger may lessen competition, the traditional analysis involves an examination of certain market factors, which are applied to the merger at hand. Brown Shoe, 370 U.S. at 328-33. Those factors include: the nature and economic purpose of the arrangement; the likelihood and size of any market foreclosure; the extent of concentration of sellers and buyers in the industry; the capital cost required to enter the market; the market share needed by a buyer or seller to achieve a profitable level of production or "scale economy"; the existence of a trend toward vertical concentration or oligopoly in the industry; and whether the merger will eliminate potential competition by one of the merging parties. Brown Shoe, 370 U.S. at 328-33.

HTI Health Services, Inc. v. Quorum Health Group, Inc., 960 F.Supp. 1104, 1135 (S.D.Miss.1997).

Determination of the relevant market is a necessary predicate to a finding of a violation of the Act because the threatened monopoly must be one which will substantially lessen competition within the area of effective competition. Substantiality can be determined only in terms of the market affected.

United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586, 593, 77 S.Ct. 872, 1 L.Ed.2d 1057 (1957) (footnote citation omitted) (underlined emphasis added). Without a well-defined relevant market, an examination of a transaction's competitive effects is without context or meaning.

Vertical mergers are not illegal per se, nor are they a suspect category under antitrust laws. Reazin v. Blue Cross Blue Shield of Kansas, 663 F.Supp. 1360, 1489 (D.Kan.1987) aff'd 899 F.2d 951 (10th Cir. 1990).

Plaintiffs' Second Claim for Relief alleges Defendant and WordPerfect contracted, combined and conspired to unreasonably restrain trade and commerce in the GroupWare for NetWare market in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.

[T]o state a claim for a Sherman Act § 1 violation, "the plaintiff must allege facts which show: the defendant entered a contract, combination or conspiracy that unreasonably restrains trade in the relevant market." Full Draw Productions v. Easton Sports, Inc., 182 F.3d 745, 755 (10th Cir.1999) (underlined emphasis added quoting TV Communications Network, Inc. v. Turner Network Television, Inc., 964 F.2d 1022, 1027 (10th Cir.1992)). See also SCFC ILC, Inc. v. Sears, Roebuck and Company, 36 F.3d 958, 965-66 (10th Cir.1994) (two step analysis for section 2 claims "equally helpful" to claims under section 1.)

Pursuant to International Travel Arrangers v. NWA, Inc., 991 F.2d 1389, 1397-98 (8th Cir.1993), if Defendant and WordPerfect maintained independent economic consciousness after they decided to merge but before the merger was complete they could conspire. If they did not maintain economic consciousness, they...