Opinions of the United
1998 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


9-9-1998

Rossi v. Standard Roofing Inc (Part I)
Precedential or Non-Precedential:

Docket 97-5185




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Volume 1 of 2

Filed September 9, 1998

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

NO. 97-5185

JOSEPH ROSSI; ROSSI FLORENCE, CORP.;
ROSSI ROOFING, INC.,
Appellants

v.

STANDARD ROOFING, INC.; ARZEE ROOFING SUPPLY
CORP.; GAF CORPORATION; ALLIED ROOFING, INC.;
SERVISTAR CORP.; ROBERT HIGGINSON; HARDWARE
WHOLESALERS, INC.; WILLIAM HIGGINSON;
CERTAINTEED CORP.; WOLVERINE CORP.; NAILITE
CORP.; ESTATE OF ROBERT HIGGINSON; AL ROTH;
CARY ROTH; JOSEPH LICCIARDELLO; WOOD FIBRE
INDUSTRIES, INC.

On Appeal From the United States District Court
For the District of New Jersey
(D.C. Civ. No. 92-cv-05377)

Argued: November 6, 1997

Before: BECKER, ROTH, Circuit Judges and
DIAMOND, District Judge.*

(Filed September 9, 1998)



_________________________________________________________________

* Honorable Gustave Diamond, United States District Judge for the
Western District of Pennsylvania, sitting by designation.
HAROLD E. KOHN, ESQUIRE
JOANNE ZACK, ESQUIRE
 (ARGUED)
MICHAEL J. BONI, ESQUIRE
Kohn, Swift & Graf, P.C.
1101 Market Street, Suite 2400
Philadelphia, PA 19107

JONATHAN D. CLEMENTE,
 ESQUIRE
Clemente, Dickson & Mueller, P.A.
218 Ridgedale Avenue
P.O. Box 1296
Morristown, NJ 07962-1296

Attorneys for Appellants
Joseph Rossi, Rossi Florence Corp.,
and Rossi Roofing, Inc.

ROBERT C. HEIM, ESQUIRE
 (ARGUED)
JOSEPH A. TATE, ESQUIRE
CHRISTINE C. LEVIN, ESQUIRE
GEORGE G. GORDON, ESQUIRE
Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103

SHELDON M. FINKELSTEIN,
 ESQUIRE
SHIRLEY B. WHITENACK, ESQUIRE
HANNOCH WEISMAN, ESQUIRE
A Professional Corporation
4 Becker Farm Road
Roseland, NJ 07068

Attorneys for Appellee
GAF Corporation

                         2
STUART M. KURITSKY, ESQUIRE
 (ARGUED)
Bursik, Kuritsky & Giasullo
443 Northfield Avenue
West Orange, NJ 07052

Attorneys for Appellees
Arzee Supply Corp.,
Alvin Roth and Cary Roth

STEVEN M. RICHMAN, ESQUIRE
 (ARGUED)
PAUL J. FERDENZI, ESQUIRE
Gallagher, Briody & Butler
212 Carnegie Center, Suite 402
Princeton, NJ 08540

Attorneys for Appellee
Wood Fiber Industries, Inc.

STEPHEN F. BAN, ESQUIRE
 (ARGUED)
Springer, Bush & Perry
A Professional Corporation
Two Gateway Center, 15th Floor
Pittsburgh, PA 15222

DAVID K. DeLONGE, ESQUIRE
Schumann, Hanlon, Doherty,
 McCrossin & Paolino
30 Montgomery Street
P.O. Box 2029
Jersey City, NJ 07302

Attorneys for Appellee
Servistar Corporation

                           3
       JOEL N. KREIZMAN, ESQUIRE
        (ARGUED)
       Evans, Osborne, Kreizman and
        Bonney
       180 White Road, Suite B 101
       Little Silver, NJ 07739

       Attorneys for Standard Roofing, Inc.,
       William Higginson, The Estate of
       Robert Higginson and
       Joseph Licciardello

OPINION OF THE COURT

TABLE OF CONTENTS

PAGE

I. FACTS AND PROCEDURAL HISTORY                       8

 A. The Parties                                       8

 B. Rossi at Standard; Rossi Forms His
    Own Company                                       10

 C. The Roofing and Siding Industry in Northern
    New Jersey; Price Discounting and
    Market Shares                                     12

 D. Rossi's Damage Claims                             14

 E. Procedural History                                15

II. SECTION 1 OF THE SHERMAN ANTITRUST ACT            16

 A. Characterizing a Group Boycott; Per   se Versus
    the Rule of Reason                                17

 B. Concerted Action                                  23

  1. Section 1 of the Sherman Antitrust Act --
       Proving the Conspiracy                         23

  2. Rossi's Evidence of Concerted Action             27

   a. Standard (Robert Higginson,
      William Higginson, and Joseph Licciardello)
      and Arzee (Al Roth and Cary Roth)               27

                                  4
   b. GAF                                              37

    (1) Matsushita Implausibility                      37

    (2) Circumstantial Evidence Against GAF            44

     (a) Distributors' Complaints and GAF's Response
                                                       45

     (b) Actions in Contravention of GAF
         Corporate Policy                              46

     (c) Monitoring and Enforcement Activities         47

     (d) Pretextual Excuses                            50

     (e) Conclusion                                    51

   c. Servistar                                        53

   d. Wood Fiber                                       58

III. PROXIMATE CAUSE AND ANTITRUST INJURY              60

IV. STATE LAW TORTIOUS INTERFERENCE
    WITH CONTRACTUAL AND PROSPECTIVE
    CONTRACTUAL RELATIONS                              69

V. CONCLUSION                                          70

BECKER, Chief Judge.*

This appeal from the grant of summary judgment in favor
of antitrust defendants presents a familiar pattern. A dealer
irritates his competitors and their principal supplier
through his aggressive price discounting practices. The
other dealers complain to the supplier, who, to placate the
aggrieved dealers, agrees not to sell any product to the
dealer. The "boycotted" dealer then brings a Sherman Act
suit, 15 U.S.C. S 1 et seq., in federal court. The alleged
conspiracy involves a number of the plaintiff's competitors,
and the refusal to deal is said to have become a group
boycott, which can be a horizontal antitrust violation with
per se antitrust implications; the supplier, notwithstanding
its vertical relation to the plaintiff, is said to have become
a co-conspirator.

The present case arose out of the rough and tumble
roofing and siding materials distribution business in
northern New Jersey, where several favored roofing and
_________________________________________________________________
* Honorable Edward R. Becker, United States Circuit Judge for the Third
Circuit, assumed Chief Judge status on February 1, 1998.

                               5
siding distributors were concerned that the entrance of a
new price cutting competitor could destabilize the market
and substantially cut into their profit margins. The
principal players in this drama are plaintiffs Joseph Rossi,
and his two successive roofing and siding distribution
businesses, Rossi Florence Corp. ("Rossi Florence"), and
Rossi Roofing, Inc. ("Rossi Roofing"); defendants Standard
Roofing, Inc., ("Standard") and Arzee Supply Corporation
("Arzee"), two of Rossi's chief competitors, and several of
their key officers; and defendant GAF Corporation ("GAF"),
the manufacturer that supplied the most important product
in the market. Minor roles were played by defendants Wood
Fiber Industries, Inc. ("Wood Fiber"), another roofing and
siding manufacturer, and Servistar Corp. ("Servistar"), a
national purchasing cooperative and reseller of roofing and
siding products.

Following discovery, the district court granted summary
judgment for all defendants on the ground that plaintiffs
had failed to adduce sufficient evidence to meet the
demanding standard of proof in the antitrust context
established by the Supreme Court's jurisprudence. The
court also relied on plaintiffs' alleged failure to demonstrate
causation and damages. While we agree with the district
court that Rossi cannot survive summary judgment as to
Servistar and Wood Fiber, we believe that the record is
sufficient to enable Rossi to survive summary judgment on
the antitrust claims as to Standard, Arzee, the individual
defendants associated with those firms, and GAF.

The Supreme Court's jurisprudence in the area of
concerted refusals to deal teaches that not every situation
in which a distributor is cut off at the behest of his
competitors constitutes a group boycott entitled to per se
treatment. Otherwise, legitimate efforts by manufacturers to
impose reasonable rules limiting intra-brand competition
would be outlawed and the beneficial effects such actions
have on inter-brand competition would be lost. Moreover,
the distinction between vertical and horizontal restraints
would blur. These concerns, however, are not implicated
here, in view of both the price-related orientation of the
alleged offending conduct of the key defendants and the
sheer scope and draconian modus operandi of the alleged
conspiracy.

                               6
The jurisprudence also renders it difficult for an antitrust
plaintiff to prove that the manufacturer and distributors
conspired, typically because it is difficult for the plaintiff to
demonstrate that what the manufacturer or supplier did
was inconsistent with independent action or that the
claimed conspiracy makes economic sense. In this case,
however, at least at the summary judgment stage, that
burden is surmounted by the presence of certain direct
evidence of conspiracy as well as: (1) evidence that GAF
acted against its consistent policy (and hence ostensibly
against its own interest) in refusing to sell (and seeing to it
that others did not sell) GAF products to Rossi; (2) evidence
of pretext in connection with GAF 's efforts to explain away
the foregoing; (3) evidence that the major suppliers had
sufficient leverage over GAF to induce it to so act; and (4)
the quite graphic and extensive nature of the statements
and actions of various defendants directed towards
eliminating Rossi as a price-cutting competitor who passed
secret rebates onto his customers and thereby threatened
to de-stabilize the market. We also discern genuine issues
of material fact on causation and damages, and this too
precludes summary judgment on the antitrust claims
against the key defendants.

Although the district court's order granting summary
judgment on the antitrust claims regarding GAF, Standard,
Arzee, and their corporate officers must be reversed, it
must be affirmed as to Servistar and Wood Fiber, since
Rossi has failed to overcome his burden of showing that
either Servistar's or Wood Fiber's actions tended to exclude
the possibility of independent action on their part. More
specifically, Rossi has failed to put forth any evidence of
Servistar's motive to conspire; as we shall explain,
Servistar's relationship to GAF was far different from that of
the distributor defendants. Rossi has also failed to show
that the other defendants had any leverage over Servistar
with which they could have coerced it to join the
conspiracy. With respect to Wood Fiber, the only evidence
Rossi has been able to adduce is that Wood Fiber may, on
one or two occasions, have responded to pressure and
threats from Standard and Arzee by not selling to Rossi,
and hence this record is insufficient to satisfy the

                               7
standards for proving concerted action as delineated by the
Supreme Court.

Rossi also pressed a tortious interference claim under
New Jersey state law. The district court granted summary
judgment for all defendants on this claim without any
discussion. This aspect of the judgment must be set aside
because it violates our rule requiring that district courts
accompany grants of summary judgment with an
explanation sufficient to permit the parties and this court
to understand the legal basis for the court's order. See
Vadino v. A. Valey Eng'rs, 

, 257-60 (3d Cir.
1990).

I. FACTS AND PROCEDURAL HISTORY

The following background facts, which describe the basic
framework and background within which this case arises,
are set forth in the light most favorable to the non-moving
party as is required when considering a motion for
summary judgment. The remainder of Rossi's evidence,
most of which deals specifically with the existence vel non
of concerted action by the defendants, will be detailed in
S II.B.2, infra, after we have explained the appropriate legal
standards.

A. The Parties

The plaintiffs, in addition to Joseph Rossi, are Rossi
Florence and Rossi Roofing.1 Rossi has been in the roofing
and siding distribution business in northern New Jersey
_________________________________________________________________

1. Defendants contend that Joseph Rossi lacks standing as an individual
to pursue this matter against them because his personal claims of injury
are derivative of the claims of Rossi Florence and Rossi Roofing. The
district court did not reach that issue because it found that no antitrust
violation existed at all. See Rossi v. Standard Roofing, Inc., 958 F.
Supp.
976, 991 n.11 (D.N.J. 1997). Since we are reversing the district court's
grant of summary judgment in favor of several of the defendants and
remanding this case for further proceedings, we will also remand the
standing issue so that the district court can consider it in the first
instance. Because we are not then differentiating between plaintiffs for
the purposes of this appeal, we will assume that all three plaintiffs have
standing, and will generally use the term "Rossi" to refer to them all.

                                  8
since 1972. Rossi Florence and Rossi Roofing were roofing
and siding distribution companies formed by Rossi at the
end of 1988 and the beginning of 1989. Both are now out
of business. This suit was brought against a number of
Rossi's competitors (as well as several individuals
associated with them), several roofing and siding
manufacturers, and one national purchasing cooperative.
Several of the original defendants, Allied Roofing, Inc.
("Allied"), Nailite Corp. ("Nailite"), Certainteed Corp.
("Certainteed"), and Wolverine Technologies Corp.
("Wolverine") have settled with Rossi and were dismissed
from the case. The remaining defendants are: Standard,
Arzee, GAF, Wood Fiber, Servistar, the estate of Robert
Higginson (hereinafter "Robert Higginson"), William
Higginson, Joseph Licciardello, Alvin Roth, and Cary Roth.

Standard and Arzee are distributors of roofing and siding
products in northern New Jersey. Like Rossi Roofing, they
purchase products from manufacturers and resell them to
contractors and applicators in large volume. Standard is
headquartered in Tinton Falls, New Jersey and has seven
branch locations, including five in New Jersey, one in
Pennsylvania, and one in Connecticut. Robert Higginson
was the founder and chairman of Standard. William
Higginson, Robert's son, is a shareholder and the current
president of Standard. Arzee is a family-owned distributor
with one of its branches located adjacent to Standard in
Cedar Knolls. Defendant Alvin Roth is a shareholder and
the president of Arzee, and defendant Cary Roth is Alvin's
son and one of Arzee's branch managers.

GAF and Wood Fiber manufacture and supply roofing
products to distributors like Rossi Roofing, Standard, and
Arzee. GAF and Wood Fiber are two of the 37 roofing
product manufacturers that serve the northern New Jersey
market. GAF manufactures and sells its roofing material
("GAF product") to most, but not all, of the distributors
located in northern New Jersey. GAF sold to Standard,
Arzee, and Allied, but refused to sell to Rossi. Joseph
Licciardello was an employee of GAF, who quit his job and
replaced Rossi as vice president of Standard after Rossi was
fired.2 Wood Fiber competes with GAF in the northern New
_________________________________________________________________

2. Section I.B, infra, provides further information about Rossi's career
at
Standard.

                                9
Jersey market, manufacturing and selling Structodek FS, a
product used principally in commercial roofing
applications.

Defendant Servistar is a member-owned, national
purchasing cooperative that operates hardware distribution
centers nationwide. Servistar has over 4000 members at
the retail level and deals primarily in paint, hardware,
plumbing and electrical supplies, housewares, lawn and
garden equipment, power tools, and lumber. Roofing
products account for only 2% of Servistar's total purchases
on behalf of its members, which were just under $1 billion
in 1990. Servistar does not warehouse roofing supplies, but
rather operates on a "drop shipment" basis, meaning that
members place their orders through Servistar (which
affords them a discount based on Servistar's status as a
national volume purchaser), and the selected roofing
manufacturer then supplies the product directly to the
member. Servistar pays the manufacturer and later collects
from the member.

B. Rossi at Standard; Rossi Forms His Own Company

From 1972 to 1988, Rossi worked for defendant Standard
as the manager of its Cedar Knolls, New Jersey branch,
selling roofing and siding materials. In 1980, Rossi was
promoted to vice president, rewarded with stock in the
company, and told that he would eventually become a co-
owner of the business. Eight years later, however, in
September 1988, Standard fired Rossi. The parties dispute
the reasons for Rossi's discharge. Rossi alleges that
Standard fired him because he refused to participate in a
conspiracy with defendant Arzee to fix prices, discussed
infra at S II.B.2.a. Standard claims that it fired Rossi for a
combination of reasons including his deteriorating work
performance, his failure to control expenses, the Cedar
Knolls branch's excessively high payroll expenses under his
management, his large personal expense account, his
failure to arrive at work until late morning, his
concentration on outside business ventures to the
detriment of Standard, and, ultimately, his failure to
achieve branch profits commensurate with branch sales.

At all events, by the time he was fired, Rossi had
developed a reputation within the industry for extremely

                               10
competitive pricing, excellent service, and reliability. While
at Standard, Rossi had refined an aggressive marketing
strategy that stressed high volume sales at low prices. This
strategy, as one might imagine, angered Rossi's competitors
and even concerned some of his suppliers, which were
sensitive to their distributors concerns about pricing.

After his termination, Rossi decided to use his
connections within the industry to open his own roofing
and siding distributorship that would serve northern New
Jersey in direct competition with Standard and Arzee.
Rossi's first attempt, in late 1988, was Rossi Florence, a
joint venture with Richard Droesch ("Droesch"), president of
Florence Corp. ("Florence"), a roofing, siding, and window
distributor in Long Island, New York. Rossi and Droesch
planned to operate their new business out of a warehouse
Rossi owned at 8 Frederick Place, located immediately
adjacent to Standard's Cedar Knolls/Morristown branch
and just down the street from Arzee's Morristown branch.
Rossi and Droesch made substantial preparations for their
venture during the fall of 1988. Droesch (together with one
of his employees) invested $100,000 in Rossi Florence, and
Rossi Florence obtained a $900,000 bank line of credit
secured by the principals' personal guarantees. By mid-
January 1989, however, Droesch decided to pull out of
Rossi Florence, and Rossi refunded his investment. Droesch
felt that because of pressure from Standard, Arzee, and
others, the new company would be unable to get the
products it needed to successfully compete in the market.
In addition, Alvin Roth, president of Arzee, threatened
Droesch that if he continued in business with Rossi in New
Jersey, Arzee would open up a branch in Long Island to
compete directly with Droesch's Florence distributorship.

Thereafter, in February 1989, Rossi incorporated Rossi
Roofing, continuing his efforts to break into the roofing and
siding distribution business in northern New Jersey. Rossi
Roofing obtained another $900,000 bank line of credit,
personally guaranteed by Rossi and his wife. The company,
which opened for business on March 20, 1989, closed in
less than a year, after experiencing great difficulty in
obtaining product lines and weathering the brunt of a
major downturn in the New Jersey housing industry. In

                               11
January 1990, unable to run Rossi Roofing profitably, Rossi
sold the company's assets to American Builders and
Contractors, Inc. ("ABC"), a national roofing and siding
distributor.

C. The Roofing and Siding Industry in Northern New
   Jersey; Price Discounting and Market Shares

During the relevant time period, the northern New Jersey
market included thirty-nine roofing distributors with more
than fifty-seven locations. Eleven residential roofing
manufacturers, nine commercial roofing manufacturers,
and seventeen vinyl siding manufacturers operated in the
region. It is undisputed that this roofing and siding
marketplace was highly competitive, and that roofing and
siding contractors constantly price-shopped, pitting
distributor against distributor in order to obtain the best
possible deal.

GAF, which served this region, offered certain favored
distributors secret off-invoice, volume and non-volume
discounts or "rebates" in the form of periodic credits
against purchases. Standard, Arzee, and former defendant
Allied purportedly all received such discounts from GAF.
The amount of these discounts was kept highly confidential
because the favored distributors feared that if other
distributors found out, they might complain to GAF and
ultimately destabilize prices in the market. As GAF district
sales manager Elmer "Bud" Krusa put it, "the less people
that know about it, the less chance you have of getting it --
dropping the entire market price." Rossi contends that
while he was employed at Standard, he would pass these
discounts on to his customers in an effort to increase his
market share, whereas his competitors typically pocketed
the rebate.

GAF and Wood Fiber are the only two manufacturers
remaining as litigants in this case. According to GAF 's own
estimates, it supplied a large percentage of the New Jersey
shingle market (38% for all shingles and 71% for laminate
shingles). GAF was Standard's primary supplier of roofing
products in the 1980's, and Standard was GAF 's biggest
customer in New Jersey and one of its top five customers in
the entire country. Standard bought $7.7 million of GAF

                               12
product in 1989 (or 32% of GAF 's total sales in New Jersey
that year), substantially more than any other GAF customer
in New Jersey.

Arzee and former defendant Allied also purchased GAF
product, but in markedly smaller quantities. Arzee, for
example, featured Tamko and Owens Corning Roofing,
rather than GAF product, and only purchased $919,747 of
GAF product in 1989 (or 4% of GAF's total sales in New
Jersey in 1989). Together, however, Standard, Arzee, and
Allied (which bought $2.1 million of GAF product in 1989)
purchased $10.7 million of the $24.1 million of GAF
product sold in New Jersey (or 44% of GAF 's total sales in
New Jersey in 1989).3 Rossi contends that, notwithstanding
the large number of other manufacturers offering product
in the area, GAF product was critical for a distributor to
successfully compete in Northern New Jersey, as evidenced
by GAF's large market share and also the fact that it was
the most desirable and popular roofing material available.
This in turn stems in part from several facts: GAF product
was well-known by both homeowners and contractors; GAF
guaranteed its product; and importantly, GAF product had
already been selected for many of the existing townhouse
projects in northern New Jersey in 1989 and 1990, making
it impossible for the builders to switch brands mid-stream.

The evidence in the record regarding Wood Fiber's market
position in 1989-90 is not as clearly defined as that of GAF.
Wood Fiber manufactures Structodek FS, a commercial
roofing product used primarily in commercial applications
for certain modified bitumen roofs. Commercial work
comprised no more than a third of Rossi Roofing's
business; the remaining two-thirds consisted of residential
roofing. We do not know from the record how much product
_________________________________________________________________

3. 1989 sales of GAF product in the northern New Jersey market
(rounded to the nearest $100,000) were:

       Company        Amount              % of Total Sales

       Standard       $ 7,700,000         32.0%
       Allied         $ 2,100,000          8.7%
       Arzee          $ 900,000            3.8%

       Total          $10,700,000         44.5%

                               13
Wood Fiber sold in the northern New Jersey market; nor do
we know what percentage of Wood Fiber's sales was
purchased by Standard or Arzee (or Allied); nor is there any
evidence that Wood Fiber had an off-invoice rebate program
favoring certain distributors similar to GAF's. This is not
surprising because Wood Fiber's involvement in this case
stems largely from two isolated episodes, one in which a
Wood Fiber representative complained of "pressure" not to
sell to Rossi Roofing, and another in which Wood Fiber
refused to supply product to Rossi after having accepted an
order. See infra S II.B.2.d.

D. Rossi's Damage Claims

Rossi submits that because of his inability to purchase
"GAF and other essential products, Rossi Roofing could not
succeed." Unable to sustain the business any longer, on
January 8, 1990, Rossi entered into an asset purchase
agreement with ABC, which leased Rossi's 8 East Frederick
Place property and opened a branch where Rossi Roofing
once stood. Most employees, including Rossi as the branch
manager, continued to work for ABC. According to Rossi,
ABC (which was able to get GAF and other products) did
very well. In 1990, it achieved over $5.5 million in sales,
and by 1993, sales had increased to $11 million.4 In 1993,
ABC fired Rossi, closed the Morristown branch, and
transferred operations to Randolph, New Jersey. Rossi then
entered into a similar agreement with Allied, which opened
up a location on Rossi's property and hired him to manage
it.

Rossi contends that he suffered substantial damages
when Rossi Florence and Rossi Roofing, unable to get GAF
and other important products, failed. In support, Rossi
offers the testimony of several of his former customers
during his tenure at Standard, who stated that they would
_________________________________________________________________

4. There is little evidence as to what the net profits (or losses) of the
ABC
branch were. Arzee contends, based upon some nebulous testimony in
the record, that the ABC branch run by Rossi suffered losses in each of
its four years of operation, app. at 4253-56, and that the Morristown
branch of ABC was a failure, generating only $5 million in revenues in
1990, $1.7 million less than Rossi's own break-evenfigure for Rossi
Roofing. App. at 4309-10.

                               14
have done business with Rossi Roofing if it had had the
necessary product lines. Thus, in Rossi's submission, if the
manufacturers had sold to him the same products that
they ultimately sold to ABC (and later Allied), Rossi Roofing
would have succeeded, and "over time, Rossi would have
had his company open up new branches, as Standard,
Arzee and Allied have done. The lost profits to Rossi
Florence, and to Rossi Roofing, have been over $7 million at
a minimum." In addition, Rossi claims to have suffered
additional, non-duplicative damages of over $1 million from
payments he made on behalf of Rossi Florence and Rossi
Roofing, including payments made on his personal
guarantees of Rossi Roofing's debts.

E. Procedural History

Rossi's action in the district court alleged, inter alia, a
group boycott in violation of Section 1 of the Sherman Act,
15 U.S.C. S 1, and Section 3 of the New Jersey Antitrust
Act, as well as tortious interference with plaintiffs'
contractual and prospective contractual relations.5 After
extensive discovery and submissions in support of and
opposition to the motions, the district court granted
defendants' motions for summary judgment, finding
insufficient evidence of concerted action, causation, and
damages. Rossi has appealed not only that judgment but
also a discovery ruling -- the district court's order denying
a motion to compel defendant GAF to provide additional
factual detail about the subject matter of GAF's counsel's
handwritten notes of three telephone conversations with
GAF employees.

The district court had subject matter jurisdiction
pursuant to 28 U.S.C. SS 1337 and 1367, as well as 15
U.S.C. S 15. We have appellate jurisdiction pursuant to 28
U.S.C. S 1291.
_________________________________________________________________

5. State law claims for breach of contract, conversion, fraud, and
negligent misrepresentation, arising out of Rossi's contractual
relationships with Standard, were dismissed without prejudice and are
not under review here.

                               15
II. SECTION 1 OF THE SHERMAN ANTITRUST ACT

Under the literal dictates of S 1 of the Sherman Act "every
contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce . . . is
declared to be illegal." 15 U.S.C. 1 (emphasis supplied). The
Supreme Court has interpreted this provision to prohibit
only unreasonable restraints. See Business Elecs. Corp. v.
Sharp Elecs. Corp., 

, 723 (1988). To determine
whether a restraint is unreasonable, courts apply one of
two modes of analysis, depending upon the nature of the
concerted action at issue. Agreements are either analyzed
through "a case-by-case application of the so-called rule of
reason," whereby the fact finder "weighs all of the
circumstances of a case in deciding whether a restrictive
practice should be prohibited as imposing an unreasonable
restraint on competition," 

omitted),
or the court applies the per se standard, which dispenses
with the need for case-by-case analysis.6 See 

per se standard, conduct that is "manifestly
anticompetitive" or "would always or almost always tend to
restrict competition," 

omitted), is
conclusively presumed to unreasonably restrain
competition "without elaborate inquiry as to the precise
harm [it has] caused or the business excuse for [its] use."
Northern Pac. Ry. v. United States, 

, 5 (1958).
This is because "of [its] pernicious effect on competition and
lack of any redeeming virtue." Northern Pac. 

. Thus, the first issue we must consider is whether the
conduct alleged here warrants per se or the more lenient
rule of reason treatment, because that determination will
dramatically affect the quantum of proof Rossi must offer to
sustain his claim.
_________________________________________________________________

6. We have also recently discussed a third standard that falls somewhere
between the rule of reason and per se standards. In our jurisprudence,
we refer to this middle ground as an abbreviated or"quick look" rule of
reason analysis. See Orson, Inc. v. Miramax Film Corp., 

,
1367 n.9 (3d Cir. 1996) (citing United States v. Brown Univ., 

,
669 (3d Cir. 1993)). This "quick look" analysis applies "where per se
condemnation is inappropriate, but where a full-blown industry analysis
is not required to demonstrate the anticompetitive character of an
inherently suspect restraint." 

Characterizing a Group Boycott; Per se Versus the Rule
   of Reason

Rossi, relying on such cases as United States v. General
Motors Corp., 

(1966), Big Apple BMW, Inc. v.
BMW of N. Am., Inc., 

, 1376 (3d Cir. 1992),
Fragale & Sons Beverage Co. v. Dill, 

, 473 (3d
Cir. 1985); 

, and Edward J.
Sweeney & Sons, Inc. v. Texaco, Inc., 

, 114 (3d
Cir. 1980), alleges that the defendants engaged in a classic
horizontal group boycott that qualifies as a per se violation.
Rossi submits that several of his fellow distributor-
competitors (i.e. Standard, Arzee, and Allied), as well as
their principal manufacturer/supplier(s), agreed to boycott
Rossi Florence and Rossi Roofing and frustrate Rossi's
attempts to obtain the products he needed to successfully
compete against them.

Defendants respond that Rossi's theory does not
comprise a per se antitrust claim because it is a vertical
conspiracy in which there has been no allegation of resale
price fixing. We agree with defendants that if this were
simply a vertical conspiracy, between one horizontal
competitor and one supplier or manufacturer, we would
analyze it under the rule of reason unless there were some
evidence of price fixing. See Business 

(analyzing an alleged agreement between one
supplier and one horizontal distributor as a vertical non-
price-fixing conspiracy under the rule of reason); Tunis

, 1502 (same); cf. Continental
T.V., Inc. v. GTE Sylvania, Inc., 

, 37, 59 (1977)
(concluding that franchise agreements that bar retailers
from selling franchised products from locations other than
those specified are analyzed under the rule of reason).7
Unlike the cases cited above, however, here there are a
number of horizontal competitors involved. Thus, this case
more closely resembles the horizontal nature of United
_________________________________________________________________

7. In Business Elecs., the Supreme Court indicated that the rationale
behind applying the rule of reason to vertical non-price restraints is
that
such restraints have the potential to promote inter-brand competition,
the "primary concern of the antitrust laws," over intra-brand
competition. 

(citations omitted).

                               17
States v. General Motors Corp., 

(1966), a case
that the Supreme Court treated as a group boycott with per
se implications.

In General Motors, the Supreme Court found a group
boycott where a group of automobile dealers had joined
together to force their manufacturer, General Motors, to
assist them in ending the practice of some dealers that
were reselling their automobiles to discounters. See 

147. Other cases fit this mold as well. See, e.g., Big
Apple 

(analyzing an alleged
agreement among supplier BMW North America and several
of its dealers to prevent a potential price-cutting competitor
from receiving a franchise as a horizontal group boycott);

(holding that when a
manufacturer terminates a distributor's supply pursuant to
an agreement with several distributors, these actions make
out a horizontal S 1 claim); cf. Klor's, Inc. v. Broadway-Hale
Stores, Inc., 

, 212-13 (1959) (applying a similar
horizontal analysis under S 2 of the Sherman Act where
manufacturers and distributors had conspired among
themselves and with a major retailer to deprive another
retailer access to product lines).

The common principle we glean from these cases is that
a conspiracy is horizontal in nature when a number of
competitor firms agree with each other and at least one of
their common suppliers or manufacturers to eliminate their
price-cutting competition by cutting his access to supplies.
From this perspective, Rossi's asserted conspiracy is
indistinguishable from those put forth in General Motors,
Klor's, Big Apple BMW and Sweeney -- namely, "joint
action to eliminate [a] discounter[ ] from participation in the
market," General 

-- and thus, the
defendants' characterization of the conspiracy Rossi alleges
as vertical, and not horizontal, cannot withstand scrutiny.

This conclusion, however, leaves us with the second (and
ultimately more difficult) question whether this horizontal
agreement, which Rossi labels a "group boycott," qualifies
as a per se violation. Traditionally, such agreements have
received such per se treatment. See Malley-Duff & Assocs.
v. Crown Life Insur. Co., 

, 140 (3d Cir. 1984).
Indeed, in all of the horizontal "group boycott" cases listed

                               18
above, the court adopted the per se approach. See, e.g.,
General Motors 

, 147; 

; Big Apple 

;

. More recently, however, the
Supreme Court has reminded us that it is not a simple
exercise to determine what conduct falls within the
"forbidden category" of a per se group boycott. See
Northwest Wholesale Stationers, Inc. v. Pacific Stationery &
Printing Co., 

, 294 (1985) (" `[T]here is more
confusion about the scope and operation of the per se rule
against group boycotts than in reference to any other
aspect of the per se doctrine.' ") (quoting L. Sullivan, Law of
Antitrust 229-30 (1977)); FTC v. Indiana Fed'n of Dentists,

, 458-59 (1986). Under the more recent
jurisprudence, it is clear that assigning the label "group
boycott" to a concerted refusal to deal with a distributor
does not have a talismanic effect, automatically bringing
the case under the per se rubric. Instead, the Supreme
Court has directed us to carefully scrutinize the nature of
the asserted refusals to deal to determine whether it fits
within the per se " `boycott' pigeonhole." Indiana Fed'n of

.

In Northwest Wholesale Stationers, the Supreme Court
attempted to explain what kinds of boycotts qualify for the
per se approach and what kinds do not. The Court
emphasized that the per se approach was appropriate when
the allegations were of "joint efforts by a firm or firms to
disadvantage competitors by either directly denying or
persuading or coercing suppliers or customers to deny
relationships the competitors need in the competitive

(internal quotes omitted). The
Court also noted that per se boycott cases usually contain
three elements: "denial of something a competitor needs to
compete effectively, defendants with a dominant position in
the relevant market, and the absence of any plausible
contention that the challenged behavior would `enhance
overall efficiency and make markets more competitive.' " P.
Areeda & H. Hovenkamp, Antitrust Law P 1510È (Supp.
1997) (quoting and interpreting Northwest Wholesale

). Finally, the Court
instructed that although "a concerted refusal to deal need
not necessarily possess all of these traits to merit per se

                               19
treatment . . . [a] plaintiff seeking application of the per se
rule must present a threshold case that the challenged
activity falls into a category likely to have predominantly
anticompetitive effects. The mere allegation of a concerted
refusal to deal does not suffice because not all concerted
refusals to deal are predominantly anticompetitive."8
Northwest Wholesale 

, 298.

Applying these precepts to the "boycott" at issue in
Northwest Wholesale Stationers, the Court determined that
it was "not a form of concerted activity characteristically
likely to result in predominantly anticompetitive effects." 

In that case, a retail office supply store had sued a
nonprofit cooperative buying association claiming that its
expulsion from the cooperative was per se illegal. The
expulsion --without explanation, notice, or hearing -- hurt
_________________________________________________________________

8. The Courts of Appeals have differed in their application of this
language. The Seventh Circuit has held that "once control over an
important resource appears, no justification for a refusal to deal can be
considered." Areeda & Hovenkamp, Antitrust Law P 1510È (interpreting
Fishman v. Wirtz, 

, 541 (7th Cir. 1986) (holding that a
concerted refusal to deal is illegal per se if the "defendants have either
market power or exclusive access to an element essential to effective
competition.") (internal quotes omitted)). The Eighth and Ninth Circuits
have focused on the number of horizontal players in the alleged
conspiracy and have found no per se rule against boycotts in situations
where the conspirators included only a single supplier and a single
retailer in competition with the plaintiff. See 

Wholesale Grocery, Inc. v. Dieter's Gourmet Foods, Inc., 

,
591 (8th Cir. 1987) ("there must be some collusion between competitors
on the same market level," for otherwise the "net economic impact of
refusals to deal" is not "immediately obvious") and Rutman Wine Co. v.
E. & J. Gallo Winery, 

, 734 (9th Cir. 1987)). The implication
of these holdings would seem to be that the result differs as the number
of parties to the conspiracy grows. This Court has tended to follow the
Eighth and Ninth Circuits and has seemingly been more willing than
some others, see, e.g., K.M.B. Warehouse Dists., Inc. v. Walker Manuf.
Co., 

, 127 (2d Cir. 1995) (viewing an alleged agreement
among a vertical manufacturer and three horizontal distributors as a
vertical non-price-fixing conspiracy subject to the rule of reason, not
per
se, analysis), to find an horizontal per se violation when a small number
of dealers have prevailed upon a manufacturer or supplier to cut off a
price discounter. See, e.g., Big Apple 

; Malley-

, and 

.

                               20
the plaintiff by effectively raising the wholesale price of
supplies and eliminating certain favorable warehousing
options made available to members of the defendant.
Examining this type of restraint, the Court held that "[t]he
act of expulsion from a wholesale cooperative does not
necessarily imply anticompetitive animus and thereby raise
a probability of anticompetitive effect." 

(citations
omitted). Rather, the Court noted that cooperatives must
"establish and enforce reasonable [membership] rules in
order to function effectively." 

rules that
the plaintiff allegedly violated (it allegedly failed to disclose
to the cooperative membership of a change in its
ownership) might have been necessary for the cooperative
to monitor its members' creditworthiness. Without a
showing that "the cooperative possesse[d] market power or
exclusive access to an element essential to effective
competition," the Court held that expulsion based upon
violation of the disclosure rules was not "likely to result in
predominantly anticompetitive effects." 

Indiana Fed'n of Dentists, the Court refused
to extend per se group boycott status to a situation in
which a professional association collectively refused to
cooperate with insurers' requests for x-rays. The Court
refused to expand the category of cases classified as per se
group boycotts to situations involving professional
associations or situations where "the economic impact of
certain practices is not immediately 

. While the collective refusal to cooperate with insurers
"resemble[d] practices that have been labeled `group
boycotts,' " the Court refused to hold that the economic
impact of this agreement was immediately obvious. 

Here, in contrast to Indiana Fed'n of Dentists and
Northwest Wholesale Stationers, the defendants are not
members of a professional association, and the economic
impact of their actions -- driving a price-cutting competitor
out of business -- is clear. Applying the precepts laid out
in Northwest Wholesale Stationers, we believe that the Rossi
boycott falls within the description of "joint efforts by a firm
or firms to disadvantage competitors by either directly
denying or persuading or coercing suppliers or customers

                               21
to deny relationships the competitors need in the
competitive 

(internal quotes
omitted). As will be discussed more fully below, see infra
S II.B.2.b(1), Rossi has adduced evidence that GAF product
was, if not unique, then at least necessary for him to
compete in the marketplace. Further, the gravamen of his
complaint fits snugly within the Court's Northwest
Wholesale Stationers description of per se concerted
refusals to deal -- namely, Standard and Arzee (and
perhaps other horizontal competitors like Allied) conspired
with manufacturers like GAF and suppliers like Servistar to
deny Rossi access to GAF product as well as to coerce other
suppliers not to sell any products to him. Importantly, all
of this activity was done against the backdrop of Standard's
and Arzee's dissatisfaction with Rossi's price-cutting
proclivities, and thus an inference can be drawn that the
conspiracy was at least partially conceived as a price
restraint.

For these reasons, we find it implausible that the alleged
behavior by the defendants would "enhance overall
efficiency and make markets more competitive," Northwest
Wholesale 

, and therefore, taking
into account the Court's most recent guidance, we conclude
that Rossi's allegations should be analyzed using the per se
framework.

Our conclusion that Rossi's allegations constitute a per
se violation of S 1 simplifies our analysis here. In the usual
rule of reason case, to establish a violation ofS 1, plaintiffs
must prove:

       (1) that the defendants contracted, combined or
       conspired among each other; (2) that the combination
       or conspiracy produced adverse, anti-competitive
       effects within the relevant product and geographic
       markets; (3) that the objects of and the conduct
       pursuant to that contract or conspiracy were illegal;
       and (4) that the plaintiffs were injured as a proximate
       result of that conspiracy.

Tunis Bros. Co., Inc. v. Ford Motor Co., 

, 1489
(3d Cir. 1985) (citations omitted), vacated on other grounds,
Ford Motor Co. v. Tunis Brothers Co. Inc., 

                               22
(1986). Here, because per se analysis applies, prongs two
and three are conclusively presumed satisfied and need not
be addressed. Accordingly, to prevail on summary
judgment, Rossi need only show the existence of a genuine
issue of material fact regarding concerted action and
proximate causation. We will address these in turn.

B. Concerted Action

1. Section 1 of the Sherman Antitrust Act-- Proving the
   Conspiracy

The presence of concerted action or an agreement is an
essential element of a S 1 claim. See Copperweld Corp. v.
Independence Tube Corp., 

, 771 (1984)
("[U]nity of purpose or a common design and
understanding, or a meeting of the minds in an unlawful
arrangement" must exist to trigger section 1 liability.)
(internal quotes omitted); Alvord-Polk, Inc. v. F. Schumacher
& Co., 

, 999-1000 (1994) (noting that the
existence of concerted action is one of the important
distinguishing features between a S 1 claim of conspiracy
and a S 2 claim of monopolization). Unilateral activity, no
matter what its motivation, cannot give rise to aS 1
violation, see 

, because a
manufacturer "has the right to deal, or refuse to deal, with
whomever it likes, as long as it does so independently."
Monsanto Co. v. Spray-Rite Serv. Corp., 

, 761
(1984). A plaintiff may utilize either direct or circumstantial
evidence in order to make out the element of concerted
action. While direct evidence, the proverbial "smoking-gun,"
is generally the most compelling means by which a plaintiff
can make out his or her claim, it is also frequently difficult
for antitrust plaintiffs to come by. Thus, plaintiffs have
been permitted to rely solely on circumstantial evidence
(and the reasonable inferences that may be drawn
therefrom) to prove a conspiracy. See 

(citing Theatre Enterprises, Inc. v. Paramount Film
Distributing Corp., 

(1954); 

).

While the traditional summary judgment standard
applies with equal force in antitrust cases,9 when the
_________________________________________________________________

9. A district court's grant of summary judgment is subject to plenary
review. See Knabe v. Boury Corp., 

, 410 n.4 (3d Cir. 1997);

                                23
plaintiff relies solely on circumstantial evidence to prove
concerted action, this analysis is modified in accordance
with the leading antitrust cases dealing with this subject,
Monsanto and Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 

, 587 (1986), and their progeny.
In Matsushita, the Supreme Court explained the limitation
courts must apply to permissible inferences when deciding
a summary judgment motion in an antitrust conspiracy
case: "[C]onduct as consistent with permissible competition
as with illegal conspiracy does not, standing alone, support
an inference of antitrust conspiracy." 

(citing 

). Rather, to
survive a motion for summary judgment, "a plaintiff seeking
damages for a violation of S 1 must present evidence `that
tends to exclude the possibility' that the alleged
conspirators acted independently," 

circumstantial evidence that reasonably tends to prove that
_________________________________________________________________

Public Interest Research of New Jersey v. Powell Duffryn Terminals, Inc.,

, 71 (3d Cir. 1990). Summary judgment "shall be rendered
forthwith if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there
is
no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). An
issue
is genuine if "the evidence is such that a reasonable jury could return a
verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 

, 248 (1986).

As in this case, when the nonmoving party will bear the burden of
proof at trial, that party must adduce evidence "sufficient to establish
the existence of [every] element essential to that party's case, and on
which that party will bear the burden of proof at trial." Celotex Corp. v.
Catrett, 

, 322 (1986). In evaluating the sufficiency of the
evidence, facts and inferences must be viewed in the light most favorable
to the party opposing summary judgment. See Eastman Kodak Co. v.
Image Technical Servs., Inc., 

, 456 (1992); Matsushita Elec.
Indus. Co., Ltd. v. Zenith Radio Corp., 

, 587 (1986). That
being said, however, when the moving party has pointed to material facts
tending to show there is no genuine issue for trial, the "opponent must
do more than simply show that there is some metaphysical doubt as to
the material facts . . . . Where the record taken as a whole could not
lead
a rational trier of fact to find for the nonmoving party, there is no
`genuine issue for trial.' " 

(citations
omitted).

                               24
[the alleged conspirators] `had a conscious commitment to
a common scheme designed to achieve an unlawful
objective.' " 

(quoting 

).

The Supreme Court's concerns about permitting the
inference of a conspiracy from ambiguous circumstantial
evidence in the antitrust context stem from its conclusion
that mistakes by an overzealous judiciary would be
"especially costly . . . chill[ing] the very conduct the
antitrust laws are designed to protect." 

; 

; Big Apple 

("Care must be taken to ensure that
inferences of unlawful activity drawn from ambiguous
evidence do not infringe upon defendant's freedom, so long
as it acts independently, to refuse to deal.") (citing United
States v. Colgate & Co., 

(1919)). For this
reason, the plausibility of an antitrust plaintiff's claim is
important. "[I]f the factual context renders [the plaintiff's]
claim implausible -- if the claim is one that simply makes
no economic sense -- [a plaintiff] must come forward with
more persuasive evidence to support [its] claim than would
otherwise be necessary." 

(citations omitted). Relatedly, in evaluating whether a
genuine issue for trial exists, the antitrust defendants'
economic motive is highly relevant. "[I]f[the defendants]
had no rational economic motive to conspire, and if their
conduct is consistent with other, equally plausible
explanations, the conduct does not give rise to an inference
of conspiracy." 

Moreover, even with a plausible
motive to conspire, ambiguous conduct will not create a
triable issue of fact with respect to the existence of a
conspiracy. See 

n.21.

Under our jurisprudence, the Matsushita standard only
applies when the plaintiff has failed to put forth direct
evidence of conspiracy. See Petruzzi's IGA Supermarkets,
Inc. v. Darling-Delaware Co., Inc., 

, 1233 (3d
Cir. 1993). Thus, in direct evidence cases, the plaintiff need
not adduce circumstantial evidence " `that tends to exclude
the possibility' that the alleged conspirators acted
independently," 

, and there
need not be an inquiry into the plausibility of the

                               25
defendants' claim or the rationality of defendants' economic
motives. See 

This is because when the
plaintiff has put forth direct evidence of conspiracy, the fact
finder is not required to make inferences to establish facts,
and therefore the Supreme Court's concerns over the
reasonableness of inferences in antitrust cases evaporate.
See 

.

Additionally, our jurisprudence does not require the
summary judgment opponent to " `match, item for item,
each piece of evidence proffered by the movant,' " but rather
he or she must only exceed the " `mere scintilla' " standard.
See 

(quoting Big Apple 

). Accordingly, when examining the
sufficiency of what the plaintiff has adduced, we are not to
"tightly compartmentalize the evidence," but rather we must
evaluate it as a whole to see if it supports an inference of
concerted action. See 

In sum, Matsushita does not introduce a special burden
on antitrust plaintiffs opposing summary judgment; it
"demands only that the nonmoving party's inferences be
reasonable in order to reach the jury, a requirement that
was not invented, but merely articulated, in that decision.
If the plaintiffs theory is economically senseless, no
reasonable jury could find in its favor, and summary
judgment should be granted." Eastman 

(footnote omitted). Conversely, Matsushita does not
mean that antitrust defendants are entitled to summary
judgment merely by showing that there is a plausible
explanation for their conduct; rather "the focus must
remain on the evidence proffered by the plaintiff and
whether that evidence `tends to exclude the possibility that
[the defendants] were acting independently.' " 

(quoting 

).
Thus, where the nonmoving party has put forth evidence
that provides an inference of concerted action, the moving
party "bears the burden of proving that drawing the
inference of unlawful behavior is unreasonable." 

Finally, while ambiguous conduct cannot create a triable
issue of fact, when "the alleged conduct is `facially
anticompetitive and exactly the harm the antitrust laws aim

                               26
to prevent,' no special care need be taken in assigning
inferences to circumstantial evidence." 

(quoting Eastman 

).

With these standards in mind, we will address the
evidence adduced by Rossi in support of his theory of
conspiracy. Cognizant of our obligation to view the evidence
as a whole and to resist the temptation to
compartmentalize it, see 

, we
will nonetheless consider Rossi's allegations, defendant by
defendant, to provide a logical structure to our analysis. We
note in this regard that this court has been relatively
hospitable to the efforts of plaintiffs to prove concerted
action. See 

, 1013; 

; Big Apple 

, 1383;
Arnold Pontiac-GMC, Inc. v. Budd Baer, Inc., 

,
1338-39 (3d Cir. 1987); Arnold Pontiac-GMC, Inc. v. General
Motors Corp., 

, 572-75 (3d Cir. 1986); Tunis

, 1502.

2. Rossi's Evidence of Concerted Action

       a. Standard (Robert Higginson, William Higginson,
       Joseph Licciardello) and Arzee (Al Roth and Cary Roth)10

We begin with Rossi's horizontal competitors, Standard
and Arzee, against whom Rossi has the strongest evidence
of motive to keep a price-cutting competitor with close ties
to many customers from entering the market. Standard's
and Arzee's (as well as the other defendants') first line of
defense to Rossi's charges is that the conspiracy he alleges
is implausible, and therefore under Matsushita, permitting
an inference of antitrust conspiracy would have the effect of
"chill[ing] the very conduct the antitrust laws are designed
to 

. According to the defendants,
there was no rational economic reason for them to conspire,
_________________________________________________________________

10. In our discussion of Standard, Robert Higginson, William Higginson,
Joseph Licciardello, and also Arzee, Alvin Roth, and Cary Roth, we find
no basis to separate the individual defendants from their respective
corporate employers. Thus, for shorthand purposes, when we make
future reference to "Standard" or "Arzee," (or the "Standard defendants"
and the "Arzee defendants"), we refer to the individuals as well as the
corporate entities with which they are related.

                               27
and thus they had no plausible motive to conspire to
boycott Rossi.

They base their implausibility claim on the fact that the
market was extremely price competitive and consisted of
upwards of three dozen competing distributors. Under
these conditions, defendants argue that they could not have
charged above-market prices and stayed in business, and
thus that they had nothing to fear from a price-cutter like
Rossi. Moreover, they submit that there would be little to
gain by excluding one more distributor from the market
when there were at least three dozen firms in the market
already. In defendants' view, any conspiracy to stabilize the
market and reap enhanced profits would be doomed to
failure (and is therefore presumably implausible) because,
to succeed, it would have required an enormously complex
and far-reaching undertaking, involving upwards of sixty
participants (each selling different quantities of comparable,
competing products) to stabilize prices at supra-competitive
levels. Defendants maintain that, because there was
virtually no likelihood that three (Standard, Arzee, and
Allied) out of the almost forty competing distributors, and
one or two (GAF and possibly Wood Fiber) out of thirty
manufacturers could have sustained such a conspiracy,
they had no rational motive to conspire, and the conspiracy
is thus implausible.

The defendants compare this to the situation in
Matsushita. There, the defendants were alleged to have
entered into a twenty-plus-year conspiracy to fix prices in
the electronics market below the market level in the hopes
of establishing a monopoly and extracting monopoly profits
in the undetermined future. See 

-90. The Court viewed this predatory pricing scheme as
implausible because it would have required multiple
defendants to endure tremendous up-front losses for the
foreseeable future in the hopes that they could, at some
point, recover these losses and make even greater profits
once they had driven their competitors from the market and
established a monopoly. See 

The Court,
examining the electronics market as well as the length and
ongoing failure of the alleged conspiracy, concluded that
there was no evidence that the defendants could ever

                               28
recoup such losses, see 

and therefore, that
the defendants had no motive to engage in the conspiracy.
See 

Standard's and Arzee's reliance on Matsushita in this
case is misplaced for several reasons. As a threshold
matter, Matsushita does not apply when there is direct
evidence of conspiracy. See 

.
Here, Rossi has adduced direct evidence of concerted action
between defendants Standard and Arzee in the form of a
threat Rossi received in December of 1988. Joseph
Licciardello, who had by that time left his job at GAF and
was working in Rossi's old job as manager of the Standard
branch at Cedar Knolls, told Rossi that Standard and Arzee
would do whatever it took to put him out of business if he
persisted with his plans to found Rossi Florence. In his
deposition, Rossi testified:

       Q: Mr. Rossi, tell me specifically what anyone from
       Standard did to prevent Rossi Florence from going into
       business.

       * * *

       A: I guess it started when Joe Licciardello came over
       and threatened me that if I went into business that he
       and Arzee Supply would do anything they could, stop
       supplies, cut the prices, whatever they had to do they
       were going to do to keep me out of business. That's the
       way he put it.11
_________________________________________________________________

11. Arzee argues that this statement is not admissible against it under
Bourjaily v. United States, 

(1987). We conclude that it is.
Under Fed. R. Evid. 801(d)(2)(E), "a statement by a coconspirator of a
party during the course and in furtherance of the conspiracy" is not
inadmissible hearsay as to that party. Under our jurisprudence, four
requirements must be met before a statement can be admitted under
this exception. "It must appear: (1) that a conspiracy existed; (2) the
declarant and the party against whom the statement is offered were
members of the conspiracy; (3) the statement was made in the course of
the conspiracy; and (4) the statement was made in furtherance of the
conspiracy." United States v. McGlory, 

, 333 (3d Cir. 1992).
The district court must find these requirements by a preponderance of
the evidence. See 

; 

.
The district court made no such finding here. It did not even address the

                                29
Licciardello's threat, viewed in a light most favorable to
Rossi, indicates that two of his competitors had discussed
and agreed to act jointly to prevent Rossi from competing
with them in the roofing and siding business in northern
New Jersey. Moreover, Licciardello's statement even details
how the two companies planned to do it; they agreed to
"stop supplies" anyway they could. Thus, we conclude that
the Matsushita implausible conspiracy argument is not
relevant to the allegations of conspiracy with respect to
Standard and Arzee. However, even if, as in the case of
GAF, there was no direct evidence of concerted action, the
conspiracy Rossi alleges is not implausible. Indeed, as we
will discuss below, with respect to Standard, Arzee, and
GAF, the conspiracy makes perfect sense. See infra
S II.B.2.b(1).

The direct evidence discussed above is enough to take the
case against Standard and Arzee beyond the constraints of
Matsushita (and thus permits us to avoid the questions
whether the circumstantial evidence tends to exclude the
possibility of independent action, whether the plaintiff 's
claim is plausible, and whether the defendants' economic
motives were rational). 

at S II.B.1. However, it is
not enough by itself to satisfy Rossi's burden in opposing
summary judgment. On the other hand, Rossi has adduced
a significant collection of other evidence, circumstantial in
nature, in support of his position. We turn to that evidence
now.

First, Rossi has adduced evidence of two meetings
between Standard and Arzee employees which, when taken
_________________________________________________________________

issue, concluding, as a matter of law, that no conspiracy existed. Thus,
the question whether there is sufficient evidence to permit such a finding
is subject to plenary review. See 

.

As will be made clear in the discussion that follows, the record is
replete with circumstantial evidence that Licciardello, Standard, and
Arzee were members of a conspiracy to boycott Rossi and drive him out
of business. See infra S II.B.2.a. As the record also shows,
Licciardello's
threat was made during the conspiracy and in furtherance of it. We
conclude therefore that Rossi has satisfied the preponderance standard
with respect to all four requirements.

                               30
together, support the inference of a joint motive by the two
defendants to unlawfully stabilize roofing prices in northern
New Jersey. This motive is consistent with the motive
behind the defendants' alleged boycott of Rossi Florence
and Rossi Roofing -- that Standard and Arzee wanted to
eliminate an uncooperative competitor who threatened to
undercut their prices and destabilize the market. Rossi
testified that sometime in 1986 or 1987, while he was still
working for Standard (he was fired in September 1989), his
boss at that time and chairman of Standard, Robert
Higginson, directed him to attend a lunch with Al and Cary
Roth of Arzee. According to Rossi, Robert Higginson told
him that this lunch had been set up so that the two
competitors could "cooperate" and share price information.
Robert Higginson also told Rossi that Standard's other
competitors had pricing agreements and that they were the
only ones who were not participating. At the lunch, Al Roth
proposed to Rossi a price-fixing scheme whereby Arzee and
Standard would fix prices and divide up their large
customers and jobs. Al Roth further explained to Rossi that
he had maintained a similar arrangement with Allied
concerning Certainteed products. Rossi rejected Al Roth's
overtures, and Standard and Arzee did not, at that time,
enter into an agreement to set prices.

The second Standard-Arzee meeting at which prices were
discussed took place over the telephone in February of
1990. It involved a conversation between Licciardello, the
manager at that time of Standard's Cedar Knolls branch,
and Cary Roth, the manager of one of Arzee's local
branches, regarding the price of GAF vinyl siding. Patrick
Mulcahy, a former employee of Standard who overheard the
conversation, recalled that Licciardello said to Cary Roth:
"We really got to run this like a business and we all have
to make a profit here. And we've got to keep certain price
levels in order to do this."12 This statement is remarkably
_________________________________________________________________

12. Standard and Arzee both raise questions about whether this
conversation actually took place. In addition to denying it, they point
out
that Mulcahy did not hear the voice of the person on the phone, and
only heard Licciardello talking to someone named "Cary." Mulcahy
assumed the person on the other end of the line was Cary Roth. As this
is before us on a motion for summary judgment, we conclude that, in a
light most favorable to Rossi, a jury could infer that "Cary" was Cary
Roth of Arzee.

                               31
similar to other statements that we have found probative of
an agreement between competitors. See, e.g., 

("[W]hy don't you put your prices in line
and make money on what you have?").

Neither of these discussions took place during the period
of the alleged conspiracy to boycott and exclude Rossi from
the market; one took place before, and one after. Yet we
reject Standard's and Arzee's contention that they are
irrelevant to our decision. The two pieces of evidence,
especially taken together, are probative of Standard's and
Arzee's motive. Evidence that Standard's and Arzee's
principals had actively considered fixing prices and
allocating customers in 1986-87, and again in 1990, is
sufficient to permit the inference that Standard and Arzee
may have had a long-standing intent to stabilize prices in
the roofing distribution business in northern New Jersey.
See Big Apple 

(reviewing
evidence outside of the statute of limitations and thus not
part of the alleged conspiracy which nevertheless
"demonstrat[ed] a pattern of conduct"); see also Andersen v.
Maryland, 

, 483-84 (1976) (proof of similar
acts is admissible to show intent or the absence of
mistake); Keyes v. School District No. 1, 

, 207-
08 (1973) (citing the well-settled evidentiary principle that
" `the prior doing of other similar acts, whether clearly a
part of a scheme or not, is useful as reducing the
possibility that the act in question was done with innocent
intent.' ") (quoting 2 J. Wigmore, Evidence 200 (3d ed.
1940)). Because Rossi was known to the defendants as a
price-cutter and potent competitor who had refused to
collude on prices in the past, this circumstantial evidence
tends to link Standard's and Arzee's motives with their
other actions in support of the boycott, which are detailed
below.

The record is also replete with examples of high pressure
recruitment, monitoring, and enforcement tactics
undertaken by Standard and Arzee in furtherance of their
efforts to prevent Rossi from purchasing roofing materials,
particularly GAF product. There is evidence that Standard
and Arzee put pressure on virtually everyone, including
manufacturers, distributors, and even Rossi's prospective

                               32
business partner, Droesch, to convince them not to do
business with Rossi. In December 1988, for example, Al
Roth called Droesch, who had agreed to establish Rossi
Florence and go into business with Rossi, and told him that
he was not happy about Rossi competing against Arzee and
that if Droesch proceeded with his plans to establish Rossi
Florence with Rossi, Roth would open up an Arzee location
on Long Island near Droesch's Florence business which
was located there. Also in late 1988 and early 1989,
representatives of several manufacturers told Rossi that
they were being pressured not to deal with him or sell to
Rossi Florence. Specifically, Rossi testified that
representatives from Gold Bond, Wood Fiber, Bird
Corporation, Homosote, Hi-Finn, Genstar, Vipco, and
Hastings Aluminum, told him that they had been
threatened by representatives of Standard. Similarly,
representatives of Nailite and Certainteed claimed that they
had been threatened by Arzee.13

There was evidence that after Rossi incorporated Rossi
Roofing in early 1989, Standard's and Arzee's pressure on
manufacturers and distributors continued. Joe Mullenhour
of Bird Corporation told Rossi that Licciardello of Standard
had threatened to drop Bird's vinyl siding if Bird
Corporation sold to Rossi Roofing. Bill Higginson of
Standard also spoke to Raymond Six of Gold Bond and told
him that he was "disappointed" that Gold Bond had agreed
to sell to Rossi Roofing. Six cut off the conversation because
he was concerned by the antitrust implications of Bill
Higginson's overtures. More specifically, Six told Higginson
that he would not let the conversation go further because:

       Gold Bond had been in an anti-trust suit back in the
       70's on gypsum. Every Gold Bond manager - well, I'll
       say every Gold Bond employee had been schooled, I'll
       say, from 1975 on, anyway, on what Robinson-Patman
       is, what Sherman anti-trust was. So the conversation
       wasn't going to go any further than what my statement
       to him was.
_________________________________________________________________

13. While offered in hearsay form, we will consider these statements
because they are capable of being admissible at trial, see 

n.9 (citations omitted), for Rossi has simply to produce the
declarants to give the testimony. 

Rossi asked Jim Hines of Hi-Finn to supply Rossi
Roofing with the "Atlas" insulation line, he arranged for
Rossi to buy the product indirectly through a middleman at
a higher price. When Hines later visited Standard on a
sales call, Licciardello told him, "You know why I can't do
business with you." Hines replied that "if it has anything to
do with the truck of Atlas insulation that Joe Rossi has in
stock, that was purchased through another distributor, not
directly through Atlas." Licciardello referred Hines to Bob
Schaab, Standard's Controller, who told Hines to"[d]o what
you want to." Based upon his experience with Schaab and
his dealings with Standard, Hines testified that he
concluded that conversation with "the feeling that his
implication may have been that, if I sold to Joe [Rossi], he
definitely wouldn't buy from me." Finally, Hines testified
that his business with Standard fell off right around the
time that Rossi purchased the Atlas insulation from the
middleman recommended by Hines. On this evidence, a fact
finder could reasonably draw the inference that Licciardello
had threatened Hines to ensure Hi-Finn's cooperation in
the boycott of Rossi, and that, when Hines rebuffed him,
Standard punished Hines and Atlas by cutting off future
purchases.

Similarly, Rick Fiore, an employee of roofing
manufacturer Certainteed, told Rossi that Cary Roth of
Arzee had pressured him and threatened to sue Certainteed
if it sold to Rossi Roofing. Robert Qualik of Nailite informed
Rossi that Arzee had told Nailite not to sell to Rossi Roofing
and that "[Arzee] had blocked [Rossi Roofing] from getting
product on a particular job right around the corner from
us." Also, Karl Loser of Wood Fiber told Rossi that he was
receiving a lot of pressure from Standard not to sell
Structodek FS, a Wood Fiber product, to Rossi Roofing.

In an effort to circumvent these supply problems arising
from his efforts to buy directly from manufacturers, Rossi
attempted to purchase product through other distributors,
even though this would cost more. For example, Rossi was
able to convince Passaic Metals, a roofing and siding
distributor in northern New Jersey, to sell him some GAF
product. In response, Bill Higginson of Standard called his
competitor, Frank Gurtman, the president of Passaic

                               34
Metals, and threatened to open a branch near Passaic
Metals and take away all of his customers if Gurtman
continued to sell to Rossi.

There is also evidence that Standard and Arzee went to
great lengths to monitor Rossi Roofing. The record indicates
that Licciardello ordered Keith Cogley and Jorge Esteves to
report to him the comings and goings of all roofing
materials at Rossi Roofing. All three closely watched Rossi's
premises on a daily basis to determine what kinds of
products Rossi was able to purchase and from where they
might be coming. Cary Roth and Ed Jacobitz of Arzee also
frequently monitored Rossi Roofing by sitting in their cars
in a cul-de-sac adjacent to Rossi's premises.

In addition, there is evidence that Standard even reported
back to GAF when its employees saw GAF product on
Rossi's premises to assist GAF in enforcing the boycott.
Former GAF district manager Licciardello, then working for
Standard, admitted that after seeing GAF product on
Rossi's premises, he called Bob Gessner of GAF to confirm
that GAF was still not selling to Rossi. On another
occasion, when a load of GAF was sitting out in front of
Rossi Roofing, Gessner said to Licciardello, "I thought we
weren't selling him," to which Licciardello responded "we're
not."

When Standard's Cogley saw a load of GAF product at
Rossi Roofing, Licciardello called GAF to find out how Rossi
had procured the product. Someone at GAF told
Licciardello that the load was not for Rossi Roofing, but
that it was being transported on a Jentar truck, and was
simply stopping overnight at 8 East Frederick Place, where
both Jentar Trucking and Rossi Roofing had offices. Later,
after Licciardello learned that Rossi Roofing had purchased
GAF product from Servistar through his Far Hills account,
see infra S II.B.2.c, Licciardello told Standard employee
Esteves that " `That's the last time we're going to be seeing
any GAF across the street.' They got the -- they were
getting the loads through [Far Hills], which is [Servistar].
That's how Joe Rossi was getting GAF and he's
[Licciardello's] going to put an end to that. `Never going to
see another GAF load across the street.' "

                               35
While this monitoring and reporting activity would not in
isolation be probative of a conspiracy, in the context of the
pressure and enforcement tactics described above, the
direct evidence that Standard and Arzee had talked about
and agreed to boycott Rossi Florence and Rossi Roofing,
and the circumstantial evidence of motive, certain
inferences can be drawn from this evidence. To enforce a
boycott, Standard and Arzee would need to monitor
carefully the supplies Rossi was able to procure,
communicate to cooperating manufacturers any evidence
that Rossi had been able to circumvent the boycott, and
bring pressure on any non-cooperating manufacturers or
distributors that refused to participate in the conspiracy.
Here, Rossi has adduced evidence of exclusive monitoring
by both Standard and Arzee, and evidence that Licciardello
could "put an end" to Rossi receiving GAF product. Viewed
in conjunction with the evidence that Standard and Arzee
pressured many manufacturers and distributors, this
monitoring and reporting activity also supports an inference
that Rossi's two primary competitors were jointly
attempting to establish a market-wide boycott of Rossi
Roofing.

We emphasize that we would not consider the evidence
that Standard and Arzee aggressively monitored Rossi
Roofing (and even reported the substance of those
observations to GAF), without more, sufficient to satisfy
Rossi's burden in opposing summary judgment. However,
in conjunction with all of the other pieces of circumstantial
evidence Rossi has adduced, we believe that this monitoring
and reporting activity represents an important thread to be
considered in the complicated tapestry of conspiracy that
Rossi weaves.

Looking at all of the evidence Rossi has assembled
against Standard and Arzee, we conclude that he has
satisfied his burden in opposing summary judgment on the
concerted action prong. First, Rossi has developed direct
evidence that Standard and Arzee had, both before and
after Rossi Roofing existed, attempted to conspire to fix
prices, allocate customers, and otherwise stabilize the
roofing and siding distribution market in northern New
Jersey. He has also shown that both defendants knew him

                               36
to be a price-cutting competitor who had frustrated their
unlawful purposes by refusing to cooperate with them.
These two facts provide strong evidence of the defendants'
motive to conspire against Rossi. Desiring to raise prices
above their competitive levels in a highly competitive
market, an inference is supported that Standard and Arzee
were concerned that they could not succeed without Rossi's
cooperation, and that they therefore decided to prevent him
from competing against them.

Next, Rossi points us to direct evidence of the boycott,
namely Licciardello's threat on behalf of Standard and
Arzee to cut off his supplies and put him out of business.
Finally, Rossi has developed considerable evidence of
Standard's and Arzee's elaborate efforts to enforce the
boycott. Rossi has produced testimony that many
manufacturers and distributors were pressured and/or
threatened not to do business with Rossi Florence and
Rossi Roofing. He has also adduced testimony that
Standard and Arzee had an elaborate monitoring system in
place, one which even included reporting back to GAF to
help enforce the boycott.

To be sure, this evidence is far from conclusive. It could
be found at trial that Standard, Arzee, and GAF were all
acting independently of one another in parallel efforts to do
Rossi in. However, given the comprehensive nature of the
evidence covering all elements of the group boycott Rossi
alleges, we must reverse the district court's order granting
summary judgment in favor of Standard, Arzee, Robert
Higginson, William Higginson, the Roths, and Licciardello.

       b. GAF

We also believe that Rossi has adduced sufficient
evidence that GAF acted in concert with Standard and
Arzee to survive its motion for summary judgment and will
reverse the district court with respect to GAF as well.

        (1) Matsushita Implausibility

GAF's first defense, like Standard's and Arzee's, is that
the conspiracy alleged by Rossi is implausible under
Matsushita. Because Licciardello's statement that Standard

                                37
and Arzee intended to establish a boycott of Rossi Roofing
is insufficient by itself to hold in GAF, and we can find no
(other) direct evidence of GAF 's participation in the alleged
conspiracy in the record, we must analyze, under the
Matsushita standard, the plausibility of the conspiracy that
Rossi alleges. 

S II.B.2.a. In contrast with that
case, we find that the theory Rossi advances with respect to
GAF 's motivations and participation in the conspiracy is
not economically implausible.

First, Rossi's claim does not, as defendants allege,
require the cooperation of dozens of distributors and
manufacturers (each selling different quantities of
comparable competing products) in the northern New
Jersey marketplace to succeed (i.e. for distributors
Standard, Arzee, and Allied to be able to charge supra-
competitive prices). Rather, it is primarily focused on the
actions of three distributors, Standard, Arzee, and Allied,
and one manufacturer, GAF. Despite the fact that this case
arises against the backdrop of the highly competitive, price-
sensitive roofing and siding industry in northern New
Jersey in 1989 and 1990, Rossi advances a plausible theory
of how these defendants could have unlawfully conspired to
fix prices and therefore why they would want to boycott
Rossi. Moreover, even if Standard and Arzee were not
conspiring to keep prices artificially inflated by pocketing
the secret rebates that their competitors were not receiving,
both still had a plausible motive to keep Rossi, an avowed
and experienced price-cutter and acknowledged potent
competitor with a reputation among their customers for
excellent service, from opening up a competing
distributorship next door.

In order to comprehend the plausibility of the conspiracy
Rossi alleges, it is necessary to understand GAF's position
in the market and the importance of GAF product. In 1990,
GAF was indisputably one of the largest and most
important manufacturers of roofing supplies in the
northern New Jersey market, with an estimated 38% share
of the entire residential roofing shingle market in New
Jersey and an estimated 71% share of the residential
roofing laminate shingle market in New Jersey. GAF not
only supplied a large percentage of the overall market, but

                               38
it also was Standard's single largest supplier during the
time that Rossi was a manager there. As such, Rossi was
extremely familiar with GAF, and a large percentage of his
customers, many of whom followed him from Standard to
Rossi Roofing, had a strong preference for GAF product.
Indeed, there is substantial testimony in the record from
many sources supporting Rossi's contention that GAF
product was critical to both Rossi Florence's and Rossi
Roofing's success in the market.

For example, Sean Coffey, one of the five largest
residential roofers in northern New Jersey, testified that he
used GAF product in 1989 and 1990 almost exclusively and
would not buy from any roofing distributor that did not
have access to it. Similarly, Francis Doherty, proprietor of
another large roofing business in northern New Jersey,
testified that "99 percent" of his strip shingle purchases
had been GAF product. John Feher, another roofer who
attempted to purchase GAF product from Rossi Roofing,
testified that GAF was very popular with everyone,
including contractors and homeowners, because "it's easy
to get and guarantees [sic] and everything is good on it."
Thomas Harnett, an executive at Bird Corporation, testified
that GAF "dominated all levels of roofing in New Jersey,"
and that it was a "highly desirable product."

Likewise, Albert Logan, a former Celotex employee, stated
that GAF had "dominate[d] the market for years,"
representing at least fifty percent of every distributor's
inventory. John Mulcahy, a former Standard employee, also
testified that GAF was "dominant and had . . . [its]
product[s] so well-established in the area." Because of this,
Mulcahy stated that any distributor denied access to GAF
product would have difficulty competing in the residential
shingle market. 

to describe the magnitude
of the adverse impact of trying to compete without GAF
product, Mulcahy stated, "It would be like a beer
distributor not having Budweiser."

                                39