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From Antitrust Law Daily, November 30, 2015

Jury’s verdict in boycott case upheld against only one of two appealing steel makers

By Jeffrey May, J.D.

The abrupt decision of JSW Steel (USA), Inc. to no longer deal with a newly-formed distributor (MM Steel, L.P.) following threats from established distributors that had formed a horizontal conspiracy supported a jury's finding that JSW participated in a per se illegal group boycott of MM Steel, the U.S. Court of Appeals in New Orleans has decided. However, now-defunct MM Steel failed to provide substantial evidence that tended to exclude the possibility that Nucor Corporation’s three refusals to deal with the plaintiff were made independent of the existing horizontal conspiracy between the distributors. Therefore, judgment against JSW was affirmed and judgment against Nucor was reversed on the antitrust claims. The other defendants in the case—the distributors and one other manufacturer—had already settled and dismissed their appeals following a $150 million damages award in the case (MM Steel, L.P. v. JSW Steel (USA), Inc., November 25, 2015, Higginson, S.).

Claims against JSW. JSW unsuccessfully argued that there was no substantial evidence to conclude that it knowingly joined the horizontal conspiracy between the distributors. JSW contended that it made an independent decision to no longer deal with MM after learning of a distributor’s lawsuit against MM Steel and after MM Steel asked JSW to postpone shipments. The appellate court ruled, however, that a reasonable juror could have concluded that those reasons were pretextual.

There was evidence that JSW agreed in writing to do substantial business with MM Steel and even extended a line of credit to the newly formed company. However, after a meeting with distributors and receiving independent threats from distributors, JSW decided to no longer do business with MM Steel. Once JSW ended its relationship with MM Steel, the steel manufacturer expanded its business with one of the distributors to the apparent conspiracy. This evidence supported the jury’s conclusion.

Claims against Nucor. Although Nucor’s decision to not deal with MM Steel was consistent with the purpose of the group boycott, a reasonable juror could not have found that Nucor’s decision to not deal with MM Steel, made in favor of a longstanding customer, tended to exclude conduct independent of the horizontal conspiracy between the distributors. The evidence established only that Nucor’s decision was either consistent with its “incumbency practice” of remaining loyal to established customers, or at most, consistent with a vertical agreement with its distributor, the court held. “Without knowing that another distributor was threatening manufacturers, or that other manufacturers were refusing to deal with MM, Nucor could not consciously commit to a common scheme to foreclose MM from the market,” according to the court.

Per se vs. rule of reason analysis. The district court did not err when it instructed the jury that if they found that the manufacturers joined the conspiracy between the distributors, the manufacturers were per se liable for a violation of Section 1 of the Sherman Act. JSW unsuccessfully contended that the U.S. Supreme Court limited the application of per se liability to group boycotts in Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 893 (2007). Per se liability would still be imposed in group boycotts cases in which members of a horizontal conspiracy used vertical agreements anticompetitively to foreclose a competitor from the market, according to the court.

Expert testimony. The appellate court also ruled that it was not an abuse of discretion for the trial court to admit the testimony of MM Steel’s damages expert. A jury awarded MM Steel damages of $52 million, which the trial court trebled. JSW argued that the jury’s damages findings were fatally defective because MM Steel’s damages expert testimony was unreliable and should not have been admitted. The court rejected JSW's challenge to MM Steel's yardstick model of damages. JSW's motion for a new trial was properly denied.

The case is No. 14-20267.

Attorneys: Reagan William Simpson (Yetter Coleman, LLP) and Mo Taherzadeh (Taherzadeh Law Firm) for MM Steel, LP. Gregory S. C. Huffman (Thompson & Knight, LLP) for JSW Steel [USA] Inc.

Companies: MM Steel, LP; JSW Steel [USA] Inc.

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