MINPECO, SA v. Hunt

• Decision Date: 15 August 1989
• Docket Number: No. 81 Civ. 7619 (MEL).,81 Civ. 7619 (MEL).
• Citation: 718 F. Supp. 168
• Parties: MINPECO, S.A., Plaintiff, v. Nelson Bunker HUNT, William Herbert Hunt, International Metals Investment Co., Ltd., Naji Robert Nahas, Gilion Financial, Inc., Advicorp Advisory and Financial Corporation, S.A., and Mahmoud Fustok, Defendants.
• Court: U.S. District Court — Southern District of New York

718 F. Supp. 168

MINPECO, S.A., Plaintiff, v. Nelson Bunker HUNT, William Herbert Hunt, International Metals Investment Co., Ltd., Naji Robert Nahas, Gilion Financial, Inc., Advicorp Advisory and Financial Corporation, S.A., and Mahmoud Fustok, Defendants.

No. 81 Civ. 7619 (MEL).

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

July 18, 1989.

As Amended August 15, 1989.

COPYRIGHT MATERIAL OMITTED

Cole, Corette & Abrutyn, Washington, D.C., for plaintiff, Minpeco, S.A.; Mark A. Cymrot, Thomas O. Gorman, Pedro R. Pierluisi, William P. McGrath, Jr., Kathleen M. Milton, James M. McNamara, Jr., Washington, D.C. and Grand & Ostrow, New York City, of counsel.

Kaye, Scholer, Fierman, Hays & Handler, New York City; Paul J. Curran, Stanley D. Robinson, Aaron Rubinstein, Michael Malina, Joel Katcoff, Phillip A. Geraci, Manvin S. Mayell, Marsha Rubin, William J. Schneier, and David S. Copeland, of counsel, and Gardere & Wynne, Dallas, Tex.; Robert E. Wolin, of counsel, for defendants Nelson Bunker Hunt and William Herbert Hunt.

Curtis, Mallet-Prevost, Colt & Mosle, New York City, for defendant, Mahmoud Fustok; Herbert Stoller, of counsel.

"Doar, Devorkin & Rieck, New York City; John J. Rieck, Jr., of counsel and Thomas J. Curnes, Dallas, Tex., for defendant, Intern. Metals Inv. Co., Ltd."

LASKER, District Judge.

In August, 1988, Nelson Bunker Hunt, William Herbert Hunt, Lamar Hunt, Mahmoud Fustok, and International Metals Investment Company were found liable to the plaintiff Minpeco, S.A. ("Minpeco") for violations of the Commodities Exchange Act ("CEA"), the federal antitrust statutes, and New York common-law fraud; all but Lamar Hunt were also found to have acted in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Judgment was entered for the plaintiff in excess of $132 million, which included compensation for short futures losses, interest paid on loans obtained to cover margin calls and close silver futures and forwards positions, and lost profits. This decision addresses the motions for judgment notwithstanding the verdict ("jnov") or, in the alternative, for a new trial, pressed by Nelson Bunker Hunt, William Herbert Hunt, International Metals Investment Company and Mahmoud Fustok ("the defendants").¹ Familiarity with the facts and earlier decisions in the case is assumed.

The defendants challenge both Minpeco's legal claims and the damages awarded. The motion for jnov on the plaintiff's legal claims challenges: 1) the antitrust verdicts on the grounds that there was insufficient evidence to support the finding of the relevant market and that, as a matter of law, the shares of the defendants should not have been aggregated to determine market power, 2) all claims on the ground that there was insufficient evidence to establish causation, 3) the common-law fraud claim on the grounds that a fraud on the market theory is not available at common-law and that, even if it were, the evidence does not establish the elements of intent and reliance, and 4) the RICO verdict to the extent it depends on the finding of common-law fraud and on the ground that the plaintiff has not established injury "by reason" of a RICO violation.

In addition, the defendants make the following arguments with respect to damages: 1) there is no evidence to support the award of lost profits, 2) the damage award for interest on borrowings is not subject to trebling, 3) the verdicts on interest on the indebtedness and losses on short trading are irrational and inconsistent and thus compel a new trial, and 4) the judgment must be offset by $45.68 million, the amount of Minpeco's loan assumed by the State of Peru. The defendants preserved these arguments in extensive motion practice before the jury was given the case.²

The discussion below evaluates the defendants' arguments in light of the standard applicable to jnov motions: "A trial court may grant or deny a motion for j.n.o.v. if the evidence leads to only one reasonable conclusion when the witnesses' credibility and the weight of the evidence are not taken into account." Proteus Books Ltd. v. Cherry Lane Music Co., Inc., 873 F.2d 502, 508 (2d Cir.1989) (citation omitted). In the case at hand, despite the serious nature of the defendants' arguments, when the evidence is construed in the light most favorable to Minpeco as it must be on a jnov motion, it cannot be said that the jury verdict was unreasonable. Id. See also Auwood v. Harry Brandt Booking Office, Inc., 850 F.2d 884, 889 (2d Cir.1988). Moreover, to the extent the arguments pose renewed challenges to the legal theories on which the claims were presented to the jury, the arguments are unpersuasive.

1. Antitrust

A. Evidence of Relevant Market

The defendants contend that there was insufficient evidence to support the jury's finding that the relevant market consisted of the December 1979 Comex, February 1980 CBT, and March 1980 Comex contracts, together with the supply of physical silver deliverable on those expiring contracts located in the warehouse.³ As the defendants emphasize, Dr. Hendrik Houthakker, the plaintiff's only witness who testified about the relevant market, acknowledged that he excluded .999 silver located outside the warehouse from his analysis because it was "his understanding" that it took a few weeks to process the silver to make it deliverable. He believed the source of this understanding was a "statement by the official in charge of entering silver in the Chicago warehouse." Trial Transcript ("TR") at 8787.

Despite its limitations, this testimony suffices to support the jury verdict. The shortcomings of Dr. Houthakker's knowledge present a question of credibility for the jury. "As a general rule, questions relating to the bases and sources of an expert's opinion affect the weight to be assigned that opinion rather than its admissibility and should be left for the jury's consideration." Viterbo v. Dow Chem. Co., 826 F.2d 420, 422 (5th Cir.1987) (citation omitted). See also Loudermill v. Dow Chem. Co., 863 F.2d 566, 570 (8th Cir.1988).

Moreover, this case does not fall outside the "general rule." It cannot be said, as was true in Viterbo, in which the court on a motion for summary judgment excluded the testimony of plaintiff's expert, that the "opinion simply lacked the foundation and reliability necessary to support expert testimony" and thus could not serve its purpose of "assisting the jury in arriving at its verdict." Viterbo, 826 F.2d at 424. In this case, Houthakker's opinion was more than the plaintiff's "testimony dressed up and sanctified as the opinion of an expert." Id. Houthakker, who is the Chair of the Economics Department at Harvard University, not only testified that his understanding derived from a warehouse official, but also that his analysis confirmed his understanding of the amount of time it took to process silver so as to make it deliverable in accordance with the rules of the exchanges. TR at 8794-95. Finally, the defendants alerted the jury to the limitations of Houthakker's testimony and offered testimony indicating that the process took very little time, and both sides' contentions as to the relevant market were presented to the jury in the charge.

B. Aggregation

The defendants pose a renewed challenge to claims of monopolization and attempt to monopolize under § 2 of the Sherman Antitrust Act⁴ because they are premised on the aggregation of the defendants' shares to establish market power. The defendants are now armed with a new Second Circuit decision affirming the district court's dismissal of the plaintiffs' antitrust claims, based in part on a holding that the positions of the defendants in that case could not be aggregated to determine whether they had monopoly power where the defendants were charged with attempting to monopolize a market involving dental equipment. H.L. Hayden Co. v. Siemens Medical Sys., Inc., 879 F.2d 1005, 1018 (2d Cir.1989).

However, my reason for not charging the jury, as the defendants requested, that it could consider only the monopoly power of each defendant remains applicable: "Unless joint action is charged and proven, the law does not permit the aggregation of market shares to establish monopoly power, but if joint action is charged and proven, it does permit aggregation." TR at 15619. In the case at hand, the plaintiff alleged not that the defendants conspired to manipulate the market but that the defendants, having conspired, monopolized and attempted to monopolize the silver futures market and thus joint action was essential to the section 2 charges, TR at 15618-22. In fact, the jury was charged that it could not consider the antitrust claims unless it found the plaintiff to have proven the existence of a conspiracy, TR at 16720.

Neither the recent circuit decision in Hayden nor the district decision, Hayden Co. of N.Y. v. Siemens Medical Systems, 672 F.Supp. 724, 741 (S.D.N.Y.1987), which was considered at the time of the charge, requires a contrary result because neither speaks to the propriety of aggregating market shares when the defendants are charged with joint action to monopolize or attempt to monopolize the relevant market. In fact, in Hayden, the district court found, and the Court of Appeals affirmed, that there was insufficient evidence of a conspiracy between the defendants. 672 F.Supp. at 743 n. 24, aff'd, at 1019. Moreover, other courts have indicated that, where joint action is alleged, as it was in this case, the shares of the defendants may be aggregated to establish market power. See R.C. Dick Geothermal Corp. v. Thermogenics, Inc., 619 F.Supp. 441, 451 n. 8 (N.D.Cal.1985) (refusing to aggregate individual defendant's market shares where "there is no evidence that the defendants acted jointly"), aff'd, 812 F.2d 1160 (9th Cir.1987), withdrawn and reh'g en banc granted, 841 F.2d 1010 (9th Cir.1988); Ralph C. Wilson Indus. v. American Broadcasting Co., 598 F.Supp. 694, 704 n. 10 (N.D.Ca.1984) (...