Pool water Prod. v. Olin Corp.

• Decision Date: 11 May 2001
• Docket Number: PLAINTIFFS-APPELLANTS,DEFENDANTS-APPELLEES,No. 99-56933,99-56933
• Citation: 258 F.3d 1024
• Parties: (9th Cir. 2001) POOL WATER PRODUCTS, A CALIFORNIA CORPORATION; AQUA TRI, A CALIFORNIA CORPORATION,, v. OLIN CORPORATION, A VIRGINIA CORPORATION; SUPERIOR POOL PRODUCTS, A DELAWARE CORPORATION,
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1024

258 F.3d 1024 (9th Cir. 2001)

POOL WATER PRODUCTS, A CALIFORNIA CORPORATION; AQUA TRI, A CALIFORNIA CORPORATION, PLAINTIFFS-APPELLANTS, v. OLIN CORPORATION, A VIRGINIA CORPORATION; SUPERIOR POOL PRODUCTS, A DELAWARE CORPORATION, DEFENDANTS-APPELLEES.

No. 99-56933

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted May 11, 2001--Pasadena, California

August 3, 2001

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Counsel Jeffrey T. Thomas and Christopher L. Pitet, Gibson, Dunn & Crutcher Llp, Irvine, California, for the plaintiffs-appellants.

Peter E. Halle, Morgan, Lewis & Bockius Llp, Washington, D.C., and Alan E. Popkin, Husch & Eppenberger Llc, St. Louis, Missouri, for the defendants-appellees.

Appeal from the United States District Court Central District of California Alicemarie H. Stotler, District Judge, Presiding D.C. No. CV-92-00563-AHS

Before: M. Margaret McKeown and Raymond C. Fisher, Circuit Judges, and David Warner Hagen,^* District Judge.

FISHER, Circuit Judge,

OVERVIEW

Plaintiffs-appellants Aqua Tri and Pool Water Products ("plaintiffs") allege that defendants-appellees Olin and Superior Pool Products ("defendants") have engaged in a "whole host" of anticompetitive activities, including the illegal acquisition of a fellow dry chemical manufacturer, FMC. That acquisition was deemed illegal by the Federal Trade Commission in a separate proceeding. In a series of pretrial motions, plaintiffs asked the district court to give the FTC decision prima facie weight in this proceeding under Section 5 of the Clayton Act, 15 U.S.C. §§ 16(a). Defendants moved to exclude plaintiffs' expert from testifying and to dismiss the case because plaintiffs lacked antitrust standing. The district court denied plaintiffs' motion and granted the defendants' motions. We affirm and hold that plaintiffs failed to meet Section 5's requirements for giving the FTC decision prima facie weight and failed to establish that they suffered any antitrust injury.

FACTUAL AND PROCEDURAL BACKGROUND

This dispute arises among four companies engaged in the manufacturing, repackaging and distributing of two chlorine-based dry swimming pool sanitizers, calcium hypochlorite ("cal-hypos") and isocyanurates ("isos").

A. Defendants Olin and Superior Pool Products

Defendant, Olin Corporation, is a long time manufacturer of cal-hypo and isos. Olin sells cal-hypos and isos through several distribution paths. It sells cal-hypos and isos in bulk to "repackagers" who repackage these chemicals into small containers or into tablets and attach their own brand name to the products. These repackagers then sell their branded products to distributers who in turn sell the chemicals to retail stores, pool contractors and pool maintenance businesses. Olin also repackages these chemicals itself and sells them directly to distributers or mass-marketers (e.g., Costco) under three brand names -HtH, Pace and Sun.

In 1985, Olin purchased the assets of FMC, which included a chemical production facility for isos, a repackaging plant and the brand name "Sun."¹ In 1986, Olin entered the wholesale pool products distribution business by purchasing Kern Products, an existing West Coast Olin distributer. Prior to Olin's purchase, Kern was a failing business. Kern was renamed Superior Pool Products ("SPP") and became a wholly owned subsidiary of Olin. Through SPP, Olin distributed isos and cal-hypos directly to retail stores, pool contractors and pool maintenance businesses.

In summary, Olin, combined with SPP, is an integrated manufacturer, repackager and distributer of pool sanitizers that sells its products in various forms to various entities along the distribution chain.

B. The FTC Proceedings

The FTC challenged Olin's acquisition of FMC in 1985. After a 52-day hearing in 1987, an Administrative Law Judge ("ALJ") made 895 findings of fact and six conclusions of law and ultimately held that the acquisition violated Section 7 of the Clayton Act and Section 5 of the FTC Act and ordered divestiture of the FMC assets. See In re Matter of Olin Corp., 113 F.T.C. 400 (1990). The FTC substantially affirmed the ALJ's order on June 13, 1990. We denied Olin's petition for review in a published decision, Olin Corp. v. FTC, 986 F.2d 1295 (9th Cir. 1993), and the Supreme Court denied Olin's petition for certiorari. 510 U.S. 1110 (1994). At that point Olin began divesting itself of the FMC assets.

C. Plaintiffs Pool Water Products and Aqua Tri

The plaintiffs, Pool Water Products ("PWP") and Aqua Tri, are related by common ownership. Aqua Tri is a repackager of cal-hypos and isos. Its primary customer is PWP, a distributer of cal-hypos and isos in California, Arizona, Florida and Texas. It sells cal-hypos and isos under its own brands -All Clear, Fresh and Guardex. PWP is a direct competitor of SPP. PWP claims that its profits have been drastically reduced as a result of Olin's and SPP's anticompetitive activities. Specifically, plaintiffs argue that PWP's profits were reduced by $55 million as a result of lost market share and price reductions in isos and cal-hypos.

D. The Proceedings in the District Court

Plaintiffs filed suit against Olin and SPP in 1992 alleging that Olin and SPP attempted to dominate the dry chemical pool sanitizer industry and destroy competition. In their Third Amended Complaint, plaintiffs alleged Olin and SPP had engaged in the following anticompetitive activities: (1) the acquisition of FMC's assets, (2) price squeezing of repackagers, (3) predatory pricing by SPP, (4) price discrimination against repackagers and distributors, (5) refusal to deal with Aqua Tri and PWP, (6) vertical integration, (7) exclusive distributorships of Olin's products, (8) collusion between Olin and other manufacturers and (9) collusion between Olin and other distributors. Plaintiffs claim these anticompetitive acts violated Sections 1 and 2 of the Sherman Act, Section 7 of the Clayton Act and California law. They claim that Olin and SPP monopolized or restrained trade in four different product markets: (1) the sale of cal-hypos by manufacturers to wholesalers across the entire United States; (2) the sale of isos by manufacturers to wholesalers across the entire United States; (3) the sale of branded cal-hypos to retailers in California, Arizona and Nevada; and (4) the sale of branded isos to retailers in California, Arizona and Nevada.

In preparation for trial, both plaintiffs and defendants filed motions in limine to exclude various items of evidence. Plaintiffs also moved to give prima facie weight to the FTC's judgment and defendants moved to dismiss the lawsuit for lack of antitrust injury. On October 28, 1999, the district court denied plaintiffs' motion to give the FTC ruling prima facie weight and granted defendants' motions to exclude plaintiffs' sanitizer pricing study, evidence of below-cost pricing and the liability and damage testimony of plaintiffs' expert, Dr. Kent Anderson. After it made these preliminary rulings, the district court held that plaintiffs had failed to put forward any evidence that they had suffered antitrust injury. It denied the remaining motions as moot and entered judgment in favor of defendants.

DISCUSSION

A. Prima Facie Weight of Prior FTC Proceeding

Plaintiffs moved in the district court to give the findings of fact and conclusions of law adopted by the FTC in its judgment against Olin prima facie evidentiary weight pursuant to Section 5 of the Clayton Act, 15 U.S.C. §§ 16(a).² The district court held that the judgment and findings could not be given such evidentiary weight because the issues and facts in the two proceedings are different. The court did allow the adjudicative facts of the prior proceedings to be admitted -i.e., documents showing there was an ALJ hearing, the Order entered by the FTC requiring divestiture and the decision of this Circuit affirming the FTC. Plaintiffs appeal the district court's decision regarding the prima facie weight of the findings and conclusions. We review the district court's decision de novo. Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 571 (1951).

Congress' intent in enacting the original version of Section 5 was "to minimize the burdens of litigation for injured private suitors by making available to them all matters previously established by the Government in antitrust actions." Id. at 568. This benefit is not without limits, however. First, it grants only prima facie weight, not collateral estoppel effect to findings. Although Section 5 generally does not bar the application of collateral estoppel, it does so when the FTC itself makes the findings. See 15 U.S.C.§§ 16(a). Second, Section 5 grants prima facie weight only to matters as to which collateral estoppel would apply had the government itself brought the suit. See id. This section makes available to a private litigant as prima facie evidence "all matters respecting which said judgment or decree would be an estoppel" between the defendant and the United States. 15 U.S.C. §§ 16(a); Emich Motors, 340 U.S. at 568.³ Accordingly, the "evidentiary use" of the prior judgment is"determined by reference to the general doctrine of estoppel." Id. For that, we look to Ninth Circuit law.

"Collateral estoppel, or issue preclusion, bars the relitigation of issues actually adjudicated in previous litigation between the same parties." Kamilche Co. v. United States, 53 F.3d 1059, 1062 (9th Cir. 1995), as amended, 75 F.3d 1391 (9th Cir. 1996) (internal quotation omitted). It precludes relitigation of both issues of law and issues of fact. Steen v. John Hancock Mut. Life Ins. Co., 106 F.3d 904, 910 (9th Cir. 1997). The party asserting collateral estoppel must show that the estopped issue is identical to an issue actually litigated and decided in the previous action. Kamilche, 53 F.3d at 1062. Preclusive force attaches only to issues that were necessary...