El Aguila Food Products, Inc. v. Gruma Corp.

United States Court of Appeals
Fifth Circuit
F I L E D
In the May 17, 2005
United States Court of Appeals Charles R. Fulbruge III
for the Fifth Circuit Clerk
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m 04-20125
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EL AGUILA FOOD PRODUCTS, INC.; LA RANCHERA FOOD PRODUCTS, INC.;
LA RENIA, INC.; ANITA’S MEXICAN FOODS CORP.; LA ESPIGA DE ORO, INC.;
GILBERT MORENO ENTERPRISES, INC.,
DOING BUSINESS AS LA MONITA;
LA FAVORITA INCORPORATED; MEX-PRO, INC.; LA TAPATIA TORTILLERIA, INC.;
MARBROS LLC,
DOING BUSINESS AS EL RANCHO;
FOOD-O-MEX CORP.,
DOING BUSINESS AS EL DORADO MEXICAN FOOD PRODUCTS;
R AND M PARTNERSHIP,
DOING BUSINESS AS CAPISTRAN TORTILLAS;
WALTER MOLINA,
DOING BUSINESS AS DOS MOLINOS TORTILLA HEAVEN;
CALIFORNIA MEXICAN FOODS, INC.; MEXICAN FOOD SPECIALITIES, INC.; SANITARY
TORTILLA MANUFACTURING, LTD.;
JFCW, INC.,
DOING BUSINESS AS CALIENTE DISTRIBUTORS;
AND
LOMPOC TORTILLA SHOP,
Plaintiffs-Appellants,
VERSUS
GRUMA CORPORATION, ET AL.,
Defendants,
GRUMA CORPORATION,
INDIVIDUALLY DOING BUSINESS AS MISSION FOODS CORPORATION;
GRUMA CORPORATION TEXAS;
MISSION FOODS CORPORATION;
GUERRERO MEXICAN FOOD PRODUCTS, INC.;
AND
AZTECA MILLING LP,
Defendants-Appellees.
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Appeal from the United States District Court
for the Southern District of Texas
m 4:03-CV-427
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Before DAVIS, SMITH, and I.
DEMOSS, Circuit Judges. The nature of this suit and the conduct
alleged to be anticompetitive are set forth in
JERRY E. SMITH, Circuit Judge:* the district court’s opinion,1 so we only briefly
summarize them here. Plaintiffs challenge
The plaintiffs in this antitrust suit, seventeen Gruma’s conduct downstreamSSits efforts to
manufacturers of tortillas, appeal a take- obtain shelf and display space in retail outlets
nothing judgment entered in favor of Gruma and to induce retailers to promote and adver-
Corporation (“Gruma”), a manufacturer of tise its tortillas. Specifically, plaintiffs chal-
tortillas and related food products, two of its lenge Gruma’s use of marketing agreements
corporate divisions, and a related entity. with retailers whereby Gruma pays up-front
Because the plaintiffs failed to offer evidence fees to retailersSSso-called “slotting fees”SSor
of damages and causation sufficient to sustain provides other price reductions or financial
a rational judgment in their favor, we affirm. incentives to obtain (and in part manage) shelf
space, advertising, and product promotion, as
well as Gruma’s conduct as it acts as a “Cate-
gory Captain,” a designation given a particular
*
Pursuant to 5TH CIR. R. 47.5, the court has de-
termined that this opinion should not be published
1
and is not precedent except under the limited cir- El-Aguila Food Prods., Inc. v. Gruma Corp.,
cumstances set forth in 5TH CIR. R. 47.5.4. 301 F. Supp. 2d 612 (S.D. Tex. 2003).
2
product manufacturer by a retailer enabling the Gundlach, to opine on the causal link between
manufacturer to assist the retailer in display Gruma’s challenged conduct and the damages
and promotional operations.2 Plaintiffs charge claimed; Gruma renewed its objection to his
Gruma with exclusive dealing in violation of testimony, and after another proffer and
section 1 of the Sherman Act and section 3 of examination, the court excluded Gundlach
the Clayton Act, monopolization and from testifying.
attempted monopolization in violation of The plaintiffs having no admissible evidence
section 2 of the Sherman Act, price discrimi- of antitrust damages or causation on which a
nation in violation of the Robinson-Patman verdict could be based, the court dismissed the
Act, and violations of state antitrust laws. jury. Gruma moved for judgment as matter of
law and moved the court to consider its
Before trial, Gruma moved for summary pending motion for summary judgment.
judgment, contending that plaintiffs could not, Thereafter, in a published opinion, the court
as a matter of law, establish any antitrust articulated its reasons for excluding the
violations. Gruma also moved to exclude, on experts and granted a take-nothing judgment
Daubert grounds,3 the plaintiffs’ designated in favor of Gruma, concluding that plaintiffs’
expert witnesses on damages and causation. claims for money damages and injunctive relief
The district court did not rule on Gruma’s fail as a matter of law.
summary judgment motion before trial; it
entered an order indicating the motion would II.
be carried with trial. The court summarily Because the district court granted Gruma’s
denied the motions to exclude but reserved the motion for summary judgment and its motion
right to reconsider the question on a renewed for judgment as a matter of law, our review is
objection at trial. de novo, and we may affirm on any basis
supported by the record.4 Private antitrust
The case proceeded to trial before a jury. liability under § 4 of the Clayton Act requires
After plaintiffs presented their fact witnesses, a plaintiff to show (1) a violation of the anti-
they offered their damages expert, Kenneth trust laws, (2) the fact of damage, and (3)
McCoin, to opine on the profits allegedly lost some indication of the amount of damage.
as a consequence of Gruma’s challenged E.g., Nichols v. Mobile Bd. of Realtors, Inc.,
conduct. Gruma renewed its Daubert objec- 675 F.2d 671, 675-76 (5th Cir. 1982). The
tion, and after a complete proffer and extended fact of damage requirement is one of causa-
voir dire examination, the court sustained the tion; the plaintiff must show that the defen-
objection and excluded McCoin from dant’s unlawful conduct was a material cause
testifying. Plaintiffs then called their expert on of injury to its business. If the requisite causal
causation and antitrust injury, Gregory link is proven, “a more relaxed burden of proof
obtains for the amount of damages than would
2
See FEDERAL TRADE COMMISSION STAFF
4
REPORT, SLOTTING ALLOWANCES IN THE RETAIL See Hugh Symons Group, plc v. Motorola,
GROCERY INDUSTRY 12-13 (Nov. 2003). Inc., 292 F.3d 466, 468 (5th Cir. 2002); Phillips
ex rel. Phillips v. Monroe County, 311 F.3d 369,
3
See Daubert v. Merrell Dow Pharms., Inc., 373 (5th Cir. 2002); LLEH, Inc. v. Wichita
509 U.S. 579 (1993). County, Tex., 289 F.3d 358, 364 (5th Cir. 2002).
3
justify an award in other civil cases.” Eleven the alleged antitrust injury and irrelevant
Line, Inc. v. N. Tex. State Soccer Ass’n, 213 insofar as it was not in any respect anchored to
F.3d 198, 207 (5th Cir. 2000). Though the specific agreements or marketing practices
relaxed, the standard for proving the quantum challenged by plaintiffs. See id. at 624-26.
of damages is not without bounds, for antitrust
damages may not be determined by guesswork A district court has broad discretion in
or speculation; “we must at least insist upon a deciding to admit or exclude expert testi-
‘just and reasonable estimate of the damage mony,6 and excluding McCoin’s testimony was
based on relevant data.’” Lehrman v. Gulf Oil anything but an abuse of discretion. Indeed,
Corp., 464 F.2d 26, 46 (5th Cir. 1972) McCoin made no effort to demonstrate the
(quoting Bigelow v. RKO Radio Pictures, 327 reasonable similarity of the plaintiffs’ firms and
U.S. 251, 264 (1946)).5 the businesses whose earnings data he relied
on as a benchmark.7 Similarly, McCoin did not
III. consider whether the plaintiffs’ firms were
We do not pause to consider the district even capable of handling the excess capacity
court’s conclusion that the plaintiffs failed, as the projected rates of return necessarily entail.
a matter of law, to establish any harm to Moreover, by characterizing all variances
competition rather than competitors in any between the trade association earnings data
properly defined market and thus any violation and plaintiffs’ respective earnings as “lost
of the antitrust laws. Instead, affirmance is profits,” no allowance was made for losses
compelled on more narrow grounds: the fail- caused by any other factorSSincluding, for
ure of proof on damages and causation. example, reductions in shelf space attributable
to other dominant firms or new entrants into
A. the relevant markets, the plaintiffs’ own failure
To prove actual damages, plaintiffs chiefly to compete for shelf space on the terms sought
relied on McCoin’s damages model. He used by retailers, and their lack of capacity or
a yardstick measure of lost profits whereby he efficiency relative to other firms.
compared plaintiffs’ sales history with sales
data and growth projections from trade associ- In any event, even if McCoin’s testimony
ation studies of national tortilla markets; he
applied a uniform gross margin to each of the
plaintiffs’ firmsSSthe major assumption being 6
See Gen. Elec. Co. v. Joiner, 522 U.S. 136,
that, absent Gruma’s illegal conduct, each of 142 (1997); Guy v. Crown Equip., 394 F.3d 320,
the plaintiffs would have performed to the rate 325 (5th Cir. 2004).
of the market as a whole. See El-Aguila, 301 7
Cf. Eleven Line, 213 F.3d at 208 (“An anti-
F. Supp. 2d at 624 n.14. The district court
trust plaintiff who uses a yardstick method of de-
found this model wholly unreliable insofar as it
termining lost profits bears the burden of demon-
attributed all of the measured lost profits to strating the reasonable similarity of the business
whose earnings experience he would borrow.”);
Lehrman v. Gulf Oil Corp., 500 F.2d 659, 667
5
Plaintiffs do not brief any salient differences (5th Cir. 1974) (“Although allowances can be
in the requirements under state law, opting to tie made for differences between the firms, the busi-
the fate of their state law claims to their federal law ness used as a standard must be as nearly identical
claims. to the plaintiff’s as possible.”).
4
had been admitted, it would not have provided 2d at 620-24. We cannot say this was an
a sufficient basis on which the jury could have abuse of discretion, for the record indicates
arrived at a reasonable and just estimate of that Gundlach did not examine sales data from
actual damages.8 And the plaintiffs did not retailers in the relevant markets to determine
present additional evidence sufficient to prove whether space allocation among the various
damages. Because plaintiffs failed to offer brands was disproportionate to their sales, nor
substantial evidence on which a principled did he attempt to tie space allocation to retail-
award of money damages could be based, the ers with which Gruma had marketing agree-
district court did not err in granting judgment ments or paid slotting fees, or to quantify
in favor of Gruma on the claims for money either the extent of exclusivity Gruma alleg-
damages. edly obtained or the extent of market foreclo-
sure allegedly caused by Gruma’s challenged
B. conduct.10 Moreover, Grundlach failed ade-
Nor did plaintiffs provide sufficient evi- quately to account for alternative causes of
dence to demonstrate that Gruma’s conduct plaintiffs’ reduction in shelf space, most
was a material cause of actual or threatened notably their failure to compete for shelf space
damage (much less of the sort the antitrust by offering similar incentives to reduce the net
laws were designed to prevent).9 To prove price paid for tortillas by retailers as well as
causation, plaintiffs relied primarily on Gund- the growing success of retailers’ own private
lach, whose view was that Gruma’s marketing lines of tortillas.
agreements and practice of paying slotting fees
resulted in exclusivity and permitted Beyond their designated expert, plaintiffs
preferential shelf-space and display positions in point to circumstantial evidence and argue that
a manner inconsistent with sales and thus the jury could have inferred causation.
restricted competitors from the market. Though jury inferences of causation are in
some instances permissible, “the required
The district court did not question Grund- causal link must be proved as a matter of fact
lach’s qualifications but excluded his testimony and with a fair degree of certainty.” Alabama
because his opinions amounted to abstract v. Blue Bird Body Co., 573 F.2d 309, 317 (5th
conclusions not adequately grounded in the Cir. 1978). And this is especially so where
facts of the case. See El-Aguila, 301 F. Supp. plaintiffs admittedly lost shelf space (and thus
sales) because of salient factors distinct from
the challenged conduct such as increasing
8
Cf. MCI Communications v. Am. Tel. & Tel. competition in the tortilla category and their
Co., 708 F.2d 1081, 1162 (7th Cir. 1983) (“When refusal even to seek shelf space in some retail
a plaintiff improperly attributes all losses to a
defendant’s illegal acts, despite the presence of sig-
nificant other factors, the evidence does not permit
a jury to make a reasonable and principled estimate
of the amount of damages. This is precisely the
type of speculation or guesswork not permitted for
10
antitrust jury verdicts.”) (internal marks omitted). Cf. Joiner, 522 U.S. at 146 (stating that a
district court “may conclude that there is simply
9
See 15 U.S.C. § 26; Cargill, Inc. v. Monfort, too great an analytical gap between the data and
Inc., 479 U.S. 104, 113 (1986). the opinion proffered”).
5
outlets where Gruma’s products were sold.11
In sum, because plaintiffs failed to present
substantial evidence demonstrating that Gru-
ma’s conduct was a material cause of its actual
or threatened injury as well as evidence on
which a jury could base a reasonable award of
money damages, their claims fail as a matter of
law. Accordingly, the judgment in favor of
defendants is AFFIRMED.
11
Cf. Taylor Pub. Co. v. Jostens, Inc., 216
F.3d 465, 485 (5th Cir. 2000) (requiring tighter
demonstration of causation where other factors
contributed to plaintiff’s losses).
6