Disaggregation of antitrust damages

Antitrust Law Journal

Volumn 65, Issue 2, 1997, Pages 311-350

  Royall, M Sean ^a  

^a Texas Bar ^*  (United States)

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EID: 0031525703     PISSN: 00036056     EISSN: None     Source Type: Journal    
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References (185)

1. 282 U.S. 555 (1931).
2. Id. at 566.
3. 451 U.S. 557 (1981).
4. Id. at 566 (quoting Linen Thread Co. v. Shaw, 9 F.2d 17, 19 (1st Cir. 1925)).
5. Northeastern Tel. Co. v. AT&-T, 497 F. Supp. 230, 247-48 (D. Conn. 1980), rev'd on other grounds, 651 F.2d 76 (2d Cir. 1981); see also, e.g., Spray-Rite Serv. Corp. v. Monsanto Co., 684 F.2d 1226, 1243 (7th Cir. 1982) (holding that, wherever possible, an antitrust plaintiff must "disaggregate the damage sum and apportion the amount of damage caused by each of [the challenged] business practices"), aff'd, 465 U.S. 752 (1984); Southern Pac. Communications Co. v. AT&-T, 556 F. Supp. 825, 1090 (D.D.C. 1983) ("The trier of fact must be able to determine from the damage evidence whether each of the particular actions alleged to form an antitrust violation 'materially contributed' to plaintiff's injury."), aff'd, 740 F.2d 980 (D.C. Cir. 1984), cert. denied, 470 U.S. 1005 (1985); In re IBM Peripheral EDP Devices Antitrust Litig., 481 F. Supp. 965, 1013-14 (N.D. Cal. 1979) (stressing that causation proof must be "closely connected to the individual acts complained of" and that the plaintiff must show "how much injury each act caused"), aff'd sub nom. Transamerica Computer Co. v. IBM Corp., 698 F.2d 1377 (9th Cir.), cert. denied, 464 U.S. 955 (1983); Van Dyk Research Corp. v. Xerox Corp., 478 F. Supp. 1268, 1326 (D.N.J. 1979) ("the plaintiff, in proving the fact of injury, must prove a direct and proximate causal connection between an alleged unlawful act and the plaintiff's alleged injury"), aff'd, 631 F.2d 251 (3d Cir. 1980), cert. denied, 452 U.S. 905 (1981); ILC Peripherals Leasing Corp. v. IBM Corp., 458 F. Supp. 423, 434 (N.D. Cal. 1978) (holding that the law requires antitrust plaintiffs, where possible, "to isolate the impact of each act" challenged as unlawful), aff'd sub nom. Memorex Corp. v. IBM Corp., 636 F.2d 1188 (9th Cir. 1980), cert. denied, 452 U.S. 972 (1981).
6. The author is an attorney with the firm that is primary counsel to Honeywell in this litigation.
7. Litton Sys., Inc. v. Honeywell, Inc., 1996-2 Trade Cas. (CCH) ¶ 71,559, at 77,969 (C.D. Cal. 1996). In outlining the scope of the disaggregation rule, the court stated: Except in circumstances where disaggregation is shown to be impossible or impractical, an antitrust plaintiff challenging a variety of conduct is required to segregate damages attributable to particular business practices or, at a minimum, to distinguish between losses attributable to lawful competition and those attributable to unlawful anticompetitive conduct. Disaggregation is required because the antitrust laws are only intended to compensate plaintiffs for losses fairly caused by a defendant's unlawful anticompetitive behavior. Id. (citation omitted).
8. The focus of this article is on private antitrust actions involving multiple claims of injury. The basic question addressed is whether in such cases plaintiffs must disaggregate their damage proof to correspond with the individual claims of injury being asserted. Although not addressed here, a similar issue may arise in antitrust suits involving only a unitary claim of injury. In such cases, the plaintiff's damage proof may be deemed invalid if it fails to isolate the damage caused by the defendant's challenged conduct, as opposed to other, presumably lawful conduct by the defendant that the plaintiff has not challenged. See, e.g., Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338, 1352-53 (3d Cir. 1975) (vacating the jury's damage verdict and remanding for a new trial where the damage figures tendered by the plaintiff's expert "were attributable at least in part to . . . lawful competition" by the defendants, yet the plaintiff "did not introduce any evidence tending to show the amount by which [those figures] should have been reduced to compensate for sales lost as a result of [such] lawful competition"). This situation also involves a question of "disaggregation," but not in the sense in which that term is used herein.
9. Bigelow v. RKO Radio Pictures, 327 U.S. 251, 264 (1946).
10. 15 U.S.C. § 15.
11. Charles N. Charnas, Segregation of Antitrust Damages: An Excessive Burden on Private Plaintiffs, 72 CAL. L. REV. 403, 404 (1984); see also James R. McCall, The Disaggregation of Damages Requirement in Private Monopolization Actions, 62 NOTRE DAME L. REV. 643 (1987).
12. Charles N. Charnas, Segregation of Antitrust Damages: An Excessive Burden on Private Plaintiffs, 72 CAL. L. REV. 403, 404 (1984); see also James R. McCall, The Disaggregation of Damages Requirement in Private Monopolization Actions, 62 NOTRE DAME L. REV. 643 (1987).
13. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n.9 (1969).
14. Id. (emphasis added); see also Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 702 (1962) (an antitrust plaintiff must show that each challenged act "materially contributed" to its alleged injury).
15. Rosebrough Monument Co. v. Memorial Park Cemetery Ass'n, 666 F.2d 1130, 1146 (8th Cir. 1981) (quoting Admiral Theatre Corp. v. Douglas Theatre Co., 585 F.2d 877, 893 (8th Cir. 1978)). Accord Story Parchment Co. v. Patterson Parchment Paper Co., 282 U.S. 555, 562 (1931) (noting that the law permits recovery only for injuries that are "definitely attributable" to the defendant's wrongful conduct); Momand v. Universal Film Exchs., Inc., 172 F.2d 37, 43 (1st Cir. 1948) ("a fair degree of certainty is . . . essential to show the causative relationship of defendants' misconduct and plaintiff's injury"), cert. denied, 336 U.S. 967 (1949).
16. See, e.g., American Bearing Co. v. Litton Indus., Inc., 729 F.2d 943, 952 (3d Cir.) ("The evidence 'linking the illegality and the injury must be more precise than that needed to establish the amount of damages.'") (citation omitted), cert. denied, 469 U.S. 854 (1984).
17. Story Parchment, 282 U.S. at 562.
18. Harkins Amusement Enters., Inc. v. General Cinema Corp., 748 F. Supp. 1399, 1406 (D. Ariz. 1990). Accord Southern Pac. Communications Co. v. AT&T, 556 F. Supp. 825, 1090 (D.D.C. 1983) (antitrust plaintiffs have an "obligation to come forward with the best, most accurate measure of damages that is reasonably available"), aff'd, 740 F.2d 980 (D.C. Cir. 1984), cert. denied, 470 U.S. 1005 (1985); In re IBM Peripheral EDP Devices Antitrust Litig., 481 F. Supp. 965, 1013 n.119 (N.D. Cal. 1979) (in antitrust cases "a plaintiff must come forward with the most accurate proof reasonably available"), aff'd sub nom. Transamerica Computer Co. v. IBM Corp., 698 F.2d 1377 (9th Cir.), cert. denied, 464 U.S. 955 (1983); ILC Peripherals Leasing Corp. v. IBM Corp., 458 F. Supp. 423, 434 (N.D. Cal. 1978) (an antitrust plaintiff must produce "the best measure [of damages] available"), aff'd sub nom. Memorex Corp. v. IBM Corp., 636 F.2d 1188 (9th Cir. 1980), cert. denied, 452 U.S. 972 (1981); Martin Motor Sales, Inc. v. Saab-Scania of Am., Inc., 452 F. Supp. 1047, 1053 (S.D.N.Y. 1978) ("plaintiff is obligated to offer the court the best evidence available in proving its damages"), aff'd, 595 F.2d 1209 (2d Cir. 1979); Riss & Co. v. Association of Am. R.Rs., 190 F. Supp. 10, 18 (D.D.C. 1960) ("In antitrust cases, a party has the burden of furnishing the best evidence that the subject matter permits as to what the impact of the claimed illegal conduct was on its business."); William Goldman Theaters, Inc. v. Loew's, Inc., 69 F. Supp. 103, 106 (E.D. Pa. 1946) (an antitrust plaintiff "must always produce all the evidence that he can"), aff'd, 164 F.2d 1021 (3d Cir. 1948); see also Cecil Corley Motor Co. v. General Motors Corp., 380 F. Supp. 819, 859 (M.D. Tenn. 1974) (granting judgment for the defendant where "the plaintiff chose . . . to go to the jury with less than the best available evidence on damages").
19. Bigelow, 327 U.S. at 264. As the Supreme Court explained in Story Parchment: Where the tort itself is of such a nature as to preclude the ascertainment of the amount of damages with certainty, it would be a perversion of fundamental principles of justice to deny all relief to the injured person, and thereby relieve the wrongdoer from his making any amend for his acts. In such a case, while the damages may not be determined by mere speculation or guess, it will be enough if the evidence show the extent of the damages as a matter of just and reasonable inference, although the result be only approximate. The wrongdoer is not entitled to complain that they cannot be measured with the exactness and precision that would be possible if the case, which he alone is responsible for making, were otherwise. 282 U.S. at 563; see also J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 566 (1981) ("[I]t does not 'come with very good grace' for the wrongdoer to insist upon specific and certain proof of the injury which it has itself inflicted.") (citation omitted).
20. Bigelow, 327 U.S. at 264.
21. Litton Sys., Inc. v. Honey-well, Inc., 1996-2 Trade Cas. (CCH) ¶ 71,559, at 77,969 (C.D. Cal. 1996).
22. Id.
23. See, e.g., Litton Sys., Inc. v. AT&-T, 700 F.2d 785, 825 (2d Cir. 1983) (observing "that damage studies are inadequate when only some of the conduct complained of is found to be wrongful and the damage study cannot be disaggregated"); see also Roger D. Blair & William H. Page, "Speculative" Antitrust Damages, 70 WASH. L. REV. 423, 448 (1995) ("If a number of the defendant's acts allegedly harmed the plaintiff, and only some of them are found illegal, a damage [study] must be capable of distinguishing the lawful competitive harm from the unlawful.").
24. 708 F.2d 1081 (7th Cir.), cert. denied, 464 U.S. 891 (1983).
25. Id. at 1163.
26. Id.
27. Id. at 1162 (quoting Bigelow, 327 U.S. at 264).
28. See id. at 1166-68. In support of its holding, the MCI court relied in part upon the First Circuit's decision in Momand v. Universal Film Exchs., Inc., 172 F.2d 37 (1st Cir. 1948), cert. denied, 336 U.S. 967 (1949). In Momand only two of the plaintiff's original 20 antitrust claims survived after the trial court recognized the res judicata effects of a prior related judgment. Because the plaintiff's damage evidence failed "to particularize the injury caused by each practice," id. at 43, there was no basis in the record for the jury to determine if the two remaining claims in fact caused the plaintiff's injury. Therefore, the trial court reversed the jury's verdict and entered judgment for the defendants. On appeal, the First Circuit stated: If the res judicata rulings in this case are correct, the plaintiff is now in the position of having his shotgun replaced with a rifle. He can no longer spread his fire over the whole range of defendants' business practices. He must concentrate on two. And if the res judicata rulings are to be given full effect, the injury alleged must be allocated to the illegal practices in some manner that can be reasonably measured. . . . Otherwise the defendants would be obliged to pay losses caused by conduct which was determined not to be liability-creating in their particular case. Id. Upon reviewing the plaintiff's proof, the First Circuit held that there was no basis in the evidence to support a finding that the plaintiff's entire injury was attributable to the two remaining claims and that the trial court, therefore, was right to order judgment for the defendants. In concluding its discussion of this issue the court stated: "[A] fair degree of certainty is . . . essential to show the causative relationship of defendants' misconduct and plaintiff's injury. Especially must this be so where a number of causes exist, [but] . . . recovery cannot be had for losses due to most of them." Id.
29. 955 F.2d 1361 (9th Cir.), cert. denied, 506 U.S. 908 (1992).
30. Id. at 1373 (emphasis added).
31. Id.
32. Id. at 1371, 1372.
33. Id. at 1372.
34. Id. at 1373. Another case addressing this issue is Multiflex, Inc. v. Samuel Moore &? Co., 709 F.2d 980 (5th Cir. 1983), cert. denied, 465 U.S. 1100 (1984), in which the plaintiff asserted claims under §§ 1 and 2 of the Sherman Act, but submitted a damage model that "projected only one total figure for the Sherman Act damages alleged under both section 1 and section 2 theories." Id. at 997. At trial the jury found the defendant liable on both claims and awarded separate damage amounts for each claim. On appeal, however, the Fifth Circuit reversed the jury's verdict on the § 1 conspiracy claim, concluding that the plaintiff had failed to establish sufficiently the fact of injury. While finding no error in the plaintiff's proof in connection with the § 2 claim, the court nevertheless set aside the jury's damage verdict on this claim and remanded for a partial new trial on damages. This was necessary, in the court's view, because "there [was] no rational basis in the record for distinguishing between the section 1 and section 2 damage awards." Id. According to the court, "Nowhere on the record [did] either party suggest what damages might be appropriate if one theory and not the other were valid in this case." Id.
35. 635 F. Supp. 1505 (S.D. Tex. 1985).
36. Id. at 1525-26.
37. Id. at 1525.
38. Id. at 1526 (citations omitted).
39. 458 F. Supp. 423 (N.D. Cal. 1978), aff'd sub nom. Memorex Corp. v. IBM Corp., 636 F.2d 1188 (9th Cir. 1980), cert. denied, 452 U.S. 972 (1981).
40. Id. at 434.
41. Id.
42. Id.
43. In re IBM Peripheral EDP Devices Antitrust Litig., 481 F. Supp. 965, 1013 (N.D. Cal. 1979), aff'd sub nom. Transamerica Computer Co. v. IBM Corp., 698 F.2d 1377 (9th Cir.), cert. denied, 464 U.S. 955 (1983) (Transamerica). In both Memorex and Transamerica the Ninth Circuit affirmed the trial court's rulings without reaching the damage issues.
44. 556 F. Supp. 825 (D.D.C. 1983), aff'd, 740 F.2d 980 (D.C. Cir. 1984), cert. denied, 470 U.S. 1005 (1985).
45. 556 F. Supp. at 1090 (citing Transamerica, 481 F. Supp. at 1013-14).
46. Id.
47. Harkins Amusement Enters., Inc. v. General Cinema Corp., 748 F. Supp. 1399, 1406 (D. Ariz. 1990); see supra note 17.
48. 458 F. Supp. at 436.
49. Id. at 434.
50. 481 F. Supp. at 1013.
51. 556 F. Supp. at 1090.
52. Id. at 1091-92.
53. W. at 1092.
54. In Litton v. Honeywell the court explained that "Litton's own damage expert testified that disaggregation was not impossible but that he never attempted to apportion the damages attributable to specific acts or conduct complained of . . . ." Litton Sys., Inc. v. Honeywell, Inc., 1996-2 Trade Cas. (CCH) ¶ 71,559, at 77,970 (C.D. Cal. 1996). As a consequence, the court concluded that "Litton . . . ha[d] failed to meet its obligation to provide the best proof of damages available." Id. The court, therefore, ordered a partial new trial on damages.
55. 429 U.S. 477 (1977).
56. Id. at 489.
57. Id.
58. This is precisely what the Second Circuit did in Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (1979), cert. denied, 444 U.S. 1093 (1980). The plaintiff in Berkey sued Kodak under § 2 of the Sherman Act seeking to recover damages for alleged monopoly overcharges on film and other photofinishing materials, measuring such damages based on "the entire excess of the monopolist's price over that which would prevail in a competitive market." Id. at 297. The Second Circuit held that this damage measure was improper because, so long as it does not engage in anticompetitive conduct, a monopolist "may charge as high a rate as the market will bear" without violating the law. Id. The court held that the "true measure of damages" in a monopoly overcharge case is "the price increment caused by the anticompetitive conduct that originated or augmented the monopolist's control over the market." Id. In other words, the court stated, "a purchaser may recover only for the price increment that 'flows from' the distortion of the market caused by the monopolist's anticompetitive conduct." Id. (quoting Brunswick, 429 U.S. at 489). The court stressed that a broader damage measure would undercut the purposes of the antitrust laws by requiring the monopolist "to forfeit its legitimately acquired advantage." Id. at 298.
59. See, e.g., Northeastern Tel. Co. v. AT&T, 497 F. Supp. 230, 247, 248 (D. Conn. 1980) ("the general rule in an antitrust case is that a plaintiff must prove the amount of damages flowing from each separate area of anticompetitive conduct"), rev'd on other grounds, 651 F.2d 76 (2d Cir. 1981).
60. 458 F. Supp. at 434.
61. Id.; see Southern Pac. Communications, 556 F. Supp. at 1091 (explaining that the Memorex court directed a verdict for IBM "on the ground that the plaintiffs' aggregated damage model was insufficient to provide a basis for measuring damages even if all of the defendant's actions were found to be unlawful").
62. 708 F.2d at 1163.
63. Id. at 1161 (citations omitted). The MCI case frequently is cited for the proposition that "plaintiffs normally need not disaggregate the harms attributable to different illegal acts of the defendant." ABA SECTION OF ANTITRUST LAW, PROVING ANTITRUST DAMAGES: LEGAL AND ECONOMIC ISSUES 42 (1996).
64. 684 F.2d 1226 (7th Cir. 1982), aff'd, 465 U.S. 752 (1984).
65. Id. at 1242.
66. Id.
67. Id. at 1242-43.
68. Id. at 1243.
69. Reconciling Spray-Rile and Memorex is not difficult. In Spray-Rite the Seventh Circuit explained that there was no conflict between its holding (excusing Spray-Rite's failure to disaggregate on impracticability grounds) and the court's ruling in Memorex (dismissing Memorex's claims given the failure to disaggregate) because in Memorex "there was evidence that disaggregation was possible," whereas in the case before it "[t]he only damage evidence introduced at trial established that it was impracticable to disaggregate." Spray-Rite, 684 F.2d at 1243 & n.13.
70. 708 F.2d at 1161.
71. Id. (citing Bigelow v. RKO Radio Pictures, 327 U.S. 251, 264-65 (1946)).
72. Id.
73. After announcing its basic holding that an antitrust plaintiff may be relieved of the obligation to disaggregate where disaggregation is shown to be impracticable, the Spray-Rite court stated: Any other rule would permit the defendant to escape compensating the plaintiff if the defendant's wrongful conduct were sufficiently varied and effective to render more exact proof of damage impossible. "[A] defendant whose wrongful conduct has rendered difficult the ascertainment of precise damages suffered by the plaintiff is not entitled to complain that they cannot be measured with the same exactness and precision as would otherwise be possible." 684 F.2d at 1243 (citation omitted).
74. Id. (emphasis added).
75. MCI, 708 F.2d at 1161.
76. The alternative reading of MCI (i.e., that it endorses a general rule against requiring disaggregation of damages among multiple unlawful acts) is even more difficult to defend, given that it assumes that the Seventh Circuit, in dictum, chose to reverse its position on an issue squarely addressed one year earlier in Spray-Rite without expressly acknowledging that it was doing so. Nevertheless, other commentators have adopted this reading of MCI. See Charnas, supra note 11, at 419-20 (suggesting that the MCI decision "signaled a limitation on the segregation doctrine that had not been recognized by other courts" in that it "refused to adopt the reasoning of those courts that would require disaggregation even if the plaintiff had proved all of its multiple allegations of injury").
77. It also conforms with the principle that antitrust plaintiffs are obliged to present the best available proof of their damages. See supra part II.C. & note 17.
78. Litton Sys., Inc. v. Honeywell, Inc., 1996-2 Trade Cas. (CCH) ¶ 71,559, at 77,969 (C.D. Cal. 1996).
79. In Memorex, Transamerica, Universal Amusements, and Southern Pacific Communications the courts concluded that at least some of the conduct upon which the plaintiff's aggregated damage proof was based was not unlawful. Yet each of these decisions suggests that, even had the plaintiff succeeded in proving that all of the challenged conduct was unlawful, the court still would have entered judgment for the defendant given the plaintiff's failure to disaggregate. See, e.g., Transamerica, 481 F. Supp. at 1010 ("Transamerica has failed to establish liability on either the monopolization or the attempt claim. But even if it had done so, it would still suffer an adverse judgment because its damage proof affords the factfinder no opportunity to calculate resulting injury without resort to speculation.").
80. See discussion of MCI and Vernon, supra part II.B.
81. See MCI, 708 F.2d at 1166-68.
82. See Vernon, 955 F.2d at 1372-73.
83. See, e.g., Blue Cross & Blue Shield United of Wis. v. Marshfield Clinic, 65 F.3d 1406, 1416 (7th Cir. 1995) (Posner, J.) (after reversing the jury's liability findings on some but not all of the plaintiff's antitrust claims, the court ordered a new trial on damages, stating that "[n]o part of the award of damages . . . can stand, because these items were not segregated by offense"), cert. denied, 116 S. Ct. 1288 (1996); see also Momand v. Universal Film Exchs., Inc., 172 F.2d 37 (1st Cir. 1948), cert. denied, 336 U.S. 967 (1949) (discussed supra note 27).
84. Litton Sys., Inc. v. Honeywell, Inc., 1996-2 Trade Cas. (CCH) ¶ 71,559, at 77,969 (C.D. Cal. 1996).
85. Id. at 77,970. The aggregated damage study presented by Litton at trial proffered a lump-sum damage amount of $298.5 million. The jury's verdict, however, was for $234 million. Litton sought to persuade the court that the smaller number actually awarded by the jury reflected the jury's understanding that some of Honeywell's conduct had been withdrawn from the case and, therefore, contended that the verdict, appropriately reduced to account for this fact, should be sustained. The court rejected this argument, reasoning as follows: Had the jury accepted Litton's proposed figure and returned a $298.5 million verdict, that verdict would have been unsustainable as too large. It would have represented an award based on Litton losses that were caused by Honeywell conduct, which the Court determined could not be considered by the jury as exclusionary conduct in support of Litton's monopolization claim. Perhaps recognizing the flaw in the single-sum damage model and the inappropriateness of awarding the full amount after the Court excluded conduct on which the amount was based, the jury returned a verdict of $234 million, an amount less than the single sum proposed by Litton. However, the $234 million verdict also is unsustainable because it cannot be explained in light of Litton's aggregated damage model. Litton's model failed to apportion damages to particular conduct. The jury simply was unable, without resort to speculation and guesswork, to determine by what amount Litton's single sum of $298.5 million should be reduced to account for conduct excluded by the Court from their consideration. Id.
86. 684 F.2d 1226 (7th Cir. 1982), aff'd, 465 U.S. 752 (1984).
87. See supra part III.C.
88. Spray-Rite, 684 F.2d at 1242.
89. As the appellate court explained, the second interrogatory, to which the jury responded "yes," asked: "Were the compensation programs and/or areas of primary responsibility, and/or shipping policy created by Monsanto pursuant to a conspiracy or combination with one or more of its distributors to fix, maintain or stabilize resale prices of Monsanto herbicides?" Id. at 1243 n.12.
90. Id. at 1243 (emphasis added).
91. Id.
92. 850 F.2d 1286 (8th Cir. 1988), cert. denied, 489 U.S. 1081 (1989).
93. Id. at 1306.
94. Id. at 1307.
95. Id.
96. The First Circuit in Momand v. Universal Film Exchs., Inc., 172 F.2d 37 (1st Cir. 1948), cert. denied, 336 U.S. 967 (1949), followed the same approach but concluded that there was no basis in the evidence to support a finding that the plaintiff's entire injury was attributable to the two (out of an original total of 20) claims that the court allowed to go to the jury. The First Circuit, therefore, affirmed the trial court's ruling dismissing the plaintiff's claims as a matter of law. See supra note 27.
97. Although perhaps unlikely, in most cases it is certainly possible that a particular portion of the conduct challenged by an antitrust plaintiff may not contribute incrementally to the total damages claimed by the plaintiff when combined with the remaining elements of conduct being challenged. For instance, a plaintiff may challenge four discrete acts by the defendant, any three of which in combination would cause the entire injury of which the plaintiff complains (e.g., being forced out of business). Indeed, in theory there could be multiple permutations of two or three (of, say, a total of four) challenged acts that, together, would be sufficient to cause the plaintiff's full injury. Yet, other permutations of two or three separate acts by the defendant may not be sufficiently harmful to the plaintiff, in the aggregate, to inflict the full injury complained of.
98. This scenario is addressed in part III.B.3, infra.
99. The rule forbidding "speculation or guesswork" in the quantification of antitrust damages applies with equal force when the judge, as opposed to the jury, sets the damage amount. For this reason, courts have held that a court may not order a remittitur where the plaintiff's damage evidence is unduly speculative. See, e.g., Olympia Equip. Leasing Co. v. Western Union Tel. Co., 797 F.2d 370, 382-83 (7th Cir. 1986), cert. denied, 480 U.S. 934 (1987).
100. NFO, 850 F.2d at 1307.
101. See supra part III.B.1.
102. 370 U.S. 690 (1962).
103. Id. at 707. Although some have attempted to argue that Continental Ore does away with the disaggregation requirement in antitrust cases, such arguments have been rejected. As one court explained: Continental Ore plainly does not hold that plaintiffs in monopolization cases may dispense with particularized proof of damages where disaggregation is possible. Indeed, the Supreme Court in that case specifically reviewed the evidence relating to each of the five incidents involved to determine whether the evidence on each was sufficient to submit that conduct to the jury, and the Court pointed out that the jury would have to determine whether each of the five incidents "materially contributed . . . to Continental's damage." Southern Pac. Communications, 556 F. Supp. 825 at 1091 n.337 (quoting Continental Ore, 370 U.S. at 702).
104. 700 F.2d 785 (2d Cir. 1983).
105. Id. at 825.
106. See id. ("AT&T correctly points out that courts have held that damage studies are inadequate when only some of the conduct complained of is found to be wrongful and the damage study cannot be disaggregated.").
107. Id.
108. Id. (emphasis added).
109. Id.
110. Litton challenged eight separate categories of Honeywell's conduct, including alleged exclusive dealing, refusals to deal, product bundling, targeted below-cost pricing, misrepresentations, interference with Litton contracts and business relationships, false product announcements, and an allegedly unlawful acquisition. See Litton Sys., Inc. v. Honeywell, Inc., 1996-2 Trade Cas. (CCH) ¶ 71,559, at 77,968 (C.D. Cal. 1996). Of these categories of challenged conduct, all but two - exclusive dealing and refusals to deal - were rejected by the court before the case was submitted to the jury. Id. at 77,970.
111. Id.
112. MCI Communications Corp. v. AT&T, 708 F.2d 1081 (7th Cir.), cert. denied, 464 U.S. 891 (1983).
113. Id. at 1163; see discussion of Spray-Rite, supra part III.B.1.
114. MCI Communications, 508 F.2d at 1164.
115. Id. (emphasis added); see also id. ("Since a major premise of the [MCI damage] study, illegality of [AT&T's pricing] was incorrect, the study must be rejected.") (emphasis added).
116. 684 F.2d 1226 (7th Cir. 1982), aff'd, 465 U.S. 752 (1984).
117. Id. at 1242-43. As explained supra part III.A., the plaintiff in Spray-Rite contended that it would have been impracticable to disaggregate its damage claim because the effects of Monsanto's challenged practices had "merge[d] together and interact[ed] among themselves." Id. at 1242. In essence, Spray-Rite maintained that Monsanto's challenged practices had combined together to cause a unitary injury and, thus, that there was no practical way to isolate the effect of any one of Monsanto's acts taken alone. Plaintiffs in other cases have made similar impracticability arguments based upon the allegedly interrelated nature of the defendant's challenged conduct or the indivisible nature of the plaintiff's injury. See, e.g., Southern Pac. Communications, 556 F. Supp. at 1091 n.337 (acknowledging SPCG's contention that disaggregation was not necessary because the conduct in issue was "interrelated" and had "a 'synergistic' effect"); see also Bonjorno v. Kaiser Aluminum & Chem. Co., 752 F.2d 802, 813 (3d Cir. 1984) (noting that "[w]hen the antitrust injury is of an indivisible nature . . . then it is unnecessary to segregate damages according to the specific causes"), cert. denied, 477 U.S. 908 (1986). A discussion of when and under what circumstances damages caused by multiple discrete acts truly are so interrelated that disaggregation would be impracticable (or impossible), or how often this situation arises, is beyond the scope of this article. Suffice it to say that such circumstances likely do exist.
118. 684 F.2d at 1243.
119. Id.
120. Id. (emphasis added).
121. Litton Sys., Inc. v. Honeywell, Inc., 1996-2 Trade Cas. (CCH) ¶ 71,559, at 77,970 (C.D. Cal. 1996).
122. Id. Litton apparently believed at this stage in the proceedings that it could cure the defect in its damage proof by disaggregating at trial. However, the court ruled that all of the parties' experts - Litton's damage expert included - would not be permitted at trial to offer testimony beyond the scope of their final expert reports. This effectively precluded Litton's strategy of disaggregating at trial because Litton's final damage report did not segregate the damage claim to correspond with the particular claims or conduct in issue.
123. Id.
124. Id. In testifying that he "simply didn't have the time" to disaggregate, Litton's damage expert made a poor choice of words. In a case in which the plaintiff is seeking to recover in the neighborhood of $1 billion in damages, courts are unlikely to lessen customary proof thresholds to accommodate the busy schedule of the plaintiff's expert witness. But suppose an antitrust plaintiff were seeking a more modest sum in damages (e.g., $500,000) and that the plaintiff's expert testified that she attempted to disaggregate but quickly realized that to do so would cost her client $200,000 (a not unrealistic number, given the high cost of working with complex computer damage models), at which time her client instructed her not to undertake to disaggregate the damage model. In this situation, could it be said that disaggregation was "impracticable" in that, although by no means impossible, it would be sufficiently difficult and expensive that a plaintiff's decision not to disaggregate was justifiable? It is not entirely clear how a court would answer this question, in part because the term "impracticability" in this context has not been clearly defined. On the one hand, in our legal system, when a plaintiff's claim is not sufficiently large to warrant undertaking the costs of litigation (given predictions of the plaintiff's expected recovery), the result in most cases is that the claim is never made, not that the proof standards are modified to favor the plaintiff. On the other hand, ultimately the antitrust plaintiff's responsibility is to "come forward with the most accurate proof reasonably available." Trans-america, 481 F. Supp. at 1013 n.119 (emphasis added). This concept, some might argue, is flexible enough to accommodate situations in which disaggregated damage proof may be "available" but not at a price that is "reasonably" justifiable given the amount in controversy.
125. See also, e.g., Vernon, 955 F.2d at 1372 (affirming dismissal of Vernon's claims, finding that Vernon's damage expert "did [not] attempt . . . to make corrections" to Vernon's damage study, despite the fact that it "failed to segregate the losses, if any, caused by [the defendant's] acts"); Schiller & Schmidt, Inc. v. Nordisco Corp., 969 F.2d 410, 415-16 (7th Cir. 1992) (affirming district court's rejection of expert damage testimony, stating that "[t]he expert should have tried to separate the damages that resulted from the lawful [aspects of defendant's conduct] from the damages that resulted from particular forms of misconduct allegedly committed by [defendant]," but "[n]o such effort was made"); Southern Pac. Communications, 556 F. Supp. at 1090, 1092 (rejecting SPCC's damage proof as "fatally deficient" and entering judgment for AT&T where "SPCC's principal damage witness conceded during plaintiffs' case-in-chief that he had never even tried to disaggregate SPCC's damage claim").
126. 497 F. Supp. 230 (D. Conn. 1980), rev'd on other grounds, 651 F.2d 76 (2d Cir. 1981).
127. Id. at 247 ("[T]he Court recognizes that the general rule in an antitrust case is that a plaintiff must prove the amount of damages flowing from each separate area of anticompetitive conduct.").
128. Id. at 247-48.
129. Id. at 248.
130. Id.
131. Van Dyk Research Corp. v. Xerox Corp., 478 F. Supp. 1268 (D.N.J. 1979), aff'd, 631 F.2d 251 (3d Cir. 1980), cert. denied, 452 U.S. 905 (1981).
132. ILC Peripherals Leasing Corp. v. IBM Corp., 458 F. Supp. 423, 434 (N.D. Cal. 1978), aff'd sub nom. Memorex Corp. v. IBM Corp., 636 F.2d 1188 (9th Cir. 1980), cert. denied, 452 U.S. 972 (1981).
133. 497 F. Supp. at 248.
134. Id.
135. Id.
136. At first blush it might appear that this result is inconsistent with those decisions (e.g., Memorex) suggesting that disaggregation is required even in cases in which the plaintiff succeeds in establishing that all of the challenged conduct is unlawful. If disaggregation is not required in a damages trial following a prior determination of liability, why should disaggregation be required in a consolidated liability-damage proceeding in which the plaintiff prevails on all liability claims? The basic answer is as follows: In a consolidated proceeding the concern is that absent disaggregation the jury may be led to speculate not only as to the amount of damages but also as to the causation of injury in fact. Where such speculation exists, it contaminates the jury's liability findings (injury in fact being a liability' issue) as well as its determination of damages. In a bifurcated proceeding one presumes that in order for the jury to reach particularized findings of liability (the kind of conduct-specific findings that form the necessary predicate to a subsequent damages-only proceeding) the proof of injury in fact cannot be aggregated. If it were, then there would not be a sufficient evidentiary basis to support conduct-specific liability findings, and absent such findings it would be improper (for reasons noted immediately below) to permit a second jury to separately determine damages.
137. 283 U.S. 494 (1931).
138. In Gasoline Products the Supreme Court held that it would be improper for a court to order a partial new trial on damage issues alone in circumstances in which "the question of damages . . . is so interwoven with that of liability that the former cannot be submitted to the jury independently of the latter without confusion and uncertainty, which would amount to a denial of a fair trial." Id. at 500. A number of courts, applying Gasoline Products, have ruled that it is improper to permit a second jury to separately assess damages if the first jury's liability verdict does not clearly identify the specific conduct found to be unlawful. See, e.g., Bohack Corp. v. Iowa Beef Processors, Inc., 715 F.2d 703, 709 (2d Cir. 1983) (affirming lower court's ruling requiring a new trial on both liability and damage issues in a Robinson-Patman Act case, noting that "[t]he first jury had not been asked to, nor did it, specify the products as to which it found defendants had violated the Robinson-Patman Act" and that "[t]he second jury thus could hardly have fathomed the issues of causation and injury . . . without considering the extent of the violation"); Eximco, Inc. v. Trane Co., 748 F.2d 287, 289 (5th Cir. 1984) (per curiam) (affirming lower court's decision to order a new trial on all issues, stating, "Because a second jury charged with determining damages would be unaware of how the first jury found that Trane breached its contract with Eximco, we are now persuaded that the district court did not abuse its discretion in ordering a new trial on both liability and damages"). But see Bonjorno v. Kaiser Aluminum & Chem. Co., 752 F.2d 802, 812-13 (3d Cir. 1984) (defendant challenged lower court's decision to bifurcate damages and liability, arguing that "because the liability jury did not distinguish among the alleged anticompetitive acts in its determination of causation, the damages jury could not know from what acts they could attribute damages"; nevertheless, the appellate court upheld the lower court's actions, concluding that the plaintiffs' injuries were "of an indivisible nature" and that "it would be extremely difficult, if not impossible, to segregate and attribute a fixed amount of damages to any one act"), cert. denied, 477 U.S. 908 (1986).
139. See, e.g., Southern Pac. Communications Co. v. AT&T, 556 F. Supp. 825, 1090 (D.D.C. 1983) ("The trier of fact must be able to determine from the damage evidence whether each of the particular actions alleged to form an antitrust violation 'materially contributed' to plaintiff's injury"), aff'd, 740 F.2d 980 (D.C. Cir. 1984), cert. denied, 470 U.S. 1005 (1985); In re IBM Peripheral EDP Devices Antitrust Litig., 481 F. Supp. 965, 1013-14 (N.D. Cal. 1979) (stressing that causation proof must be "closely connected to the individual acts complained of" and that the plaintiff must show "how much injury each act caused"), aff'd sub nom. Transamerica Computer Co. v. IBM Corp., 698 F.2d 1377 (9th Cir.), cert. denied, 464 U.S. 955 (1983); Van Dyk Research Corp. v. Xerox Corp., 478 F. Supp. 1268, 1326 (D.N.J. 1979) ("the plaintiff, in proving the fact of injury, must prove a direct and proximate causal connection between an alleged unlawful act and the plaintiff's alleged injury"), aff'd, 631 F.2d 251 (3d Cir. 1980), cert. denied, 452 U.S. 905 (1981); ILC Peripherals Leasing Corp. v. IBM Corp., 458 F. Supp. 423, 434 (N.D. Cal. 1978) (holding that the law requires antitrust plaintiffs, where possible, "to isolate the impact of each act" challenged as unlawful), aff'd sub nom. Memorex Corp. v. IBM Corp., 636 F.2d 1188 (9th Cir. 1980), cert. denied, 452 U.S. 972 (1981).
140. Litton Sys., Inc. v. Honeywell, Inc., 1996-2 Trade Cas. (CCH) ¶ 71,559, at 77,970 (C.D. Cal. 1996).
141. This again raises a difficult question of interpretation - namely, whether the term "impracticability" should be construed to refer solely to the feasibility of developing disaggregated damage proof or should also encompass economic considerations, such as the cost of developing such proof compared with the plaintiff's potential recovery. See supra note 123. If it were possible at some price to disaggregate a damage model on an act-by-act basis, but the cost of doing so made it "impracticable" given the relatively small amount in controversy, should the plaintiff be permitted to segregate its damages at a higher level of generality? In the author's view, it is not clear that courts should be permitted to lessen a standard of proof in a way that increases the likelihood of the jury speculating in awarding damages against the defendant only because the plaintiff's claim is small in comparison to the cost of developing more precise proof of its alleged injury. The difference in this situation and the traditional notion of impracticability (which refers to the feasibility of disaggregation) is that, in the latter instance, there is an underlying notion that the defendant should bear responsibility if its actions (or, more specifically, the complicated interrelations among its various challenged acts) have prevented the plaintiff from providing a more precise measure of damages. It is not self-evident that a defendant is similarly responsible for the fact that its actions allegedly caused injuries to the plaintiff that are insufficient in magnitude, monetarily, to justify the plaintiff in producing the level of precision in proof of damages that the law customarily requires.
142. Other cases culminating in a partial new trial on damages include Blue Cross & Blue Shield United of Wis. v. Marshfield Clinic, 65 F.3d 1406 (7th Cir. 1995), cert. denied, 116 S. Ct. 1288 (1996); Multiflex, Inc. v. Samuel Moore & Co., 709 F.2d 980 (5th Cir. 1983), cert. denied, 465 U.S. 1100 (1984); see supra note 33.
143. 283 U.S. 494 (1931); see supra note 137.
144. Id. at 500.
145. MCI, 708 F.2d at 1167.
146. Id. at 1167-68.
147. Id. at 1168 n.123; see Blue Cross & Blue Shield United of Wis. v. Marshfield Clinic, 65 F.3d 1406, 1416-17 (7th Cir. 1995) (Posner, J.) (explaining that, "of the purposes ascribed to the giving of a special verdict . . . probably the most important is to minimize the likelihood or scope of a retrial in a case in which there is more than one independent ground for recovery"), cert. denied, 116 S. Ct. 1288 (1996).
148. Trial Tr. at 7843.
149. The verdict form used by the trial court in MCI is reprinted in an appendix to the Seventh Circuit's decision. 708 F.2d at 1207.
150. Gasoline Products, 283 U.S. at 500.
151. 958 F.2d 525 (2d Cir. 1992).
152. Id. at 531.
153. 823 F.2d 1215 (8th Cir. 1987), cert. denied, 484 U.S. 1026 (1988).
154. Id. at 1239-40 (citing Gasoline Products, 283 U.S. at 499-500).
155. Id. at 1240. In Sears v. Southern Pac. Co., 313 F.2d 498 (9th Cir. 1963), the court came to the same conclusion: Since the judgment must be reversed, we have carefully considered whether to remand the case for new trial on the limited issue of damages, or a complete new trial covering all issues. Our conclusion is that, because the evidence in either event would largely be the same, a jury should be permitted to consider and apply it, with the aid of the court's instructions, to all issues rather than the isolated one of damages. Id. at 503 (citing Gasoline Products). A similar analysis led the court in Masson v. New Yorker Magazine, Inc., 832 F. Supp. 1350 (N.D. Cal. 1993), to order a new trial on all issues: It is clear that the issues of damages and liability are so interwoven that a new trial on all issues is warranted. A jury cannot determine damages alone in this case without first considering liability, including the nature of plaintiff's reputation before the article was published, how the questions defamed him by damaging that reputation, the falsity of the quotations, and, of course, the issue of constitutional malice. While the plaintiff argues in favor of retaining the jury's answers to special verdict questions regarding falsity and defamatory content . . . , the Court sees no intellectually honest way of parsing the case in this manner. Id. at 1377; see also Pumphrey v. K.W. Thompson Tool Co., 62 F.3d 1128, 1134 (9th Cir. 1995) (affirming trial court's order of new trial on both damage and liability issues, even though error affecting jury's verdict "did not relate to the issue of damages"), cert. denied, 116 S. Ct. 1042 (1996).
156. In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1182 (3d Cir. 1993) (citation omitted). Accord Alabama v. Bird Blue Body Co., 573 F.2d 309, 318 (5th Cir. 1978) (noting that "'in a private antitrust suit there is no neat dividing line between the issue of liability and damages'" and that "because of this vague dividing line between liability and damages . . . separate trials of liability and damages 'must be approached with trepidation'") (citations omitted).
157. 663 F.2d 930 (9th Cir. 1981), cert. denied, 459 U.S. 828 (1982).
158. Id. at 933 (quoting Gasoline Products, 283 U.S. at 500).
159. Id.
160. Id. at 934.
161. Id.
162. Cases falling within this category include Vernon, Memorex, Transamerica, Southern Pacific Communications, and Universal Amusements.
163. 1990-1 Trade Cas. (CCH) ¶ 69,032 (C.D. Cal. 1990), aff'd in part and rev'd in part, 955 F.2d 1361 (9th Cir.), cert. denied, 506 U.S. 908 (1992).
164. 955 F.2d at 1372.
165. Id.
166. 1990-1 Trade Cas. at 63,665.
167. 955 F.2d at 1372-73.
168. Id. at 1373.
169. 523 F. Supp. 954 (M.D. Pa. 1981).
170. Id. at 966.
171. Id. at 969-70.
172. Id. at 974-75.
173. Id. at 975.
174. See, e.g., Olympia Equip. Leasing Co. v. Western Union Tel. Co.,797 F.2d 370, 383 (7th Cir. 1986) (finding that the trial court erred in ordering a remittitur from $54 million to $12 million because "[t]he record contain[ed] no basis for a rational estimation of Olympia's damages"), cert. denied, 480 U.S. 934 (1987).
175. 850 F.2d 1286 (8th Cir. 1988), cert. denied, 489 U.S. 1081 (1989).
176. See id. at 1307 ("On remand, the court shall afford the parties an opportunity to point out evidence in the existing record from which it may determine whether NFO's damage . . . should be reduced and, if so, the amount of such reduction.").
177. See, e.g., Rosebrough Monument Co. v. Memorial Park Cemetery Ass'n, 666 F.2d 1130, 1147 (8th Cir. 1981) (finding that where plaintiff's damage evidence, which the district court found to be "wholly speculative," was "insufficient only as to the measurement of damages," not the fact of damage, "an award of nominal damages [was] justified," and, therefore, remanding to district court with instructions to award nominal damages in the amount of $3), cert. denied, 457 U.S. 1111 (1982); Home Placement Serv., Inc. v. Providence Journal Co., 573 F. Supp. 1423, 1432 (D. R.I. 1983) (awarding nominal damages in the amount of $3, finding that the plaintiff's unduly speculative damage proof "left quantification of damages at the mercy of unbridled conjecture"), aff'd in part, rev'd in part, (1st Cir. 1984), cert. denied, 467 U.S. 1191 (1985); Knutson v. Daily Review, Inc., 468 F. Supp. 226, 240 (N.D. Cal. 1979) (awarding nominal damages in the amount of $3, finding that "even though the fact of damages [had] been established, plaintiffs ha[d] not proven the amount of damages" and thus "it would be sheer speculation, and in fact contrary to the evidence, to award more than nominal damages"), aff'd, 664 F.2d 1120 (9th Cir. 1981).
178. See, e.g., Argus, Inc. v. Eastman Kodak Co., 612 F. Supp. 904, 923 (S.D.N.Y. 1985) ("It is the obligation of a Court to exclude, in limine, exhibits and damage theories which are based on speculation and guesswork, and are not 'sufficiently probative.'") aff'd, 801 F.2d 38 (2d Cir. 1986), cert. denied, 479 U.S. 1088 (1987); Shannon v. Crowley, 538 F. Supp. 476, 484 (N.D. Cal. 1981) (granting motion in limine excluding plaintiff's damage evidence "as being too speculative"); Pacific Mailing Equip. Corp. v. Pitney Bowes, Inc., 499 F. Supp. 108, 119 (N.D. Cal. 1980) (granting motion in limine to exclude damage evidence that consisted of "speculation").
179. Vernon, 955 F.2d at 1373.
180. Id. at 1372.
181. Id. at 1373.
182. 845 F.2d 802 (9th Cir. 1988).
183. Id. at 806.
184. Id. at 807.
185. Id. at 808.