Opinion
CV 03-753-PA.
May 7, 2004
OPINION AND ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
Defendant's motion for summary judgment is denied. Defendant's briefs mostly seek to relitigate matters already decided adversely to Weyerhaeuser. Defendant also errs by compartmentalizing each alleged anticompetitive act and analyzing it in a vacuum instead of considering the cumulative impact of those acts. They are alleged to have been in furtherance of an overall scheme, not isolated acts. For instance, a contract that by itself may not foreclose competitors from obtaining alder logs at reasonable prices assumes greater significance when coupled with other acts restricting the log supply, as Plaintiff alleges. A pattern of anticompetitive acts can also be evidence of intent.
I reject any suggestion that higher log prices cannot be antitrust injury. A jury has already determined that (through 2001) Weyerhaeuser employed anticompetitive acts to monopolize, or perpetuate a monopoly in, the alder log market, forcing at least one competitor out of business. Higher log costs sustained by other competitors, as a result of the Defendant's illegal activities, can constitute antitrust injury. The increase in log prices allegedly was an integral component of the illicit scheme. Defendant denies the allegations, but that is a jury question.
Defendant also argues that higher log prices are actionable only if access to logs is foreclosed entirely, or if the "predatory pricing" standard is satisfied. I disagree. If Defendant deliberately drove the price of logs up as part of a scheme to prevent its competitors from obtaining logs at economical prices — even though that meant Defendant was paying more than it had to for logs or even letting logs rot in the yard to keep them from competitors — that is anticompetitive conduct which makes economic sense only because of the adverse effect upon competition. This is not mere price competition, as Weyerhaeuser suggests, nor — as framed — is it a matter of an inefficient rival simply being outbid for logs that both companies needed.
In its arguments regarding log prices, Defendant focuses on whether Northwest Hardwoods, as a whole, operated at a loss for entire calendar years. Brief at 13. However, the company obtained many logs from sources other than the open market. This might effectively subsidize the open-market purchases for which Weyerhaeuser allegedly overpaid, or at least that possibility is not precluded by Defendant's summary judgment materials. The HRMC materials on internal log transfer pricing may also bear on this issue.
The Supreme Court carefully scrutinizes claims alleging predatory retail pricing because lower retail prices benefit consumers, and the Court does not want to discourage price competition, which is lawful conduct.
"The mechanism by which a firm engages in predatory pricing-lowering prices — is the same mechanism by which a firm stimulates competition; because cutting prices in order to increase business often is the very essence of competition. Mistaken inferences are especially costly, because they chill the very conduct the antitrust laws are designed to protect. It would be ironic indeed if the standards for predatory pricing liability were so low that antitrust suits themselves became a tool for keeping prices high." Brooke Group, Ltd. v. Brown Williamson Tobacco Corp., 509 U.S. 209, 226-27 (1993) (internal citations and punctuation omitted).
Weyerhaeuser argues that the same standard should apply when a monopolist drives raw material prices up in an effort to destroy competitors. However, the public policy arguments are not the same. Consumer don't benefit from higher raw material prices, or by logs rotting in the lumber yard, nor is deliberately driving prices up likely to be confused with legitimate competition.
Honest competition for logs that Weyerhaeuser needed to supply its own mills is not unlawful conduct, even if that meant Weyerhaeuser outbid competitors when necessary or entered into contracts intended to assure a steady log supply. The antitrust laws are violated only when that behavior goes beyond satisfying Weyerhaeuser's legitimate needs, and is undertaken for the purpose of preventing competitors from obtaining the logs they require, at reasonable prices.
Weyerhaeuser argues that because Plaintiff (and several other mills) remain in business, Weyerhaeuser will be unable to recoup losses it sustained by any anticompetitive conduct such as over-paying for logs. Consequently, Defendant reasons, there is no antitrust violation, citing Brooke Group (a predatory retail pricing case).
Defendant's arguments often focus on recent conduct, either when Siletz was nearing trial or post-verdict. For instance, Defendant asserts that Washington Alder won 89 of 90 recent bids for logs against Weyerhaeuser, but that was in 2003. Brief at 15, 18. It tells the court nothing about conditions during 1998 through Sept. 2002. Defendant also quotes a Cascade employee as saying conditions are "particularly favorable for sawmillstoday." Brief at 19 (emphasis added). The same employee said those improvements all "happened the last year and a half." Id. The deposition was taken November 21, 2003, so the "last year and a half" again coincides with the Siletz trial and post-verdict period. Similarly, Defendant asserts that "plaintiff has access to supplies of logs at competitive levels since the third quarter of 2002." Brief at 18. That might be relevant in any divestiture proceeding, but not here.
Defendant's argument ignores the possibility that Plaintiff and a few other mills survived only because Weyerhaeuser modified its conduct in the face of pending antitrust litigation. If Defendant was engaged in conduct that violated the antitrust laws, but its plans were thwarted by the filing of an antitrust action, Weyerhaeuser remains liable for the harm inflicted upon its competitors as a result of the abortive scheme. The alternative would be a rule that subjects a monopolist to liability only if its scheme succeeds, and would require competitors to wait until they are all driven out of business before relief is available from the courts. That would defeat the Congressional purpose in enacting the antitrust laws. EvenBrooke Group, the predatory pricing case on which Weyerhaeuser relies, did not impose such a requirement.
During the jury trial, I will not let either side offer evidence regarding any changes in Weyerhaeuser's conduct after the damage period. That might require disclosure of privileged communications and legal advice, and could also focus undue attention upon other antitrust litigation against Weyerhaeuser.
Plaintiff need prove only that it was "likely" Weyerhaeuser would have been able to recoup its losses, notwithstanding that the filing of these antitrust cases may have prevented Weyerhaeuser from actually doing so, or that other events interfered. See Brooke Group, 509 U.S. at 232-33. This determination must be made from the perspective of the time period at issue, rather than 20-20 hindsight, i.e., whether at the time Weyerhaeuser acted it had a reasonable expectation of being able to recoup any losses it expected to sustain as a result of the anticompetitive conduct.
To the extent supported by the evidence, recoupment might consist of lower log prices or higher lumber prices once competing mills were eliminated, or a combination thereof, so long as the evidence suggests it was a likely result of the alleged scheme, as viewed from the time that Weyerhaeuser acted. I note that, with regard to log prices, the determination that Weyerhaeuser had a monopoly in the log market necessarily implies that Weyerhaeuser had the ability to control prices or exclude competition, albeit that ability need not be absolute or even have been exercised. See American Bar Association, SAMPLE JURY INSTRUCTIONS IN CIVIL ANTITRUST CASES, p. C-4 (1999) (monopoly power defined). To the extent Defendant argues otherwise, and asserts that there were no significant barriers to entry, this contention is largely foreclosed by the verdict in Siletz.
Next, Weyerhaeuser seeks to bar Plaintiff from recovering damages sustained prior to June 4, 1999, i.e., four years before this case was filed. It is undisputed that Plaintiff knew in 1998 and 1999 that log prices were high, and suspected Weyerhaeuser was responsible. Of course, suspicions alone are insufficient to state an antitrust claim. See Mt. Hood Stages, Inc. v. Greyhound Corp., 555 F.2d 687, 698 (9th Cir. 1977) (subsequent history omitted). Weyerhaeuser's growing dominance of the market is not enough either, as possession of monopoly power is not itself unlawful. Id. at 696, 698. On the other hand, Plaintiff apparently believed it had sufficient information to initiate an antitrust action, or at least that is what Plaintiff claimed in a letter to Weyerhaeuser dated June 8, 1999. Perhaps it was mere puffery.
Plaintiff asserts it did not know, at the time, about the frauds Weyerhaeuser allegedly perpetrated upon Coast Mountain or the States of Oregon and Washington. However, it is questionable whether those subsequent events could revive a claim based upon earlier events, if in fact it had ripened.
Plaintiffs did not know, and could not reasonably have known, about Weyerhaeuser's alleged plans to put them out of business, or all the details of the alleged scheme to deliberately increase log prices and prevent them from getting logs. Damages might also have been too uncertain, with the information known, to warrant filing an action. Cf. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338-40 (1971). Still, I am leaning towards barring Plaintiff from recovering damages before June 1999. Since essentially the same evidence will come in either way, I likely will wait until I've heard Plaintiff's evidence before making a final ruling. Plaintiff should bifurcate the damage periods, so it can be limited to the period beginning June 1999.
Technically, the date is June 4, 1999, but it may not be practical to separate out the first three days of June.
As I stated at oral argument, I am concerned about the strength of the lumber market claim. However, I am not persuaded by Defendant's assertion that its conduct was lawful as a matter of law. I also reject the assertion that Plaintiff's experts "conceded" that Plaintiff's lumber market definition is invalid.
Defendant also argues that Plaintiff sustained no damages in the lumber market. That's not necessarily correct. Although I required Plaintiff to plead the two markets as separate claims, they are related. Defendant's conduct in the log market allegedly was part of a scheme to monopolize both the log and lumber markets. Having eliminated most of its competitors, Weyerhaeuser would then be free to raise prices in the lumber market. In addition, it would not have to be concerned with price competition from competing sellers. There are references in Weyerhaeuser documents to excess capacity in the industry, and other evidence from which a jury could infer that Weyerhaeuser decided to eliminate this perceived excess capacity through anticompetitive conduct. I see no reason why the damages sustained by plaintiffs, if any, could not be applicable to both markets.
In the interests of time, I will not discuss Defendant's other arguments in this opinion. Suffice to say that I have considered them but do not believe summary judgment is appropriate.