In Champagne Metals v. Ken Mac Metals, Inc., Nos. 04-6222 and 05-6139 (10th Cir. 2006), plaintiff aluminum distributor, a recent entrant in the aluminum distribution market, alleged that competing aluminum distributors engaged in a conspiracy to withhold business from any aluminum mill that supplied the plaintiff in order to force the plaintiff out of business and deter others from entering the aluminum distribution market in violation of Section 1 of the Sherman Act. The Western District of Oklahoma granted the defendants’ motion for summary judgment, holding that plaintiff’s proffered evidence of conspiracy was insufficient. According to the district court, the plaintiff did not offer direct evidence of a conspiracy and, applying the principle that the range of permissible inferences from circumstantial evidence of a conspiracy is limited where the economic rationality of the alleged conspiracy is doubtful, the district court found plaintiff’s circumstantial evidence of conspiracy insufficient to save it from summary judgment because the economic theory of the plaintiff’s claim made little economic sense. On appeal, the Tenth Circuit reversed. It held that the plaintiff had produced direct evidence of conspiracy, though that evidence was not by itself sufficient to overcome a summary judgment motion, and that the district court erred in finding that the plaintiff’s economic theory was dubious and consequently undervalued the plaintiff’s circumstantial evidence of conspiracy.   

The plaintiff offered the statement of a representative of one of the defendants to an employee of an aluminum mill that supplied the plaintiff that he and "other potential customers [of the mill]…would cause other distributors" to remove their business from the mill if it continued selling to plaintiff as direct evidence of a conspiracy. Viewing this statement in the light most favorable to the plaintiff, as a court must on a motion for summary judgment, the Tenth Circuit found that it was explicit, direct evidence of an agreement between aluminum distributors. However, the Tenth Circuit also found that this statement, by itself, did not meet the burden that a nonmovant on a summary judgment motion bears of presenting facts such that a reasonable jury could find in its favor. The statement did not, for example, indicate which, if any, of the other defendants were among the "other customers" which were part of the agreement. Thus, although the plaintiff did adduce some direct evidence, it was, in the opinion of the court, slight. As such, the Tenth Circuit felt it necessary to consider additional circumstantial evidence to determine whether summary judgment was appropriate.

The plaintiff argued that the district court improperly discounted its circumstantial evidence because it erroneously concluded that the economic theory underlying its claim was "plausible but weak." The district court noted that, although the plaintiff alleged that the purpose of the boycott was to avoid price cutting and maintain market share, the plaintiff did not claim that there was any separate price-fixing or market-allocation agreement, nor was there any evidence of collusion on price or supply. Indeed, the district court found that there was actually ample evidence of competition between the defendants. In addition, there was no evidence of the defendants’ market power and it was unclear, based on the structure of the industry, whether a smaller, more strategically designed group of aluminum distributors could have better accomplished the alleged goals of the conspiracy.

In concluding that the district court erred in its analysis of the plausibility of the plaintiff’s economic theory, the Tenth Circuit first pointed out that exclusionary group boycotts are in and of themselves a violation of the antitrust laws; a concomitant agreement on price-fixing or market allocation is not necessary for liability. Moreover, plaintiff’s theory that the defendant distributors acted together to keep the plaintiff out of the market is, in the view of the Tenth Circuit, entirely economically rational. The defendants could have feared that an aggressive new competitor like the plaintiff could erode their profit margins and take market share from them and banded together in an attempt to prevent the plaintiff’s entry through a group boycott of any mill that supplied the plaintiff. The plaintiff introduced evidence that the defendants complained to a mill that supplied the plaintiff that because of plaintiff’s entry into the market, "prices had come down in the marketplace," "there wasn’t nearly the profit level there used to be," and that "adding another distributor would dilute market share, dilute market pricing." Since the plaintiff’s group boycott theory made economic sense, the court concluded, the district court improperly devalued the plaintiff’s circumstantial evidence. 

In sum, the Tenth Circuit found that the plaintiff had produced some direct evidence of a conspiracy, though that evidence alone was insufficient, and that the plaintiff had alleged an economically rational group boycott theory that necessitated a serious consideration of the plaintiff’s circumstantial evidence of conspiracy. The Tenth Circuit thus remanded the case to the district court, instructing it to "determine…whether the circumstantial evidence, viewed through the lens of a highly plausible theory, and combined with [plaintiff’s] direct evidence, creates a genuine issue of material fact as to the existence of a conspiracy."

Authored by:

Anik Banerjee

(213) 617-4124