JORDAN, Circuit Judge.
I. Introduction ...365
II. Background ...366
IV. TLI's Cross-Appeals ...409
V. Conclusion ...414
When asked why he was so intent on scaling Mount Everest, the ill-fated mountaineer George Mallory famously replied: "because it's there."
This case arises from the fractured relationship between a large communications equipment manufacturer, Avaya Inc. ("Avaya"), and one of its dealers and service providers, TLI.
We conclude that the entry of judgment as a matter of law was erroneous. Given how intertwined the two sides' claims are — and given that Avaya's antitrust defense relied in large part on justifying Avaya's conduct as a response to TLI's conduct — we also conclude that the erroneous Rule 50 judgment infected the jury's verdict. We must therefore vacate the judgment of the District Court. A tour of the mountain follows.
Avaya, the appellant and cross-appellee, "designs, manufactures, sells, and maintains telecommunications equipment." (Opening Br. at 7.) Two of its products in particular are the subject of this suit. The first is its private branch exchange ("PBX"), which "is essentially a special-purpose computer ... that functions as a telephone switchboard" and is used by "[l]arge organizations needing an internal telephone network." (Id.) The second product is its predictive dialing system ("PDS"), which is an "automated telephone dialing system that uses a predictive algorithm to anticipate when the user ... will be able to reach someone, improving the chances a call will be answered." (Id. at 7-8.) The PBX technology was invented in the 1980s by AT&T Co., which in 1996 spun its PBX business off to Lucent Technologies, Inc., which in turn spun off Avaya in 2000.
TLI and three individuals who operated it are the appellees and cross-appellants. TLI sold post-warranty maintenance for Avaya PBXs and PDSs. At one point, TLI was also part of Avaya's Business Partner program, selling communications systems on Avaya's behalf. When Avaya began downsizing from 1999 to 2001, it encouraged its Business Partners to hire laid-off Avaya maintenance technicians, even subsidizing that process. TLI made several such hires and began to offer maintenance services in 2001. Not long after, in 2003, TLI and Avaya acrimoniously severed their relationship,
Of the two types of systems at issue in this litigation, the PBX has a substantially larger market. Avaya characterizes PBX systems as durable goods with extended longevity and high fixed costs. During much of the time relevant to this suit, PBX systems had a useful lifespan of about eight years, though some could remain in use for decades.
One of those "aspects" is a set of maintenance features
Avaya and its authorized Business Partners offer maintenance service, which is a profitable line of business. Avaya contends that the "margin on the initial sale of a PBX is `thin,'" whereas the rate of profit on maintenance work is much higher. (Opening Br. at 8.) It says that the profit the company earns from maintenance is an important source of funds for the improvement of PBX systems and the development of new models, which are released roughly every two years. According to Avaya, its major competitors in this market — Cisco, Siemens, and Microsoft — follow a similar business model of low-margin equipment and high-margin maintenance, and those firms compete with each other and with Avaya over the "total cost of ownership" of both equipment and maintenance. (Opening Br. at 9.)
During the time period covered by this litigation, Avaya offered three tiers of maintenance options for PBX customers. The highest-end, most expensive option was to buy maintenance from Avaya itself, whose technicians had full access to ODMCs and certain other Avaya software capabilities.
The second, intermediate, option was to purchase maintenance from an authorized Avaya Business Partner. Business Partners could access a customer's maintenance software through a login called "DADMIN," once Avaya activated it on a customer's PBX. As participants in Avaya's maintenance program, Business Partners had to complete special training and
Finally, Avaya offered a self-maintenance option to its customers. Prior to 2008, customers who undertook to maintain their own PBX systems would have to purchase a license to gain access to the necessary MSPs. In 2005, out of tens of thousands of Avaya PBX customers, about 270 of Avaya's largest customers used the self-maintenance option, which allowed their in-house technology departments to perform maintenance on their PBX systems. With its 2008 hardware release, Avaya began making MSPs part of the base package for all PBX purchasers, so that they no longer had to pay additional money for access to those maintenance features. They were, however, then subject to heightened contractual restrictions against using independent service providers ("ISPs").
ISPs in fact became a fourth source of maintenance for Avaya PBX systems, and — from Avaya's perspective at least — a very unwelcome one. Avaya has made no secret of its hostility to ISPs, and it acknowledges that it "has never given third parties the logins necessary to access the ODMCs needed to maintain PBXs." (Opening Br. at 15.) As Avaya characterizes it, prior to 2003, there were no significant ISPs on the market, and they did not become noticeable market players until 2005. At that point, Avaya released an internal July 2005 bulletin affirming that "Avaya ... does not provide maintenance support for clients of or directly to unauthorized service providers" (J.A. 7043), and it recapitulated its policy that MSPs and self-maintenance licensing would not be available to customers who used ISPs. A 2006 federal court opinion rejected an antitrust suit challenging Avaya's policy against giving ISPs maintenance software access.
In its campaign against ISPs, Avaya updated its customer agreements in 2008 to make explicit that PBX purchasers agreed not to use unauthorized third parties for any service that required MSPs. Specifically, one license restriction stated that the
(J.A. 7283.)
The other Avaya equipment at issue in this case is the PDS system, the market for which is substantially smaller than the PBX market. Avaya presented evidence at trial that no more than 840 Avaya PDS systems were installed nationwide (about 20% of the total PDS market), with Avaya providing maintenance service to about 200 of those customers.
The PDS market is similar to the PBX market in at least one important respect. In both, Avaya says, the profits from maintenance contracts help fund the development of new systems and the upgrades of existing systems. Avaya regularly updates its PDS software with patches to "fix bugs or adapt the product to changing circumstances." (Opening Br. at 14.) Prior to 2007, patches were available for free to PDS customers on Avaya's website; after 2007, customers who purchased new PDS systems could only receive patches if they purchased a minimum of one year of software support from Avaya.
The two sides in this case present dramatically different stories of their dispute, which began in 2003.
From 1996 to 2003, TLI was an Avaya Business Partner and sold Avaya systems. Around 2000, Avaya launched a program to encourage Business Partners to offer maintenance services. TLI took the opportunity.
The relationship between Avaya and TLI soured that same year, over TLI's efforts to compete for maintenance contracts with other Business Partners and with Avaya directly. Avaya had introduced a revised set of obligations for its Business Partners, the new program being set forth in what Avaya called the "Avaya One" agreement. The intent was to limit intra-brand
The formal relationship between Avaya and TLI ended in 2003. TLI had refused to sign on to any agreement that would limit its ability to compete for maintenance clients. Instead, it negotiated a separate agreement with an Avaya agent, under which TLI was exempted from most of the rules against competing for existing maintenance business. When higher-ups at Avaya learned of this non-conforming deal, they invoked a termination provision of the contract in July 2003 that allowed them to end the deal on 60-days' notice.
According to TLI, Avaya jumped the gun on the 60-day notice period and began prematurely terminating TLI's access to its clients' systems, while notifying remaining Business Partners that they should poach TLI's clients. TLI says that Avaya then went on the warpath to sweep away ISPs, and that ODMC and MSP access restrictions were created to prevent ISPs from competing in the maintenance market. It claims that Avaya would keep customers in the dark about restrictions on ISP service until after the customers had already purchased an expensive system and were "locked in," at which point Avaya would deliberately misconstrue the license contracts to assert that ISP maintenance was prohibited. TLI also accuses Avaya of other supposedly anticompetitive conduct, including shortening the PBX warranty period in an attempt to force customers to sign up for Avaya maintenance contracts and ending a program that allowed customers to gain MSP access without using an Avaya-authorized provider. TLI argues that it was the target of particularly hostile action by Avaya. First and foremost, TLI alleges that Avaya "sent threatening and misleading letters" to TLI's "current and potential customers, discouraging them from doing business" with TLI based on a claim that "unauthorized access to the PDS/PBX system [was] a violation of federal and state laws," a claim that TLI considers to be "without legal basis." (Answering Br. at 9-10 (internal quotation and editorial marks omitted).) Throughout this litigation, TLI has styled those letters as sowing "fear, uncertainty, and doubt" among its customers, and it has dubbed that correspondence the "FUD letters" for short. Additionally, TLI accuses Avaya of "trespassing on [TLI's] customers' systems and disabling their access to critical maintenance software" (Answering Br. at 10), as well as punitively instituting this lawsuit against TLI.
In Avaya's much different narrative, TLI engaged in underhanded tactics to peel off Avaya customers in ways that
Avaya filed suit on June 2, 2006, alleging a host of common law business torts, breach of contract, and violations of federal statutes, specifically the Digital Millennium Copyright Act and the Lanham Act. It sought both money damages and injunctive relief to halt TLI's practices. Those claims were refined over the following four years, eventually resulting in the Fourth Amended Complaint (the "Complaint"), filed in February 2010, which presented the claims as they went to trial.
Pretrial proceedings lasted for seven years, comprising extensive discovery and motions practice, during which many of the claims were resolved. In 2012, TLI's common law claims were all dismissed by summary judgment. The District Court also dismissed TLI's antitrust claims that alleged illegal tying between PBX system upgrades and maintenance. In addition, Avaya voluntarily dismissed its federal statutory claims and several of its common
Some of the issues on appeal concern litigation conduct. TLI accuses Avaya of malicious litigation behavior, which allegedly cost TLI "millions of dollars in excess litigation costs and delayed resolution of the case for several years." (Answering Br. at 13.) Specifically, TLI accuses Avaya of abusing the discovery process by making copious and unnecessary requests for documents and admissions and delivering an excessive number of documents to TLI late in the proceedings. TLI suggests that Avaya knowingly pursued meritless claims, namely those that it voluntarily dismissed on the eve of trial. And TLI further alleges that Avaya "routinely produced inadequately-prepared corporate designees for deposition" (id. at 15), served excessively long expert reports, and litigated complex Daubert motions to be able to present experts, only to drop the experts and "substantial portions" of the expert reports at trial (id. (quoting J.A. 352)). Avaya denies any allegations of bad faith conduct and defends its actions as nothing more than vigorous litigation in a complex case.
The trial began on September 9, 2013, opening with Avaya's remaining affirmative claims against TLI — for breach of contract, tortious interference with prospective economic gain, fraud, unfair competition, unjust enrichment, aiding and abetting former Avaya employees' misuse of confidential information, and civil conspiracy. As the District Court described it, Avaya's "jury presentation [] lasted two months, involved 35 witnesses, and spanned over 6,000 pages of transcript." (J.A. 190.)
TLI then moved for, and the District Court granted, judgment as a matter of law as to all of Avaya's affirmative claims. The gist of the Court's analysis was that TLI's customers were authorized to use the maintenance commands and to give them to TLI, so that TLI could not have breached contractual or tort duties by gaining access to those commands.
With Avaya's affirmative case thrown out, TLI then proceeded to present its antitrust counterclaims to the jury, with that portion of the trial spanning nearly four months. When the presentation of evidence concluded, the Court held a fifteen-hour conference with the parties to reconcile their voluminous proposed jury instructions, eventually settling on a set of instructions that ran for 80 pages. Eight distinct antitrust claims ultimately went to the jury.
On March 27, 2014, the jury returned a verdict, finding Avaya liable on two of the eight claims: (1) attempted monopolization of the PBX maintenance market, in violation of § 2 of the Sherman Act, and (2) unlawfully tying PDS software patches to maintenance, in violation of § 1 of the Sherman Act. The jury awarded TLI $20 million in damages in a general verdict, which the Court trebled to $60 million in accordance with 15 U.S.C. § 15(a).
After trial, both sides filed post-trial motions, seeking either judgment as a matter of law or a new trial on the claims now appealed to us, and the District Court denied those motions. TLI also requested an injunction ordering Avaya to allow its PBX customers to give ODMC access to ISPs. The Court granted that injunction, but it limited it to PBXs sold before May 2008 because Avaya had by then included in its sales contracts language to put customers on clear notice that they could not use ISPs for maintenance. Finally, the
We first take up Avaya's appeal of the District Court's grant of judgment as a matter of law on its common law claims against TLI for tortious interference with prospective business advantage, unfair competition, fraud, and breach of contract.
A motion for judgment as a matter of law under Federal Rule of Civil Procedure 50(a) "should be granted only if, viewing the evidence in the light most favorable to the nonmovant and giving it the advantage of every fair and reasonable inference, there is insufficient evidence from which a jury reasonably could find liability." Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1166 (3d Cir. 1993) (citation omitted).
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150-51, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (internal quotation marks and citations omitted). Given that the District Court heard two months of testimony on Avaya's common law claims, judgment as a matter of law could only have been appropriate in the extraordinary circumstance that none of that evidence could lead a reasonable jury to find that TLI was liable on any one of the common law claims.
We exercise plenary review over the order granting the motion for judgment as a matter of law, and we apply the same standard as the District Court should have. Lightning Lube, 4 F.3d at 1166. Though the District Court ably supervised the introduction of volumes of evidence and was attentive in managing this complex case, we cannot help but conclude that its decision to grant TLI's motion for judgment as a matter of law was irretrievably flawed. Avaya provided ample proof of conduct that could support its common law claims, much of which was uncontroverted and came directly from the testimony of TLI executives themselves. While we have high regard for the fine jurist who was at the helm in the District Court, this case is a reminder that "judgment as a matter of law should be granted sparingly." Goodman v. Pa. Tpk. Comm'n, 293 F.3d 655, 665 (3d Cir. 2002).
Avaya presented evidence that TLI engaged in conduct that was at best ethically dubious, and quite possibly unlawful. To summarize the conduct at issue, it is undisputed that TLI enlisted former Avaya employees to "hack" and "crack" Avaya systems, that it submitted deceptive requests for login access, and that it used Avaya's proprietary knowledge — gained while still Avaya's Business Partner — to compete directly against Avaya. As a result, TLI was able to lure a significant amount of business away from Avaya and its Business Partners. TLI's surreptitious business dealings and its executives' own admissions of secrecy belie any claim that it thought its own conduct was fair and proper.
The first method TLI used to hack into its clients' Avaya systems was hiring former Avaya employee Dave Creswick to crack logins and passwords. Creswick knew that TLI needed the passwords "[t]o do their maintenance" in competition with Avaya. (J.A. 2277.) He would hack into systems and activate MSPs on TLI's clients' systems, and he also activated DADMIN login access several times.
The evidence introduced at trial of the Creswick hacking scheme was copious, and came mostly from the testimony of TLI executives themselves. Chief Technology Officer Scott Graham acknowledged that TLI paid Creswick to "enable some logins and MSPs" (J.A. 2292) and that it began paying Creswick for this service while TLI was still under contract as an Avaya Business Partner. CEO Douglas Graham acknowledged using Creswick as an "ex-Avaya employee [to] create a new password for the system[s]." (J.A. 2747.) Avaya introduced an email in which Douglas Graham offered Creswick "a flat rate of $300 a password for single situations and $200 a password if you do more [than] one password at a time." (J.A. 6117.) In another email, Creswick bragged to Douglas Graham that "there has not been [an Avaya PBX] system created that I cannot get into." (J.A. 6059.) TLI eventually developed additional means to access Avaya PBXs, and by 2008, it had begun to "read [] passwords" for itself, using a method similar to (but simpler than) Creswick's. (J.A. 2361.)
TLI also hacked Avaya systems by hiring another former Avaya employee, Harold Hall, who used software "provided by Avaya" during his time as an Avaya employee to "beat" Avaya's security systems. (J.A. 2293). Hall had taken the software, called an "ASG key," with him when he left Avaya's employment. He acknowledged at trial that he did not receive permission from Avaya to do so. Scott Graham admitted that Hall's method was necessary to overcome "an additional security method that was implemented by Avaya on certain releases of the ... PBX software." (J.A. 2365.) He conceded that he knew "Hall had [software] provided to him by Avaya" and that he "believe[d] [Hall] used it through most of his career at Avaya" before using that software "subsequently as a contractor." (J.A. 2366.) In his own testimony, Hall estimated that he had used the ASG key for TLI "40 [to] 60" times. (J.A. 3057.)
The second way that TLI gained access to Avaya's PBX systems was to cajole Avaya Business Partners into submitting deceptive requests for login access. As Scott Graham characterized it, TLI would "work[] with several Business Partners" to have them "submit[] a DADMIN form
TLI's third method for surreptitiously gaining access to Avaya systems was to rely on proprietary information learned when it was under contract as an Avaya Business Partner. Scott Graham testified that "108 locations or about 8 percent" of the PBX systems that TLI serviced "were systems for which TLI provided maintenance using a login that it had obtained from Avaya when TLI was a Business Partner." (J.A. 2423.) An additional "17 percent" of TLI's maintenance business was for "systems that were ... using a default login or password." (J.A. 2424.) TLI "did indeed learn of [those default passwords] during the time that [TLI was] a Business Partner." (J.A. 2332.)
Avaya also presented evidence that TLI knew that Avaya considered maintenance access to be proprietary and that TLI deliberately acted in secret to gain system access, from which a jury could infer malice or bad faith. Scott Graham admitted in his testimony that TLI "hid [its] activities from Avaya" and that the information about how TLI gained access was "carefully guarded" when dealing with customers — though he denied providing customers with affirmatively false information. (J.A. 2293-94.)
TLI actually went to great lengths to conceal its activities from Avaya. Scott Graham acknowledged that if Avaya knew that TLI was behind the vicarious DADMIN login requests, it would not have provided them. Accordingly, TLI would have customers sign blank request forms and would not disclose to them the identity of the Business Partner that would actually submit the form, because "if the Business Partner was identified to the customer, that could get back to Avaya." (J.A. 2345.) TLI believed (no doubt rightly) that if Avaya learned of that practice, it would have intervened to stop the unauthorized access.
As for the hacking schemes, Douglas Graham acknowledged that "it was very important to [TLI] that Avaya didn't know about Mr. Creswick." (J.A. 2748.) In an email, Graham wrote that one way TLI got "access to [Avaya] systems" was "having an ex-Avaya employee create a new password for the system," and he suggested that "[i]f [Avaya] knew of" the manner in which TLI was getting access, it "would probably be raising it" in litigation. (J.A. 6363-64.) TLI executive Bruce Shelby testified that TLI would make customers sign non-disclosure agreements before revealing who its subcontractors were, for fear that Avaya would find out and "put pressure on all the Business Partners that were on our subcontractor list not to work with us." (J.A. 2986.) He also testified that TLI did not want Avaya "to find out ... how TLI was gaining access to the on-demand
Testimony also established that TLI acted to obfuscate its practices when dealing with its own customers. For example, when Avaya changed its customer contract language regarding DADMIN access, Scott Graham sent an email to TLI leadership suggesting a tactic to conceal the firm's methods:
(J.A. 5817.) The obfuscation apparently worked; in fact, two of TLI's customers testified that they did not know that TLI was not an authorized maintenance provider when they hired the firm.
TLI also took preemptive actions to prevent Avaya from interrupting its activities. According to Scott Graham's testimony, TLI knew that the MSPs were licensed by Avaya to each customer and that the licenses "all implied" that "Avaya could shut [the MSPs] off" at the end of a customer's contractual relationship with Avaya. (J.A. 2382.) Therefore, as Douglas Graham put it in an email, TLI would "tak[e] over the system" of a customer it had successfully solicited, "before Avaya ha[d] time to turn the [MSPs] off, or change the passwords," which was "simply done by disconnecting the phone line that links Avaya to the customer's system." (J.A. 6363.) Similarly, Harold Hall testified that he would access the Avaya systems using the DADMIN logins he had cracked with the software he had walked away with when he quit Avaya, and then he would change the DADMIN password. He testified that the practice was a "routine thing" that TLI did, and that it ensured that "nobody other than [TLI could] access that [system] using the DADMIN login." (J.A. 3055.) One TLI employee testified that she was instructed to tell customers who were cancelling a contract with Avaya to "change the line that they had in place" and to "change a password," all "so that Avaya couldn't access the system." (J.A. 2463.)
All of the common law claims at issue have as an element that Avaya establish actual damages resulting from TLI's unlawful activity. At trial, Avaya presented evidence of several avenues through which TLI's alleged misappropriation of maintenance access caused it financial harm.
First, Avaya lost license revenue when TLI provided the misappropriated access to its customers, who would otherwise have had to license access from Avaya. Scott Graham testified that TLI provided customers with logins that went beyond the base customer logins. Douglas Graham testified to a specific instance in which TLI provided a high-level password to a client so that the client would "not have to pay Avaya for MSPs." (J.A. 2720.) Shelby testified that TLI would "tell prospective customers that they did not need to pay for MSPs if they were to become a TLI maintenance customer," "because [TLI] had another method to gain access." (J.A. 3033.)
Second, TLI would itself sell passwords to customers, as was established by Douglas Graham's testimony. He described how TLI charged "setup fees" for customers who needed a new password. (J.A. 2750.) Also, "[t]here was a time where [TLI] would charge customers if [TLI] had to
Third, and most importantly, the allegedly misappropriated access enabled TLI to compete directly with Avaya for maintenance customers, costing Avaya profit in its high-margin maintenance business. Scott Graham testified that, from 2001 on, TLI competed with Avaya for maintenance dollars. Douglas Graham acknowledged that, since that time, TLI "marketed ... its own maintenance, to existing Avaya maintenance customers," and he identified one customer in particular that TLI "took over" from Avaya. (J.A. 2704-05.) Shelby acknowledged that TLI "targeted PBX owners with existing maintenance contracts because they were the ones ... who were most likely to spend money on PBX maintenance." (J.A. 2983.) He also stated that, of those existing maintenance contracts, "[t]he vast majority were with Avaya." (J.A. 2983.)
Avaya presented evidence that TLI's ability to compete for that business depended on the maintenance access that Avaya contends was misappropriated. Scott Graham agreed that "unless [TLI] could access the maintenance commands built into the software, [it] couldn't ... do the maintenance." (J.A. 2385.) He also stated that "[s]ome of the services" offered by TLI for the PBX maintenance at issue "do require the maintenance commands." (J.A. 2294.) And he acknowledged that "generally" the commands at issue "can't be executed by a customer level login with no MSPs," hence requiring a higher-level login of the type that was gained by the various means just described. (J.A. 2294.)
The competition for business was especially costly to Avaya because maintenance was a major driver of the profits from its PBX and PDS systems.
Moreover, if the jury credited Avaya's case, it would have been able to apportion damages to different conduct, because it had evidence of TLI's total maintenance earnings and the proportion of maintenance attributable to each form of allegedly unlawful access. Avaya's accounting expert testified that, depending on which profit model was believed (the plaintiff's or the defendant's), TLI made between $20,260,092 and $31,160,190 from its maintenance of Avaya PBX systems between 2003 and 2010. TLI's own analysis concluded that its maintenance services were based on logins procured in the following proportions: 8% was "obtained from Avaya when TLI was a Business Partner" (J.A. 2423); 1% was using "a well-known Business Partner password" (id.); 5% was based on deceptive requests from other Business Partners; 24% was "obtained through Mr. Creswick" (J.A. 2424); 28% was "using a login that the customer had provided it access to" (id.); 17% was obtained through a "default login or password" (id.); and 16% was "obtained internally," including "through use of the known key with Mr. Hall" and TLI's internally-developed cracking method (id.). If the jury found each of those courses of conduct to be unlawful, the total would account for 99% of the profit that TLI garnered from its Avaya PBX maintenance business. Even limiting the analysis to just the more obviously problematic conduct — deceptive log-in requests, hacking and cracking, and using passwords TLI gained as a Business Partner — it accounts for 53% of TLI's business.
With all the foregoing considerations taken together, we conclude that Avaya presented substantial evidence that, but for TLI's competition, made possible only by its alleged theft of proprietary information, Avaya would have received a significant portion of the money TLI's clients spent on maintenance. Further, it would have been feasible for the jury to attribute particular losses to particular conduct.
In granting judgment as a matter of law to TLI on Avaya's common law claims, the District Court largely relied on its ruling that Avaya's contracts with its equipment customers entitled those customers to give TLI access to their systems to perform maintenance. The District Court ruled that, as a matter of law, "Avaya failed to prove the software licensing agreements entered into by TLI's 470 customers upon purchasing their PBXs prohibited them from allowing TLI[] to access the ODMCs on their systems." (J.A. 201.) Because that threshold legal determination was so central to the rest of the District Court's analysis, we turn to considering whether it was correct.
There is no dispute that New Jersey law governs this issue, according to the choice of law provision in the customer contracts, and under New Jersey law, "discerning contractual intent is a question of fact unless the provisions of a contract are
Two sets of license agreements are in dispute, those before and those after 2007. Each is the subject of a distinct question. For the pre-2007 agreements, the question is whether it was ambiguous that they permitted licensees — i.e., Avaya customers — to provide access to ISPs. The post-2007 agreements unambiguously barred giving such access, but it is disputed whether Avaya's customers actually entered into those agreements. We conclude that, for both sets of agreements, Avaya presented sufficient evidence to at least create disputes of material fact, so that those questions should have been answered by the jury, not the Court.
In ruling that PBX license agreements unambiguously gave purchasers a right to use maintenance commands and to provide access to third parties, the District Court relied on language from the "Purchase/Service Agreement." The Court's conclusion was based on a provision in "[l]icensing agreements used from 1990 to 2003," which "granted the purchaser `a personal, non-transferable and non-exclusive right to use ... all software and related documentation furnished under this agreement.'" (J.A. 204 (quoting license agreement, an example of which is at J.A. 5856).) In the District Court's reading, that language gave Avaya PBX customers a "personal ... right" to use MSPs, which the Court viewed as "software ... furnished under this agreement." In the Court's view, that right to use MSPs extended to the customer's maintenance provider, whether an employee or an independent contractor such as TLI.
Avaya challenges the District Court's interpretation of those agreements, arguing that the MSPs required to perform maintenance were not in fact "furnished under" the Purchase/Service Agreement, so that customers did not have a "right to use" them. (Opening Br. at 30.) Instead, MSPs were "licensed separately through an MSP Addendum ... or Maintenance Assist agreement." (Id.) "Avaya delivered new equipment with MSPs turned off, enabled them only if customers signed a separate ... agreement, and disabled them if that agreement expired." (Id.) Although customers could maintain their PBX systems without MSPs, it was "just not as efficient" to do so without the remote access that MSPs allowed (J.A.
We do not need to answer who has the better reading of the contracts because, at a minimum, they are ambiguous, and the District Court erred in ruling that Avaya's reading is untenable. MSPs may have been embedded in the software given to customers, but customers' ability to access them required a separate purchase from Avaya. If the District Court's interpretation were correct, then any time a customer downloaded a piece of software that had components requiring additional payment and permissions, courts would treat the entire software and all its components as having been "furnished" to the customer in the original purchase. That is questionable, and the contrary interpretation is, at the very least, plausible. Moreover, given that Avaya's business model was dependent on selling base equipment and then licensing and enabling additional features such as MSPs, the conclusion that those features were unambiguously meant to be "furnished" in the base purchase is far from clear. As Avaya points out, "[h]undreds of self-maintenance customers paid Avaya for... access commands," which would "make no sense if the Purchase/Service Agreements already entitled customers" to them. (Opening Br. at 32.) Avaya, its customers, and even TLI did not read the agreements that way before the lawsuit, and the District Court erred in declaring that the terms were unambiguously contrary to all the parties' understandings.
Avaya also notes that in 1999, the agreements were modified to include a provision that a customer "will not enable or attempt to permit any third party to enable software features or capacity (e.g. additional storage hours, ports, or mailboxes) which Avaya licenses as separate products without Avaya's prior written consent." (J.A. 205 n.24.) Based on that language, Avaya argues that customers were barred from allowing an ISP to enable features, such as MSPs, without Avaya's consent. The District Court, however, did not consider that provision to apply to MSPs. It read the list of enumerated examples — "storage hours, ports ..., and voice mailboxes" — to be "clearly incongruous" with MSPs. (Id.) Accordingly, the Court ruled that MSPs were unambiguously not a "feature[] or capacity" subject to the provision's restrictions.
For much the same reasons that we disagree with the District Court's construction of the "furnished under" language, we also conclude that it was improper to determine that terms "features or capacit[ies]" were unambiguous and did not apply to MSPs. Storage hours, additional ports, and mailboxes are some examples of the add-ons that Avaya licensed separately, but MSPs and ODMCs that provided remote maintenance access might rationally be viewed by a jury as being just as much "features" that enhance a customer's use of a PBX system.
Having resolved that the District Court erred in construing the pre-2007 customer contracts to be unambiguously contrary to Avaya's interpretation, we turn to the post-2007 agreements.
Avaya did present sufficient evidence to establish a dispute of material fact, which should have gone to the jury. The form agreement itself was in evidence, and an Avaya employee testified that the standard form agreements as of 2008 included the specific reference restricting use of MSPs. That employee also explained that the forms were crafted by a "forms committee" that ensured that uniform terms and conditions were "incorporated into the templates," which were then incorporated into "procedures under which [Avaya] used form agreement[s]" for PBX equipment, software, and maintenance sales. (J.A. 2615.) Given the evidence of Avaya's centralized form-drafting procedure, an example of an actual prototypical form, and examples of earlier generations of forms that were in fact signed by customers, a jury could have reasonably found that the post-2007 form agreements were in fact reflective of PBX purchasers' license obligations. It was thus improper for the District Court to resolve the question as a matter of law rather than leave it to the jury.
We now turn to the specific claims that Avaya asks us to revive. We first consider
As a federal court sitting in diversity, and as is undisputed by the parties, we are obligated to apply New Jersey's law to the tort claims. See Lorenzo v. Pub. Serv. Coordinated Transp., 283 F.2d 947, 948 (3d Cir. 1960) (per curiam). In Printing Mart-Morristown v. Sharp Electronics Corp., the Supreme Court of New Jersey held that, in a claim of tortious interference with prospective business advantage, "[w]hat is actionable is `[t]he luring away, by devious, improper and unrighteous means, of the customer of another.'" 116 N.J. 739, 563 A.2d 31, 36 (1989) (quoting Louis Kamm, Inc. v. Flink, 113 N.J.L. 582, 175 A. 62, 66 (N.J. 1934)). To prevail on such a claim, Avaya "was required to show [1] that it had a reasonable expectation of economic advantage, [2] which was lost as a direct result of [TLI'C's] malicious interference, and [3] that it suffered losses thereby." Ideal Dairy Farms, Inc. v. Farmland Dairy Farms, Inc., 282 N.J.Super. 140,659 A.2d 904, 932 (N.J. Super. Ct. App. Div. 1995) (citation omitted).
In terms of the first element — protectable economic expectations — the Supreme Court of New Jersey has held that "[i]t is not necessary that the prospective relation be expected to be reduced to a formal, binding contract," and that such prospective relations include "the opportunity of selling or buying land or chattels or services, and any other relations leading to potentially profitable contracts." Printing Mart, 563 A.2d at 39 (quoting Restatement (Second) of Torts § 766B cmt. c (1979)). Courts have found "a reasonable expectation of economic gain in as slight an interest as prospective public sales." Id. at 38 (collecting cases).
Protectable economic expectations can arise from both existing and potential customers. "Tortious interference developed under common law to protect parties to an existing or prospective contractual relationship from outside interference." Id. at 38 (emphasis added) (citation omitted). Satisfaction of the first element does not turn on whether the customer is characterized as current or prospective, but rather whether the facts of the case "giv[e] rise to some `reasonable expectation of economic advantage.'" Id. at 37 (quoting Harris v. Perl, 41 N.J. 455,197 A.2d 359, 363 (1964)).
In Lamorte Burns & Co. v. Walters, the Supreme Court of New Jersey held that the "taking of plaintiff's confidential and proprietary property and then using it effectively to target plaintiff['s] clients, is contrary to the notion of free competition that is fair." 167 N.J. 285, 770 A.2d 1158, 1172 (2001). In that case, two of Lamorte's employees collected information on its clients with the purpose of using it to start their own business in direct competition with Lamorte. Id. at 1162. The court held that such conduct was sufficient to make out a claim of tortious interference, so that the targeting of a company's current clients was sufficient to ground a tortious interference claim. Id. at 1172.
For a plaintiff to establish the third element, loss and causation, there must be "proof that if there had been no interference there was a reasonable probability that the victim of the interference would have received the anticipated economic benefits." Printing Mart, 563 A.2d at 41 (quoting Leslie Blau Co. v. Alfieri, 157 N.J.Super. 173, 384 A.2d 859, 865 (N.J. Super. Ct. App. Div. 1978)). As the Appellate Division of the New Jersey Superior Court has explained, "[i]t is sufficient that plaintiff prove facts which, in themselves or by the inferences which may be legitimately drawn therefrom, would support a finding that, except for the tortious interference by the defendant with the plaintiff's business relationship with [another party], plaintiff would have consummated the sale and made a profit." McCue v. Deppert, 21 N.J.Super. 591, 91 A.2d 503, 505-06 (N.J. Super. Ct. App. Div. 1952).
The District Court here decided that TLI's access was not itself wrongful and that, therefore, Avaya's tortious interference claim must fail. That conclusion rested on two propositions: first, that Avaya had previously allowed TLI to provide maintenance, and, second, that "customers' licensing agreements specifically allow[ed] for third-party service providers." (J.A. 226.) Both those propositions are problematic in ways that undermine the District Court's decision.
As to the first point, the District Court was wrong to conclude that TLI was entitled to access ODMCs merely because it had been allowed to do so while it was an Avaya Business Partner. Of course TLI was permitted access when it was a contractual partner of Avaya's, but the District Court provided no rationale to explain why that access survived the termination of that relationship. By close analogy, former employees in Lamorte were entitled to use their employer's proprietary customer information while they were working for that employer, but they were not entitled to use that information when they
As to the second point, we have already explained in detail why the District Court erred in concluding that Avaya customers were unambiguously entitled to give TLI remote access to perform maintenance. Even if the District Court were correct, however, that would not immunize TLI from a tortious interference claim when it comes to stealing away customers who had service contracts with Avaya. In Wear-Ever Aluminum, Inc. v. Townecraft Industries, Inc., the Chancery Division of the New Jersey Superior Court emphasized that, even though the plaintiff company's contracts with its employees were terminable at will, that did not permit a third party to interfere with the employment relationship. 75 N.J.Super. 135, 182 A.2d 387, 393 (N.J.Super.Ct.Ch.Div. 1962). Even if the contract in question permits an act eventually taken by a customer, "a stranger to the contract may not exercise his will in substitution for the will of either of the parties to the contract." Id. Moreover, even if TLI could have lawfully obtained access to MSPs and ODMCs from Avaya's customers, that did not insulate it from tort liability for the methods it actually used to access the maintenance commands. If a homeowner gives a neighbor permission to borrow tools, the neighbor is not thereby insulated from a trespass suit if he chooses to break into the garage to get them.
Having rejected the District Court's assessment of those two threshold matters, we turn next to its application of a multifactor test for tortious interference from the Restatement (Second) of Torts § 767 (1979).
The factors in that test are laden with subjective value judgments that will rarely be answerable as a matter of law. Nonetheless, and in the face of the already-recounted unflattering evidence against TLI, the District Court concluded that "[e]very single factor strongly indicates that [TLI's] conduct d[id] not rise to the level ... the law proscribes." (J.A. 227.) We disagree.
Second, the Court considered the nature of the protected interest, and it observed — without further comment or citation to authority — that "the law does not protect as forcefully a firm's economic interest in possible, future customers as it does interests in contracting parties." (J.A. 228.) Whether or not that is true, TLI was in fact interfering with Avaya's relationships with then-existing maintenance customers. There was nothing speculative, or under-whelming, about that economic interest.
Third, in considering society's interest, the District Court found that TLI's conduct "brought greater competition to the market and challenged widespread and vexatious threats of litigation." (J.A. 228.) We do not believe the District Court was in a position to weigh the relative social merits of TLI's conduct with Avaya's proprietary interests in its software and its legitimate business expectations with its maintenance customers. That is exactly the kind of factual and ethical determination meant for the jury rather than the Court.
Fourth, in considering the proximity of TLI's conduct to the interference, the District Court emphasized that TLI's "interference was far removed from their allegedly improper conduct" because it only accessed the ODMCs after the customer in question had left Avaya. (J.A. 229.) But the customers never would have left Avaya if TLI had not been able to promise ODMC access. The allegedly tortious conduct that enabled that access was therefore the sine qua non of TLI's business.
Finally, in considering the relations of the parties, the District Court determined that that factor "counsels for a finding of lawful conduct, as a mere four months after it signed the modified Avaya One agreement, and not long after originally encouraging TLI to invest in its maintenance business, Avaya cancelled the contract, thereby jeopardizing [TLI's] monetary investment and business model." (J.A. 229-30.) That TLI chose to compete against Avaya rather than accept the standard Business Partner arrangement — and therefore prompted Avaya to terminate their relationship — cannot insulate TLI's allegedly tortious conduct. Avaya's supposed bad acts and predatory conduct may end up supporting TLI's antitrust counterclaims, but the District Court provided no authority to suggest that those acts permitted TLI to engage in hacking or fraud in retaliation for its termination as a Business Partner.
A straightforward application of New Jersey's test for tortious interference with prospective economic advantage leads, we believe, to the conclusion that Avaya presented sufficient evidence from which a reasonable jury could conclude that TLI tortiously interfered with Avaya's prospective business advantage. Avaya had a reasonable expectation of ongoing business with its own customers, who are the
In sum, the District Court improperly made inferences in favor of the moving party, TLI, as to both contract interpretation and tortious interference with prospective economic advantage, and it failed to recognize the sufficiency of the evidence Avaya had adduced. If the jury had been allowed to draw its own inferences from the evidence, it may have agreed with the District Court that TLI's conduct was somehow permitted by Avaya's customer contracts. But the jury may very well have determined that TLI's actions were not shielded by the customer contracts and were instead unethical, against the public interest, and ultimately tortious. We express no opinion on the correct answer in this dispute, holding only that the matter was for the jury to decide.
Next, we consider Avaya's unfair competition claim. New Jersey law is not precise about what constitutes unfair competition. But while "[t]he amorphous nature of unfair competition makes for an unevenly developed and difficult area of jurisprudence," at heart it "seeks to espouse some baseline level of business fairness." Coast Cities Truck Sales, Inc. v. Navistar Int'l Transp. Co., 912 F.Supp. 747, 786 (D.N.J. 1995) (interpreting New Jersey law) (citations omitted).
In New Jersey, unfair competition is commonly invoked for claims similar to misappropriation of trade secrets or commercial
What constitutes misappropriation is somewhat vague. "It is not possible to formulate a comprehensive list of the conduct that constitutes `improper' means of acquiring a trade secret." Restatement (Third) of Unfair Competition § 43 cmt c. (1995). Generally, however, "`[i]mproper' means ... include theft, fraud, unauthorized interception of communications, inducement of or knowing participation in a breach of confidence, and other means either wrongful in themselves or wrongful under the circumstances of the case." Id. § 43. Even a legitimate business purpose will not excuse otherwise tortious conduct if the means used are improper. See Lamorte, 770 A.2d at 1171. As another court has put it,
Torsiello, 955 F.Supp.2d at 314 (internal quotation marks and citations omitted).
For a plaintiff to establish damages, New Jersey law allows recovery under a disgorgement theory in cases of unfair competition. See Castrol, Inc. v. Pennzoil Quaker State Co., 169 F.Supp.2d 332, 345-46 (D.N.J. 2001) (ruling that the plaintiff in that case was "entitled to disgorgement of [the defendant's] profits" for its "claims under the New Jersey Common Law of Unfair Competition....").
We hold that Avaya presented sufficient evidence that a reasonable jury could have concluded that there was unfair competition under a misappropriation theory. The District Court's grant of judgment as a matter of law was thus erroneous. TLI gained access to proprietary information — namely ODMC login passwords — using hacking, the solicitation of disloyal former Avaya employees, and information learned during TLI's own time as an Avaya Business Partner. A jury could have determined that TLI's methods of gaining Avaya's proprietary information constituted misappropriation. Likewise, Avaya could show damages under either a lost profit theory or a disgorgement theory. Given that such a large proportion of TLI's well-accounted profits resulted from conduct that Avaya alleges was rooted in the misappropriation or proprietary information, the disgorgement theory may have been simple for the jury to apply to determine damages.
We next consider Avaya's common law fraud claim. Under New Jersey law,
Liberty Mut. Ins. Co. v. Land, 186 N.J. 163, 892 A.2d 1240, 1247 (2006). A jury must find fraud by clear and convincing evidence, a standard which demands "evidence so clear, direct and weighty and convincing as to enable the factfinder to come to a clear conviction, without hesitancy, of the precise facts in issue." N.J. Div. of Youth & Family Servs. v. I.S., 202 N.J. 145, 996 A.2d 986, 1000 (2010) (quoting In re Seaman, 133 N.J. 67, 627 A.2d 106, 110 (1993)). Proof of damages can be supported by a jury inference that a defendant's actions "reduced the plaintiff's profits, although by an uncertain amount." Nappe v. Anschelewitz, Barr, Ansell & Bonello, 97 N.J. 37, 477 A.2d 1224, 1233 (1984).
Based on the trial record, there was ample evidence from which a reasonable jury could have found for Avaya on the fraud claim. The evidence for the first element — fraudulent conduct — is straightforward. TLI had its customers fill out forms requesting login permissions but instructed those customers to leave the "Business Partner" component of the form blank, to be filled in later by TLI. TLI would then insert the name of an authorized Business Partner so that Avaya would provide the requested login information. TLI therefore willfully misrepresented who was making the request for the login credentials and acknowledged the materiality of that misrepresentation by confirming that it did not want Avaya to find out what they were doing, because Avaya would otherwise not provide the logins.
The evidence also satisfies the second element, knowledge, in that it supports a conclusion that TLI knew it was operating under false pretenses. The form at issue, by its very language, is a request from a customer to Avaya for delivery of information to a specifically named Business Partner. The form provided that the login Avaya furnished would allow "the Business Partner listed above ... to perform additions, changes, moves and/or upgrades." (J.A. 5313.) Yet TLI submitted the form knowing full well that the "Business Partner
As to the third element, the reasonableness of relying on the representation, TLI filled out the form with the name and information of an existing, authorized Business Partner. A jury could find that Avaya acted reasonably by providing access information when it believed such access was being delivered to a provider with whom it had an existing contract.
The final element, damages, is what most concerned the District Court. As established above, however, Avaya presented strong evidence — sufficient for the clear and convincing standard — that every dollar made by TLI in its maintenance of Avaya products was necessarily to some degree at Avaya's expense. A jury could have reasonably concluded that each time TLI used a fraudulently obtained login to win or keep a maintenance contract, that cost Avaya profit. As the Supreme Court of New Jersey confirmed in Nappe, such an inference is enough to sustain a finding of damages, even where the exact amount may be uncertain. 477 A.2d at 1233.
Avaya thus presented sufficient evidence to send the fraud claim to the jury, based on TLI's deceptive login requests.
Finally, we turn to Avaya's breach of contract claims against TLI. As developed at trial, Avaya contended that TLI breached two contracts: the 1998 dealer agreement between Lucent and TLI, and the 2003 Avaya One agreement that was effective until TLI's participation as a Business Partner was terminated.
The 1998 contract's choice of law provision provides that it is governed by Delaware law. In Delaware, the elements of a breach of contract claim are: "[1] the existence of the contract, whether express or implied; [2] the breach of an obligation imposed by that contract; and [3] the resultant damage to the plaintiff." VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003).
The signature page of the 1998 agreement evidences a contract between Lucent (Avaya's predecessor) and TLI (referred to in the contract as the "Dealer"), satisfying the first element of the cause of action. Section 2.8 of the 1998 agreement provides, in part, as follows:
(J.A. 5905 (emphases added).)
Avaya claims that TLI breached that "best efforts" clause by marketing and selling maintenance services to existing Lucent/Avaya customers. At trial, Douglas Graham admitted that TLI "marketed ... to existing Avaya maintenance customers" in 2001, while the firm "was operating under the terms of the 1998 Lucent dealer agreement." (J.A. 2704.) He also acknowledged a particular client to whom TLI had "marketed ... maintenance to replace existing Avaya maintenance." (J.A. 2705.)
In spite of what is arguably a clear violation of § 2.8 of the agreement, the District Court concluded that TLI's conduct "does not constitute a breach" because the Court interpreted § 2.8 to prohibit only the marketing of "Lucent Products," a defined term that did not include maintenance. (J.A. 212.) That, however, is an overly cramped interpretation of the provision. Although a jury could perhaps import the "Lucent Products" language into the "best efforts" clause, that clause could just as easily support an interpretation that generally bars the marketing of maintenance to Lucent/Avaya customers. Indeed, the best efforts clause specifically prohibits marketing to Lucent/Avaya customers "with existing maintenance contracts ... or to any entity that is considering a proposal from Lucent for ... maintenance services," which strongly suggests that maintenance was part of the prohibition. (J.A. 5905.) The District Court therefore erred in assuming that "no reasonable jury" could have found a breach of § 2.8. (J.A. 213.)
As to the final element, damages, we conclude that the same analysis for the earlier causes of action would have supported a jury finding that any profit that TLI gained by its breach of contract must have come, at least in part, at Avaya's expense. Therefore, we conclude that a jury could reasonably have found all three elements of a breach of contract, and judgment as a matter of law was not proper.
The choice of law clause in the Avaya One agreement, § 18.1, provides that New York law governs. Under New York law, the elements of a breach of contract claim are similar to Delaware's: "[1] the existence of a contract, [2] the plaintiff's performance pursuant to the contract, [3] the defendant's breach of his or her contractual obligations, and [4] damages resulting from the breach." Neckles Builders, Inc. v. Turner, 117 A.D.3d 923, 986 N.Y.S.2d 494, 496 (2014).
The signature page of the Avaya One agreement evidences a contract between Avaya and TLI, satisfying the first element. Section 7.3 of the Avaya One agreement provides, in part, as follows:
The agreement also included, at § 4.1, a general morality clause that bound TLI for the duration of the agreement:
(J.A. 6951 (emphases added).)
Although Avaya's performance — the second element of a breach of contract claim — was not part of the District Court's analysis, the record provides sufficient evidence for a jury to conclude that Avaya did perform. TLI was operating as a Business Partner under the Avaya One agreement from its execution until the business relationship between the parties was terminated. Douglas Graham acknowledged that the relationship was "mutually beneficial" and that, "[a]s an Avaya Business Partner... TLI was authorized by Avaya to resell certain Avaya products and services." (J.A. 2699.) Indeed, Avaya equipment was "by far [the] leading manufacturer product that [TLI] sold." (J.A. 2700.)
The District Court's analysis focused on the third element — the actual breach of a contractual obligation. Avaya's claim for breach of § 7.3 is straightforward. Insofar as MSPs and DADMINs were "licensed Materials which inherently include[d] the capability of being remotely enabled," a jury could find that TLI breached its contractual obligations when it "enable[d] ... or assist[ed] any third party to enable, such features or capabilities without Avaya's express written permission." (J.A. 6953.) Even though the District Court acknowledged that the meaning of those terms was "less than perfectly clear," it nonetheless concluded that the term "features and capabilities" unambiguously excluded MSPs and DADMIN logins. (J.A. 218-19.) Yet the activation of MSPs and use of DADMIN logins allowed customers to perform remote maintenance, for which customers were willing to pay additional licensing fees, suggesting that the customers considered them to be features or capabilities. Even if a reasonable jury could have agreed with the District Court's reading of the contract, there was at least sufficient ambiguity in the Avaya One agreement that the jury could have seen it the other way and agreed with Avaya that MSPs and DADMIN logins are "features and capabilities," the unauthorized activation of which by TLI amounted to a breach of contractual obligations.
As to the morality clause in § 4.1, Avaya contended that TLI breached its obligations when it began its allegedly unethical business practices during the term of the contract, in preparation for soliciting maintenance customers away from Avaya. Those activities included hacking logins and enlisting Business Partners to obtain ODMC access. As early as May 2003, while still bound by the Avaya One agreement, TLI solicited Creswick to "pull ... password[s]." (J.A. 2281.) In September, during the contract term, TLI began to seek a "discreet Avaya Business Partner ... [to]
Analysis of damages — the final element of the cause of action — was not central to the District Court's grant of judgment as a matter of law. However, the analysis for damages is as straightforward as for the tort claims, because PBX and PDS maintenance business gained by TLI as a result of its breach must have come, to some extent, at Avaya's expense.
Based on the foregoing analysis, we conclude that the District Court's grant of judgment as a matter of law was erroneous for the four affirmative common law claims that Avaya addresses in this appeal.
Avaya, of course, argues that the error did spill over into the antitrust verdict. It presents three bases for concluding that the judgment as a matter of law prejudiced the jury's consideration of the antitrust counterclaims: first, it undermined Avaya's defense that its responses to TLI's conduct were reasonable and pro-competitive; second, it lent false credence to TLI's assertion that Avaya knew there was no truth to its letters (the so-called "FUD" letters described above) telling customers that using ISPs would be unlawful; and third, it led the District Court to wrongly restrict Avaya's cross-examinations of TLI witnesses. We agree that those problems, all resulting from the erroneous grant of judgment as a matter of law, did indeed likely affect the antitrust verdict.
All of the antitrust counterclaims against Avaya were presented under the "rule of reason," which gives effect to the Supreme Court's instruction that the Sherman Act "only means to declare illegal any [restraint] which is in unreasonable restraint of trade." United States v. Trans-Missouri Freight Ass'n, 166 U.S. 290, 327, 17 S.Ct. 540, 41 L.Ed. 1007 (1897) (emphasis added). "Under this rule, the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition." Cont'l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977). Therefore, limitations on Avaya's ability to explain the reasonableness of its actions had the potential to harm its defense.
The District Court's instructions in light of its erroneous Rule 50 decision on the common law claims may well have affected the jury's assessment of the reasonableness and purpose of Avaya's actions. The jury was prevented from deciding the antitrust claims and the common law claims in concert and from evaluating whether TLI's allegedly tortious conduct provided a legitimate business justification for the things Avaya's did. Specifically, the Court instructed the jury that
(J.A. 4739 (emphasis added).)
Not only did the District Court so instruct the jury, but TLI itself repeatedly emphasized that instruction in its closing argument in order to undercut Avaya's defense that there was a reasonable business justification for its actions. Consider this passage from TLI's summation:
(J.A. 4732.)
The District Court's erroneous instruction, combined with TLI's repeated hammering of the point, highlights how important the lawfulness or unlawfulness of TLI's actions could have been to the jury's deliberations. Avaya's entire affirmative case alleged that TLI's conduct was tortious and in breach of contractual obligations. If true, Avaya's defensive response could be seen as substantially more reasonable, and its intentions substantially less predatory. By instructing the jury that it could not consider TLI's conduct to be unlawful — an instruction premised on the flawed grant of judgment as a matter of law — the District Court improperly prevented the jury from weighing Avaya's defenses in light of the rule of reason standard for both the § 1 and § 2 Sherman Act claims.
Beyond the general infection of the jury's consideration of the reasonableness of Avaya's actions, the District Court's grant of judgment as a matter of law also undercut a specific portion of Avaya's antitrust defense.
Among the evidence put forward by TLI to prove predatory conduct were the FUD letters. Those letters told customers that MSPs "are not available to customers of Unauthorized Service Providers," that
Whether those letters could constitute monopolistic conduct turned on whether they were true. As the District Court instructed the jury, "the law does not allow [TLI's] injury to be based on ... Avaya's dissemination of truthful statements." (J.A. 621.) The jury's assessment of the letters' truthfulness was surely influenced by the District Court's instruction that TLI's "use of and access to such maintenance software may not be considered by you as unlawful" and that "[t]o the extent Avaya has alleged that TLI[] engaged in illegal or unlawful conduct, in connection with its business operations, such allegations should be disregarded." (J.A. 615.)
That instruction all but told the jury that the letters were false in their allegation that TLI's access was unlawful. TLI's trial counsel then connected those closely adjacent dots when he took advantage of the instruction to argue to the jury that Avaya's FUD letters were untruthful and therefore monopolistic:
(J.A. 4736.)
Avaya also contends that the District Court's grant of judgment as a matter of law hindered its ability to present evidence in its defense against the antitrust claims. It points to two examples in particular.
First, during Avaya's cross-examination of TLI's CEO, Avaya's counsel asked about how TLI got access to Avaya brand PBX systems. At a sidebar, the District Court told counsel that, "[i]f you're trying to tell the jury they're illegal, I have a problem with that." (J.A. 4440.) The Court did allow the line of questions but under the restriction that counsel could not imply that TLI's actions were unlawful.
Second, when Avaya was examining its own economics expert, it presented evidence that restrictions it placed on its Business Partners actually ended up "clearing the field" in a way that advantaged
Those specific examples speak to a broader point. They highlight that, if Avaya had been able to argue that TLI's conduct was unlawful, that argument would likely have been a key and repeated part of its defense to the antitrust claims. Each argument by TLI's counsel to the contrary could have been met with a forceful response. Avaya's claim that it was "hamstrung in its ability to justify its supposedly anticompetitive conduct" is therefore a fair and accurate one. (Third Step Br. at 19.)
Having concluded that the judgment as a matter of law on Avaya's common law claims was an error, and that that error likely affected the jury's consideration of the antitrust claims, we must now consider whether that effect was harmless. "An error will be deemed harmless only if it is highly probable that the error did not affect the outcome of the case," and, in that same vein, an error cannot be said to be harmless unless there is a high probability "that the result would have been the same had the jury been correctly instructed." Hill v. Reederei F. Laeisz G.M.B.H., Rostock, 435 F.3d 404, 411 (3d Cir. 2006) (internal quotation marks omitted). We have held, when interpreting this "highly probable" standard, that an error is not harmless if it could have "reasonably ... affected the outcome of the trial," id. at 411, or if the jury "quite possibly" relied on an erroneous instruction, see Hirst v. Inverness Hotel Corp., 544 F.3d 221, 228 (3d Cir. 2008).
In this case, we cannot say that it was "highly probable" that the District Court's erroneous Rule 50 decision and resulting erroneous jury instruction about the lawfulness of TLI's conduct did not affect the outcome of the antitrust claims.
Avaya does not simply seek vacatur, however. It argues that we should reverse the judgment and hold that it is entitled to judgment on the antitrust counterclaims because TLI adduced insufficient evidence to support them. We begin our analysis of that argument by reviewing how the antitrust laws treat product tying. We then turn to Avaya's claim-specific contentions and conclude that the PBX attempted monopolization counterclaim is legally invalid for PBXs sold after 2008 and that the PDS tying counterclaim must fail as a matter of law.
TLI's antitrust counterclaims against Avaya are based on an allegedly unlawful use of tying to restrain and monopolize the market for PBX and PDS maintenance services. "[A] tying arrangement may be defined as an agreement by a party to sell one product [or service] but only on the condition that the buyer also purchases a different (or tied) product [or service], or at least agrees that he will not purchase that product [or service] from any other supplier." Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958). For a pair of products or services to be distinct, and therefore capable of being tied together, "there must be sufficient consumer demand so that it is efficient for a firm to provide [them] separately." Kodak, 504 U.S. at 462, 112 S.Ct. 2072. Tying can support a Sherman Act claim either under § 1, as an unlawful restraint on trade, or under § 2, as an unlawful act of monopolization or attempted monopolization. See Phillip E. Areeda & Herbert Hovenkamp, Fundamentals of Antitrust Law ("Fundamentals") § 17.01, at 17-13 (4th ed. Supp. 2015); see also 15 U.S.C. §§ 1-2.
Not all ties are illegal, however. To declare otherwise would risk making practically every product the subject of an antitrust suit, because, in theory at least, most any product can be deconstructed into component parts that could be sold separately. For that reason, "[i]t is clear ... that every refusal to sell two products separately cannot be said to restrain competition." Jefferson Par. Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 11, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984) partially abrogated on other grounds by Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28, 126 S.Ct. 1281, 164 L.Ed.2d 26 (2006). Instead,
Id. at 12, 104 S.Ct. 1551. Therefore, "[w]hen ... the seller does not have ... the kind of market power that enables him to force customers to purchase a second, unwanted product in order to obtain the tying product, an antitrust violation can be established only by evidence of an unreasonable restraint on competition in the relevant market." Id. at 17-18, 104 S.Ct. 1551.
In this case, nobody contends that the primary market for PBX and PDS systems is anything other than competitive, or that Avaya's main competitors in that market — large firms such as Cisco, Siemens, and Microsoft — cannot use prices to discipline Avaya in that primary market. As to the primary market, then, TLI's position is not that Avaya's "share of the market is high" or that it "offers a unique product that competitors are not able to offer." Id. at 17, 104 S.Ct. 1551. Rather, TLI has proceeded under a specialized theory of tying developed in a Supreme Court case called Eastman Kodak Company v. Image Technical Services, Inc., 504 U.S. 451, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). Review of the Kodak opinion and our Court's elaboration of its principles is essential, then, because TLI's counterclaims rise or fall based on whether they comport with a Kodak theory of antitrust liability.
Kodak presented the Supreme Court with a situation similar to the one before us, consisting of a primary market for complex durable goods and an aftermarket for maintenance service. Kodak sold photocopier equipment, as well as maintenance service and replacement parts. Id. at 455, 112 S.Ct. 2072. The parts were of proprietary design and were not interchangeable with other manufacturers' parts. Id. at 456-57, 112 S.Ct. 2072. Kodak sold both parts and service, using different contract arrangements to charge different prices to different customers. Id. at 457, 112 S.Ct. 2072. When Kodak attempted to prevent the sale of its parts to independent maintenance service providers —
On ultimate appeal from the district court's grant of summary judgment for Kodak, the Supreme Court ruled that the plaintiffs had put forward a strong enough case to proceed to trial. The Court accepted Kodak's argument that the primary equipment market was competitive, id. at 465 n.10, 112 S.Ct. 2072, but it nonetheless ruled that the plaintiffs could proceed under a § 1 tying theory of antitrust liability. It refused to endorse Kodak's assertion that competition in the primary market would necessarily discipline the maintenance aftermarket, preferring not to adopt "[l]egal presumptions that rest on formalistic distinctions rather than actual market realities." Id. at 466, 112 S.Ct. 2072. Instead, the Court insisted on a context-specific factual analysis of whether "the equipment market does discipline the aftermarkets so that [both] are priced competitively overall, or that any anti-competitive effects of Kodak's behavior are outweighed by its competitive effects." Id. at 486, 112 S.Ct. 2072. "The fact that the equipment market imposes a restraint on prices in the aftermarkets" does not, on its own, "disprove[] the existence of power in those markets." Id. at 471, 112 S.Ct. 2072 (citation omitted).
In explaining how a seller facing a competitive primary equipment market could nonetheless exercise market power in the parts and maintenance aftermarkets, the Court expounded a theory whereby high information and switching costs would allow the seller to exploit customers who had already purchased the equipment and were then "locked in" to the aftermarkets. Id. at 476, 112 S.Ct. 2072. It explained that "[l]ifecycle pricing of complex, durable equipment is difficult and costly," and that the information needed for such lifecycle pricing "is difficult — some of it impossible — to acquire at the time of purchase." Id. at 473, 112 S.Ct. 2072. Because "[a]cquiring the information is expensive[, i]f the costs of service are small relative to the equipment price, ... [consumers] may not find it cost efficient to compile the information." Id. at 474-75, 112 S.Ct. 2072. Additionally, competitors may not provide that information, either because they do not have it themselves or because they may wish to collusively engage in the same behavior with their own customers so that "their interests would [not] be advanced by providing such information to consumers." Id. at 474 & n.21, 112 S.Ct. 2072 (citation omitted). Customers' information limitations could be paired with high switching costs so that
Id. at 476, 112 S.Ct. 2072. In other words, tying liability may exist in an aftermarket where the seller can exploit customers who have already purchased the equipment and cannot easily shift to another brand.
The Supreme Court also posited that the threat of anticompetitive exploitation of aftermarkets in light of high information and switching costs would be particularly severe in cases where the seller could engage in price discrimination, i.e., charging different prices to different types of consumers.
Not only was that theory sufficient to support § 1 liability, the Court also held that it could support § 2 liability for unlawful monopolization. In that analysis, the Court incorporated the § 1 analysis for whether the equipment market and the service and parts aftermarkets were distinct for antitrust purposes. Id. at 481, 112 S.Ct. 2072. It was comfortable with defining a single-brand market as relevant for antitrust purposes as long as such a market was justified by "the choices available to ... equipment owners," as "determined... after a factual inquiry into the `commercial realities' faced by consumers." Id. at 482, 112 S.Ct. 2072 (quoting United States v. Grinnell Corp., 384 U.S. 563, 572, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966)). A successful plaintiff had to prove more, however, to succeed on a § 2 claim, because simply proving monopoly power in the aftermarket was not enough. A § 2 claim additionally requires showing the use of that monopoly power "to foreclose competition, to gain a competitive advantage, or to destroy a competitor." Id. at 482-83, 112 S.Ct. 2072 (quoting United States v. Griffith, 334 U.S. 100, 107, 68 S.Ct. 941, 92 L.Ed. 1236 (1948)). Therefore, in defending against a § 2 claim, the seller has the opportunity to justify its actions so that "[l]iability turns ... on whether `valid business reasons' can explain [its] actions." Id. at 483, 112 S.Ct. 2072 (quoting Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985)). The Court was willing to consider as valid business reasons both controlling inventory costs and ensuring high quality maintenance service, but it did not consider the record in Kodak as sufficient to warrant summary judgment. Id. at 483-86, 112 S.Ct. 2072.
Since Kodak, our Court has had the opportunity to develop that case's theory of antitrust liability, most notably in a pair of cases called Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430 (3d Cir. 1997), and Harrison Aire, Inc. v. Aerostar International, Inc., 423 F.3d 374 (3d Cir. 2005).
In Queen City Pizza, we considered a Kodak-style claim by a group of franchisees against Domino's Pizza, alleging that Domino's had used its monopoly power over the market for franchise rights and
We also emphasized in Queen City Pizza that "[t]he Kodak case arose out of concerns about unilateral changes in Kodak's parts and repairs policies." Id. at 440. Because Kodak's change in policy against independent maintenance providers "was not foreseen at the time of sale, buyers had no ability to calculate these higher costs at the time of purchase and incorporate them into their purchase decision." Id. The Domino's franchisees, on the other hand, "knew that Domino's Pizza retained significant power over their ability to purchase cheaper supplies from alternative sources because that authority was spelled out in ... the ... franchise agreement," so the "franchisees could assess the potential costs and economic risks at the time they signed the franchise agreement." Id. If the franchisees found the contractual requirements "overly burdensome or risky at the time they were proposed, [they] could have purchased a different form of restaurant, or made some alternative investment," id. at 441, so that the transaction was "subjected to competition at the pre-contract stage," id. at 440. We thus characterized Kodak as concerned largely with the threat of unfair surprise for customers in the aftermarket, a threat ameliorated if the aftermarket terms were made clear in a primary market contract.
In evaluating the evidence in Harrison Aire, we cautioned that, although "[o]ne important consideration is whether a unilateral change in aftermarket policy exploits locked-in customers," id. at 383, "an `aftermarket policy change' is not the sine qua non of a Kodak claim," id. at 384. Other factors to consider include "evidence of (1) supracompetitive pricing, (2) [the seller's] dominant share of the relevant aftermarket, (3) significant information costs that prevent[] lifecycle pricing, and (4) high `switching costs' that serve[] to `lock in' [the seller's] aftermarket customers." Id. Applying those factors to the specific circumstances of the Harrison Aire case, we concluded that "[n]either information costs nor a unilateral change in aftermarket policy prevented [the plaintiff] from shopping for competitive lifecycle balloon prices when it purchased the ... balloon at issue." Id. at 384-85. Without "other evidence dissociating competitive conditions in the primary balloon market from conditions in the aftermarket for replacement fabric," it was "clear that [the plaintiff] got precisely the balloon and the aftermarket fabric that it bargained for in the competitive primary market." Id. at 385. Therefore, summary judgment against the monopolization claim was appropriate.
Kodak makes clear that, in certain limited circumstances, a competitive primary market will not insulate a defendant from antitrust liability. But neither that case nor our subsequent case law overturns the more general principle that a plaintiff's theory of antitrust liability must be economically plausible. Thus, in the summary judgment context, "`antitrust law limits the range of permissible inferences' that can be drawn `from ambiguous evidence.'" Harrison Aire, 423 F.3d at 380 (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).
With that in mind, we do not read — and have never read — Kodak to modify the requirement that a plaintiff in a tying case prove that the defendant has market power sufficient "to force a purchaser to do something that he would not do in a competitive market." Jefferson Parish, 466 U.S. at 14, 104 S.Ct. 1551. In general, we expect a vibrant and competitive primary market to discipline and restrain power in related aftermarkets. What Kodak stands for is the principle that there can be some exceptions to that expectation, when a plaintiff can produce a plausible economic theory of market failure, supported by sufficient evidence. In evaluating the issues in this case, we must consider just how broadly that Kodak exception should be read.
A leading antitrust treatise seems to suggest that Kodak should be read as confined to the lock-in situation that was that opinion's focus. As that treatise distills the Kodak analysis: "Kodak could exploit locked-in customers with supracompetitive prices only if it could profitably (1) dispense with sophisticated new customers or (2) could discriminatorily overcharge only those existing customers whose exploitation would not affect new sales." Areeda & Hovenkamp, Fundamentals, supra, § 5.12, at 5-102 (Supp. 2016).
We have not read Kodak quite so narrowly. The Supreme Court emphasized that "[l]egal presumptions that rest on formalistic distinctions rather than actual market realities are generally disfavored in antitrust law" and that antitrust claims should be resolved "on a case-by-case basis, focusing on the particular facts disclosed by the record." Kodak, 504 U.S. at 466-67, 112 S.Ct. 2072 (citations and internal quotation marks omitted) (quoting Maple Flooring Mfrs. Ass'n v. United States, 268 U.S. 563, 579, 45 S.Ct. 578, 69 L.Ed. 1093 (1925)). In Harrison Aire, we declined to read Kodak as applying narrowly to only cases involving "[a]n aftermarket policy change," because Kodak mandated that courts look at "several relevant factors." Harrison Aire, 423 F.3d at 384. The test is more broad: a plaintiff pursuing a Kodak-style claim must present evidence to support a plausible economic explanation that competition in the primary market is "dissociat[ed] ... from conditions in the aftermarket." Id.
Showing exploitation of locked-in customers, as detailed in Kodak, is one way to satisfy that burden, but our own case law prevents us from concluding in the abstract that it is the only way to do so. Therefore, we interpret Kodak as standing for two propositions: (1) that firms operating in a competitive primary market are not thereby categorically insulated from antitrust liability for their conduct in related aftermarkets; and (2) that exploitation of locked-in customers is one theory that courts will recognize to justify such liability. Kodak identified factors to evaluate alleged anticompetitive aftermarket behavior, and it is possible that those factors may support a theory of antitrust liability that is not necessarily predicated on lock-in exploitation. But any such alternative theory must satisfy the more general rule that an antitrust theory needs to "make[] ... economic sense" and be supported by the evidence. Matsushita, 475 U.S. at 587, 106 S.Ct. 1348.
Having laid out the applicable principles of law for Kodak-style tying and monopolization claims, we turn to their application in the two surviving antitrust counterclaims in this case.
Avaya argues that we should reverse the PBX attempted monopolization judgment on two grounds. First, it says that, once it introduced contract language in 2008 that made clear to customers that they would not be able to use ISPs, no Kodak claim could lie as a matter of law. Second, it asserts that, as a matter of law, TLI's
According to Avaya, by May 2008, all purchasers of new PBX systems were on notice that they were contractually barred from using ISPs, so that there could be no antitrust aftermarket for maintenance. It points out that the sales agreement that accompanied PBX systems at that point expressly provided for "[l]icense [r]estrictions" that made it clear to purchasers — sophisticated and unsophisticated alike — that they could not use ISPs for maintenance. (J.A. 7283.) Specifically, § 6.2 of the sales agreement provided that the
(Id.) Even TLI's CEO, Douglas Graham, testified that when Avaya introduced that version of the sales contract for its new PBX systems, it was "making it clear that... part of buying [a PBX] is the customer giving up the ability to access an [ISP]." (J.A. 2746.)
In its post-trial opinion granting TLI's request for an injunction, the District Court endorsed that view, even quoting Graham's language. Accordingly, it limited the injunction against Avaya's restraints on ISPs to cover only those PBX systems purchased prior to May 2008.
We agree that no antitrust liability for a Kodak-style attempted monopolization claim could lie after May 2008 when customers were put on clear notice that purchasing an Avaya PBX precluded use of ISP maintenance. As we explained in Queen City Pizza, when the defendant's power "stems not from the market, but from plaintiffs' contractual agreement," then "no claim will lie." 124 F.3d at 443. By May 2008, PBX customers were on clear notice that Avaya "retained significant power over their ability to purchase cheaper [maintenance] from alternative sources because that authority was spelled out in detail in section [6.2] of the standard [customer] agreement." Id. at 440. If the customers viewed those terms as "overly burdensome ... at the time they were proposed, [they] could have purchased a different [brand] of [PBX]." Id. at 441. Avaya was therefore "subjected to competition at the pre-contract stage" in the primary market, id. at 440, which was undeniably competitive. Absent a new and compelling economic theory to justify antitrust liability that reaches beyond Kodak — which TLI has not provided — Avaya cannot be liable under the antitrust laws for enforcing a transparent contract freely agreed to in a competitive market.
The Supreme Court has established that
Grinnell, 384 U.S. at 570-71, 86 S.Ct. 1698. The purpose of that two-element test for monopolization is to avoid imposing liability when a firm has come to possess a dominant market position in procompetitive fashion by simply out-competing its rivals with a superior product or service. Therefore, even a firm with dominant market share will be liable only when its actions are predatory or anticompetitive in nature. More specifically, a § 2 claim will lie only when "(1) ... the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power." Spectrum Sports, 506 U.S. at 456, 113 S.Ct. 884. Phrased another way, the would-be monopolist must make "use of monopoly power `to foreclose competition, to gain a competitive advantage, or to destroy a competitor.'" Kodak, 504 U.S. at 482-83, 112 S.Ct. 2072 (quoting Griffith, 334 U.S. at 107, 68 S.Ct. 941).
Avaya argues that, as a matter of law, there was insufficient evidence of predatory conduct to sustain the conclusion that the second element of a § 2 claim had been proven. According to Avaya, the allegedly predatory acts — e.g., terminating dealings with TLI; sending "fear, doubt, and uncertainty" letters to TLI's maintenance customers; and trespassing and spying on TLI's customers — cannot support a verdict of antitrust liability. We find some merit to Avaya's arguments that those individual acts may be justifiable and not anticompetitive, but we need not resolve this particular argument because it misses the forest for the trees.
It is true that, in a traditional § 2 claim, a plaintiff would have to point to specific, egregious conduct that evinced a predatory motivation and a specific intent to monopolize. See Spectrum Sports, 506 U.S. at 456, 113 S.Ct. 884. But in the context of a Kodak claim, any proof that the primary market and the aftermarket are separate for antitrust purposes will necessarily include substantial evidence of predatory conduct. The basis of a prototypical Kodak claim is that through some combination of price discrimination and post-sale surprise in the aftermarket, the defendant has managed to dissociate a competitive primary market from an aftermarket that the defendant dominates. In
Without itself resolving whether a Kodak claim will necessarily include significant evidence of predation, the Supreme Court's analysis in Kodak suggested that our approach is the right one. In considering the predation prong of § 2 claims, the Court in Kodak merely incorporated its prior analysis of market separation to conclude that the plaintiffs had "presented evidence that Kodak took exclusionary action to maintain its parts monopoly and used its control over parts to strengthen its monopoly share of the Kodak service market." Id. If we substitute "Avaya" for "Kodak" and "ODMCs/MSPs" for "parts," we can write the same sentence in this case. Rather than requiring some proof of additional predatory conduct in the maintenance market, that portion of the Kodak opinion focused instead on Kodak's affirmative defense that "`valid business reasons' [could] explain [its] actions." Id. (quoting Aspen Skiing, 472 U.S. at 605, 105 S.Ct. 2847).
We apply the same analysis here. The evidence that convinced the jury that Avaya has dissociated the primary market from the aftermarket is sufficient to show exclusionary conduct for purposes of § 2. For that reason, we reject Avaya's request for judgment as a matter of law because it asks for proof of additional predatory conduct that is unnecessary in a case like this.
Avaya also asks us to reverse the judgment against it for unlawfully tying PDS patches to maintenance, arguing that there was insufficient evidence to support any finding that there was a distinct aftermarket for patches. Before October 2007, Avaya argues, it "made patches freely available to all Avaya PDS owners without requiring them to purchase Avaya maintenance." (Opening Br. at 75.) The patches were available on Avaya's website for any PDS owner to access, irrespective of who provided system maintenance. At trial, TLI's CEO agreed with that, and a representative of SunTrust — the one customer that TLI put on as evidence for its PDS tying claim — testified that TLI was able to provide patches during the entire period that SunTrust hired TLI for maintenance. For PDS hardware sold from October 2007 onward, Avaya did restrict access to its PDS patches to users of Avaya's own support services, but the requirement to purchase Avaya support with the PDS hardware
TLI does not challenge those basic facts, but it argues that the PDS verdict can nonetheless stand. As to the pre-2007 period, it argues that "Avaya used the threat of withholding patches to coerce PDS owners into purchasing maintenance from Avaya" (Answering Br. at 64), so that, even though the patches were formally available for free, Avaya still effected a tie. TLI points, as an example, to a letter sent in 2005 to PDS customers telling them that they risked losing access to a host of services, including patches, if they "ch[o]se to engage an Unauthorized Service Provider for services," and threatening that "Avaya will take all necessary legal action against violators in order to protect Avaya proprietary intellectual property." (J.A. 6945.) As to the post-2007 period, TLI argues that "Avaya PDS owners were not made aware of ... Avaya's policies." (Answering Br. at 67.) Moreover, even if the policy was transparent, TLI argues that there was nonetheless sufficient evidence that the "patches aftermarket ... was not disciplined by the primary PDS market." (Id. at 66.)
The 2005 letter to PDS customers, like the PBX FUD letters, was no doubt a frustration to TLI in its own efforts to build its business. Avaya was indeed intent on dominating its own intra-brand market. But that does not mean that Avaya fell afoul of the antitrust laws, which "were enacted for `the protection of competition not competitors.'" Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962)). It is undisputed that Avaya's patches were freely available to customers on its website without any strings attached before 2007, and the only witness put forward by TLI to prove the efficaciousness of Avaya's threats acknowledged that his firm was freely able to receive patches through TLI. "[W]here the buyer is free to take either product by itself there is no tying problem even though the seller may also offer the two items as a unit at a single price." Northern Pacific, 356 U.S. at 6 n.4, 78 S.Ct. 514. Given that Avaya offered the patches freely to PDS customers, TLI needed to put forward compelling evidence that Avaya was somehow nevertheless effecting a de facto tie between patches and maintenance. Were TLI to prevail on vague allegations that a strongly-worded letter was as effective as a technological or contractual tie, that would dramatically expand the reach of tying liability. The Kodak standard demands more, and we accordingly agree that the evidence before the jury was insufficient as a matter of law to sustain a tying claim pertaining to PDS systems sold before October 2007, while patches were still freely available.
As for PDS systems sold after Avaya's October 2007 policy went into effect, TLI's tying claim runs into the same problems as did its claim for antitrust injury in the post-2008 PBX market — Avaya introduced clear contractual language in the primary market prohibiting ISP use. If new PDS customers considered the requirements to purchase Avaya software support and to refrain from using ISPs "overly burdensome... at the time they were proposed, [the buyers] could have purchased a different [brand] of [PDS]." Queen City Pizza, 124 F.3d at 441. Where the primary market is indisputably competitive — and there is no dispute here that it was and is — a plaintiff must show special circumstances, such as Kodak-style lock-in, to overcome the inference that such competition will
We therefore reverse the jury's entire PDS tying verdict and remand with instructions for the District Court to enter judgment for Avaya on that claim. Given that result, we pause briefly to note that our reversal of the PDS verdict would endanger the validity of the damages award, even if we were not otherwise vacating it because of the District Court's errors regarding the common law claims. "Where a jury has returned a general verdict and one theory of liability is not sustained by the evidence or legally sound, the verdict cannot stand because the court cannot determine whether the jury based its verdict on an improper ground." Wilburn v. Maritrans GP Inc., 139 F.3d 350, 361 (3d Cir. 1998) (citations omitted); see also Avins v. White, 627 F.2d 637, 646 (3d Cir. 1980) (Where "[i]t is ... impossible to determine if the jury based its verdict on all" the allegedly unlawful acts "or ... on only one," then "there is the distinct possibility that if we affirm the jury's verdict, we may do so on the basis of" lawful acts.); Albergo v. Reading Co., 372 F.2d 83, 86 (3d Cir. 1966) ("Where, as here, a general verdict may rest on either of two claims — one supported by the evidence and the other not — a judgment thereon must be reversed.").
In this case, the verdict form merely asked the jury to name "the total amount of damages, if any, that ... TLI[] has proven ... were caused by Avaya's violation(s) of the antitrust laws." (J.A. 640.) There is therefore no way to discern which portion of the damages the jury attributed to the PDS tying claim, and which to the PBX attempted monopolization claim. It is true that the PBX market is substantially larger, but if we affirmed the damages verdict on the basis of the pre-2008 PBX claim alone, we would nonetheless risk the "distinct possibility that ... we may do so on the basis of" damages attributable to a liability theory that is invalid. Avins, 627 F.2d at 646. Moreover, the jury lacked a cogent way to disaggregate the PBX and PDS damages in the first place because TLI's expert offered testimony based on combined damages.
Having resolved Avaya's appeals, we turn now to TLI's cross-appeals. It challenges the District Court's grant of
We begin with the District Court's grant of summary judgment against TLI's counterclaims for trade libel and for tortious interference with prospective economic advantage. Both claims were based on the so-called FUD letters that Avaya sent to existing and prospective TLI customers. The tortious interference claim was also based on Avaya's deactivation of TLI customers' MSPs. The District Court granted summary judgment against TLI on those claims on the ground that TLI did not present sufficient evidence to create a dispute of material fact over whether Avaya's conduct actually caused TLI any loss in business.
The District Court provided a detailed explanation of the deficiency of the evidence before it. As to the MSP deactivations, the Court observed that MSP access
As to the FUD letters, the District Court decided that TLI had not "come forth with sufficient evidence that the Avaya letters were the de facto cause of the loss of current and prospective maintenance contracts." (J.A. 105.) TLI's examples of lost contracts were not at all persuasive. For instance, TLI suggested that the State of Michigan was one such lost contract, but an employee of that state testified that there were "numerous reasons" not to use TLI — unrelated to Avaya, and some directly caused by TLI — and that she was not under any "impression that Avaya would sue the State of Michigan if it awarded the contract to [TLI]." (J.A. 106.)
In this appeal, TLI relies principally upon that expert report and contests the District Court's characterization of it, arguing
The District Court's rejection of TLI's argument was thoroughly justified. The evidence TLI offered in opposing summary judgment consisted of naked accusations that Avaya's conduct cost it business. That the allegations were recited by an expert witness or by TLI employees does not bolster them.
The jury rejected TLI's § 1 tying claim for the PBX market and found that there was no relevant antitrust aftermarket for PBX patches, but TLI nonetheless asks us to revive a separate § 1 tying claim. It appeals the District Court's grant of summary judgment against its claim that Avaya unlawfully tied PBX upgrades and maintenance.
Before addressing the reasoning of the District Court, we note that, in light of our already-set-forth explanation of Kodak-style tying claims, we are skeptical of the tying claim regarding PBX upgrades, especially given the jury's rejection of the tying claim related to PBX software patches. Upgrading a PBX system requires a customer to step back into the competitive primary PBX market, thereby at least partially ameliorating any lock-in concern and making it less likely that Avaya could dissociate the primary market from an aftermarket. We acknowledge that in the PBX upgrade market there may still be some reliance on past investments in an old Avaya system, but if the jury rejected the notion that PBX patches satisfied the Kodak theory — when patches are strictly aftermarket products — we doubt that it would have been more sympathetic to an argument that upgrades were unlawfully used as a tie.
Antitrust theory aside, the District Court granted summary judgment for the simple reason that TLI had failed to present any substantial evidence that Avaya's alleged threats to withhold upgrades had actually affected "a substantial amount of interstate commerce," as required to make out a § 1 claim. (J.A. 165.) It characterized TLI's proffered evidence as consisting of "little more than assertions," which the
Reviewing the record ourselves, and drawing all reasonable inferences in favor of TLI, we find ourselves in agreement with Avaya and the District Court. In opposing summary judgment, TLI presented no evidence to raise an issue of material fact about whether Avaya was able to harm TLI by using PBX upgrades to restrain competition in the maintenance market. We will therefore also affirm that aspect of the District Court's summary judgment order.
The final issue we consider is TLI's cross-appeal of the District Court's ruling, under the Noerr-Pennington doctrine, that TLI could not present evidence at trial of Avaya's litigation conduct as a basis for the accusation of monopolistic conduct. "Under the Noerr-Pennington doctrine — established by Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961), and United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965) — defendants are immune from antitrust liability for engaging in conduct (including litigation) aimed at influencing decisionmaking by the government." Octane Fitness, LLC v. ICON Health & Fitness, Inc., ___ U.S. ___, 134 S.Ct. 1749, 1757, 188 L.Ed.2d 816 (2014) (citation omitted). In Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993), the Supreme Court explained that "sham" litigation — unlike ordinary litigation — is not off limits as a source of antitrust liability. The Court gave a two-part test for identifying a lawsuit as a sham: "First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits.... [S]econd[,] ... the baseless lawsuit conceals `an attempt to interfere directly with the business relationships of a competitor,'" id. at 60-61, 113 S.Ct. 1920 (emphasis removed) (quoting Noerr, 365 U.S. at 144, 81 S.Ct. 523), "through the `use of the governmental process — as opposed to the outcome of that process — as an anticompetitive weapon,'" id. at 61, 113 S.Ct. 1920 (alteration and emphases removed) (quoting City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 380, 111 S.Ct. 1344, 113 L.Ed.2d 382 (1991)).
TLI challenges the District Court's contention that "the whole case has to be a sham" for the sham exception to apply. (Suppl. App. 190.) Instead, TLI argues, the sham exception should be applied on a claim-by-claim basis. Avaya responds by citing the language in Professional Real Estate that refers to a "lawsuit" rather than a claim, and which references the "governmental process" rather than any specific action in a suit. It also argues that, as a policy matter, adopting a claim-by-claim "approach would introduce extraordinary complexity into jury deliberations" by forcing juries to not only decide the merits of each claim but also decide which
We agree with that conclusion. True, one might imagine a situation where a single claim, separated from an otherwise arguably meritorious suit, is so harmful and costly to a defendant that it might impose anticompetitive harm on the defendant in a way that triggers the sham litigation exception to Noerr-Pennington. But the Supreme Court's elaboration of the "sham" exception suggests that we should not go hunting for that example, and this case is not it. Some of Avaya's claims that were dismissed before trial may have been weak, but they were part and parcel of a course of litigation that proceeded to two months of substantial evidence and argument to a jury. We do not consider Avaya's affirmative claims to be frivolous or unsubstantiated; in fact, we are vacating the Rule 50 judgment that was entered against them. TLI may consider Avaya's litigation conduct vexatious — as the District Court did in awarding prejudgment interest — but its suit against TLI was not a "sham."
For the foregoing reasons, we will vacate the judgment of the District Court and remand for further proceedings consistent with this opinion. We will also reverse the judgment of liability on the entire PDS tying claim and on the PBX attempted monopolization claim as to the post-2008 time period and will remand with instructions to enter judgment as a matter of law for Avaya on those claims. We will affirm the orders of the District Court as to all issues raised by TLI's cross-appeal.
HARDIMAN, Circuit Judge, concurring in part and dissenting in part.
For litigation that has lasted some fifteen years, this appeal involves remarkably few disputed facts. The trouble began soon after Plaintiff Avaya (the Goliath of this saga) laid off many of its workers because of a downturn in the telecommunications market in 2000. Those layoffs gave rise to independent companies that offered aftermarket maintenance on the Private Branch Exchanges (PBXs) sold by Avaya. In fact, Avaya provided training and subsidies to companies that hired its former employees, and some companies became authorized Avaya dealers or business partners. Defendant TLI (the David of the saga) became one of those official business partners.
TLI obtained its first customer in 2001 and invested millions in its maintenance business. For whatever reason, Avaya reversed course in 2002 and began limiting the ability of its business partners, customers, and independent (unauthorized) providers to perform PBX maintenance. This change in strategy resulted in the creation of the Avaya One contract, which required Avaya business partners to promise not to solicit maintenance business from selected Avaya customers. Some 300 Avaya One contracts were signed and TLI signed its
When Avaya's Head of Global Sales, Linda Schumacher, learned of the carve-out TLI had negotiated, she was "shocked" and quickly took steps to cancel TLI's contract just four months after it was signed. On July 31, 2003, Avaya gave the required 60 days' notice that it was terminating the contract and spent the months of August and September notifying TLI's customers that it soon would no longer be an Avaya business partner. Claiming antitrust violations, TLI went to federal court seeking an injunction requiring Avaya to allow TLI access to the codes necessary to maintain its customers' machines. The court denied the injunction and TLI dropped the case.
Undeterred, TLI used a variety of methods to access its customers' PBXs in order to perform maintenance. TLI accessed some machines by using passwords and logins it had received previously and it obtained others from the internet. Some of TLI's customers had purchased permissions for the life of their machines, which enabled TLI to provide maintenance by using those logins. Other methods used by TLI were deceitful and/or unethical. For example, some Avaya business partners acted as conduits for TLI by posing as the maintenance provider, only to pass along the credentials to TLI. TLI also employed two former Avaya employees, David Creswick and Harold Hall, who used what they had learned to "hack and crack" the PBXs of TLI's customers to obtain the credentials necessary to service them. In short, even after TLI was terminated as an Avaya business partner, TLI used various methods to provide aftermarket maintenance — a service that purchasers of Avaya's PBXs were expressly authorized by contract to provide for themselves or to hire third parties like TLI to provide.
Avaya sued TLI in federal court in 2006, alleging numerous causes of action under federal and state law. After seven years of scorched-earth litigation, Avaya withdrew six claims just days before the trial began. For almost two months, Avaya put on evidence in support of its seven remaining claims. At the conclusion of Avaya's case-in-chief, TLI moved for judgment as a matter of law under Rule 50 of the Federal Rules of Civil Procedure. The District Court granted TLI's motions, throwing out Avaya's case in its entirety.
My colleagues on the panel, both experienced former trial lawyers and trial judges, conclude that the District Court committed legal error when it granted TLI's Rule 50 motions. Although I had far less experience as a trial lawyer and trial judge than my distinguished colleagues, my visceral reaction to the Court's Rule 50 decision is consistent with theirs. The question looms large: Why, after seven years of discovery and two months of trial, did a jurist with 22 years of experience not allow any of Avaya's claims go to the jury? To ask the question implies the imprudence of the decision, at least on an instinctual level. But visceral reactions aren't always correct, and I must say that after reading the entire transcript of the trial, I agree with Judge Irenas's 52-page opinion explaining his reasons for throwing out Avaya's case. After seven years, Avaya finally withdrew almost all of its federal claims. The seven state-law claims that remained — which involved breach of contract, fraud, and unfair competition — simply were not proven at trial. At the end of
Having expressed my opinion on that score, I confess enough doubt about the propriety of the District Court's decision to grant the Rule 50 motion that the focus of my partial dissent presumes the correctness of my colleagues' opinion on that point. Instead, I take issue with the decision to vacate the judgment TLI earned on two of its counterclaims arising under the antitrust laws. Even assuming, arguendo, that the District Court erred when it granted TLI's Rule 50 motions, I remain convinced that any error had little or no impact on the verdicts in favor of TLI. In my estimation, David struck Goliath right between the eyes and should not be deprived of his hard-earned victory on the counterclaims.
The crux of my partial dissent is that I cannot agree that the District Court's rejection of Avaya's claims "taint[ed] the entire trial and the ultimate verdict." Majority Op. 365. Perhaps I would find greater assurance in the Majority's taint analysis if Avaya had adequately raised it. I have serious doubts that it did. Even still — without the benefit of developed adversarial briefing on the issue — I do not believe the District Court's judgment as a matter of law so impaired Avaya's ability to defend itself against TLI's allegations of anticompetitive conduct that we cannot have confidence in the jury verdict as a whole. For that reason, I would affirm the verdict with respect to Avaya's pre-2008 attempted monopolization of the PBX maintenance aftermarket and I respectfully dissent from the Majority's holding to the contrary.
Under both the Federal Rules of Appellate Procedure and our Local Rules, "appellants are required to set forth the issues raised on appeal and to present an argument in support of those issues in their opening brief." Kost v. Kozakiewicz, 1 F.3d 176, 182 (3d Cir. 1993). A "passing reference to an issue ... will not suffice to bring that issue before this court." Laborers' Int'l Union of N. Am. v. Foster Wheeler Energy Corp., 26 F.3d 375, 398 (3d Cir. 1994) (omission in original) (quotation marks omitted) (quoting Simmons v. City
This requirement is not a mere formality. As my esteemed colleague recently wrote: "[t]here is good reason for this [rule]. Brief, casual references to arguments do not put the opposing party on adequate notice of the issue, nor do they develop it sufficiently to aid our review." NLRB v. FedEx Freight, Inc., 832 F.3d 432, 446, 2016 WL 4191498, at *11 (3d Cir. Aug. 9, 2016) (Jordan, J., concurring).
Avaya's opening brief mentioned the taint issue only in passing. The matter received no mention in Avaya's issues section of the brief, which I find significant because the question of whether the District Court erred in granting judgment as a matter of law against Avaya's common law claims is an issue distinct from whether such error tainted the verdict on TLI's antitrust claims — something the structure of the Majority opinion rightly makes clear. See United States v. Joseph, 730 F.3d 336, 341-42 (3d Cir. 2013) (distinguishing between "issues" and "arguments"). Then, on the three occasions Avaya did mention tainting in its brief, its argumentation was skeletal at best.
The three-point tainting theory on which the Majority bases its decision comes not from Avaya's opening brief but from its reply brief. See Avaya Reply Br. 18-19; Majority Op. 391-97. But the black-letter rule is that "[w]e will not revive a forfeited argument simply because" an appellant finally develops "it in its reply brief." Republic of Argentina v. NML Capital, Ltd., ___ U.S. ___, 134 S.Ct. 2250, 2255 n.2, 189 L.Ed.2d 234 (2014); see also In re Surrick, 338 F.3d 224, 237 (3d Cir. 2003). This dooms at least two taint-related arguments developed only on reply: (1) that judgment as a matter of law against Avaya's common law claims undermined Avaya's ability to present pro-competitive justifications for its conduct, and (2) the related point that the District Court erroneously limited witness testimony to that effect.
Avaya did not couch its argument regarding the effects of the District Court's instructions about the lawfulness of TLI's access to maintenance commands on the jury's consideration of the "fear, uncertainty, and doubt" (FUD) letters in terms of tainting until its reply brief. It did, however, raise this alleged instructional error in its separate argument that the jury could not have properly found that Avaya engaged in anticompetitive conduct in the PBX maintenance aftermarket. I address this argument below. As for the other grounds on which the Majority deems the antitrust verdict improper, I would hold them forfeited.
Even had Avaya adequately developed all three prongs of its taint argument, I would not conclude that the District Court's errors constituted reversible error. First, the Majority concludes that the District Court's instructions after its dismissal of Avaya's common law claims undermined the jury's ability to assess the reasonableness of Avaya's actions in light of TLI's allegedly unlawful conduct. It highlights the trial judge's instruction that TLI's "use of and access to [Avaya's] maintenance software may not be considered by you as unlawful when deciding TLI[`s] claims against Avaya asserted in the counterclaim." App. 4739.
Despite this instruction, Avaya had ample opportunity to present the jury with legitimate and procompetitive defenses for its actions, and those defenses did not depend on whether TLI's conduct was so egregious as to be against the law. Indeed, Avaya's persistent refrain to the jury was that the actions Avaya took against TLI were reasonable because TLI was an "unauthorized" PBX servicer undermining Avaya's "procompetitive" Business Partners program. App. 4569-71.
In a similar vein, the Majority finds taint in the constraints the District Court imposed on the evidence Avaya presented at trial. The Majority notes that Avaya "points to two examples in particular" of how the District Court's judgment as a matter of law "hindered its ability to present evidence in its defense against the antitrust claims."
Finally, I am not persuaded that the District Court's instruction that it was not "unlawful," App. 615, for TLI to access Avaya's maintenance software tainted the jury's consideration of whether the FUD letters constituted anticompetitive conduct. Among other things, these letters told Avaya customers that accessing PBX and PDS systems through unauthorized service providers "is a violation of federal and state laws and could result in civil and criminal liability and penalties" and that Avaya would "take all necessary legal action against violators." App. 6945; see also App. 3904-05, 3940, 4057-58, 7307. And with respect to these letters, the Court instructed the jury that "the law does not
Even if the jury had not been instructed that unauthorized access to Avaya software was not illegal, it is unlikely that it would have reached a different verdict. Avaya's own witnesses admitted that they had no idea whether there was any legal basis for the letters Avaya sent to its PBX customers stating that unauthorized use of maintenance service permissions and logins "violat[es] ... federal and state laws" and "could result in civil and criminal penalties." And they conceded that Avaya did not actually plan to sue its customers. App. 3904-05, 3940, 4057-58. Even if some of the threats Avaya issued in its FUD letters might have been rooted in truth (the fact that use of an unauthorized service provider could result in the loss of certain services only provided by Avaya and its Business Partners certainly was), the jury's inescapable conclusion was that at least some of these threats were not true. Indeed, in defending the letters, Avaya focused on the obvious truths (Avaya-exclusive benefits, TLI's unauthorized status, etc.) yet conceded "the fact that a private party can't possibly pursue criminal liability," which is "for the public authorities." Tr. 15871. Avaya characterized this misstatement of law as "unfortunate language," id.; the jury surely recognized this as a euphemism for "not true." Simply put, it was obvious to any fair-minded reader that the FUD letters were over-the-top, at least partially baseless, and threats that couldn't fairly be described as "legal opinion." Avaya Br. 66. I do not perceive a high probability that the jury would have found them kosher had it known that a customer's hiring an unauthorized service provider might amount to a breach of contract. After all, it was instructed that even if "a truthful statement is coupled or limited with an untruthful statement, the truthful statement loses its protection and can underlie an injury." App. 621.
The Majority upends a sound verdict — reached after a decade of litigation and
(J.A. 6363.)
Fineman v. Armstrong World Indus., Inc., 980 F.2d 171, 186 (3d Cir. 1992) (citing Printing Mart, 563 A.2d at 37; Restatement (Second) of Torts § 766B).
This is also where the Dissent's "David and Goliath" analogy breaks down. Avaya was certainly the bigger competitor, but TLI was no plucky little company armed only with the business equivalent of a sling and a few stones. It was a sophisticated and aggressive company, which, at least according to Avaya and a great deal of the evidence at trial, was prepared to, and did, engage in what even the Dissent acknowledges were "deceitful and/or unethical" business methods. (Id. at 415.) Since those methods were such that the jury could have found them unlawful, the Rule 50 error was not harmless.
The analogy here would be an argument that the primary market was for PBX systems, which "forced" the purchase of ODMCs and MSPs as the "tying" products, which were in turn allegedly used to force purchase of maintenance as the "tied" service. No matter how many intermediate steps are alleged, however, in the end our concern is whether the defendant forced purchases of a tied product using power in some distinct market. Jefferson Parish, 466 U.S. at 12, 104 S.Ct. 1551. Queen City Pizza stands for the proposition that if the supposed forcing is entirely the result of a transparent contractual agreement, then that is not the concern of the antitrust laws. A plaintiff cannot avoid that outcome merely by crafting a complaint to allege intermediate steps.
Areeda & Hovenkamp, Fundamentals, supra, § 5.12, at 5-102 to 103.
In a companion treatise, those scholars suggest going even further to limit the reach of Kodak in circumstances of competitive primary markets:
Phillip E. Areeda & Herbert Hovenkamp, 10 Antitrust Law ¶ 1740, at 133 (3d ed. 2011).
"We exercise plenary review" over a district court's decision on whether to grant judgment as a matter of law against a jury verdict, but we "must not weigh evidence, engage in credibility determinations, or substitute [our] version of the facts for the jury's." Pitts v. Delaware, 646 F.3d 151, 155 (3d Cir. 2011).
We agree, however, that — if there is a retrial — the Court should consider describing to the jury a logical path for it to follow in evaluating whether the primary market is dissociated from the aftermarket. For example, with respect to the PBX attempted monopolization claim, a theory of dissociation by aftermarket surprise in this case might run as follows:
The foregoing example is not meant as a directive that the District Court must follow, but rather as one proposed approach to "channel" — as Avaya puts it — the jury's consideration of the factors identified in Kodak. (Opening Br. at 53.)
Avaya also appealed the District Court's decision to grant TLI prejudgment interest on the basis of what it determined to be Avaya's vexatious litigation strategy. Because we vacate the verdict and the corresponding damages award, the issue of prejudgment interest is moot, and we decline to address it. The question may be considered afresh, if necessary, following retrial.
With regard to the legal standard for trade libel, both parties agree that TLI had to prove special damages. TLI wanted the Court to apply a "material and substantial part" test for causation of those damage, see Patel v. Soriano, 369 N.J.Super. 192, 848 A.2d 803, 835 (N.J. Super. Ct. App. Div. 2004), whereas Avaya supports the "natural and direct result" standard that the District Court did apply, see Mayflower Transit, LLC v. Prince, 314 F.Supp.2d 362, 378 (D.N.J. 2004). Again, we need not resolve which standard is correct because the outcome is the same under either.
Finally, I commend Judge Jordan for his rigorous synthesis of the Eastman Kodak Company v. Image Technical Services Inc. branch of antitrust law, which has bedeviled litigants and courts alike. I agree with his analysis wholeheartedly. Because the District Court's jury instructions comport with the principles outlined by Judge Jordan, I would hold that they were sufficient to "properly apprise[] the jury of the issues and the applicable law." Smith v. Borough of Wilkinsburg, 147 F.3d 272, 275 (3d Cir. 1998) (quotation marks omitted) (quoting Limbach Co. v. Sheet Metal Workers Int'l Ass'n, AFL-CIO, 949 F.2d 1241, 1259 n.15 (3d Cir. 1991) (en banc)).
To the extent that sufficient evidence also needed to support TLI's other theory of liability (anticompetitive refusal to deal) given that the general verdict form does not indicate which of Avaya's allegedly anticompetitive acts formed the basis for the verdict, I would hold — with some reservation — that it does. The District Court's instructions were consistent with the Supreme Court's precedents setting forth the "limited circumstances in which a firm's unilateral refusal to deal with its rivals can give rise to antitrust liability," Pac. Bell Tel. Co. v. Linkline Commc'ns, Inc., 555 U.S. 438, 448, 129 S.Ct. 1109, 172 L.Ed.2d 836 (2009), and my review of the record leads me to conclude that TLI provided that "minimum quantum of evidence from which a jury might reasonably afford relief." Starceski v. Westinghouse Elec. Corp., 54 F.3d 1089, 1095 (3d Cir. 1995) (quoting Rotondo v. Keene Corp., 956 F.2d 436, 438 (3d Cir. 1992)).
