USCA1 Opinion
United States Court of Appeals
For the First Circuit
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No. 97-1783
SPRINGFIELD TERMINAL RAILWAY COMPANY, ET AL.,
Plaintiffs, Appellants,
v.
CANADIAN PACIFIC LIMITED, DBA, CP RAIL SYSTEM,
Defendant, Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Robert B. Collings, U.S. Magistrate Judge]
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Before
Selya, Circuit Judge,
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Coffin, Senior Circuit Judge,
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and Stahl, Circuit Judge.
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Robert S. Frank, Jr., with whom Robert M. Buchanan, Jr.,
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Eric J. Marandett, Kenneth E. Steinfield, and Joshua A. Engel
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were on brief for appellants.
Terence M. Hynes with whom Michael Fehner was on brief for
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appellee.
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December 22, 1997
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COFFIN, Senior Circuit Judge. This is an appeal from a
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summary judgment for defendant in a civil antitrust action
brought under Section 2 of the Sherman Act, 15 U.S.C. 15,
seeking damages for an "attempt to monopolize . . . any part of
the trade or commerce among the several States." The appeal also
challenges the district court's refusal to exercise its
supplemental jurisdiction over one count of the complaint
charging violation of the Massachusetts Antitrust Act, Mass. Gen.
L. ch. 93, 5, and another count charging tortious interference
with prospective business advantage.
The Parties
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The plaintiffs are three railroad companies owned by
Guilford Transportation Industries, Inc., with principal offices
in New Hampshire. They are the Boston and Maine Corporation
(B&M), the Maine Central Railroad Company, and the Springfield
Terminal Railway Company, which collectively comprise the
Guilford Rail System. We shall refer to plaintiffs-appellants
simply as Guilford. The defendant-appellee is Canadian Pacific
Ltd., with principal offices in Montreal, Quebec. We shall refer
to it as CP. Guilford's lines run from New England to New York;
CP's relevant line runs through central Maine between the
Canadian provinces of New Brunswick and Quebec.
The Market
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The market subject to the alleged attempted monopolization
is, for purposes of this case, assumed to be that of rail
transportation to and from northern New England. The principal
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customers are thirty plants producing building materials, wood
pulp, and paper located in Maine, New Hampshire, and Vermont, and
their suppliers and customers. Incoming traffic consists of
clay, chlorine, and other supplies; outgoing traffic consists of
paper, pulp, and building materials. Of the thirty plants,
twenty-three are on Guilford's lines; three are on a line of the
Bangor and Aroostook Railroad in Maine; one is on the short-line
Aroostook Valley Railroad in northern Maine; and three are on the
St. Lawrence & Atlantic Railroad in Vermont. CP and Guilford
compete for plants on the Bangor and Aroostook line; neither
serves mills on the St. Lawrence & Atlantic Railroad. There are
no plants on a CP line.
The Issue
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The basic theme of the complaint, filed on August 1, 1994,
is that CP, a corporation with some $10 billion in revenues,
attempted to drive out of business or force the sale of Guilford,
which was in fragile financial circumstances, thereby destroying
competition in the market above described. In submitting its
motion for summary judgment, CP assumed the truth of facts
alleged in the complaint. Therefore, the relevant market, the
intent to monopolize, and the existence of predatory conduct --
three of the four requisites of an attempt to monopolize -- are
not in issue. What is to be decided is whether the complaint and
affidavits raise a genuine issue of fact as to the existence of
"a dangerous probability of achieving monopoly power." Spectrum
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Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993).
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The Facts Alleged
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We take the facts as alleged in the complaint. Although we
review a summary judgment decision in which the district court
considered both the complaint and an affidavit from each party,
the affidavits submitted do not assert any facts that are
relevant to our decision.
After covering the material we already have briefly
described, the complaint addresses CP's underlying motive. It
alleges: (1) on May 15, 1990, CP agreed to purchase the Delaware
and Hudson Railway Company (D&H); (2) before this purchase,
Guilford linked much of its traffic to and from points outside
New England through D&H lines, amounting to 68 percent of
Guilford's traffic in 1988, and dropping to 43 percent in 1989;
(3) in 1990, at some unidentified time, the figure dropped to 27
percent; (4) CP's purchase of D&H was "predicated upon D&H/CP
retaining the share of interchange traffic D&H had historically
had with [Guilford];" (5) D&H/CP has sustained subsequent yearly
losses of some $8 million; and (6) therefore, since retaining the
Guilford interchange business was essential to D&H's health, CP
"entered into a series of transactions" to weaken Guilford, force
a lease, sale, or bankruptcy, "from which CP and others would be
able to acquire its lines."
Four activities were alleged under the caption of
"Defendant's Unlawful Conduct." The first was a 1989 request to
obtain trackage rights over Conrail lines in Pennsylvania and
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Maryland as a prerequisite to the acquisition of D&H lines.
Conrail refused.
In early 1990, an effort was made, in connection with CP's
planned acquisition of D&H, to increase the level of traffic
interchange between Guilford and D&H through a proposal to
acquire trackage rights, with an option to purchase, over
Guilford's line between Mechanicville, New York, and Fitchburg,
Massachusetts. Guilford rejected the proposal.
At the same time, in April and May, 1990, CP sought the
assistance of the Federal Railroad Administration (FRA) in
obtaining the consent of Guilford to CP's proposal. FRA
allegedly cooperated by threatening to default Guilford's
subsidiary, Boston and Maine, under a preference share agreement
with FRA, which would trigger a B&M obligation to pay FRA some
$26 million. FRA senior management also allegedly stated that
Guilford would regret it if the company turned down CP's
proposal. In late 1990, FRA notified B&M that its
"reconfiguration" of part of a line (i.e., removal of tracks)
violated the preference share agreement. Had FRA called a
default, CP knew that Guilford would face bankruptcy and be
subject to acquisition by CP on favorable terms. But no default
is alleged to have been declared.
These three instances of alleged efforts, while evidence of
intent, produced no results adverse to Guilford. Only the fourth
alleged incident describes an effort ripening into conduct. Both
CP and Guilford submitted bids to a large paper-making facility,
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the Great Northern plants, for transport of 4,744 carloads of
paper to 165 locations between January 1, 1991 and April 30,
1993. CP's bids were for less than its estimated average
variable cost; for example, the average variable cost for one bid
involving more than a fourth of the total traffic was estimated
at $1,000 per carload while the expected revenue was less than
$350. In December 1990, CP was awarded a contract for 4,204
carloads.
The complaint alleged that this conduct was "intended to
divert revenues from the Guilford Rail System" so as to weaken it
and permit CP "or others collaborating with CP" to acquire it.
The essential part of the complaint concluded with the allegation
that CP, once it had acquired Guilford, could recoup the costs of
such predatory pricing through restoring the interchange traffic
and increasing rail rates. The high barriers to new entry in the
market and the weakened condition of Guilford allegedly
contributed to the likelihood that CP would accomplish this goal.
Proceedings Below
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CP's motion for summary judgment urged three grounds.
First, accepting the truth of all allegations, CP claimed
exemption from antitrust liability under 49 U.S.C. 11321(a),
which provides that ICC approval of a purchase of one carrier by
another creates an exemption "from the antitrust laws and from
all other law . . . as necessary to let that person carry out the
transaction, hold, maintain, and operate property . . . ."
Second, CP claimed that there existed no dangerous probability of
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monopoly in any event because it was not alleged that CP had any
market power, and it had not been shown probable that Guilford
would agree to sell to CP or that the ICC would approve such a
purchase. Third, CP argued that the state law claims, resting on
the district court's supplemental jurisdiction, should be
dismissed along with the federal claim.
The district court, after an unfortunate two year hiatus
during which apparently no progress was made in resolving the
case, rested its summary judgment on the following conclusions:
deeming market share a "highly significant" though not exclusive
factor in assessing the probability of successful monopolization,
it reasoned that at most CP controlled little more than ten
percent of the market, which was not "sufficiently 'proximate' to
monopoly;" that nothing in the record indicated that, if Guilford
were forced to sell its rail lines, it would sell to CP; and that
the record failed to demonstrate that ICC approval would be
forthcoming. Finding the federal antitrust claim unsupported by
sufficient factual allegations to create a genuine issue, the
court in its discretion declined to exercise its supplemental
jurisdiction over the state claims.
Discussion
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Standards. The familiar standards of summary judgment
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review apply here. Some are in appellants' favor: review is
plenary, Steinke v. SunGard Financial Systems, 121 F.3d 763, 768
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(1st Cir. 1997); a genuine issue of fact that is truly material
will defeat the motion, Celotex Corp. v. Catrett, 477 U.S. 317,
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325-27 (1986); and facts and reasonable inferences therefrom must
be taken favorably to the non-movant, Blanchard v. Peerless Ins.
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Co., 958 F.2d 483, 490 (1st Cir. 1992).
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But other standards have come to hold in check too ready a
creation of a factual issue. Unsupported assessments, conclusory
allegations, and speculative suppositions carry no weight.
Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st
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Cir. 1990). We add to this litany that in a case such as this,
where intent and subjective motive are not in question, but where
the issue involves the objective and rather technical data called
for by the requirement of a dangerous probability of achieving
monopoly power, the careful construction of a complaint takes on
enhanced importance.
In addition to standards of review, standards of careful
practice caution that the pleader anticipate a summary judgment
motion and have in mind the availability of Fed. R. Civ. P. 56(f)
if further discovery seems necessary, that timely steps to amend
be taken when the need arises, and that appropriate proffers of
evidence be made if the record needs supplementing. Moreover, a
motion for summary judgment thrusts into possible question any
fatal factual deficiency, whether or not it is then at the
forefront of controversy. A non-movant must live with the double
standard that, while a loser at the fact finding stage cannot
raise new issues to secure reversal, "A party may defend a
judgment in its favor on any legitimate ground without appealing
from the judgment on that issue." United States v. Massachusetts
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Institute of Technology, Nos. 97-1287, 97-1382, slip op. at 14
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(1st Cir. Nov. 25, 1997) (citation omitted).
ICC Approval Immunity. By far the major emphasis below on
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the part of CP was placed on the argument that, since the entire
objective of CP's scheme was, according to the complaint, the
acquisition of Guilford, and since such an acquisition of one
railroad by another must be approved by the ICC (now by the
Surface Transportation Board), CP would fit the statutory
description of "[a] rail carrier . . . participating in . . . a
transaction approved by the [ICC]" who may "own and operate
property . . . acquired through the transaction . . . exempt from
the antitrust laws . . . ." 49 U.S.C. 11321(a).
Before the district court, CP conceded for the purpose of
this argument that it would acquire Guilford, but, based on the
above reasoning, contended that it would be exempt from antitrust
liability. On appeal, Guilford strenuously argues that any
exemption must be restricted to a transaction that is "necessary
to let that rail carrier . . . hold, maintain, and operate
property . . . acquired through the transaction." Id. CP's
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predatory pricing, it maintains, was prior to and separate from
acquisition of Guilford by CP. There would be no policy reason
to exempt such preliminary conduct; a company that mercilessly
took all kinds of actions to bring a victim to its knees should
not be granted absolution if its malevolent campaign proved
successful. Moreover, antitrust exemptions should be narrowly
construed.
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We are not impressed with the cases cited by CP. Its simple
rationale is that if acquisition of Guilford (and the consequent
monopoly position of CP in the market) is approved and therefore
immunized by the ICC, an attempt to achieve such a legal status
cannot be unlawful. But although government approval of a
consolidation or merger may exempt those who took part from legal
obstacles that would hinder its consummation, as in Brotherhood
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of Locomotive Engineers v. Boston & Maine Corp., 788 F.2d 794,
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800-801 (1st Cir. 1986), CP has given us no authority for
extending immunity to remote and egregious conduct that brings
about a condition of subservient vulnerability and thus sets the
stage for a subsequent consolidation, merger, or purchase
agreement.
While we acknowledge a considerable scope of immunity
created by ICC approval, we are unwilling to take a position of
first impression and grant immunity as a per se matter to all
events that precede the ICC action. We find distasteful the
proposition that a railroad company could indulge in any kind of
anticompetitive chicanery and, if successful, be immunized, or,
if not successful, defend against an unlawful attempt charge
because there would be no dangerous probability of monopoly.
Like the district court, we shall not pass on this issue.
Market Power. As we have observed, the district court
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placed some reliance on its estimate that CP controlled not much
more than ten percent of the market. Guilford maintains that
since the complaint alleged that there were only two market
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participants, Guilford and CP, and that CP intended to force the
sale of Guilford's assets to CP, and since CP had the financial
means to accomplish this, a jury could find that a dangerous
probability of monopolization existed. Pre-predation market
power under these circumstances, argues Guilford, is not the sole
indicator of success.
We are well aware of the impressive case law requiring a
plaintiff in an attempted monopolization case to demonstrate a
substantial pre-existing market share. We affirmed the decision
in Benjamin v. Aroostook Med. Ctr., 937 F. Supp. 957, 966-67 (D.
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Me. 1996), aff'd, 113 F.3d 1 (1st Cir. 1997), petition for cert.
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filed, 66 U.S.L.W. 3308 (U.S. Aug. 11, 1997), which recognized
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that the requirement of market power is commonly shown by market
share. But most of the cases cited by CP are pre-Spectrum
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Sports. And that decision does not impose an inflexible
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requirement that pre-predation market share be demonstrated. As
the district court recognized, Spectrum Sports, after recognizing
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the higher standard of proof required against a single firm, as
contrasted with concerted activity, states that
demonstrating the dangerous probability of
monopolization in an attempt case also requires inquiry
into the relevant product and geographic market and the
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defendant's economic power in that market.
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Spectrum Sports, 506 U.S. at 459 (emphasis added).
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Areeda and Hovenkamp, in their antitrust treatise, see P.
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Areeda & H. Hovenkamp, Antitrust Law 807, p. 355 (1996), engage
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in a thoughtful discussion of the requirement of market share,
tending to resist expansionary doctrine, but acknowledging merit
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in some relaxation of the requirement. Their bottom line is:
"The all-important consideration is that the alleged conduct must
be reasonably capable of creating a monopoly in the defined
market." Id. They add, "As always, however, market share is an
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imperfect surrogate for market power." Id. They make the
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interesting comment that the threshold power requirement might be
lowered if only injunctive "cease-and-desist" relief were
requested, rather than triple damages and attorney's fees. Id.
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at 357.
Guilford relies on United States v. American Airlines, 743
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F.2d 1114, 1118-1119 (5th Cir. 1984), as precedent for assessing
the probability of monopolization by adding the market share of
Guilford, the putative victim, to that of CP. The company also
properly cites Areeda & Hovenkamp's Antitrust Law 807h, p. 362,
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as recognizing this addition as appropriate "in some
circumstances." But it is quite clear that in American Airlines,
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the offer of American to its fierce competitor, Braniff, to end
their competition and jack prices twenty percent was "uniquely
unequivocal and its potential . . . uniquely consequential," 743
F.2d at 1119. In other words, the conduct was "the most
proximate to the commission of the completed offense that [it]
was capable of committing." Id. at 1118-1119. In the instant
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case, predatory pricing would have to persist so far as to bring
Guilford to the point of selling or bankruptcy, a sale to CP
would have to take place, and approval would have to be granted
by the ICC before monopolization became a fact.
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We recognize that aggregation of the market power of
predator and predatee may in some cases be warranted, and we do
not insist on proof of thirty or fifty percent or some such
percentage of market share as a per se threshold requirement in
all attempted monopolization cases. But we give weight to the
traditional requirement, and require exceptional circumstances
before straying from it. An all-powerful outsider with unlimited
financing and a record of persistent, unambiguously
anticompetitive conduct that has a demonstrably serious adverse
effect on its competitor might well pass the test.
As we discuss below, however, this is not such a case.
Other Factors Relevant to Dangerous Probability.
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Notwithstanding the lack of asserted facts demonstrating market
share, Guilford would have us conclude that CP's conduct
reasonably could be thought capable of creating a dangerous
probability of monopolization in the northern New England rail
transportation market based on the fact that CP admitted the
truth of the allegations of the complaint for purposes of summary
judgment. Guilford asserts that the complaint alleged that
Canadian Pacific would acquire Guilford's rail assets and that CP
conceded this point.
It is clear to us, however, that CP's attempt to obtain a
stipulation that monopolization necessarily assumed acquisition
by CP was in the context of CP's contention that ICC approval of
any acquisition conferred antitrust immunity. Indeed, a
concession for all purposes that acquisition of Guilford was
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probable would also be a concession of the basic point at issue,
the existence of a dangerous probability of monopoly.
No more persuasive is Guilford's assertion of prejudicial
error in the court's refusal to consider a proffer of evidence
that CP would purchase Guilford's assets. The "evidence" was a
statement by Guilford's counsel at a motion hearing that he had
obtained a document showing CP's belief that it would acquire
Guilford's assets when Guilford succumbed to bankruptcy, which it
thought was imminent. Not only was there no subsequent attempt
through affidavit or otherwise to have the document admitted to
the record, but even more importantly, the substance of the
representation was only that CP did indeed aspire to acquire
Guilford's assets and believed in its feasibility, something that
has not been in issue. A belief of an aspirant does not
constitute evidence of the probability of realization of the
aspiration. We see no merit in this assertion of error, either
procedurally or substantively.
This brings us to an analysis of the conduct alleged. To
begin, we must dismiss the several allegations of conduct that
resulted in no action -- the 1989 refusal of Conrail to grant
trackage rights, the 1990 rejection by Guilford of CP's request
for trackage rights between Mechanicville and Fitchburg with an
option to purchase, and the 1990 failure of the Federal Railroad
Administration to follow through on its CP-induced threats of
default.
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We are left with the single instance of CP's below cost bid
to Great Northern and the resulting contract in December 1990.
Guilford would have us attach no relevance to the solitariness of
the predatory pricing incident, on the ground that CP has
conceded the alleged existence of such conduct. But mere
existence of predatory price cutting, and the extent of such
conduct sufficient to justify a finding of dangerous probability
of monopolization, are two quite different issues.
Guilford also contends that CP, which opposed Guilford's
"Motion to Allow Discovery to Proceed" -- a motion "designed to
obtain information that would permit the identification of
particular instances where Canadian Pacific engaged in below cost
pricing" -- should not now be permitted to argue for affirmance
because of the inadequacy of the complaint. But the Motion to
Allow tells us only that the documents withheld by CP as "highly
confidential" "involve revenue and cost data [which] go to the
heart of [Guilford's] predatory pricing claim." There is no
assertion that Guilford intended to broaden the complaint to add
other incidents to the bids on the Great Northern business.
We are not in a position to judge whether Guilford was
unfairly cut off from obtaining evidence necessary to withstand a
motion for summary judgment. There exists a clear-cut way for a
litigant in Guilford's position to avoid this difficulty of
exercising hindsight. Rule 56(f) of the Federal Rules of Civil
Procedure specifically calls upon a litigant who feels prejudiced
by too precipitate a demand for summary judgment to file a timely
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affidavit with the court asserting the need for further
discovery. As we have held, failure to resort to such first aid
will ordinarily bar belated aid. See Rivera-Flores v. Bristol-
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Myers Squibb Caribbean, 112 F.3d 9, 14 (1st Cir. 1997).
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We are not moved by Guilford's explanation that it did not
make a Rule 56(f) submission "because the Court had expressed its
complete disinterest in evidence directed to that issue." CP's
motion for summary judgment excluded no issue; its basis was
"that there exists no genuine issue of material fact warranting a
trial." At the hearing on the motion, the court indicated that
it understood CP to be making an "alternative argument" to ICC
immunity. A party opposing summary judgment must touch all
bases. Even if the focus of counsel and the trial court is on
one issue, an appellate court may affirm a judgment on another
ground, if made "manifest by the record." Frillz, Inc. v. Lader,
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104 F.3d 515, 516 (1st Cir. 1997).
Even less worthy of consideration is Guilford's tortured
argument that, despite its having made no move to amend its
complaint, the court should have treated the summary judgment
motion as a motion to dismiss and sua sponte given it the
opportunity to do so. Although Guilford asserts that it "could
plead additional facts that would cure any perceived
insufficiency in the Complaint," such facts are not identified.
All that the complaint asserts is the single incident in
which CP, through predatory pricing, obtained a contract to carry
4,204 carloads annually of Great Northern's 4,744 carload total.
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The contract was to expire on April 30, 1993. We do not know who
obtained the contract to carry the remaining 540 carloads or why
some other carrier managed to withstand CP's predatory pricing.
Although Great Northern's facilities were among the largest,
there were 29 other plants in the market, only three of them
served by CP. There is no information about the financial impact
of this incident on Guilford. And there is no information
concerning CP's market share.
Perhaps even more significantly, there is no evidence that
CP engaged in predatory pricing after December 1990, some three
years and seven months before Guilford's complaint was filed.
There is no information relating to any new request for bids
following expiration of the Great Northern contract on April 30,
1993. We are not told whether CP sought or retained that
business.
We deem highly relevant and persuasive the following
observations by Areeda and Hovenkamp in their treatise:
[W]hen challenged exclusionary conduct had ended three
years earlier without increasing the defendant's market
share or forcing the exit of any competitor, a court is
likely to see no dangerous probability of success.
Although the conduct's potential at the time it occurs,
rather than its actual effect, determines its legality,
later effects sometimes indicate the nature of that
potential. . . .
We would find attempt claims presumptively
implausible if the challenged conduct has been in place
for at least two years and the remaining market remains
robustly competitive as evidenced by ongoing entry,
profitability of rivals, and stability of their
aggregate market share.
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Federal Antitrust Law 807f, pp. 360-61 (citing Ashkanazy v.
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Rokeach & Sons, 757 F. Supp. 1527 (N.D. Ill. 1991)).
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Although this rationale apparently was not considered by the
district court, it nevertheless was "made manifest by the
record," see Frillz, 164 F.3d at 516, and constitutes an
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"independently sufficient ground" for decision, see Hidalgo v.
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Overseas Condado Ins. Agencies, Inc., 120 F.3d 328, 332 (1st Cir.
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1997) (citation omitted).
Another factor militating against a reasonable finding of
dangerous probability of monopolization that the district court
relied upon was the uncertainty of obtaining the necessary
approval by the ICC. The court concluded its reasoning on this
point by saying that "there is no way to judge how the ICC would
view an acquisition of the Guilford Rail System by CP.
Disapproval is just as likely as approval." We agree.
The relevant statute governing ICC approval is 49 U.S.C.
11324(d), which requires approval of an acquisition unless "there
is likely to be substantial lessening of competition, creation of
a monopoly, or restraint of trade in freight surface
transportation . . . and . . . the anticompetitive effects of the
transaction outweigh the public interest in meeting significant
transportation needs." CP cites various instances where the ICC
has disapproved mergers that threatened a reduction in
competition; Guilford cites actions where "public interest" has
been held to outweigh any reduction in competition. We simply do
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not know how the ICC would view the competing considerations on
the record of this case.
So viewing the allegations of the complaint, we conclude
that Guilford has failed to put forth sufficient facts to justify
a finding of a dangerous probability of monopolization. We
therefore have no occasion to consider the sufficiency of facts
alleged to support the likelihood that CP would acquire
Guilford's assets or CP's arguments concerning the absence of
barriers to entry into the market and elasticity of demand.
We add that we see no reason to question the district
court's action in declining to exercise its supplemental
jurisdiction over state law claims.
Affirmed. Each party to bear its own costs.
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