Multistate Legal Studies, Inc. v. Harcourt Brace Jovanovich Legal and Professional Publications, Inc.

• Decision Date: 29 August 1995
• Docket Number: No. 94-1148,94-1148
• Citation: 63 F.3d 1540
• Parties: 1995-2 Trade Cases P 71,109 MULTISTATE LEGAL STUDIES, INC., a Delaware corporation, Plaintiff/Counter-Defendant/Appellant, v. HARCOURT BRACE JOVANOVICH LEGAL AND PROFESSIONAL PUBLICATIONS, INC.; Colorado Professional Education, Inc., doing business as Colorado Bar Refresher, Inc., Defendants/Counter- Claimants/Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1540

63 F.3d 1540

1995-2 Trade Cases P 71,109

MULTISTATE LEGAL STUDIES, INC., a Delaware corporation Plaintiff/Counter-Defendant/Appellant, v. HARCOURT BRACE JOVANOVICH LEGAL AND PROFESSIONAL PUBLICATIONS, INC.; Colorado Professional Education, Inc., doing business as Colorado Bar Refresher, Inc. Defendants/Counter- Claimants/Appellees.

No. 94-1148.

United States Court of Appeals Tenth Circuit.

Aug. 29, 1995.

James M. Harris of Sidley & Austin, Los Angeles, CA (Robert Fabrikant of Sidley & Austin, Los Angeles, CA; Julia E. Sullivan of Sidley & Austin, Washington, DC; and Richard A. Feinstein of McKenna & Cuneo, Washington, DC, with him on the briefs), for appellant.

Tucker K. Trautman of Ireland, Stapleton, Pryor & Pascoe, Denver, CO (Hardin Holmes of Ireland, Stapleton, Pryor & Pascoe, Denver, CO; Stephen M. Axinn and John D. Harkrider of Skadden, Arps, Slate, Meagher & Flom, New York City; and Edward P. Timmins of Otten, Johnson, Robinson, Neff & Ragonetti, Denver, CO, with him on the briefs), for appellees.

Before ANDERSON and McWILLIAMS, Circuit Judges, and BROWN, ^* District Judge.

STEPHEN H. ANDERSON, Circuit Judge.

I. INTRODUCTION

The plaintiff in this antitrust action is Multistate Legal Studies, Inc. ("PMBR"), a commercial provider of bar examination preparation to would-be lawyers in Colorado and elsewhere. PMBR claims that anticompetitive actions by two other providers of bar review courses, defendants Harcourt Brace Jovanovich Legal and Professional Publications, Inc. ("HBJL") and its Colorado licensee, Colorado Professional Education, Inc. d/b/a Colorado Bar Refresher, Inc. ("CBR"), were the reason PMBR's Colorado market share dropped from 84 percent in 1991 to 23 percent in 1993.

PMBR accuses HBJL and CBR of the following antitrust law violations: engaging in an illegal tying arrangement and conspiring to fix predatory prices, in violation of section 1 of the Sherman Act; attempting and conspiring to monopolize the supplemental bar workshop market and monopolizing and conspiring to monopolize the full-service bar review course market, in violation of section 2 of the Sherman Act. PMBR appeals the district court's grant of summary judgment against it on all claims. ¹

We hold that PMBR has shown a genuine issue of material fact with respect to the Sherman Act section 1 tying and predatory pricing claims, and the Sherman Act section 2 claims of attempt and conspiracy to monopolize the supplemental course market, but not with respect to the claims of monopolization of and conspiracy to monopolize the full-service course market.

PMBR also appeals the district court's order overruling PMBR's objections to a magistrate judge's order concerning confidential record information. Because we are remanding the case for trial of other issues, the court's order on this issue becomes interlocutory, and we decline to review it at this time.

II. BACKGROUND

A. BAR EXAM PREPARATION

The Colorado bar exam consists of four components: the Multistate Bar Exam ("MBE"), the Multistate Professional Responsibility Exam ("MPRE"), essay questions, and a law practice simulation problem known as a "performance test."

Two types of bar review courses are relevant to this litigation: "full-service" courses, designed to prepare students for all components of a jurisdiction's bar examination, and "supplemental multistate workshops," which prepare students for only the MBE portion of a jurisdiction's bar exam.

At the heart of this case is the 1992 decision by HBJL and CBR, who previously had offered their full-service course and their supplemental MBE course separately, to offer the full-service course only in a package with the supplemental workshop. HBJL is the country's largest provider of full-service bar review courses. Its exclusive Colorado licensee, CBR, is entitled to use HBJL's "BAR/BRI" course trade name, course materials and national lecturers. HBJL and CBR have stipulated for summary judgment purposes that they exercise monopoly power over the Colorado full-service course market; PMBR's evidence puts their market share at more than 80 percent. See Plaintiff-Appellant's App. at 191 (Summ. of Attach. to Pl.'s Mem. in Opp'n to Defs.' Mot.Summ.J. [hereinafter "Summary"]. Their only full-service competitor in Colorado is a company called SMH Bar Review.

The evidence indicates both sides have viewed PMBR as a potential competitor in the Colorado full-service course market. It invested three years and $1 million in an effort to enter the California full-service market, but ultimately abandoned that effort. In conjunction with a company called BRG, PMBR offers a full-service course in Georgia, Alabama, and Tennessee, and has expressed its plans to expand throughout the Southeast. PMBR claims that its plan to expand its full-service course from California to other states, including Colorado, has been stymied by the losses caused by the Defendants' alleged predatory acts. Id. at 360-61 (Feinberg Aff. p 30).

PMBR is the largest provider of supplemental MBE workshops nationally, and in Colorado it currently offers only supplemental MBE workshops. PMBR controlled 84 percent of the Colorado supplemental MBE market in 1991 but claims to have dropped to 23 percent by 1993. As discussed infra, HBJL and CBR contest these figures, but we accept them as true for summary judgment purposes. See Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 456, 112 S.Ct. 2072, 2076, 119 L.Ed.2d 265 (1992).

In addition to the full-service BAR/BRI course, HBJL and CBR also offer a supplemental MBE workshop that competes with PMBR's workshop. The Defendants' course was previously called the HBJ Multistate Workshop; now it is called "Gilbert." In 1991, the Defendants had 11 percent of the Colorado workshop market, but by 1993 their share had risen to 76 percent. Other actual or potential competitors in that market include a company called APTS, with 1 percent of the market in 1993; Reed Law Group, which planned a 1993 workshop but cancelled it; and SMH Bar Review, which historically has bundled its MBE training into its full-service course but also offered a separate workshop in 1991.

B. ANTICOMPETITIVE ACTS

PMBR claims that HBJL and CBR engaged in various anticompetitive acts directly targeted at PMBR in the supplemental MBE market. PMBR also claims that HBJL and CBR illegally acquired their monopoly power in the full-service market through a secret market allocation agreement, and their monopoly power made it possible for their acts in the MBE workshop market to harm PMBR.

1. Acts Allegedly Directed at PMBR

PMBR claims that starting in 1992, HBJL and CBR began bundling together their supplemental MBE workshop, Gilbert, with their full-service BAR/BRI course and pricing the bundled Gilbert workshop below cost. PMBR also presents evidence of a substantial increase nationwide in the number of scheduling conflicts between the BAR/BRI course and the PMBR workshop starting in 1991. PMBR identifies three specific conflicts in Colorado, in the summer 1991, winter 1991, and summer 1992 courses. And PMBR complains that HBJL and CBR advertised falsely that the BAR/BRI course would include the Gilbert workshop "for free" when actually, in 1993, Defendants raised the BAR/BRI course price by $50.

PMBR contends that these acts had a twofold purpose: to achieve a monopoly in the supplemental MBE workshop market, and thereby to so weaken PMBR that it would be forced to abandon its efforts as a full-service competitor. PMBR alleges that the Defendants adopted this strategy after a prior attempt to avoid competition had failed. PMBR's president, Robert Feinberg, stated that in 1989, HBJL's chief executive officer, Richard Conviser, proposed an illegal market allocation agreement whereby HBJL would abandon the supplemental MBE workshop market nationwide if PMBR would refrain from pursuing future entry into the full-service market outside California. See Plaintiff-Appellant's App. at 193-94 (Summary); id. at 359 (Feinberg Aff. p 23). Mr. Feinberg said that when he refused, Mr. Conviser threatened to make him "sorry," and the bundling, predatory pricing, increase in scheduling conflicts, and false advertising then ensued.

2. Defendants' Acquisition of Monopoly Power

PMBR also argues that when HBJL and CBR, or their predecessors, signed their first licensing agreement, they secretly entered into an illegal agreement dividing up the Colorado, Wyoming, and other markets between them, and they have secretly renewed their noncompetition pact ever since. The companies were competitors in the Colorado full-service market before signing their first license agreement in 1974. Since then, although their original written agreement and subsequent written extensions have not prohibited competition, the two companies have not competed against each other. HBJL and CBR deny any secret agreement and say it simply would make no sense to compete and undermine the BAR/BRI trademark. The companies' latest written agreement, signed in 1989, was to expire in 1991 but remains in effect by oral extension.

To support its allegation that a secret agreement existed, PMBR offers evidence that HBJL officials previously proposed market allocation agreements to two other competitors, id. at 195-96 (Summary), as well as to PMBR itself, and that in one state HBJL entered an explicit market allocation agreement that was declared illegal per se by the Supreme Court. See Palmer v. BRG of Georgia, Inc., 498 U.S. 46, 49-50, 111 S.Ct. 401, 402-03, 112 L.Ed.2d 349 (1990) (per curiam). PMBR also points to evidence that CBR's founder, Jerry Kopel, once threatened to offer competing bar review courses outside Colorado if HBJL did not give him more favorable license terms, but he ultimately did not carry out his threat.

III. DISCUSSION

We review the grant of summary judgment de novo, applying the same legal standard used by the district court under Fed.R.Civ.P. 56(c)....