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From Antitrust Law Daily, April 20, 2017

Motor vehicle dealership denied new trial on Robinson-Patman Act claim against Chrysler

By Peter Reap, J.D., LL.M.

Mathew Enterprise, Inc., a Chrysler, Jeep, Dodge, and Ram dealership operating as Stevens Creek, was not entitled to a new trial based on improper jury instructions in its trial against franchisor Chrysler Group for allegedly offering incentive payments to its other dealers in Northern California but not to Stevens Creek in violation of § 2(a) of the Robinson-Patman Act, the federal district court in San Jose, California, decided. The dealership’s argument that it was entitled to a new trial on the basis of a jury instruction that misstated the law on the burden of proof for establishing functional availability was without merit because that question properly assigned the burden to the defendant dealership. Further, the dealership was incorrect in arguing that the jury instruction’s failure to mention evenhandedness as an element of functional availability was reversible error because the instruction’s statement that Stevens Creek had to prove practical attainability, without a specific mention of evenhandedness, was an accurate statement of the law. The dealership’s final argument, that the jury instruction and verdict form "confused" the jury, was both waived and meritless (Mathew Enterprise, Inc. v. Chrysler Group LLC, April 20, 2017, Freeman, B.).

Chrysler’s Volume Growth Program (VGP), which generally provides dealers with incentives if they meet certain sales objectives in a given month. In this action, Stevens Creek claimed that for a period of time from July 2012 through June 2013, Chrysler violated the Robinson-Patman Act (RPA) by engaging in price discrimination against Stevens Creek through the manner in which Chrysler set Stevens Creek’s monthly sales objectives to qualify for incentive payments under Chrysler’s VGP.

A jury found that although Stevens Creek had proved by a preponderance of the evidence that (1) the vehicle sales from Chrysler that were being compared were of like grade and quality and (2) the sales from Chrysler that were being compared occurred at about the same time. Stevens Creek did not prove price discrimination by a preponderance of the evidence. Accordingly, the jury returned a verdict for Chrysler. Stevens Creek filed a motion for a new trial. It challenged one jury instruction (Instruction 23) and the related verdict form question (Question No. 3).

Functional availability. At issue here was the judicially created doctrine of functional availability, the court noted. According to this court-created rule, the plaintiff in an RPA suit cannot recover damages for lower prices paid by its competitors to the defendant if those same prices were available to the plaintiff from a practical standpoint and on equal terms with its competitors.

Burden of proof of establishing functional availability. Stevens Creek argued that Instruction 23 misstated the law because the judicially created doctrine of functional availability is an affirmative defense, for which the burden of proof is on the defendant. The court disagreed. An affirmative defense is an assertion raising new facts and arguments that, if true, will defeat a plaintiff’s claim, even if all allegations in the complaint are true. In contrast, a defense that points out a defect in the plaintiff’s prima facie case is not an affirmative defense. Because courts routinely recognize that the functional availability doctrine negates two essential elements of an RPA claim, the court disagreed that the doctrine is an affirmative defense.

Stevens Creek cited one case out of the Eleventh Circuit, and several district court cases, in which it argued that courts have identified the functional availability doctrine as an affirmative defense. Stevens Creeks’ reliance on these cases, however, was misplaced, the court said. Because these cases did not contradict or even question the weight of the case law establishing that the doctrine of functional availability negates two essential elements of a plaintiff’s RPA claim, the court did not find persuasive the argument that functional availability is an affirmative defense.

Citing the Sixth Circuit ruling in Smith Wholesale, Stevens Creek next contended that even if functional availability negates an element of a plaintiff’s RPA case, the burden of proof would not be fully on an RPA plaintiff. Smith Wholesale Co., Inc. v. R.J. Reynolds Tobacco Co., 477 F.3d 854, 866 (6th Cir. 2007). Instead, Stevens Creek maintained that the initial burden would be on the plaintiff to establish the elements of its RPA claim, including price discrimination, and then the burden would shift to the defendant to convince the jury that the discounts were justified. Here, Stevens Creek mischaracterized the reasoning of Smith Wholesale, the court said. The burden-shifting scheme described by the Court in Smith Wholesale strongly suggested that the burden of proof at trial with respect to functional availability is properly on the plaintiff in an RPA case, according to the court.

Elements of functional availability. Stevens Creek next argued that Jury Instruction 23 improperly stated the law regarding the elements of functional availability. In particular, Stevens Creek contended that the court failed to instruct the jury on the second element of functional availability—that the incentives must be available on an equal basis to each buyer—and instead only instructed the jury that the objectives must have been practicably attainable.

The wealth of precedent suggested that there are not two elements to functional availability, but rather that functional availability is a concept that can be captured in multiple ways, the court explained. Here, the final jury instruction stated that to prove the incentive program was functionally unavailable to it, Stevens Creek had to prove practicable attainability, not that it was also evenhanded. As the Tenth Circuit ruled in a similar case involving a jury instruction on volume discounts, the jury instruction given in that case, and here, offered the jury an accurate statement of the law, even if it did not provide all of the detail Stevens Creek desired, according to the court. Even if there was error, it was harmless. The jury’s verdict indicated that the jury believed that Chrysler’s VGP was practically attainable to Stevens Creek.

Confusion. Stevens Creek’s final argument is that Instruction Number 23 and Verdict Form Question 3 were confusing because they "toggl[ed] between the concepts of ‘functional availability’ and ‘functional unavailability.’"

Stevens Creek’s argument was unconvincing. First, Stevens Creek failed to present "confusion" as a basis for challenging the instruction before the instant motion, and has thus waived the argument. Second, even if Stevens Creek did not waive this issue, it was meritless, the court held. The jury did not express any confusion with respect to Jury Instruction 23 and the instruction was plain English—expressing a negative in an alternative way was unlikely to cause confusion.

The case is No. 5:13-cv-04236-BLF.

Attorneys: Ali Kamarei (In-House Counsel), Eric A. Baker (Boardman & Clark LLP) and Halbert Bennett Rasmussen (Arent Fox LLP) for Matthew Enterprise, Inc. Colin Kass (Proskauer Rose LLP) and Robert Edmund Davies (Donahue Davies LLP) for Chrysler Group LLC.

Companies: Matthew Enterprise, Inc.; Chrysler Group LLC

MainStory: TopStory Antitrust FranchisingDistribution CaliforniaNews

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