     Case: 14-20267   Document: 00513285667        Page: 1   Date Filed: 11/25/2015




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT


                                    No. 14-20267
                                                                  United States Court of Appeals
                                                                           Fifth Circuit

                                                                         FILED
MM STEEL, L.P.,                                                   November 25, 2015
                                                                    Lyle W. Cayce
             Plaintiff - Appellee                                        Clerk

v.

JSW STEEL (USA) INCORPORATED; NUCOR CORPORATION,

             Defendants - Appellants




                Appeals from the United States District Court
                     for the Southern District of Texas


Before BENAVIDES, CLEMENT, and HIGGINSON, Circuit Judges.
STEPHEN A. HIGGINSON, Circuit Judge:
      This case concerns the Gulf Coast domestic steel industry. In 2011, two
longtime steel industry salesmen opened a new steel distributor, MM Steel,
L.P. (“MM”). MM quickly found it difficult to survive because certain steel
manufacturers, including Nucor Corporation (“Nucor”) and JSW Steel (USA),
Inc. (“JSW”), refused to sell them steel. Shortly before MM closed, MM sued
the manufacturers and MM’s competing distributors, claiming that the
distributors formed an illegal conspiracy to deprive MM of steel and that the
manufacturers knowingly joined the conspiracy. After a six-week trial, a jury
found the defendants per se liable under Section 1 of the Sherman Act, 15
U.S.C. § 1. The district court trebled the damages to more than $150 million.
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                                 No. 14-20267
The defendants timely appealed, but the distributors and one manufacturer
settled and dismissed their appeals, leaving JSW and Nucor as the only
appellants. Finding, inter alia, insubstantial evidence that Nucor joined this
conspiracy, we REVERSE the judgment as to Nucor, but we AFFIRM the
judgment as to JSW.
                               BACKGROUND
                                       I.
      In the Gulf Coast domestic steel industry, steel manufacturers sell
approximately half of their steel plate to end users, including companies such
as Wal-Mart, Exxon, and General Motors, and sell the other half to distributors
who then sell the plate to end users. To be profitable, the distributors rely on
their supply agreements with the manufacturers.            Plaintiff MM is a
distribution company that was founded by two steel distributor salesmen—
Matt Schultz and Mike Hume. Defendants Nucor and JSW are two major steel
manufacturers in the Gulf Coast region.
      The record supports the following facts. Schultz and Hume worked
together as salesmen at American Alloy (“AmAlloy”), a steel distributor, until
they left in 1999 to open an office in Houston for another distributor, Chapel.
In spring 2011, Schultz and Hume began planning to leave Chapel to open
their own distribution company, MM. As part of their preparation, they met
with JSW, from whom they had purchased steel at Chapel. On August 2, 2011,
MM and JSW signed a one-year supply agreement for MM to purchase a
certain amount of steel plate per month from JSW. MM received a $750,000
line of credit from Wells Fargo, and JSW agreed to extend an additional line of
credit for double that amount. On September 1, without providing notice,
Schultz, Hume, and two other top Chapel salesmen resigned from Chapel, and
officially opened MM.


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                                  No. 14-20267
      Chapel and AmAlloy were not pleased that Schultz and Hume had left
to open MM. On September 3, AmAlloy executives discussed “do[ing] all we
can to help [Chapel] in going after [MM].” Chapel’s president, Stan Altman,
was overheard telling a Chapel salesman “[i]f you don’t have any steel, you
can’t sell any steel.”     On September 8, Altman met with Arthur Moore,
AmAlloy’s president, and upon leaving the meeting, Moore said “[d]on’t worry,
we’re going to get them.” Chapel informed Moore that Chapel “plan[s] on
taking all available courses of actions, legally and otherwise, including
notifying any mill that is selling [to MM], that they can no longer expect any
future business from Chapel.” As described in more detail below, Chapel and
AmAlloy went forward with plans to threaten manufacturers to not sell steel
to MM.
                                       II.
      On September 15, 2011, Chapel filed a lawsuit against MM and its
founders alleging that MM had violated a non-compete agreement. The next
day, MM told JSW to hold off on shipments until further notice. On September
20, MM met with JSW. MM informed JSW that the lawsuit prompted their
request to stop shipments and raised the possibility of having to return some
steel that JSW had manufactured for MM.           The day before the meeting
between MM and JSW, JSW executives met with AmAlloy’s Moore, at Moore’s
invitation. Moore told JSW’s representatives that JSW had a choice to make:
“The choice was to do business with American Alloy or to do business with MM
Steel.” Later, on September 29, Moore emailed Chapel’s Altman about JSW’s
“ridiculously low” sales prices to MM and said he hoped Chapel would be
successful in shutting MM down. On October 4, Chapel and JSW met, and
Chapel gave JSW a choice to do business with Chapel or with MM.
      Around October 14, Chapel and MM settled the lawsuit over the non-
compete agreement.        The settlement prohibited MM from contacting and
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selling to certain customers for six months. MM then told JSW the lawsuit
had been resolved and asked for a quote. On October 20, JSW’s president,
Mike Fitch, told MM that it would not be doing business with MM going
forward and that it “understood the gravity of the situation.” The day before
JSW told MM it was ending their relationship, JSW emailed Chapel wanting
to see “if JSW and Chapel Steel could step up business for [Chapel’s] Houston
[office] and other locations.” Chapel then internally commented on the
“[i]nteresting timing” of JSW’s approach to “step up business.”
                                     III.
      Nucor and Chapel’s relationship dates back to 2000. Nucor supplies
seventy-five percent of Chapel’s steel, and Chapel is Nucor’s largest external
customer.   On September 1, 2011, Hume left Nucor’s Jeff Whiteman a
voicemail saying that Hume had left Chapel to start MM and that MM hoped
to sell Nucor steel to a longtime Chapel customer. In response, Whiteman
immediately emailed Chapel’s president to pledge his “fulles support.”
Following that email, Chapel executives informed Nucor that MM had
partnered with JSW, and Nucor reiterated its support of Chapel by instructing
its employees that Nucor would not be quoting MM but “will continue to
support our existing customers.” Around September 2, MM’s Hume reached
out to three separate Nucor employees, including Nucor’s President Whiteman,
and each employee declined to quote or discuss a potential sale with Hume.
      The jury received evidence, which Nucor contests as inadmissible,
alluding to a threat allegedly made by Chapel to Nucor before September 5.
On September 5, John Sergovic, the president of ArcelorMittal USA, another
steel manufacturer not included in this lawsuit, sent an internal email stating
that he had been threatened by Chapel’s Altman to not sell to MM and that
“Stan [Altman] said he made the same comment to Jeff Whiteman at Nucor.”


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                                 No. 14-20267
      In early October, Nucor employees dined with Chapel employees in
connection with a retirement party. Nucor denies that MM was discussed at
this dinner. On October 26, MM asked Nucor for a quote, and Nucor did not
respond. Later, on January 5, 2012, after Nucor got a quote request from a
similarly named “M and M Steel,” Nucor emailed Chapel asking, “Are these
our boys?” Chapel responded, “No our boys are MM Steel but I appreciate you
keeping an eye out for them.”
      After JSW decided to stop supplying MM, MM began buying steel from
North Shore, another distributor and customer of Nucor. North Shore began
placing orders on MM’s behalf from Nucor. Nucor was not happy to learn about
this arrangement because it allowed MM to circumvent Nucor’s “practice” of
not accepting business that conflicts with the business of a current client in
order to “stick with [the original] supply chain”—what Nucor referred to as its
incumbency practice. Nucor told North Shore it would be a problem to ship
steel to MM, and North Shore stopped ordering steel for delivery to MM. On
March 19, 2012, Hume and Schultz secretly taped North Shore’s Byron Cooper
telling them that Nucor’s Whiteman told Cooper that “there’s a lot of pressure
on the mills to not support [MM] from their biggest customers” and also that
Whiteman stated “[t]here’s a mandate at Nucor that’s against supporting []
MM Steel.”
      MM closed and officially stopped doing business in August 2013.
                                      IV.
      On April 29, 2012, MM sued Nucor, JSW, Chapel, Reliance, AmAlloy,
AmAlloy’s Moore, and SSAB (an additional manufacturer) in federal court
alleging, inter alia, an illegal group boycott in violation of § 1 of the Sherman
Act, 15 U.S.C. § 1. MM also brought a claim against JSW for breach of contract.
The district court denied defendants’ motions to dismiss and motions for
summary judgment. SSAB settled before trial for $2.5 million. The remaining
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defendants proceeded to trial.            MM’s sole theory of liability was that
defendants were per se liable for joining a horizontal group boycott.                     As
illustrated in the jury’s answer to Interrogatory Number 1, the jury found that
the distributors “conspire[d] to persuade, induce, or coerce any steel mill not to
sell steel plate to MM.” Under Interrogatory Number 3, the jury found that
Nucor and JSW both “knowingly join[ed] the conspiracy” (emphasis added).
This finding resulted in a per se violation of § 1 of the Sherman Act and an
award of $52 million. 1        The jury also found JSW liable for breaching its
agreement to supply MM and awarded damages of $2 million for this breach.
The district court denied various motions for judgment as a matter of law and
for new trials.     MM elected to recover on its antitrust claims, foreclosing
recovery on its contract claim, and the district court trebled the damages,
entering a final judgment holding all defendants jointly and severally liable.
       Defendants timely appealed, but the distributor defendants (Reliance,
Chapel, AmAlloy, and Moore) settled for undisclosed terms and dismissed their
appeals. Nucor and JSW are the remaining defendants on appeal. Nucor and
JSW appeal the antitrust liability finding and award of damages. In the
alternative, JSW also appeals the breach of contract award.                     Nucor also
appeals the district court’s denial of its motions for a new trial due to the court’s
exclusion of expert testimony, flawed jury instructions, the admittance of
inadmissible hearsay, and MM’s improper closing arguments. JSW appeals
the district court’s denial of its motion for a new trial due to the admission of
MM’s “patently unreliable” damages expert. Because we affirm the antitrust
judgment as to JSW and reverse the judgment as to Nucor, we will not address


       1Interrogatory Number 4 asked, “Did one or more steel mills refuse to sell steel plate
to MM Steel as a result of the conspiracy thereby denying it access to a supply of steel plate
necessary for it to compete effectively?” Although the jury answered in the affirmative,
because this question did not specifically ask the jury to consider each manufacturer
separately (as Interrogatory Number 3 did), clarity is lacking.
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Nucor’s evidentiary claims, nor will we address JSW’s appeal of the breach of
contract award.
                                DISCUSSION
                                       I.
      We first consider whether there was substantial evidence to conclude
that Nucor and JSW entered into a horizontal conspiracy with the distributors
to refuse to deal with MM. We review jury verdicts deferentially. EEOC v.
Boh Bros. Constr. Co., 731 F.3d 444, 451 (5th Cir. 2013). We review the denial
of a judgment as a matter of law de novo, but we apply the district court’s
standard: granting judgment as a matter of law only if the “facts and inferences
point ‘so strongly and overwhelmingly in the movant’s favor that reasonable
jurors could not reach a contrary conclusion.’ ” Id. (citation omitted). We can
reverse a denial of a motion for judgment as a matter of law only if “the jury’s
factual findings are not supported by substantial evidence or if the legal
conclusions implied from the jury’s verdict cannot in law be supported by those
findings.” Am. Home Assurance Co. v. United Space Alliance, LLC, 378 F.3d
482, 486–87 (5th Cir. 2004). Substantial evidence is something more than “a
scintilla of evidence.” Hunnicutt v. Wright, 986 F.2d 119, 122 (5th Cir. 1993).
      To establish liability under § 1 of the Sherman Act, 15 U.S.C. § 1, a
plaintiff must show that the defendants “(1) engaged in a conspiracy (2) that
restrained trade (3) in a particular market.” Spectators’ Commc’n Network Inc.
v. Colonial Country Club, 253 F.3d 215, 220 (5th Cir. 2001). MM’s sole theory
of liability for the manufacturers is that Nucor and JSW joined a horizontal
(i.e., between competitors) conspiracy between AmAlloy and Chapel, as
explicitly found by the jury in Interrogatories Numbers 1 and 3. Nucor and
JSW do not challenge the jury’s finding that a horizontal conspiracy existed
between the distributors, but rather, they argue that there was not substantial
evidence for the jury to conclude that they joined the conspiracy. After a
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searching review of the record that exceeds 30,000 pages, we hold that there
was not substantial evidence to conclude that Nucor joined the alleged
conspiracy, but we affirm the finding as to JSW.
      Only a concerted refusal to deal is illegal; a manufacturer “generally has
a right to deal, or refuse to deal, with whomever it likes, as long as it does so
independently.” Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761
(1984). So that liability is not levied for independent refusals to deal, a plaintiff
seeking to prove that a defendant joined an antitrust conspiracy without direct
evidence of the conspiracy must present evidence “that tends to exclude the
possibility” of independent conduct.         Id. at 764; see Insulate SB, Inc. v.
Advanced Finishing Sys., Inc., 797 F.3d 538, 545 (8th Cir. 2015) (“Under the
‘Colgate doctrine,’ ‘[a] manufacturer . . . generally has a right to deal, or refuse
to deal, with whomever it likes, as long as it does so independently.’ ” (citing
United States v. Colgate & Co., 250 U.S. 300, 307 (1919)); see also Multiflex,
Inc. v. Samuel Moore & Co., 709 F.2d 980, 988 (5th Cir. 1983) (“An antitrust
conspiracy is rarely shown by direct evidence, and usually is proved by
inference and suspicion.” (citing United States v. Paramount Pictures, Inc., 334
U.S. 131 (1948))). Circumstantial evidence of a refusal to deal will not tend to
exclude independent conduct unless refusing to deal is “inconsistent with [the
manufacturer’s] independent self-interest.”            Viazis v. Am. Ass’n of
Orthodontists, 314 F.3d 758, 763 (5th Cir. 2002).            The jury was properly
instructed that a single firm’s refusal to deal does not entail a conspiracy if it
makes that decision independently.
      A plaintiff seeking to prove that a defendant joined a conspiracy must
also provide evidence that the conspiring parties “had a conscious commitment
to a common scheme designed to achieve an unlawful objective.” Monsanto,
465 U.S. at 764 (citation omitted). MM must have provided evidence showing
Nucor and JSW knew “the essential nature and general scope” of the joint plan.
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H & B Equip. Co. v. Int’l Harvester Co., 577 F.2d 239, 245 (5th Cir. 1978)
(citation omitted). However, MM did not need to prove that Nucor and JSW
orchestrated the plan.     Rather, parties who knowingly join an antitrust
conspiracy, like any conspiracy, are liable to the same extent as other
conspirators. See United States v. All Star Indus., 962 F.2d 465, 478 (5th Cir.
1992) (“It is well-established that, as a participant in [a bid-rigging] conspiracy,
MIA is legally liable for all the acts of its co-conspirators in furtherance of this
crime.”); Spectators’ Commc’n Network, 253 F.3d at 220-21. The jury was also
properly instructed that “[w]hat the evidence must show is that . . . each
defendant knowingly became a member of the conspiracy.”
      The type of conspiracy that MM alleged and that the jury found Nucor
and JSW to have joined is a group boycott—here, and often, a concerted
agreement among competitors to refuse to deal with a manufacturer unless the
manufacturer refuses to deal with an additional (typically new) competitor.
See Spectators’ Commc’n Network, 253 F.3d at 221.            MM’s sole theory of
antitrust liability was that Nucor and JSW joined the group boycott by joining
the horizontal conspiracy among the competitors, the distributors. For us to
affirm liability, a reasonable jury must have been able to conclude that Nucor
and JSW knowingly joined the conspiracy between the distributors to refuse to
deal with MM. Specifically, MM must have presented substantial evidence
tending to exclude the possibility that JSW and Nucor each acted independent
of the distributors’ horizontal conspiracy. See Viazis, 314 F.3d at 762.
                                        A.
      JSW contends that there was not substantial evidence to conclude that
JSW knowingly joined the horizontal conspiracy between the distributors. We
disagree.   We first summarize the evidence presented to the jury.             JSW
originally agreed in writing to do substantial business with MM. JSW even
extended a line of credit to the newly formed company. However, after meeting
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with executives from both AmAlloy and Chapel, and receiving independent
threats from two distributors, JSW decided to no longer do business with MM.
When ending their relationship, JSW told MM that it understood the “gravity
of the circumstance.” The day before JSW ended its relationship with MM,
JSW contacted Chapel to expand their business with Chapel, including its
Houston office.
       Although evidence of mere complaints from a distributor to a
manufacturer would not be sufficient evidence to establish a conspiracy or that
a manufacturer joined a conspiracy, see Viazis, 314 F.3d at 763, evidence that
a manufacturer responded to a distributors’ actual threat can show concerted
action that is not independent conduct. Id. at 763–64; see Monsanto, 465 U.S.
at 767–68 (holding that evidence of specific threats to refuse to deal was
probative of concerted action). JSW received actual threats in the form of
ultimatums to refuse to deal with MM from AmAlloy and Chapel, both of whom
had already formed a horizontal conspiracy. 2 The fact that both companies
made these threats within several weeks of each other was sufficient evidence
for a reasonable juror to conclude that JSW was aware of the horizontal
conspiracy to exclude MM from the market. A reasonable juror also could have
concluded that JSW’s abrupt decision to no longer deal with MM following
these threats and JSW’s statements regarding that decision tended to exclude
the possibility of conduct that was independent of the distributors’ conspiracy.
       JSW contends that it made an independent decision to no longer deal
with MM after learning of Chapel’s lawsuit against MM and after MM asked
JSW to postpone shipments. A reasonable juror could have concluded that


       2AmAlloy threatened JSW on September 19, 2011, and Chapel threatened JSW on
October 4. The horizontal conspiracy and group boycott between these distributors was
confected at the meeting between AmAlloy and JSW on September 8, 2011; as described in
MM’s brief to this court, “the first business between the companies since Matt and Mike left
AmAlloy in 1999, [signaling] a wholesale change in their relationship.”
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these reasons were pretextual and that instead, JSW’s refusal to deal was a
response to the two threats from the distributors. See Rossi v. Standard
Roofing, Inc., 156 F.3d 452, 478 (3d Cir. 1998) (holding that pretextual excuses
to explain a refusal to deal can be circumstantial evidence of a conspiracy);
DeLong Equip. Co. v. Washington Mills Electro Minerals Corp., 990 F.2d 1186,
1195–96 (11th Cir. 1993) (same). At the time JSW ended its relationship with
MM, Chapel and AmAlloy had already threatened JSW, and MM had already
settled the lawsuit with Chapel. In addition, JSW risked a breach of contract
claim by ending this relationship. A reasonable juror could have concluded
that JSW’s explanation for its supposedly independent refusal to deal was
pretextual. Because there was substantial evidence that tended to exclude the
possibility that JSW acted independent of the horizontal conspiracy between
the distributors when it refused to deal with JSW, we affirm the jury’s finding
that JSW joined the horizontal conspiracy between the distributors.          See
Monsanto Co., 465 U.S. at 761.
                                      B.
      Nucor also argues that there was not substantial evidence to conclude
that it joined the horizontal conspiracy between the distributors. We agree.
For us to affirm the finding that Nucor joined the horizontal conspiracy, a
reasonable juror must have been able to conclude from the evidence that Nucor
knew “the essential nature and general scope” of the joint plan and joined it.
See H & B Equip. Co., 577 F.2d at 245. MM needed to provide substantial
evidence that tended to exclude the possibility that Nucor’s three refusals to
deal (September 2, 2011, October 26, 2011, and March 2012) with MM were
made independent of the existing horizontal conspiracy between the
distributors. See Viazis, 314 F.3d at 762. After our searching review of the
record, we conclude that MM did not provide such evidence.


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      On September 1, 2011, Nucor was first approached by MM’s Hume, who
let Nucor know that he had left Chapel and started MM. Nucor’s President
Whiteman immediately emailed Chapel’s Altman to let him know that they
were aware of this development and would continue supporting Chapel. 3
Nucor then first refused to quote MM on September 2, 2011. On September 5,
2011, John Sergovic, the president of ArcelorMittal, sent an internal email,
which Nucor contests on appeal, stating that Nucor was threatened by Chapel
to not deal with MM before that date. Although Nucor’s initial email of support
to Chapel does not reference this threat or suggest knowledge of this threat, a
reasonable juror could have credited Sergovic’s email as evidence that Nucor
received a threat from Chapel to not deal with MM before committing to its
own decision to refuse to deal with MM. 4
      Nucor asserts that each time it refused to deal with MM, it was acting in
accordance with its “incumbency practice,” where Nucor remains loyal to
established customers, such as Chapel, in order to maintain its original supply
chain. Even if the jury did not credit this practice, MM did not provide evidence
showing that when Nucor first refused to quote MM, Nucor was aware of an
agreement between the distributors to foreclose MM from the market. MM
failed to provide evidence that tended to exclude the possibility that Nucor
acted independent of such a conspiracy. In fact, at the time Nucor first refused
to quote MM, Nucor believed that JSW, its competitor, was supplying MM.
Hence Nucor would not have perceived that its refusal to deal (a decision either



      3  Earlier that day, a Chapel representative visited Nucor with another customer, and
according to Nucor’s Whiteman, the representative was busy with phone calls due to a
development at Chapel’s Houston office. That interaction led Whiteman to refer to MM’s
formation as “the crisis” in his email to Altman. MM did not present any evidence showing
that the Chapel representative discussed MM during the visit on September 1.
       4 Notably, the cross-examination of JSW’s President Fitch elicited knowledge of raw

threats from both Chapel and AmAlloy. The cross-examination of Nucor’s President
Whiteman did not reveal any knowledge of the alleged threat from Chapel.
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made independently or even with Chapel) would help foreclose MM from the
market. In addition, as MM contends, the horizontal agreement between the
two distributors was not confected until September 8, 2012, the first date that
AmAlloy and Chapel met following the establishment of MM. 5 Nucor’s decision
not to deal with MM took place on September 2, 2012, without knowledge of a
horizontal conspiracy between Chapel and AmAlloy, and without knowledge of
a concerted purpose to rid MM from the market.
       Although Nucor’s decision to not deal with MM was consistent with the
purpose of the group boycott, Nucor’s decision does not tend to exclude the
possibility that it was made independent of the group boycott. The Supreme
Court has held that “conduct as consistent with permissible competition as
with illegal conspiracy does not, standing alone, support an inference of
antitrust conspiracy.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 588 (1986). The evidence establishes only that Nucor’s decision to
support Chapel and not deal with MM was either consistent with its
incumbency practice, or at most, consistent with a vertical agreement with
Chapel, its longstanding customer. Without knowing that another distributor
was threatening manufacturers, or that other manufacturers were refusing to
deal with MM, Nucor could not consciously commit to a common scheme to
foreclose MM from the market. See Monsanto, 465 U.S. at 764. A reasonable
juror could not have found that Nucor’s original September 2 decision to not
deal with MM, made in favor of a longstanding customer, tended to exclude
conduct independent of the horizontal conspiracy between the distributors. 6



       5 MM did not present any evidence showing that Chapel and AmAlloy communicated
regarding MM before this meeting.
       6 Again, MM’s sole theory of liability was that Nucor joined the horizontal conspiracy

and was thus per se liable for antitrust violations. We do not address whether this evidence
would be sufficient to establish that Nucor and Chapel entered into a vertical refusal to deal
agreement that could be held unlawful under the rule of reason. See NYNEX Corp. v. Discon,
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       MM has not identified any record evidence showing that Nucor was
approached by any distributor other than Chapel seeking concerted action
against MM. In fact, the only evidence that could lead a reasonable juror to
conclude that Nucor became aware of an agreement between the distributors
was the statement made by North Shore’s Cooper to Hume and Schultz that
MM recorded on March 19, 2012.                  Cooper stated that Nucor’s President
Whiteman told Cooper, “So there’s a lot of pressure on the mills to not support
you from their biggest customers.” Before Cooper made this statement, Nucor
had refused to do business with North Shore when North Shore sold its steel
to MM. Even if a reasonable juror could infer that when Nucor refused to deal
with North Shore when selling to MM, Nucor was aware of the agreement
between the distributors, Whiteman’s statement does not tend to exclude the
possibility that Nucor acted independent of the horizontal conspiracy between
the distributors. Nucor’s decision to not do business with North Shore when
North Shore was selling to MM was consistent with its original decision not to
deal with MM, which was made on September 2, 2011, without knowledge of
the conspiracy between the distributors. See also Southway Theatres, Inc. v.
Georgia Theatre Co., 672 F.2d 485, 494 (5th Cir. 1982) (recognizing this court’s
consistent enforcement of the rule that “inference of a conspiracy is always
unreasonable when it is based solely on parallel behavior that can be explained
as the result of the independent business judgment of the defendants”). We
hold that MM did not present substantial evidence from which a reasonable
juror could conclude that Nucor’s unwavering refusal to deal with MM in favor
of its longstanding relationship with Chapel tended to exclude the possibility


Inc., 525 U.S. 128, 136 (1998); see also In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 317
(3d Cir. 2010) (“While pleading exclusively per se violations can lighten a plaintiff’s litigation
burdens, it is not a riskless strategy. If the court determines that the restraint at issue is
sufficiently different from the per se archetypes to require application of the rule of reason,
the plaintiff’s claims will be dismissed.”).
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that Nucor’s actions were made independent of the horizontal conspiracy
between AmAlloy and Chapel and joined by JSW. For that reason, we reverse
the judgment as to Nucor.
                                        II.
      We next consider whether the district court erred in instructing the jury
that if it found that Nucor and JSW joined the conspiracy between the
distributors, Nucor and JSW would be per se liable under § 1 of the Sherman
Act. The decision to analyze the conspiracy under a per se theory of liability is
a question of law that we review de novo. See Craftsmen Limousine, Inc. v.
Ford Motor Co., 363 F.3d 761, 772 (8th Cir. 2004). Having reversed the verdict
as to Nucor, we address only JSW’s arguments. JSW argues (1) that the per
se rule does not apply and (2) in the alternative, “the case should be remanded
for a new trial because the district court failed to properly submit the Tunica
factors to the jury.”
                                        A.
      Whether a restraint on trade is per se illegal or is analyzed under the
rule of reason is a key distinction in antitrust law. Although § 1 proscribes
“[e]very contract, combination . . . , or conspiracy . . . in restraint of trade or
commerce,” 15 U.S.C. § 1, it is well-established that only unreasonable
restraints on trade actually violate the Sherman Act. NYNEX Corp. v. Discon,
Inc., 525 U.S. 128, 133 (1998).        To determine whether a restraint is
unreasonable, courts use one of two methods of analysis. Most agreements are
analyzed under the rule of reason, whereby a court “must decide whether the
questioned practice imposes an unreasonable restraint on competition, taking
into account a variety of factors, including specific information about the
relevant business, its condition before and after the restraint was imposed, and
the restraint’s history, nature, and effect.” State Oil Co. v. Khan, 522 U.S. 3,
10 (1997).   But, certain agreements “because of their pernicious effect on
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                                       No. 14-20267
competition and lack of any redeeming virtue are conclusively presumed to be
unreasonable and therefore illegal without elaborate inquiry as to the precise
harm they have caused or the business excuse for their use.” United States v.
Gen. Motors Corp., 384 U.S. 127, 146 (1966) (citation omitted). Group boycotts
to foreclose an entrant from the market are of this latter character. Id.
       The Supreme Court has consistently held that the per se rule is
applicable to group boycotts identical to the boycott alleged in this case. See
NYNEX, 525 U.S. at 135. The Supreme Court has regularly applied per se
liability to agreements described as “either directly denying or persuading or
coercing suppliers or customers to deny relationships the competitors need in
the competitive struggle.” Nw. Wholesale Stationers, Inc. v. Pac. Stationery &
Printing Co., 472 U.S. 284, 294 (1985) (citation omitted). 7 The Court enforces
the per se rule to these group boycotts because “the likelihood of
anticompetitive effects is clear and the possibility of countervailing
procompetitive effects is remote.” Id. In Klor’s, Inc. v. Broadway-Hale Stores,
Inc., the Court found it per se unlawful for manufacturers, distributors, and a
retailer to agree to refuse to deal with another competing retailer. 359 U.S.
207, 209–10 (1959). In United States v. General Motors Corp., the Court held
it per se unlawful for an automobile manufacturer to agree with automobile
dealers to boycott other dealers that were discounting cars. 384 U.S. at 145.
These cases, and many more, illustrate that group boycotts involving a
horizontal conspiracy to foreclose a market participant are considered per se
violations of § 1. See Gen. Motors Corp., 384 U.S. at 146.



       7 That a group boycott organized by a cooperative or professional organization is
analyzed under the rule of reason unless the plaintiff can show that the cooperative or
professional organization possessed “market power or exclusive access to an element
essential to effective competition” has no bearing on this case as it does not involve a
cooperative or a professional organization. See Nw. Wholesale, 472 U.S. at 296; see also F.T.C.
v. Indiana Fed’n of Dentists, 476 U.S. 447, 458–59 (1986).
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                                  No. 14-20267
      JSW contends that the Supreme Court limited the application of per se
liability to group boycotts in Leegin Creative Leather Prods., Inc. v. PSKS, Inc.,
551 U.S. 877, 893 (2007).      In antitrust law, a distinction exists between
agreements that are made between competitors (horizontal agreements) and
agreements between manufacturers and customers (vertical agreements). In
Leegin, the Supreme Court held that the per se rule is inapplicable to
price-setting vertical agreements, adding in dicta that this holding would
extend to vertical agreements that facilitate horizontal conspiracies to increase
prices. Id. (“To the extent a vertical agreement setting minimum resale prices
is entered upon to facilitate [horizontal cartels that decrease output or reduce
competition to increase prices], it, too, would need to be held unlawful under
the rule of reason.” (emphasis added)).
      Long before Leegin, settled Supreme Court case law held that purely
vertical agreements to refuse to deal are not per se unlawful. NYNEX, 525
U.S. at 135. Purely vertical refusals to deal, often referred to as exclusive
dealing agreements, frequently have procompetitive justifications, such as
limiting free riding and increasing specialization.         See Richard Posner,
Antitrust Law 253 (2d ed. 2001). However, the crux of the group boycotts at
issue in the cases in which per se liability has always applied is that members
of a horizontal conspiracy use vertical agreements anticompetitively to
foreclose a competitor from the market. See NYNEX, 525 U.S. at 135 (“The
agreement in Fashion Originators’ Guild involved what may be called a group
boycott in the strongest sense: A group of competitors threatened to withhold
business from third parties unless those third parties would help them injure
their directly competing rivals.” (describing Fashion Originators’ Guild of Am.
v. Fed. Trade Comm’n, 312 U.S. 457, 461–63 (1941)); Klor’s, Inc., 359 U.S. at
208–09. In these cases, the vertical participants, the manufacturers, actually
join the horizontal conspiracy. See United States v. MMR Corp. (LA), 907 F.2d
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                                  No. 14-20267
489, 498 (5th Cir. 1990) (holding that a non-competitor participant in a
horizontal conspiracy was per se liable because “[i]f there is a horizontal
agreement between A and B, there is no reason why others joining that
conspiracy must be competitors”); Spectators’ Commc’n Network, 253 F.3d at
223; see also Klor’s, Inc., 359 U.S. at 212–13; Nw. Wholesale Stationers, Inc.,
472 U.S. at 294. Each court that has addressed the anticompetitive nature of
these group boycotts was aware of the vertical components of the conspiracy
and still applied per se liability to each member of the conspiracy. See, e.g.,
Klor’s, Inc., 359 U.S. at 208–09.      For example, in Klor’s, which remains
controlling precedent, the Supreme Court applied per se liability to all of the
participants in a group boycott that was arranged by only one competitor
because there was a horizontal agreement among those that carried out the
boycott. Klor’s, 359 U.S. at 212–13.
      We decline to hold that the Supreme Court silently overruled this line of
cases by stating that vertical agreements to regulate prices that facilitate
horizontal agreements to regulate prices “too, would need to be held unlawful
under the rule of reason.” Leegin, 551 U.S. at 893; see also Anderson News, LLC
v. Am. Media, Inc., 680 F.3d 162, 183 (2d Cir. 2012) (recognizing, post-Leegin,
that, under Klor’s, per se liability applies to group boycotts with horizontal and
vertical components). But cf. Toledo Mack Sales & Serv., Inc. v. Mack Trucks,
Inc., 530 F.3d 204, 225 (3d Cir. 2008) (holding that under Leegin per se liability
did not apply to vertical agreements between manufacturers and distributors
to refuse to deal with distributors that were not part of a horizontal price-fixing
conspiracy, but not finding that the manufacturers joined a horizontal group
boycott). The district court did not err when it instructed the jury that if they
found that the manufacturers joined the conspiracy between the distributors,
the manufacturers were per se liable for a § 1 violation.


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                                       No. 14-20267
                                             B.
       JSW also argues that in the alternative scenario where this court does
not outright apply the rule of reason to determine the legality of the alleged
conspiracy, we should order a new trial because the jury was not instructed to
consider the factors discussed in Tunica Web Advertising v. Tunica Casino
Operators Ass’n, Inc., 496 F.3d 403, 414–15 (5th Cir. 2007).                   The Tunica
decision does not affect our above holding that the per se rule applies to the
group boycott alleged in this case. Instead, Tunica potentially expanded per
se liability. In Tunica, this court reversed summary judgment where the
district court concluded that the per se rule applies only to group boycott cases
“where one of the conspirators is a direct competitor of the victim.” Id. at 414.
This court recognized (post-Leegin) that per se liability applies to group
boycotts where there is a horizontal agreement to foreclose a competitor from
the market, but we also held that the per se rule is not limited to group boycotts
where the horizontal agreement is among competitors. Id. at 413–14. The
Tunica court then instructed the district court to consider three factors on
remand to determine whether per se liability applies. 8 Id. at 414. Even if the
Tunica court did not intend to expand per se liability, the application of the
three factors was limited to the specific facts of that case. See id. at 414. The
district court did not err by not applying these factors or instructing the jury
to consider them before applying per se liability.
                                             III.
       Finally, we address JSW’s argument that the jury’s damages findings
were fatally defective because MM’s damages expert, Stephen P. Magee,


       8 These factors were: “(1) whether the casinos hold a dominant position in the relevant
market; (2) whether the casinos control access to an element necessary to enable TWA to
compete; and (3) whether there exist plausible arguments concerning pro-competitive
effects.” Id. at 414–15. In light of our description of the alleged conspiracy, each of these
factors would likely be met in this case.
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                                   No. 14-20267
should have been excluded. Before trial, JSW filed a Daubert motion to exclude
Magee’s testimony as unreliable. The district court denied the motion. JSW
renewed the same objections at trial, in motions for judgment as a matter of
law post-trial, and in a motion for a new trial, all of which the district court
denied. JSW raises the same arguments on appeal.
        We review “the district court’s determination of admissibility of expert
evidence under Daubert for abuse of discretion.”        Knight v. Kirby Inland
Marine Inc., 482 F.3d 347, 351 (5th Cir. 2007) (referencing Daubert v. Merrell
Dow Pharms., Inc., 509 U.S. 579 (1993)). Under Daubert, “[t]he proponent
need not prove to the judge that the expert’s testimony is correct, but she must
prove by a preponderance of the evidence that the testimony is reliable.” Moore
v. Ashland Chem. Inc., 151 F.3d 269, 276 (5th Cir. 1998). The Daubert inquiry
is flexible, but the proponent must establish reliability by showing that the
testimony is based on reasoning or methodology that is “scientifically valid.”
Id.
        JSW contends that there are four problems with Magee’s testimony and
with the jury’s damages award. In so arguing, JSW asserts that the existence
of any of these problems individually, or all cumulatively, requires a new trial
or remittitur. JSW contends that when using the yardstick model of damages,
Magee (1) relied on an invalid comparator, (2) used the wrong time period for
comparison, (3) “assumed a gross-profit margin that, indisputably, no company
achieved during the alleged damage period,” and (4) failed to take into account
MM’s settlement with Chapel that reduced its customer pool for the first six
months of operation. We find no abuse of discretion in the district court’s
admission of Magee’s testimony.

        JSW’s asserted fatal flaws all relate to the expert’s use of the yardstick
model. We have described this model as follows:


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                                 No. 14-20267
      There are two generally recognized methods of proving lost profits:
      (1) the before and after theory; and (2) the yardstick test. The
      before and after theory compares the plaintiff’s profit record prior
      to the violation with that subsequent to it. The before and after
      theory is not easily adaptable to a plaintiff who is driven out of
      business before he is able to compile an earnings record sufficient
      to allow estimation of lost profits. Therefore, the yardstick test is
      sometimes employed. It consists of a study of the profits of
      business operations that are closely comparable to the plaintiff’s.
      Although allowances can be made for differences between the
      firms, the business used as a standard must be as nearly identical
      to the plaintiff’s as possible.
Lehrman v. Gulf Oil Corp., 500 F.2d 659, 667 (5th Cir. 1974). Because MM
was newly formed at the time the alleged conspiracy began, it had no financial
performance to use as the “before” in the before and after test. Thus, Magee
used the yardstick approach. As a comparator, Magee chose the first twelve
years of operation at Chapel’s Houston office, which Schultz and Hume had
opened and ran until they left to start MM. He excluded an outlier year in
which Chapel’s performance was extraordinary. Magee imported the average
gross-profit margin from this comparator and projected profits, assuming that
MM would have kept operating for ten years. We find no abuse of discretion
in allowing Magee to testify according to this approach.
      JSW asserts that Chapel’s Houston office was too different from MM to
be a reliable comparator in the yardstick model. An antitrust plaintiff must
“demonstrate the reasonable similarity of the business whose earning
experience he would borrow.” Eleven Line, Inc. v. N. Tex. State Soccer Ass’n,
Inc., 213 F.3d 198, 208 (5th Cir. 2000). MM has adequately done so here.
Chapel’s Houston office is not nearly as dissimilar as other comparators this
court has found to be improper yardsticks. See El Aguila Food Prods., Inc. v.
Gruma Corp., 131 F. App’x 450, 453 (5th Cir. 2005) (where an expert “made no
effort to demonstrate the reasonable similarity of the plaintiffs’ firms and the
businesses whose earnings data he relied on as a benchmark”); Eleven Line,
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                                 No. 14-20267
Inc., 213 F.3d at 208 (where the expert’s yardstick was not nearly identical and
he offered no evidence of the comparators’ geographic location, size, market
served, or costs of operation). Magee’s yardstick was “as nearly identical to
[MM] as possible.”     Lehrman, 500 F.2d at 667; cf. J. Truett Payne Co. v.
Chrysler Motors Corp., 451 U.S. 557, 566 (1981) (noting that courts are willing
to accept some uncertainty in antitrust damages estimates because the
“vagaries of the marketplace usually deny us sure knowledge of what plaintiff’s
situation would have been in the absence of the defendant’s antitrust
violation”).   Therefore, the district court did not abuse its discretion by
concluding that Magee’s comparator was reliable.
      Similarly, JSW contends that Magee should have used the years 2011–
2013 as his benchmark period instead of 2001–2011. JSW contends that 2001–
2011 were “some of the best years for the steel industry” and are not
representative of the industry’s future performance. As support, JSW cites
weaknesses in the steel market in 2011–2013.        JSW has not shown that
Magee’s use of 2001–2011 data was unreasonable or unsupported. Magee
excluded one extraordinary year (2004), and his benchmark period included six
years of recession. The defendants had the opportunity to show whether the
benchmark period was correct on cross examination. See Daubert, 509 U.S. at
596 (“Vigorous cross-examination, presentation of contrary evidence, and
careful instruction on the burden of proof are the traditional and appropriate
means of attacking shaky but admissible evidence.”). We find no abuse of
discretion as to this point.
      JSW also asserts that Magee’s model is unreliable because no actual
competitor achieved the gross-profit margin that his model projected for MM.
This criticism is related to the previous two criticisms; Magee used the gross-
profit margin achieved by Chapel’s Houston office between 2001 and 2011
(excluding 2004). JSW contends that Chapel’s Houston office from 2012–2013,
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                                  No. 14-20267
or MM acting as a broker in 2011, is the proper comparator for gross-profit
margin. Magee’s assumption that MM would achieve better margins than its
competitors was reasonable based on evidence that MM’s leadership was
simply better than that of its competitors. While at Chapel, MM’s founders
had achieved a twenty percent profit margin in a year so bad for the steel
industry that another distributor had its first negative year in forty years.
Magee’s projections were perhaps rosy, but they were not unreliable.            In
addition, JSW’s competing expert adequately aired his disagreement. It was
not an abuse of discretion to allow MM’s expert to provide his own model
reaching a different projected gross-profit margin. See Pipitone v. Biomatrix,
Inc., 288 F.3d 239, 250 (5th Cir. 2002) (“The fact-finder is entitled to hear [the
expert’s] testimony and decide whether it should accept or reject that
testimony after considering all factors that weigh on credibility, including
whether the predicate facts on which [the expert] relied are accurate.”).
      Lastly, JSW argues that Magee failed to consider the fact that for the
first six months of operation, MM was prohibited from doing business with
approximately 190 of Chapel’s former customers. Magee’s testimony shows
that he considered this limitation but ultimately decided the limitation was
temporary and would not affect MM’s sales potential. This decision did not
make Magee’s testimony unreliable.
      Because the district court did not abuse its discretion by admitting the
testimony of MM’s damages expert, Magee, the district court correctly denied
JSW’s motion for a new trial. See Munn v. Algee, 924 F.2d 568, 575 (5th Cir.
1991) (“When reviewing the disposition of a new trial motion, we normally
reverse the judgment only for an abuse of discretion.”).
                                CONCLUSION
      Following a six-week jury trial, the district court entered judgment for
MM on its claim under § 1 of the Sherman Act alleging an illegal conspiracy
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                                No. 14-20267
between the distributors and manufacturers of the Gulf Coast domestic steel
industry. MM alleged that Nucor and JSW, steel manufacturers, joined the
horizontal conspiracy between MM’s competing distributors to refuse to deal
with MM. The jury was correctly instructed to apply per se liability if they
found that the manufacturers joined the conspiracy. The jury, finding that the
manufacturers joined the conspiracy, awarded MM damages of $52 million,
which the court trebled.    We hold, among other things, that there was
substantial evidence for the jury to conclude that JSW joined the conspiracy
between the distributors. However, there was not substantial evidence, direct
or circumstantial, to conclude that Nucor joined the horizontal conspiracy
between the distributors—MM’s only theory of § 1 liability.
      We REVERSE the judgment as to Nucor and AFFIRM the judgment as
to JSW.




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