Toledo Mack Sales v. Mack Trucks Inc ( 2008 )

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
6-17-2008
Toledo Mack Sales v. Mack Trucks Inc
Precedential or Non-Precedential: Precedential
Docket No. 07-1811
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PRECEDENTIAL
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No: 07-1811
_______________
TOLEDO MACK SALES & SERVICE, INC.,
Appellant,
v.
MACK TRUCKS, INC.
_______________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 02-cv-4373)
District Judge: Honorable Ronald L. Buckwalter
_______________
Argued March 5, 2008
Before: BARRY, JORDAN, and HARDIMAN, Circuit
Judges.
Filed: June 17, 2008
_______________
Robert L. Byer [ARGUED]
Wayne A. Mack, Jr.
J. Manly Parks
James H. Steigerwald
David A. Degnan
Duane Morris, LLP
30 S. 17 th Street
Philadelphia, PA 19103-4194
Counsel for Appellant
Barbara M. Mather [ARGUED]
Jeremy Heep
Christopher J. Huber
Barak A. Bassman
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth & Arch Streets
Philadelphia, PA 19103-2799
Counsel for Appellee
_______________
OPINION OF THE COURT
_______________
JORDAN, Circuit Judge.
Toledo Mack Sales and Service, Inc. (“Toledo”)
appeals from an order of the United States District Court for
the Eastern District of Pennsylvania granting judgment as a
matter of law in favor of Mack Trucks, Inc. (“Mack”) on
Toledo’s claim under § 1 of the Sherman Antitrust Act
2
(“Sherman Act”). Toledo also appeals the District Court’s
grant of summary judgment for Mack on Toledo’s claim
under the Robinson-Patman Act (“RPA”), and its grant of
judgment as a matter of law for Mack on Mack’s
counterclaim for misappropriation of trade secrets. Because
we conclude that Toledo presented at trial enough evidence to
permit the Sherman Act claim to go to the jury, we will vacate
the District Court’s disposition of that claim and remand for
further proceedings. We will affirm the District Court in all
other respects.
I. Jurisdiction and Standard of Review
The District Court exercised jurisdiction over Toledo’s
claims pursuant to 28 U.S.C. § 1331, and over Mack’s
counterclaim pursuant to 28 U.S.C. §§ 1332 and 1367(a).
We have jurisdiction under 28 U.S.C. § 1291. We exercise
plenary review over a district court’s decision to grant
judgment as a matter of law. Northview Motors, Inc. v.
Chrysler Motors Corp., 227 F.3d 78, 88 (3d Cir. 2000).
Judgment as a matter of law is appropriate “only if, viewing
the evidence in the light most favorable to the nonmovant and
giving it the advantage of every fair and reasonable
inference,” a verdict in favor of the nonmovant cannot be
supported by legally sufficient evidence. Fair Hous. Council
v. Main Line Times, 141 F.3d 439, 442 (3d Cir. 1998)
(citations omitted).
Our review of a district court’s order granting
summary judgment is also plenary. Assaf v. Fields, 178 F.3d
170, 171 (3d Cir. 1999). Summary judgment is appropriate if
3
“the pleadings, the discovery and disclosure materials on file,
and any affidavits show that there is no genuine issue as to
any material fact and that the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(c). As in our review
of an order granting judgment as a matter of law, we must,
when reviewing a summary judgment order, view all of the
evidence in the light most favorable to the non-moving party
and draw all reasonable inferences in that party’s favor.
Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S.
451, 456 (1992).
II. Background
A. Mack and Toledo
Mack manufactures a variety of heavy-duty trucks and
is said to enjoy significant power within the market for such
vehicles.1 It distributes and services its products primarily
through a nationwide network of authorized dealers, each of
which is assigned a geographic region called an “Area of
Responsibility” (“AOR”). A dealer’s AOR is not exclusive,
and Mack’s stated policy is that dealers are free to sell
anywhere in the country.
1
For example, Toledo’s expert economist, Frank Gollop,
testified that “Mack [has] market power in both the heavy
duty vocational [low cab over engine truck market,] as well
as conventional straight truck markets, whether you look at
the U.S. as a whole or the U.S., excluding the west.” (App. at
A1676; see infra note 16).
4
Most of Mack’s trucks are made to order from various
chassis, engine, and transmission options. When a potential
customer contacts a Mack dealer, the dealer obtains a list of
specifications from the potential customer and submits the list
to Mack. Mack then informs the dealer of the price at which
it is willing to sell the requested truck to the dealer. An
important aspect of that price is a transaction-specific
discount known as “sales assistance.” The amount of sales
assistance that Mack offers a dealer on a particular transaction
varies according to the nature of the relationship between the
dealer and the customer, the number of trucks ordered,
potential competition, and other factors. Dealers’ requests for
sales assistance are submitted to a Mack District Manager,
who has the authority to grant sales assistance up to a certain
dollar amount. Requests for additional sales assistance
beyond that amount typically must be submitted for approval
by a Regional Vice President. Requests for sales assistance
beyond the amount that a Regional Vice President may
authorize must be approved by Mack’s Controller. Of course,
the greater the discount that Mack provides to the dealer, the
lower the price that the dealer can profitably charge the
customer. Once Mack tells the dealer how much the dealer
will have to pay for a truck, the dealer then prepares a quote
for the potential customer, using, among other things, the
price it must pay Mack to fulfill the customer’s order. If the
customer accepts the dealer’s quote, the dealer orders the
truck from Mack and Mack custom-builds it according to the
customer’s specifications. The dealer then buys the truck
from Mack and sells it to the customer. However, if the
customer does not accept the dealer’s quote, the dealer
5
usually does not buy the truck from Mack and no sale takes
place.
Often, potential customers will solicit bids from
multiple Mack dealers as well as from Mack’s competitors.
Accordingly, Mack dealers compete against both non-Mack
dealers and, at least in theory, among themselves. Because
the amount of sales assistance Mack offers to a dealer on a
potential sale is a significant factor in determining the price at
which the dealer will in turn offer to sell a truck to a potential
customer, it is also a significant factor in determining whether
a potential customer decides to accept a dealer’s quote.
Toledo was an authorized Mack dealer located, as one
might guess, in Toledo, Ohio. Dave Yeager has owned
Toledo since 1982. After acquiring Toledo, Yeager
implemented a business strategy that focused on offering the
lowest possible price to his customers. Until Mack
terminated Toledo’s status as an authorized dealer, Toledo
aggressively pursued its low-price sales strategy throughout
the country, competing on price against other Mack dealers
for sales in other dealers’ AORs.
B. Toledo’s Sherman Act Claim
Toledo alleges that, by competing on price against
other Mack dealers, it began to undermine an unlawful
conspiracy that Mack and the dealers had developed to keep
6
prices on Mack products artificially high.2 According to
Toledo, this conspiracy has two parts. First, Toledo claims
that, beginning in the mid-1980s, individual Mack dealers
entered into “gentlemen’s agreements” not to compete with
each other on price. Second, Toledo alleges that, beginning
in 1989, Mack entered into an agreement with its dealers that
it would delay or deny sales assistance to any dealer who
sought to make an out-of-AOR sale, thereby protecting
dealers that sell within their own AORs. Toledo argues that
the combination of the horizontal collusion among dealers
and the vertical collusion between Mack and the dealers
violates § 1 of the Sherman Act because it prevents Mack
dealers from competing with one another, thereby allowing
Mack and its dealers to maintain artificially high prices on the
sale of Mack trucks. Toledo also asserts that Mack’s decision
to deny it sales assistance on out-of-AOR sales violates the
prohibition on discriminatory pricing embodied in the RPA.
2
The present case is not the first time Toledo and Mack
have sparred over the antitrust implications of Mack’s
approach to providing sales assistance. Between March 1988
and October 1990, Toledo’s attorney sent several letters to
Mack claiming that Mack’s conduct violated § 1 of the
Sherman Act. In 1991, Toledo and Mack signed a release
which read: “Each of Mack and Toledo hereby fully releases
... the other ... from any and all claims, demands, losses,
expenses, action, cause of action, or liabilities whatsoever
arising out of or in connection with sales assistance ...
claimed, requested, approved, paid, credited, or rescinded as
of the date of this release ... .” (App. at A4460-61.)
7
At trial, Toledo presented evidence to show the existence of
the alleged horizontal and vertical agreements.
1. Toledo’s Evidence of Agreements Among
Mack Dealers
Toledo offered testimony that Mack dealers agreed not
to compete with one another. Yeager, Toledo’s owner,
testified that, while he was attending a dealer meeting in the
late 1980s, two Mack dealers from New Jersey approached
him and told him that “the way it works” in New Jersey is
that “dealers don’t compete on price.” (App. at A513.)
Toledo also introduced deposition testimony by Jack Lusty, a
former District Manager for Mack who had been responsible
for supervising Toledo from 1998 to 2002. Lusty said that,
despite Mack’s official policy of allowing dealers to sell
anywhere, Mack dealers had unwritten agreements not to
compete with each other. Finally, Toledo introduced copies
of handwritten notes taken at a Mack sales meeting in 1999
by a consultant named Hallie Giuliano. At that time,
Giuliano was working on a project for Mack and, according
to her notes and an affidavit she signed later, she heard Ron
Gerhard, a Mack employee, say at the sales meeting that
“there was a ‘gentlemen’s agreement’ among Mack truck
dealers that they would sell only in their own areas of
responsibility. [Gerhard] also stated that some Mack truck
dealers did not honor the ‘gentlemen’s agreements’ and
engaged in sales efforts in other Mack dealers’ territories.”
(App. at A3537.)
8
2. Toledo’s Evidence of an Agreement
Between Mack and Mack Dealers
Toledo also presented three categories of evidence to
show that Mack agreed with its dealers that it would deny
sales assistance on sales a dealer tried to make outside of that
dealer’s AOR. First, Toledo introduced recordings and notes
of conversations between Yeager and various Mack
executives referring to an informal policy against out-of-
AOR sales. Second, Toledo introduced evidence that, in
1989, Mack adopted an official policy of denying sales
assistance on out-of-AOR sales. Toledo also presented
evidence that this policy was the result of a meeting between
Mack executives and dealer representatives. Finally, Toledo
presented evidence that, despite Mack’s claims to have
abandoned its prior policy, Mack in fact continued to enforce
that policy until at least the time Toledo filed suit in 2002.
With respect to evidence of an informal policy, Toledo
introduced at trial notes taken in July 1988 by Richard Tracht,
the Mack District Manager responsible for overseeing Toledo
at that time. According to Tracht’s notes, Yeager asked him
whether Mack approved of Toledo’s practice of selling trucks
outside its AOR. Tracht recorded that he told Yeager that
“Mack did not like [Yeager’s] policy as he was selling the
majority of his trucks to already established Mack customers
and in doing so was breaking established profit structures ...
[making] the Mack dealers look bad in customers [sic] eyes
causing a lot of concern between customers and dealers.”
(App. at A3963.)
9
Toledo also introduced a cartoon Tracht sent to
Yeager featuring two shabbily dressed men sitting in front of
a “poor house,” with one man saying to the other,“[m]y Mack
Distributorship did more business than any others in the state.
The trick was to undercut my competitor’s rates.” (App. at
A3286.) At the top of the cartoon, Tracht had typed: “This
could be what we are headed for if we do not stop selling
against other Mack dealers and concentrate on the real
competition. Think about it!!” Id.
In addition, Toledo introduced a recording of a
December 1988 telephone conversation3 between Yeager and
Dennis Wurzelbacher, Mack’s then-Parts Promotion
Manager. During that conversation, Yeager and
Wurzelbacher discussed the sales of Mack parts called “glider
kits,” which are bare truck bodies without engines or
transmissions. Wurzelbacher told Yeager that “[t]he ...
problem we have is there are certain dealers that are sending
[sic] glider kits in other people’s backyards and we are
getting calls on it.” (App. at A3994.3) Yeager then asked
Wurzelbacher what Mack’s written policy was on dealers
competing with one another. Wurzelbacher responded that
he was not aware of an official company policy but that it
was his opinion that “there was a policy that would say, hey,
3
Over the course of several years, Yeager had secretly
recorded a number of telephone conversations between
himself and various Mack executives, and those recordings
featured prominently in Toledo’s evidence at trial.
10
you’re only supposed to sell in your territory, okay?” (App.
at A3994.4.)
Toledo also introduced evidence that Mack adopted an
official policy of denying sales assistance on out-of-AOR
sales. In 1989, Mack issued Marketing Distribution Bulletin
38-89 (“Bulletin 38-89”). Under this “major ... change in
official truck pricing policy” (App. at A3147), Mack sought
to “enhance the competitive strength of Mack distributors
within their respective geographic areas of sales and service
responsibility.” Id. To that end, Mack eliminated sales
assistance on sales by a dealer outside the dealer’s AOR. The
express purpose of the policy was to create “increased profit
margins for Mack distributors as well as the Company.”
(App. at A3147.)
Toledo introduced evidence at trial to show that
Bulletin 38-89 was the result of an agreement between Mack
and its National Distributor Advisory Council (“NDAC”) to
prevent dealers from engaging in sales outside their AORs.4
Specifically, Toledo introduced a recording of a July 1989
phone call between Yeager and Dick Murphy, a Mack Vice
President, during which Yeager asked Murphy whether the
4
The NDAC consists of two Mack executives and seven
dealers. The NDAC’s dealer members are elected by their
peers at an annual dealers meeting. Two of the seven dealer
representatives serve as NDAC’s Chairman and Vice
Chairman, and the remaining five serve as representatives for
five geographic regions.
11
NDAC had unanimously recommended Bulletin 38-89.
Murphy responded, “Oh yes. Oh very much so. Very much
so. I mean, something as significant as this, it had to come
from all walks.” (App. at A4025.) Murphy indicated that
some dealers had complained about the new policy. He then
said “if there’s something that would justify [changing the
policy] we’ll get the [NDAC] together and perhaps we’ll
consider it.” (App. at A4024.)
Toledo also introduced a recording of another July
1989 conversation between Yeager and Gary Johnson,
Mack’s Vice President of Distributor Sales. During that
exchange, Johnson explained that he was “kind of new on the
job” and then went on to say that
the one thing I can tell you that would be fair
and legitimate advice is that I think this policy
[i.e., Bulletin 38-89] came about to a large
extent because of the voice of the distributor
organization. ... And if it’s probably ever gonna
be changed or modified, it will come about as a
result of the voice of the dealer organization.
(App. at A4058.)
Johnson then stated, “I can tell you, and this probably
is not a surprise, that when we talked about some of the
problems that come from selling outside of the territory, I
guess Toledo goes pretty close to the top of the list.” (App. at
A4059.) After some additional discussion, Yeager stated
that, “[a]s I understand what [the dealer network did,] they
12
did not recommend [a] restrictional territorial system. ...
[A]nd if they did, it’s strictly a self-serving type of thing for
the dealers that have a lot of geographical area.” (App. at
A4062-63.) Johnson responded by simply saying “Um-
hmm.”5 (App. at A4063.)
5
Of course, on this and other points, Mack introduced
evidence to contradict Toledo’s evidence. For example, Mack
provided evidence to support its argument that Bulletin 38-89
was solely the product of Mack management’s decision-
making, not the NDAC’s. Bob Nuss, who was the NDAC
Chairman during 1989, testified that, on May 8, 1989, Mack
presented a draft of Bulletin 38-89 to the dealers at an NDAC
meeting. According to Nuss, the draft included provisions
eliminating sales assistance for out-of-AOR sales and
provisions providing that Mack would give dealers sales
assistance on one- and two- truck deals. Nuss also testified
that “[t]he new truck retail pricing policy was discussed
thoroughly”(App. at A2197), and that while the dealers had
insisted that Bulletin 38-89 include sales assistance on one-
and two-truck deals, the decision to eliminate sales assistance
on out-of-AOR sales was made by Mack alone. Finally, Nuss
testified that, although Mack solicited comments on Bulletin
38-89 from NDAC members, the final language in Bulletin
38-89 which eliminated sales assistance on out-of-AOR sales
was identical to the language in the draft proposal circulated
at the May 8, 1989 meeting. Mack’s evidence, however, does
not override our obligation to view the evidence in the light
most favorable to Toledo. See Northview Motors, 227 F.3d
at 88 (explaining that judgment as a matter of law is
13
In October 1989, shortly after it had adopted Bulletin
38-89, Mack issued a revised policy, Marketing Distribution
Bulletin Addendum 38-89A (“Bulletin 38-89A”). Bulletin
38-89A provided that “[s]ales [a]ssistance shall be uniformly
made available to ALL Mack distributors on an equal basis,
actively and directly involved in prior negotiations with the
retail customer for the purchase of new Mack vehicles.”
(App. at A3982 original emphasis). Toledo presented
evidence at trial, however, indicating that, despite the new
policy, Mack and some of its dealers continued to work in
concert to prevent other Mack dealers from selling outside
their individually assigned AORs.
Regarding the period from 1989 to 1998, Toledo
introduced a recording of a January 1991 telephone
conversation between Yeager and Kevin Flaherty, Mack’s
Vice-President for Sales. During the conversation, Yeager
and Flaherty discussed some difficulties Yeager was having
selling three trucks Toledo had bought from Mack.6 Yeager
appropriate “only if, viewing the evidence in the light most
favorable to the nonmovant and giving it the advantage of
every fair and reasonable inference, there is insufficient
evidence from which a jury reasonably could find liability”)
(citations and internal quotation marks omitted).
6
A Mack dealer would ordinarily have little difficulty
selling a truck it had bought from Mack because, as we have
explained, Mack trucks are specialized, custom-made goods
and a dealer ordinarily does not purchase a truck from Mack
14
requested sales assistance to sell those trucks outside of his
AOR. Flaherty told him, however, that “our policy has not
changed” and that Mack would provide sales assistance if
Yeager sold the trucks inside his AOR but would not “give a
whole lot of hope” if the sales were outside of it. (App. at
4085-86.) Flaherty emphasized, “[O]bviously, we’re looking
to protect our distributors. That’s always been the backbone
of Mack is to protect our distributors.” (App. at 4086.)
During a second conversation between Yeager and Flaherty
in June 1991, Flaherty stated that “[if] there’s ever a
manufacturer that protected their distributor organization ...
It’s the Mack truck company, to a fault.” (App. at 4128.)
Toledo also introduced a recording of a conversation
that took place in 1996 between Yeager and Bob Grussing,
Mack’s Parts Manager. Grussing told Yeager that dealers
“constantly want Mack to get involved in these territorial
disputes ... and to protect them from one another. And right
or wrong, we do that, you know.” (App. at A4147.)
until a customer actually places an order with the dealer.
However, Yeager explained to Flaherty during their
conversation that Toledo had ordered the three trucks
discussed above because Mack “was in bad need of orders at
that time” and had “encouraged [Toledo] to place an order.”
(App. at A4087.)
15
Grussing also stated that such protection was a “long standing
tradition” and that “I don’t know if I can break that.” Id.
To establish that Mack continued to participate in an
illegal conspiracy with its dealers from 1998 to 2002, Toledo
points to various conversations between Jack Lusty, the Mack
District Manager responsible for supervising Toledo during
that time period, and Jeff Yelles, a Mack Regional Vice
President who was Lusty’s immediate superior. Lusty
testified that Yelles told him in 2002 that he “kn[ew] what
[Toledo] [was] trying to do. [Toledo] wants to establish
discounts and sell trucks all over the place. We are not going
to let this happen.” (App. at A2824.) Lusty also testified that
Yelles told him that Yeager was “just soliciting customers on
price; ... we have to beat the living shit out of him. ... [H]e is
a son of a bitch.” (App. at A2818.) Yelles also allegedly told
Lusty, in a profanity-laced burst of anger, that Toledo was not
“play[ing] by the rules” and that someone “should take
[Yeager] out.” (App. at A2825.)
Toledo presented evidence that Yelles took affirmative
steps to prevent Toledo from selling outside its AOR. Lusty
testified that, in 2000, Yelles instructed him to tell Toledo to
stop competing against another Mack dealer for a particular
sale to a customer located outside Toledo’s AOR. Yelles told
Lusty to tell Toledo that Mack would not release sales
assistance on any sale by Toledo to that customer.
Accordingly, Lusty sent Yeager a fax instructing him to
“cease his predatory approach to customer prospecting.”
(App. at 2812.) Yelles himself admitted at trial that, on at
least one occasion in 2003, he asked Mack’s Controller, Steve
16
Polzer, to delay approving Toledo’s request for sales
assistance so that another Mack dealer could get the
customer’s business instead.
Finally, Lusty testified that, after 1998, Mack used the
sales assistance process to “control dealers.” After rescinding
the 1989 policy, Mack implemented a system of “cross-
checks” which were ostensibly designed to ensure that, in a
situation where an out-of-AOR dealer competed with an in-
AOR dealer, both dealers received the same amount of sales
assistance from Mack. The system was presented by Mack as
requiring equal treatment. Supposedly, a dealer who wished
to make an out-of-AOR sale had to indicate to its District
Manager the area into which the dealer wished to make the
sale before it could receive sales assistance. The dealer’s
District Manager would then conduct a cross-check by
contacting the District Manager responsible for that AOR and
informing him or her of the potential sale. If it turned out that
the dealer into whose AOR the sale would be made was
competing for the same deal, then the in-AOR District
Manager and the out-of-AOR District Manager were to
ensure that both dealers received equal amounts of sales
assistance.
Despite the stated purpose of the cross-checks,
however, Lusty testified that from 1999 to 2003, the cross-
checks were often used as an “early warning system” to let an
in-AOR dealer know when an out-of-AOR dealer was
attempting to make a sale inside the in-AOR dealer’s territory.
(App. at A2877.) Lusty explained that District Managers
would often grant requests for sales assistance verbally rather
17
than using Mack’s computer system, so that in-AOR dealers
could give a potential customer a quote before an out-of-AOR
dealer could obtain a quote on the same deal. Lusty also said
that, because there was no record of verbal grants of sales
assistance, District Managers would sometimes use this tactic
to extend a discount to a dealer without conducting a cross-
check.
C. Toledo’s RPA Claim
Toledo also introduced expert testimony at trial to
support its contention that Mack had offered it less favorable
sales assistance than it provided to other dealers. That
testimony was based on a comparison of the average amount
of sales assistance Mack offered to Toledo as compared with
the average amount of sales assistance Mack had offered to
other dealers located in the same general geographic area.
Toledo’s expert testified that this comparison demonstrated
that Toledo received far less sales assistance than other
similarly situated Mack dealers. However, the expert did not
compare the amount of sales assistance Mack offered to
Toledo and to other dealers when Toledo and another dealer
competed directly against one another for a sale to the same
customer. Therefore, the expert was unable to offer an
opinion about whether Mack had discriminated against
Toledo in sales involving head-to-head competition with
another Mack dealer.
18
D. Mack’s Counterclaim for Misappropriation of
Trade Secrets
Once sued, Mack fired back with a counterclaim
alleging that Toledo had misappropriated a proprietary
software program called MACSPEC 2001, which contained
detailed parts specifications for every truck part that Mack
manufactures. Mack had provided a copy of that program to
Toledo so that it could adequately assist customers who
needed replacement parts or repair work. However,
according to Mack, Toledo gave a copy of MACSPEC 2001
to PAI Industries, Inc., one of Mack’s competitors.
Contending that Toledo had violated both its obligation not
to misappropriate trade secrets and the terms of the
MACSPEC 2001 license agreement, Mack terminated
Toledo’s distributorship agreement. Toledo responded with a
protest to the Ohio Vehicle Dealer’s Board, which ruled in
favor of Toledo. Mack unsuccessfully appealed to the
Franklin County Court of Common Pleas. Mack then further
appealed to the Tenth Appellate District of the Ohio Court of
Appeals. That court reversed and held that Mack was
justified in terminating Toledo’s distributorship agreement
because the MACSPEC 2001 software was a proprietary
trade secret which Toledo had misappropriated by
transferring it to a Mack competitor without Mack’s
permission. Mack Trucks, Inc. v. Motor Vehicle Dealers Bd.,
No. 05AP-768, 2006 WL 1495122, at *6-10 (Ohio Ct. App.
June 1, 2006).
19
E. Procedural History
Toledo filed this case against Mack on July 7, 2002.7
As already noted, Toledo’s complaint alleged that Mack and
its distributors had entered into an illegal conspiracy in
restraint of trade in violation of § 1 of the Sherman Act, and
that Mack had violated the RPA by engaging in
discriminatory pricing. Again, as noted, Mack
counterclaimed for misappropriation of trade secrets.
Prior to the trial, the District Court granted summary
judgment in favor of Mack on Toledo’s RPA claim,
concluding that it was barred as a matter of law under Volvo
Trucks North America, Inc. v. Reeder-Simco GMC, Inc., 546
U.S. 164 (2006). At the close of evidence at trial, the District
Court granted Mack’s motion for judgment as a matter of law
on Toledo’s Sherman Act claim. The Court also granted
Mack’s motion for judgment as a matter of law on the
misappropriation of trade secrets counterclaim. As to the
latter ruling, the Court concluded that the favorable judgment
for Mack in the Ohio Court of Appeals was preclusive as to
the issue of Toledo’s liability because the Ohio judgment
encompassed every element necessary to show a
misappropriation of trade secrets. The District Court then
submitted Mack’s misappropriation counterclaim to the jury
7
Because of the 1991 release between it and Mack, (see
supra note 2) Toledo limited its 2002 claims to “conduct by
Mack subsequent to the date of the release.” (Appellant Br.
at 16-17) (emphasis added).
20
on the issue of damages. The jury returned a verdict of
$11.34 million.
In an opinion and order denying Toledo’s post-trial
motion for reconsideration, the District Court explained that
Toledo’s § 1 claim was barred by the applicable four-year
statute of limitations because “Yeager knew or had reason to
know of the alleged conspiracy as early as 1989.” (App. at
A5.) The District Court then presented a summary of
Toledo’s evidence within the limitations period and, relying
on Supreme Court cases discussing the special restrictions on
the inferences that may permissibly be drawn from the
evidence in antitrust cases, concluded that none of that
evidence showed that an illegal conspiracy existed because
“[t]he inferences [Toledo] wants to draw fall short of
reasonable ones in the antitrust context.” (App. at A8.)
Finally, the District Court reduced the jury’s damages award
to $1.6 million, which Mack accepted. Toledo then filed this
timely appeal.
III. Discussion
Toledo raises three issues on appeal. First, it contends
that it adduced sufficient evidence for its § 1 claim to go the
jury and that, therefore, the District Court erred by granting
judgment as a matter of law on that claim. Second, Toledo
argues that the District Court erred in granting summary
judgment in favor of Mack on its RPA claim because the
database discussed at trial showed that Mack sold trucks to
other dealers at favorable prices that it refused to extend to
Toledo. Finally, Toledo contends that Mack’s counterclaim
21
for misappropriation of trade secrets is barred by
Pennsylvania’s “gist of the action” doctrine. We discuss each
of these arguments in turn.
A. Toledo’s Sherman Act § 1 Claim
Section 1 of the Sherman Act prohibits “a conspiracy
... in restraint of trade or commerce among the several States
... .” 15 U.S.C. § 1. On appeal, the parties’ primary
contentions concern whether Toledo’s evidence was sufficient
to allow a jury to consider whether illegal agreements existed
among Mack dealers and between Mack dealers and Mack
itself.8 Before turning to the parties’ arguments on this point,
8
Collusion between a manufacturer and its dealers to keep
a product’s price artificially high is likely to be an unusual
phenomenon because other manufacturers and dealers of the
same or substitute products can, simply by selling at a lower
price, render the colluding parties’ agreement economically
unwise. See Phillip E. Areeda, Herbert Hovenkamp,
Fundamentals of Antitrust Law § 1603f (3d ed. 2007)
(explaining that “[d]ealers cannot win excess profit through a
distribution restraint unless a manufacturer who [agrees to
assist] them has sufficient market power to make a restriction
on output feasible and profitable.”). However, collusion
between manufacturers and dealers is feasible when one
manufacturer dominates the market, or when all
manufacturers in the market enter into agreements with their
dealers to keep prices artificially high. Id. §§ 16.03f3,
16.03f4. As discussed more fully herein, infra at 37-41, such
22
however, we address the District Court’s conclusion that
Toledo’s suit was barred by the statute of limitations.
1. The Statute of Limitations
Section 1 claims are subject to a four-year statute of
limitations. 15 U.S.C. § 15b. In granting Mack’s motion for
judgment as a matter of law on Toledo’s § 1 claim, the
District Court declined to consider pre-1998 evidence of the
existence of a conspiracy because it concluded that “Yeager
knew or had reason to know of the alleged conspiracy as early
as 1989 and thus the suit filed 13 years later [in 2002] was
barred by the four-year statute of limitations.” (App. at A5.)
The District Court then went on to examine whether evidence
of events within the limitations period from 1998 to 2002 was
sufficient to allow the jury to conclude that a conspiracy
existed. The District Court concluded that the 1998 to 2002
evidence was not sufficient because “the inferences [Toledo]
wants to draw fall short of reasonable ones in an antitrust
context.” (App. at A7 (citing In re Baby Food Antitrust Litig.,
166 F.3d 112, 124 (3d Cir. 1999)).)
collusive agreements may be unlawful under the rule of
reason analysis applied to vertical price restraints under § 1.
See, e.g., Leegin Creative Leather Prods., Inc., v. PSKS, Inc.,
127 S. Ct. 2705, 2717 (2007) (explaining that “[t]o the extent
a vertical agreement setting minimum resale prices is entered
upon to facilitate [a dealer] cartel, it ... would need to be held
unlawful under the rule of reason”).
23
Toledo argues that the District Court erred by requiring
it to show exclusively with post-1998 evidence that a
conspiracy existed. Instead, Toledo contends that the District
Court should have considered whether all of the evidence it
presented, including evidence of events prior to 1998, was
sufficient to allow a jury to conclude that, from 1998 until at
least 2002, Mack and its dealers engaged in overt acts in
furtherance of a continuing conspiracy that began before
1998. We agree. Although Toledo claims that the conspiracy
began in 1989, long before the limitations period, it presented
evidence from which a rational jury could conclude that the
unlawful agreements continued in effect through the time of
trial in 2002. Toledo seeks damages only for acts committed
in furtherance of the conspiracy from 1998 to 2002, within the
limitations period, but it is entitled to present evidence from
outside that period to sustain its burden of proof.
The Supreme Court has held that “[g]enerally, a cause
of action under § 1 accrues and the statute of limitations
begins to run when a defendant commits an act that injures
the plaintiff’s business.” Zenith Radio Co. v. Hazeltine
Research, Inc., 401 U.S. 321, 338 (1971) (citation omitted).
However, “[i]n the context of a continuing conspiracy to
violate the antitrust laws, ... each time a plaintiff is injured by
an act of the defendant[] a cause of action accrues to [it] to
recover the damages caused by that act ... and ... as to those
damages, the statute of limitations runs from the commission
of the act.” Id. (citations omitted); see also Hanover Shoe,
Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 502 n.15
(1968) (concluding that the plaintiff could bring a § 1 claim in
1955 for conduct which first began in 1912 because the
24
defendant’s actions were “conduct which constituted a
continuing violation of the Sherman Act, and which inflicted
continuing and accumulating harm on [the plaintiff]”).
Consistent with that precedent, we have stated that “a
conspiracy’s refusal to deal, which began outside the
limitations period, may be viewed as a continuing series of
acts upon which successive causes of action may accrue.” In
re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144,
1173 (3d Cir. 1993) (citation and internal quotation marks
omitted). Therefore, we hold that Toledo was not required to
prove an illegal conspiracy with evidence restricted to the
limitations period. Its burden was, rather, to present evidence
sufficient to allow a rational jury to conclude that Mack and
its dealers committed during the limitations period overt acts
in furtherance of an illegal conspiracy or conspiracies, even if
the conspiracies began before the limitations period.9 We turn
9
Both in its brief and at oral argument, Mack argued that
the District Court’s decision was correct because Toledo’s
evidence and the inferences that could be drawn from that
evidence would not allow a jury to conclude that any illegal
conspiracy ever existed or, alternatively, that any conspiracy
continued in effect during the limitations period. By its own
terms, however, that argument is about the sufficiency of
Toledo’s evidence, not about the legal rules governing
continuing conspiracy cases under § 1. In a related argument,
Mack contends that the 1991 release between it and Toledo,
see supra note 2, bars Toledo’s § 1 claim. We disagree. The
release does not apply to claims for antitrust damages based
25
now to whether the evidence that Toledo presented at trial
meets that standard.
2. The Sufficiency of Toledo’s Evidence
At the outset, we are mindful that, under our standard
of review, we must “expose the evidence to the strongest
light favorable to the party against whom the motion [for
judgment as a matter of law] is made and give [that party] the
advantage of every fair and reasonable inference.” Raiczyk v.
Ocean County Veterinary Hosp., 377 F.3d 266, 269 (3d Cir.
2004) (citation omitted). In addition, we must not “tightly
compartmentalize the evidence,” but review it “as a whole to
see if it together supports an inference of concerted action.”
Petruzzi’s IGA Supermarkets, Inc. v. Darling-Delaware, Co.,
Inc., 998 F.2d 1224, 1230 (3d Cir. 1993).
Of course, we must comply with those standards in the
context of the precise language of § 1 and the cases
on events which occur after the execution of the release. Cf.
Three Rivers Motor Co. v. Ford Motor Co., 522 F.2d 885,
896 n.27 (3d Cir. 1975) (holding that parties may not waive
liability for future antitrust violations). Although the release
prevents Toledo from seeking damages for events that
occurred before 1991, Mack cites no authority, nor have we
found any, for the proposition that a release prevents a party
from relying on events that occurred prior to the signing of
the release to establish facts necessary to show a continuing
conspiracy.
26
interpreting it. As noted, § 1 prohibits “[e]very contract,
combination ... or conspiracy, in restraint of trade.” We have
explained that “[d]espite its broad language, Section 1 only
prohibits contracts, combinations, or conspiracies that
unreasonably restrain trade.” In re Flat Glass Antitrust
Litig., 385 F.3d 350, 356 (3d Cir. 2004) (original emphasis).
Thus, to succeed on a § 1 claim, a plaintiff must meet two
requirements. First, the plaintiff must show that the
defendant was a party to a “contract, combination ... or
conspiracy.” Second, the plaintiff must show that the
conspiracy to which the defendant was a party imposed an
unreasonable restraint on trade.
In the present case, Toledo alleges that Mack dealers
entered into an unlawful conspiracy among themselves to fix
prices, and Toledo further alleges that Mack agreed to
support that conspiracy by, among other things, denying sales
assistance to a dealer that, like Toledo, attempted to compete
against other Mack dealers on price. In what follows, we
analyze both of those purported agreements – the horizontal
agreement among the dealers, and the vertical agreement
between Mack and the dealers – to determine whether Toledo
presented sufficient evidence for a jury to decide that each
agreement existed and that each agreement was a conspiracy
that unreasonably restrained trade in violation of § 1. As
explained more fully below, special rules govern our analysis
of Toledo’s evidence for the existence of the agreements and
their legality.
27
a. Toledo’s Evidence of an Unlawful
Agreement Between Mack Dealers
Because § 1 of the Sherman Act by its terms requires
concerted action, “unilateral activity, no matter what its
motivation, cannot give rise to a § 1 violation.” Rossi v.
Standard Roofing, Inc., 156 F.3d 456, 465 (3d Cir. 1998).
To show concerted action, a plaintiff must produce evidence
that would allow a jury to infer that “the alleged conspirators
had a unity of purpose or a common design and
understanding, or a meeting of the minds.” Monsanto Co. v.
Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984). Regarding
the types of evidence which may be used to show that the
concerted action requirement is met, we have said that,
[w]hile direct evidence, the proverbial
‘smoking-gun,’ is generally the most
compelling means by which a plaintiff can
make out his or her claim, it is also frequently
difficult for antitrust plaintiffs to come by.
Thus, plaintiffs have been permitted to rely
solely on circumstantial evidence (and the
reasonable inferences that may be drawn
therefrom) to prove a conspiracy.
Rossi, 156 F.3d at 465.
Further, to avoid punishing lawful conduct, the
Supreme Court has placed certain limits on the inferences that
may be drawn from the evidence in antitrust cases. The
Court has explained that certain evidentiary restrictions are
28
necessary in antitrust cases since “mistaken inferences ... are
especially costly because they chill the very conduct the
antitrust laws are designed to protect.” Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 594 (1986).
Therefore, “antitrust law limits the range of permissible
inferences from ambiguous evidence in a § 1 case. ...
[C]onduct as consistent with permissible competition as with
illegal conspiracy does not, standing alone, support an
inference of antitrust conspiracy.” Id. at 588 (citations
omitted). In addition, “if the factual context renders the
plaintiff’s claim implausible – if the claim is one that simply
makes no economic sense – a plaintiff must come forward
with more persuasive evidence to support its claim than
would otherwise be necessary.” Rossi, 156 F.3d at 466
(quoting Monsanto, 475 U.S. at 587) (punctuation omitted).
Finally, “in evaluating whether a genuine issue for trial exists,
the antitrust defendants’ economic motive is highly relevant.
If the defendants had no rational economic motive to
conspire, and if their conduct is consistent with other, equally
plausible explanations, the conduct does not give rise to an
inference of conspiracy.” Id. (quoting Monsanto, 475 U.S. at
596) (punctuation omitted). Nevertheless, we have held that
those limits on inferences do not apply to a plaintiff’s direct
evidence of an unlawful agreement under § 1.10 Id.
10
We have held that the strictures on circumstantial
evidence in antitrust cases
only appl[y] when the plaintiff has failed to put
forth direct evidence of conspiracy. Thus, in
29
In the present case, Toledo presented several pieces of
direct evidence for the existence of one or more agreements
among Mack dealers not to compete with each other.
Because we conclude that Toledo’s direct evidence is
sufficient to allow a jury to conclude that a conspiracy not to
compete existed among Mack dealers, we need not apply the
rules restricting inferences drawn from circumstantial
evidence.
Toledo’s first piece of evidence of an agreement not to
compete was Yeager’s testimony that, in the early 1980s,
other Mack dealers told him bluntly that dealers “did not
compete on price.” (App. at A513.) Second, Mack consultant
Hallie Giuliano testified that in 1999, Ron Gerhard, a Mack
direct evidence cases, the plaintiff need not
adduce circumstantial evidence that tends to
exclude the possibility that the alleged
conspirators acted independently, and there
need not be an inquiry into the plausibility of
the defendants’ claim or the rationality of
defendants’ economic motives. This is because
when the plaintiff has put forth direct evidence
of conspiracy, the fact finder is not required to
make inferences to establish facts, and therefore
the Supreme Court’s concerns over the
reasonableness of inferences in antitrust cases
evaporate.
Rossi, 156 F.3d at 466.
30
employee, told her that “there was a ‘gentlemen’s agreement’
among Mack truck dealers that they would sell only in their
own AORs ... [but] that some Mack truck dealers did not
honor the ‘gentlemen’s agreements’ and engaged in efforts in
other Mack dealers’ territories.” (App. at A3537.) Finally,
when Jack Lusty, Yeager’s district manager from 1998 to
2002, was asked whether “some Mack dealers [had] unwritten
understandings with other Mack dealers that they wouldn’t
compete in each other’s AOR’s,” he responded that “[t]here
were – there were some Mack dealers that – and I’ve heard
them called gentlemen’s agreements, where they wouldn’t
compete in other dealers’ areas ... .” (App. at A2877.)
While admitting that the record before us contains
statements about agreements between dealers, Mack argues
that Toledo’s evidence is insufficient to give to a jury because
the record does not reveal the exact extent of any such
agreements. Viewing the evidence in the light most favorable
to Toledo, Mack’s argument is unpersuasive. It may well be
that Toledo’s inability to present the details of any agreement
among dealers would leave a jury unpersuaded that such
agreements did in fact exist. That, however, is not our
inquiry. Instead, we must consider whether the evidence
entitles Toledo to place that question before the jury at all.
We believe it does. Simply put, Toledo’s evidence was
sufficient because a jury considering it could believe it and
reasonably conclude that agreements not to compete did exist
31
among Mack dealers.11 The possibility that a jury might not
believe the direct evidence does not, in itself, mean that the
jury should not consider it.
Having concluded that Toledo’s evidence was
sufficient to show the existence of a non-competition
agreement among Mack dealers, we turn to whether the jury
could conclude that the agreement was an unreasonable
restraint of trade in violation of § 1. When considering the
legality of an agreement under § 1, two different methods of
analysis may be used, depending upon the nature of the
agreement at issue. “Certain restraints of trade are per se
unreasonable, while others require more searching analysis
under the ‘rule of reason.’” Flat Glass, 385 F.3d at 356. Per
se restraints are “conclusively presumed to unreasonably
restrain competition ‘without elaborate inquiry as to the
precise harm [they have] caused or the business excuse for
[their] use.’” Id. (quoting Rossi, 156 F.3d at 461). The
limited categories of agreements subject to per se treatment
include “horizontal price-fixing - i.e., where competitors at
the same market level agree to fix or control the prices they
will charge for their respective goods or services ... .” Id.
(citations and internal punctuation and quotation marks
11
Consistent with our earlier discussion of the principles
governing continuing conspiracy cases, we note that Toledo’s
evidence of agreements between dealers includes statements
about events that took place in the 1980s, outside the
limitations period, as well as later statements and evidence
about the existence of horizontal agreements.
32
omitted); see also Leegin, 127 S. Ct. at 2717 (“A horizontal
cartel among ... competing retailers that ... reduces
competition in order to increase price is, and ought to be, per
se unlawful.”). It is readily apparent that, if there were an
agreement among Mack dealers as alleged, it involved
horizontal competitors colluding to control prices and,
therefore, would be per se unlawful. Thus, viewed in the
light most favorable to Toledo, the evidence shows a
horizontal agreement that violates § 1.
b. Toledo’s Evidence of an Unlawful
Agreement Between the Dealers
and Mack
Obviously, evidence sufficient to allow a jury to
conclude that illegal agreements existed among Mack dealers
does not establish that Mack itself was a party to an
agreement that violated § 1 of the Sherman Act. Toledo
contends, however, that it presented sufficient evidence to
allow a jury to conclude that Mack did enter into an illegal
vertical agreement with its dealers. According to Toledo, it
showed an agreement between the dealers and Mack that
Mack would support the dealers’ illegal conspiracy to control
prices, and that one tool Mack employed to that end was a de
facto ban on out-of-AOR sales by dealers like Toledo that
sought to compete with other dealers on price.
Our analysis of the alleged vertical agreement between
Mack and its dealers follows the same pattern we used when
considering the alleged horizontal agreement among the
33
dealers. First, we consider Toledo’s evidence of the
agreement, and second, we consider the agreement’s legality.
Toledo presented direct evidence that Mack agreed
with its dealers to support their anti-competitive agreements
and that it did so by, among other things, refusing to offer
sales assistance to dealers who sought to sell outside their
AORs.12 Jack Lusty testified that Jeff Yelles told him in
2002, during the time when Mack ostensibly permitted its
dealers to sell everywhere, that he “kn[ew] what [Toledo]
[was] trying to do. [Toledo] wants to establish discounts and
sell trucks all over the place. We are not going to let this
happen.” (App. at A2824.) Lusty also testified that Mack
executives used sales assistance to “control dealers and that
the real purpose of Mack’s system of cross-checks was to
give an in-AOR dealer the advantage over an out-of-AOR
dealer.”
12
We reiterate that, under Rossi, we need not apply the
strictures on inferences drawn from ambiguous circumstantial
evidence that would apply in the absence of direct evidence of
a conspiracy. Nevertheless, in addition to Toledo’s direct
evidence of an agreement between the dealers and Mack,
Toledo had indirect evidence of that conspiracy, including its
evidence that Mack acted contrary to its own stated policy of
allowing out-of-AOR sales. Even under Monsanto’s
limitations on inferences from circumstantial evidence, that
evidence appears to have been sufficient to create a jury
question as to whether there was an agreement between Mack
and its dealers.
34
Moreover, Mack does not contest that, in 1989, it
issued Bulletin 38-89, which eliminated sales assistance to
dealers on sales outside their AORs. Importantly for purposes
of showing a conspiracy under § 1, Toledo presented evidence
that Bulletin 38-89 was the result of a collaboration between
Mack and its dealers. According to that evidence, Mack’s
NDAC, a group consisting of both Mack executives and
dealer representatives, worked on a draft of Bulletin 38-89.
In addition, when Yeager asked Dick Murphy whether
NDAC’s approval of the new policy was a “unanimous kind
of thing,” Murphy responded, “Oh yes. Oh very much so.
Very much so. I mean, something as significant as this, it had
to come from all walks.” (App. at A4025.) Mack’s Vice
President of Distributor Sales, Gary Johnson, told Yeager that
the one thing I can tell you that would be fair
and legitimate advice is that I think this policy
came about to a large extent because of the
voice of the distributor organization ... . If it’s
probably ever gonna be changed or modified, it
will come about as a result of the voice of
dealer organizations.
(App. at A4058.)
Mack’s attempts to discredit Johnson’s statement about
the dealers’ role in creating Bulletin 38-89 only demonstrates
why the jury should have been given a chance to consider
Toledo’s § 1 claim. First, Mack argues that Johnson was
mistaken because, immediately before explaining the origins
of the policy, he stated that he was “new on the job.” While a
35
jury presented with that argument might conclude that
Johnson’s statements are insufficient to establish that Mack
and its dealers conspired, that does not mean that a jury could
not believe Johnson and reach the opposite conclusion.
Johnson stated unequivocally that Bulletin 38-89 “came about
to a large extent because of the voice of the distributor
organization.” (App. at A4058.) Because Bulletin 38-89 was
issued as official Mack policy, a jury presented with
Johnson’s statement, along with Murphy’s statement, could
rationally conclude that Bulletin 38-89 was the result of an
agreement between Mack and its dealers.
Mack also attacks Johnson’s statement by citing our
decision in Edward J. Sweeney & Sons, Inc. v. Texaco Inc.,
637 F.2d 105 (3d Cir. 1980). In Sweeney, we held that
testimony would not support an inference of conspiracy when
a witness stated that he “believed [the defendant] changed
[the plaintiff’s] hauling allowance because of ... retailer
complaints,” but then admitted that his opinion “was just an
unsupported surmise.” 637 F.2d at 112. Seizing on the
witness’s statement in Sweeney that his belief was an
“unsupported surmise,” Mack argues that, because Johnson
only told Yeager “what [he] th[ought] occurred,” his
statement is insufficient to support an inference of conspiracy.
We disagree. In the first place, Sweeney is inapposite because
Johnson’s statement is direct evidence of collusion, which, if
believed, requires no further inference. Second, unlike the
witness in Sweeney, Johnson never stated that his belief about
the origins of Bulletin 38-89 lacked support, and his position
as Vice President of Distributor Sales buttresses the
36
conclusion that his statement was based on first-hand
knowledge, not mere surmise.
Mack’s argument that Murphy’s statements cannot be
taken as showing a conspiracy is equally unpersuasive.
Relying on Monsanto, Mack argues that the tape recording of
Yeager’s conversation with Murphy shows, at most, that
Mack responded to dealer complaints about Toledo. In
Monsanto, the Supreme Court held that, to establish
concerted action under § 1 using direct evidence, a plaintiff
cannot simply show that the defendant received complaints
about the plaintiff’s price cutting from other dealers, nor is it
enough to show that the defendant received complaints and
acted in response. 465 U.S. at 764 (citing Sweeney, 637 F.2d
at 111-12). Instead, a plaintiff must produce evidence that
would allow a jury to conclude that “the alleged conspirators
had a unity of purpose or a common design and
understanding, or a meeting of the minds.” Id. The
necessary “meeting of the minds” requires “more than a
showing that the distributor conformed to the suggested
price. It means as well that evidence must be presented both
that the distributor communicated its acquiescence or
agreement, and that this was sought by the manufacturer.” Id.
at 764 n.9.
Mack argues that Yeager’s conversation with Murphy
does not meet Monsanto’s requirements because, even if
believed, it shows only that Mack adopted Bulletin 38-89 in
response to dealer complaints. However, in Monsanto itself,
the Court held that a jury should be permitted to consider
whether a conspiracy existed based on evidence of a meeting
37
between Monsanto and its distributors. During the meeting at
issue in that case, the parties discussed “Monsanto’s efforts to
get the market place in order,” id. at 765 (internal punctuation
omitted), and also discussed how to ensure a “level
playground” in which the decision of the “umpire” in
enforcing the “rules of the game” would be final, id. at 766.
The Supreme Court agreed that the report of the meeting
could be describing “the likely reaction to unilateral
Monsanto pronouncements.” Id. at 766 n.11. Nevertheless,
the Court explained that the report could also indicate that
Monsanto and its distributors entered into an illegal
agreement and that “the interpretation of [the] ... testimony ...
properly was left to the jury.” Id.
In this case, Toledo presented evidence that Mack and
its dealers met, discussed, and unanimously approved Bulletin
38-89 before Mack issued it. One view of the evidence may
be, as Mack insists, that the dealers at the NDAC meeting
were reacting to unilateral pronouncements by Mack, but
another view is possible and entirely reasonable. Under
Monsanto, then, how to view that evidence should be left to
the jury.
Toledo also presented evidence that the conspiracy
between Mack and its dealers continued from 1989 until well
into the limitations period. As we have noted, in October
1989, Mack amended Bulletin 38-89 with Bulletin 38-89A,
which stated a policy purportedly permitting dealers to sell
38
everywhere.13 However, Toledo presented direct evidence in
the form of statements by various Mack executives that
Mack’s policy against out-of-AOR sales continued unchanged
despite the amendment to Mack’s official policy. For
example, when Toledo attempted to sell three trucks outside
its AOR in 1991, Kevin Flaherty told Yeager that “our policy
has not changed,” and he indicated that Mack would provide
sales assistance if Toledo sold the trucks inside its AOR but
not outside of it. (App. at A4086.) Similarly, Bob Grussing,
Mack’s Parts Manager, told Yeager in 1996 that dealers
“constantly want Mack to get involved in these territorial
disputes ... and to protect them from one another. And right
or wrong, we do that, you know.” (App. at A4147.)
Grussing also stated that such assistance was a “long standing
tradition” and that “I don’t know if I can break that.” Id.
Mack attacks the statements by Flaherty and Grussing
in various ways. Mack argues that Flaherty’s statements do
not show that Mack’s policy remained unchanged because
Flaherty was actually trying to convince Yeager to provide
him with the information necessary to conduct a cross-check
so that Toledo could compete on an equal footing with any
13
Mack argues that its decision to withdraw Bulletin 38-89
and replace it with an official policy permitting out-of-AOR
sales demonstrates that it withdrew from any conspiracy that
had existed earlier in 1989. Whether Mack withdrew from a
conspiracy, however, is a jury question. Cf. United States v.
Lowell, 649 F.2d 950, 956 (3d Cir. 1981) (“[T]he question of
withdrawal is for the finder of fact.”).
39
other Mack dealer that might be attempting to make the same
sale. Once again, Mack would have us view the evidence in
the light most favorable to it, even though we are bound to do
just the opposite at this point in the case. Moreover, Jack
Lusty testified that, although Mack claimed that its system of
cross-checks was used to ensure that all dealers competing
for the same sale received equal sales assistance, the real
purpose of cross-checks was to prevent dealers from
competing effectively with one another. Because we must
assume the truth of Lusty’s testimony at this stage, Mack’s
characterization of Flaherty’s statements, even if correct,
would not prevent a jury from concluding that a conspiracy
existed. Further, as Toledo points out, Flaherty’s statement
that “our policy has not changed” was made after Mack had
ostensibly retracted its ban on sales assistance on out-of-AOR
sales. See Rossi, 156 F.3d at 452, 478 (noting that actions by
a party that are inconsistent with its stated policy support an
inference of concerted action).
Mack’s attack on Grussing’s statement is also flawed.
Mack argues that because Grussing’s expertise was parts
rather than trucks, his statements do not show a conspiracy
involving truck sales. Again, this is an argument suited for
presentation to a jury, not this Court. In addition, Yelles
made several comments to Lusty that support the conclusion
that, during the limitations period, Mack continued a policy
of preventing dealers from selling outside their AORs. Of
particular note, Yelles stated that Yeager “was not playing by
the rules.” (App. at A2825.) A jury could reasonably
understand that the “rules” Yelles was talking about were an
40
agreement not to engage in price competition outside one’s
own AOR.14
Viewed in the light most favorable to Toledo, these
statements by Mack executives are sufficient to allow a jury
to decide whether an agreement between Mack and its dealers
continued into the limitations period. Mack’s arguments to
the contrary fall short because they fail to recognize the
nature of our inquiry. Rather than determining whether Mack
actually violated § 1, our function now is simply to decide
whether Toledo’s evidence is sufficient to allow a jury to
consider Toledo’s § 1 claim.
Because Toledo’s evidence was sufficient to allow a
jury to conclude that Mack entered into a competition-
restricting agreement with its dealers, the only remaining
question before us as to that agreement is whether, if proven,
it violates § 1 of the Sherman Act. In contrast to horizontal
14
Lusty also testified that in 2001, Yelles told him that he
“kn[ew] what [Toledo] [was] trying to do. [Toledo] wants to
establish discounts and sell trucks all over the place. We are
not going to let this happen.” (App. at A2824.) Lusty also
testified that in 2002, Yelles told him that Yeager was “just
soliciting customers on price ... we have to beat the living shit
out of him. ... [H]e is a son of a bitch.” (App. at A2818.)
Finally, Yelles himself testified that, on at least one occasion
in 2003, he asked Mack’s Controller to delay approving
Toledo’s request for sales assistance so that a different Mack
dealer could make a sale.
41
price-fixing agreements between entities at the same level of a
product’s distribution chain, the legality of a vertical
agreement that imposes a restriction on the dealer’s ability to
sell the manufacturer’s product is governed by the rule of
reason. Leegin, 127 S. Ct. at 2725. The rule of reason
analysis applies even when, as in this case, the plaintiff
alleges that the purpose of the vertical agreement between a
manufacturer and its dealers is to support illegal horizontal
agreements between multiple dealers. Id. at 2717 (“A
horizontal cartel among competing manufacturers or
competing retailers that decreases output or reduces
competition in order to increase price is, and ought to be, per
se unlawful. To the extent a vertical agreement setting
minimum resale prices is entered upon to facilitate either type
of cartel, it, too, would need to be held unlawful under the
rule of reason.”) (citation omitted and emphasis added).15
15
We note that in Rossi we characterized the agreement at
issue as horizontal and subject to per se analysis even though
Rossi, like Toledo here, alleged that his direct competitors
conspired with each other and with a common manufacturer
to cut off his access to customers. 156 F.3d at 458, 461-62.
At that time, agreements to set minimum resale prices were
per se unlawful under § 1. See id. (“We agree with
defendants that if this were simply a vertical conspiracy,
between one horizontal competitor and one supplier or
manufacturer, we would analyze it under the rule of reason
unless there were some evidence of price fixing.”) (emphasis
added). After Leegin, vertical agreements to set prices are no
longer per se unlawful but subject to the rule of reason. 127
42
“When conducting a rule of reason inquiry, the
factfinder weighs all of the circumstances of a case in
deciding whether a restrictive practice should be prohibited as
imposing an unreasonable restraint on competition.” AT & T
Corp. v. JMC Telecom, LLC,
470 F.3d 525, 531 n.7 (3d Cir. 2006) (citations omitted). In
Rossi, we identified four factors that are relevant to an
analysis of a restraint under the rule of reason:
(1) that the defendants contracted, combined or
conspired among each other; (2) that the
combination or conspiracy produced adverse,
anti-competitive effects within the relevant
product and geographic markets; (3) that the
objects of and the conduct pursuant to that
contract or conspiracy were illegal; and (4) that
the plaintiffs were injured as a proximate result
of that conspiracy.
156 F.3d at 464-65 (citation omitted).
S. Ct. at 2725. In light of Leegin, we conclude that the rule of
reason, not per se analysis, applies to the vertical agreement
Toledo alleges was in existence here. Cf. United States v.
Fisher, 502 F.3d 293, 296 (3d Cir. 2007) (citation omitted)
(explaining that while a panel of this Court is ordinarily
bound by the decision of a prior panel, a subsequent panel
may depart from a previous panel’s decision if required to do
so by an intervening Supreme Court decision).
43
In Leegin, the Supreme Court also identified
additional issues relevant to the rule of reason inquiry. Two
of those are particularly relevant to Toledo’s appeal. First,
“[t]he source of the restraint may be an important
consideration. If there is evidence retailers were the impetus
for a vertical price restraint, there is a greater likelihood that
the restraint facilitates a retailer cartel ... .” 127 S. Ct. at 2719.
Second, “that a dominant manufacturer or retailer can abuse
resale price maintenance for anti-competitive purposes may
not be a serious concern unless the relevant entity has market
power.” Id. at 2720.
As to the first rule of reason factor we identified in
Rossi, we have already explained that, viewed in the light
most favorable to Toledo, the previously highlighted
statements by Mack executives are sufficient to allow a jury
to decide whether an agreement between Mack and its dealers
continued into the limitations period. Further, we note that,
consistent with Leegin, Toledo produced evidence that the
agreement was the result of dealer pressure.
Toledo also presented sufficient evidence to allow a
jury to conclude that the agreement between Mack and its
dealers produced anti-competitive effects in the relevant
product and geographic markets. Toledo bears the burden of
identifying those markets and showing the anti-competitive
effect of the agreement between Mack and its dealers.
Gordon v. Lewistown Hosp., 423 F.3d 184, 210 (3d Cir.
2005). We have explained that proof of anti-competitive
effects “can be achieved by demonstrating that the restraint is
facially anticompetitive or that its enforcement reduced
44
output, raised prices or reduced quality. Alternatively,
because proof that the concerted action actually caused
anticompetitive effects is often impossible to sustain, proof of
the defendant’s market power will suffice.” Id. Market
power is “the ability to raise prices above those that would
prevail in a competitive market.” United States v. Brown
Univ., 5 F.3d 658, 668 (3d Cir. 1993). At trial, Toledo
presented expert testimony that Mack has power in two
different product markets. The first of those markets is called
the conventional straight truck market and includes vehicles
that have an engine placed out in front of the driver’s cab.
The second market consists of low cab over engine trucks, or
LCOE trucks, which have an engine placed underneath the
driver’s cab. Toledo’s expert testified that Mack “[has]
market power in both the heavy duty vocational LCOE, as
well as conventional straight truck markets, whether you look
at the U.S. as a whole or the U.S., excluding the west.”16
(App. at A1676.)
Toledo also presented sufficient evidence that “the
objects of and the conduct pursuant to th[e] contract or
conspiracy were illegal.” Rossi, 156 F.3d at 466. As
explained, Toledo has alleged that Mack agreed to support the
horizontal agreement among the dealers to control prices. In
Leegin, the Supreme Court expressly condemned such
agreements. 127 S. Ct. at 2717.
16
That assertion was supported by an analysis we need not
recount here.
45
Finally, Toledo adduced evidence that it was injured
as a result of the unlawful conspiracy. For example, Toledo
presented evidence that, during the limitations period, Jeff
Yelles asked Mack’s Controller to delay approving one of
Toledo’s requests for sales assistance on an out-of-AOR sale
so that another Mack dealer could make a sale. Toledo also
presented evidence that, during the limitations period, Yelles
refused to give sales assistance to Toledo on out-of-AOR
sales.
Applying the rule of reason analysis to Toledo’s § 1
claim, we conclude that Toledo presented sufficient evidence
of an illegal agreement between Mack and its dealers for a
jury to find for Toledo. Therefore, we vacate and remand the
District Court’s decision on that claim.
B. Toledo’s RPA Claim
In addition to its § 1 claim, Toledo also argues that
Mack’s conduct violates the RPA’s prohibition on
discriminatory pricing. The relevant provision of the RPA
provides that,
[i]t shall be unlawful for any person engaged in
commerce ... to discriminate in price between
different purchasers of commodities of like
grade and quality ... where the effect of such
discrimination may be substantially to lessen
competition ... or to injure, destroy, or prevent
competition with any person who either grants
or knowingly receives the benefit of such
46
discrimination, or with customers of either of
them.
15 U.S.C. § 13(a).
Toledo argues that Mack engaged in discriminatory
pricing by giving other Mack dealers more favorable
discounts than were given to Toledo. At trial, Toledo
presented expert testimony comparing the average amount of
sales assistance Mack offered to Toledo with the average
amount of sales assistance Mack offered other dealers located
in the same general geographic area. Toledo’s expert testified
that the comparison demonstrated that Toledo received far
less sales assistance than other nearby Mack dealers.
However, Toledo’s expert did not compare the amount of
sales assistance Mack offered to Toledo and to other dealers
when Toledo and another dealer actually competed against
each other for a sale to the same customer. Therefore,
Toledo’s expert was unable to offer an opinion about whether
Mack had discriminated against Toledo in head-to-head
competition.
The RPA was originally enacted to “target the
perceived harm to competition occasioned by powerful buyers
rather than sellers; specifically, Congress responded to the
advent of large chainstores, enterprises with the clout to
obtain lower prices for goods than smaller buyers could
demand.” Reeder-Simco GMC, Inc., 546 U.S. at 175. In the
Supreme Court’s recent decision in Reeder-Simco, the
plaintiff was a Volvo dealer who, like Toledo, sold custom-
made, specialized heavy-duty trucks. Id. at 170-71. Like
47
Toledo, Reeder-Simco relied heavily on discounts offered by
the truck manufacturer, in that case Volvo, to sell its trucks.
Id. Finally, like Toledo, Reeder-Simco alleged that the
manufacturer had violated the RPA by offering it less
favorable discounts than were offered to other dealers. Id. at
171-73. The Supreme Court noted that the alleged price
discrimination did not implicate the original purpose of the
RPA because “the allegedly favored purchasers are dealers
with little resemblance to large independent department stores
or chain operations, and the supplier’s selective price
discounting fosters competition among suppliers of different
brands.” Id. at 181. Elsewhere in its opinion, the Court
reinforced the need to interpret the RPA narrowly, explaining
that “[i]nterbrand competition ... is the ‘primary concern of
antitrust law.’” Id. at 180 (quoting Continental T.V., Inc. v.
GTE Sylvania, Inc., 433 U.S. 36, 51 n.19 (1977)). The Court
further explained that “[t]he [RPA] signals no large departure
from that main concern. ... [W]e [will] resist interpretation
geared more to the protection of existing competitors than to
the stimulation of competition.” Id. (emphasis in original).
In short, the Court indicated that the RPA should be narrowly
construed.
In Crossroads Cogeneration Corp. v. Orange &
Rockland Utilities, Inc., 159 F.3d 129, 142 (3d Cir. 1998), we
were careful to keep the RPA confined. There, the defendant
allegedly offered to sell electricity to certain customers at
lower prices than it offered to its other customers, including
Crossroads. Id. We held that Crossroads’ RPA claim could
not withstand a motion to dismiss because merely offering
lower prices to a customer does not give rise to a price
48
discrimination claim. Id. at 142. Instead, “a plaintiff must
allege facts to demonstrate that (1) the defendant made at
least two contemporary sales of the same commodity at
different prices to two different purchasers; and (2) the effect
of such discrimination was to injure competition.” Id.
(citation omitted).
The Supreme Court in Reeder-Simco expressly
declined to decide whether the RPA even applies to markets
based on competitive bidding and special-order sales.
Reeder-Simco, 546 U.S. at 180. Our decision in Crossroads,
however, suggests that the RPA does not apply in a case such
as this, which involves a single sale of a customized good via
a competitive bidding process. Although Mack dealers may
compete with one another by bidding against each other for
the same deal, and the amount of sales assistance Mack offers
to each dealer may well determine whether a customer
chooses to accept a bid from one Mack dealer or another,
Mack does not sell a truck to the dealer until the customer
actually selects a dealer’s bid. Because no sale takes place
until a customer accepts a dealer’s bid, the amount of sales
assistance Mack is willing to provide to a particular dealer is
part of an offer by Mack to sell, not a sale. Regardless of any
competition between the dealers during the bidding process,
only a dealer whose bid is accepted by a customer will
actually buy a truck from Mack. Therefore, only one sale, not
two, actually results.17 Cf. M.C. Mfg. Co., Inc. v. Texas
17
One might complain that this reasoning elevates form
over substance, but we are bound by precedent and think it no
49
Foundries, Inc., 517 F.2d 1059, 1065 (5 th Cir. 1975) (“[I]n
order for there to be discrimination between purchasers
violative of [the RPA] there must be actual sales at two
different prices to two different actual buyers ... .” (internal
quotation marks and citation omitted)) .
Finally, we reject Toledo’s argument that Corn
Products Refining Co. v. FTC, 324 U.S. 726 (1945), requires
us to abandon the two-sales requirement we articulated in
Crossroads. Corn Products involved a claim under § 2(e) of
the Clayton Act which prohibits discrimination “in favor of
one purchaser against another purchaser or purchasers of a
commodity bought for resale ... by ... contributing to ... any
services in connection with ... the sale or offering for sale of
such commodity ... upon terms not accorded to all purchasers
on proportionally equal terms.” 15 U.S.C. § 13(d). In Corn
Products, the Federal Trade Commission filed suit against a
sugar supplier that had agreed to pay a large portion of the
advertising expenses of the Curtiss Candy Company
(“Curtiss”), one of its principal customers, but did not agree
to a similar arrangement with another customer who bought
the same products. Id. at 743. The sugar supplier argued that
it had not provided advertising services to a “purchaser” of its
injustice to narrowly interpret the oft-questioned RPA. Cf.
Antitrust Modernization Commission, Report and
Recommendations, April 2007, at iii, 317-26
(recommendation by statutory commission, whose members
were appointed by the President and Congress, that the RPA
be repealed in its entirety).
50
product because nothing in the contract between it and
Curtiss required Curtiss to buy sugar in exchange for the
advertising. Id. The Court rejected that argument, noting
that Curtiss had in fact purchased all of its sugar from the
supplier even though the contract in question did not require
it to do so, and that the supplier had not paid the advertising
expenses of any of the other companies that bought its sugar
products. Id. at 744.
Corn Products, decided long before our opinion in
Crossroads, does not require us to abandon the two-sales
requirement in RPA cases. Assuming arguendo that a claim
of discriminatory advertising is analogous to a claim of
discriminatory pricing, Corn Products, unlike Reeder-Simco
and the present case, involved two actual sales to different
customers, as opposed to mere offers to sell. In short,
Toledo’s policy arguments based on Corn Products do not
override the import of Reeder-Simco or our own binding
precedent. We will therefore affirm the District Court’s grant
of summary judgment for Mack on Toledo’s RPA claim.
C. Mack’s Misappropriation of Trade Secrets
Counterclaim
Toledo’s final argument is that the District Court erred
in granting judgment as a matter of law in favor of Mack on
Mack’s counterclaim for misappropriation of trade secrets.
On appeal, Toledo argues that Mack’s counterclaim is
actually for breach of the MACSPEC 2001 license agreement,
and that, under Pennsylvania’s “gist of the action” doctrine,
Mack cannot recover in tort for breach of contract. The “gist
51
of the action” doctrine is “designed to maintain the conceptual
distinction between breach of contract claims and tort claims
[by] precluding plaintiffs from recasting ordinary breach of
contract claims into tort claims.” eToll Inc. v. Elias/Savion
Advertising Inc., 811 A.2d 10, 14 (Pa. Super. Ct. 2002). The
focus of an analysis under the “gist of the action” doctrine is
whether “actions lie from a breach of the duties imposed as a
matter of social policy” or “from the breach of duties imposed
by mutual consensus.” Redevelopment Auth. of Cambria
County v. Int’l Ins. Co., 685 A.2d 581, 590 (Pa. Super. Ct.
1995). We agree with the District Court that Mack’s claim
for misappropriation of trade secrets sounds primarily in tort,
rather than contract law, and therefore the “gist of the action”
doctrine does not bar Mack’s counterclaim.
The Ohio Court of Appeals found that Mack took
several steps independent of issuing a license agreement to
insure that its dealers did not give copies of the MACSPEC
2001 software to unauthorized persons. Those steps included
the use of “unlock codes” during the installation process and
prominent warning screens informing users that unauthorized
use would subject them to civil and criminal penalties. Mack
Trucks, Inc. v. Motor Vehicle Dealers Bd., No. 05AP-768,
2006 WL 1495122, at *7 (Ohio Ct. App. June 1, 2006).
Thus, Toledo’s duty to keep the software confidential did not
arise simply from its license agreement with Mack but,
instead, had roots in its independent duty to keep Mack’s
trade secrets confidential, and the counterclaim can properly
52
be seen as sounding in tort.18 We therefore reject Toledo’s
argument and affirm the District Court’s grant of judgment as
a matter of law on the counterclaim.
IV. Conclusion
Mack presented sufficient evidence to allow a jury to
consider its claim under § 1 of the Sherman Act.
Accordingly, we will vacate the District Court’s grant of
judgment as a matter of law and remand that claim for further
proceedings. We will affirm the District Court’s disposition
of Toledo’s RPA claim and Mack’s counterclaim for
misappropriation of trade secrets.
18
In addition, we note that Toledo initially denied the
existence of the contract it now uses to invoke the “gist of the
action” doctrine. Toledo cannot properly change its position
now. Tops Apparel Mfg. Co. v. Rothman, 244 A.2d 436, 439
n.8 (Pa. 1968) (“When a [party] alleges a fact in a court of
justice, for [its] advantage, [it] shall not be allowed to
contradict it afterwards.”)
53