By E. Darius Sturmer, J.D.
Complaining competitor failed to show enough evidence of antitrust injury and damages to support Robinson-Patman Act claims, appellate court says, and order denying motion to amend complaint was proper owing to undue delay and futility.
A federal district court in the U.S. Virgin Islands made no error in entering judgment in favor of a cement supplier accused by a customer of unlawful price discrimination and denying the customer leave to amend its complaint, the U.S. Court of Appeals in Philadelphia has ruled. The appellate court agreed with the court below that the customer, Spartan Concrete Products, LLC, failed to provide sufficient evidence of antitrust injury and damages from the alleged conduct. Further, the undue delay in filing for leave and the prejudice and futility inherent in further amendment of the claims justified the court’s denial of that request in a separate order, the court decided. Therefore, both orders were affirmed (Spartan Concrete Products, LLC v. Argos USVI, Corp., July 5, 2019, Hardiman, T.).
Background. Spartan, a seller of ready-mix concrete on St. Croix, began doing business with the defendant/appellee, Argos USVI, Corp., in 2010 when expanding its business to St. Thomas and St. John. Argos was the only vendor on St. Thomas of the bulk cement used in the concrete, and it sold to both Spartan and to the company Spartan aimed to displace as the lone seller of ready-mix concrete on that island at the time, Heavy Materials. To achieve that aim, Spartan launched a price war against Heavy Materials over the next three years, allegedly sustaining total losses of over $3.8 million over that period.
However, Spartan asserted, Argos gave Heavy Materials a 10 percent volume discount that enabled the incumbent monopolist to withstand Spartan’s competitive pressure and ultimately drive Spartan from the market by means of a market-splitting agreement whereby Spartan would not compete on St. Thomas if Heavy Materials did not compete on St. Croix.
Spartan sued Argos in January 2015, claiming that the volume discount constituted price discrimination in violation of §2(a) of the Robinson-Patman Act. By November 2016, Spartan had moved to amend its complaint to add civil conspiracy and intentional interference with business relations claims, and Argos had sought leave to add antitrust counterclaims against Spartan based on its purported non-compete agreement with Heavy Materials. Both motions were denied several months later, and the district court conducted a bench trial in July 2017 that ended when the court granted Argos’ motion for a directed verdict at the conclusion of Spartan’s evidence, finding that while Spartan had established the first three elements of a §2(a) claim, it had failed to provide sufficient evidence of antitrust injury and damages to support its price discrimination claim.
Antitrust injury. Spartan’s arguments that it "proved the fact of antitrust injury through evidence that the merciless price war caused [it] to suffer continued losses and eventually to go out of business" and "proved its lost sales" through employee testimony about price competitiveness in a two-competitor market were as unconvincing to the appellate court as they were to the district court. The evidence did not sufficiently prove antitrust injury. Although one of the witness employees insisted that Spartan lost jobs to Heavy Materials because of the price difference, he had conceded that the testimony had been premised on an assumption unverified by any analysis or documents showing the reasons customers bought from Heavy Materials rather than Spartan, the appellate court observed. Moreover, Spartan failed to identify or provide testimony from lost customers supporting that conclusion. Citing Supreme Court precedent, the appellate court stated that the employee’s "assumptions and generalized statements about price fall short of the requirement to show an ‘actual injury attributable to’ the alleged price difference.
In addition, noted the court, the evidence at trial showed that Spartan lost sales and profits for reasons unrelated to the cement discount. Testimony indicated that Heavy Materials won the majority of the large commercial projects based on quality rather than price, and even Spartan’s employee witness acknowledged that the company lost profits because of its short-term plan of "selling concrete . . . at prices that were below its marginal cost." This evidence, along with Spartan’s lost revenue from writing off more than $345,000 in bad debts from customers, broke the causal connection required for antitrust injury because it suggested that factors other than price discrimination contributed to Spartan’s lost sales and profits, in the appellate court’s view.
Spartan also presented no evidence linking the 10 percent discount to its inability to compete in the St. Thomas market, the court said. Instead, evidence showed that Spartan was able to compete with Heavy Materials for three years, its price war achieving a nearly 30 percent share of the retail ready-mix concrete market on the island. "Spartan [could not] show antitrust injury merely by its closure on St. Thomas, especially because in exited the market after agreeing with Heavy Materials to divide the islands," according to the appellate court. Thus, the district court did not err in granting judgment in favor of Argos, the court concluded. Nor did the lower court err in finding that Spartan did not present sufficient evidence on the amount of its antitrust damages, it noted.
Leave to amend. The appellate court next rejected Spartan’s argument that the district court had abused its discretion in denying its motion to amend. The company’s contentions that there was no undue delay in filing the motion and that the additional claims would not prejudice Argos were both unpersuasive. In agreeing with a magistrate judge’s finding that the parties exhibited undue delay in completing discovery, the district court detailed that delay. While both parties advanced plausible arguments about the cause of the delay and whether it should impact Spartan’s motion to amend, Spartan failed to show that the court erroneously applied the law to these facts, especially considering Spartan’s substantial delay in pursuing discovery from Argos and Heavy Materials. The finding of undue delay, on its own, sufficed to affirm the court’s denial of Spartan’s motion to amend, and "the prejudice inherent in allowing leave to amend on this record provide[d] another independent reason to affirm the [d]istrict [c]ourt."
This case is No. 18-1942.
Attorneys: Christopher A. Kroblin (Kellerhals Ferguson Kroblin PLLC) for Spartan Concrete Products, LLC. Howard Feller (McGuireWoods) for Argos USVI, Corp. f/k/a Caricement USVI, Corp.
Companies: Spartan Concrete Products, LLC; Argos USVI, Corp. f/k/a Caricement USVI, Corp.
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