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                                                                         [PUBLISH]

               IN THE UNITED STATES COURT OF APPEALS

                        FOR THE ELEVENTH CIRCUIT
                               ____________

                                  No. 11-14983
                                  ____________

                      D.C. Docket No. 1:02-cv-02600-RDP

GULF STATES REORGANIZATION
GROUP, INC.,

                                                          Plaintiff-Appellant,
                                      versus

NUCOR CORPORATION,

                                                          Defendant-Appellee.

                                 _____________

                   Appeal from the United States District Court
                      for the Northern District of Alabama
                                ______________

                                  (July 15, 2013)

Before TJOFLAT, CARNES, and JORDAN, Circuit Judges.

JORDAN, Circuit Judge:

      Like a swallow returning to Capistrano, this antitrust case is before us again.

In 2006, we ruled that Gulf States Reorganization Group had sufficiently alleged
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injury, and reversed the district court’s dismissal of its complaint against Nucor

Corporation. See Gulf States Reorganization Group v. Nucor Corp., 466 F.3d 961,

967–68 (11th Cir. 2006). In so ruling, we explicitly noted that we were not

addressing the merits of GSRG’s claims. See id. at 967, 968 n.4. On remand,

GSRG amended its complaint, abandoning any claim that Nucor was a monopolist.

      The claims in the amended complaint—like those in the initial complaint—

arose from the purchase, by Nucor and Casey Equipment Company, of the assets

of Gulf States Steel in a Chapter 7 bankruptcy liquidation proceeding in Alabama.

After discovery, Nucor moved for summary judgment, and, in two reports, a

special master recommended that the district court grant Nucor’s summary

judgment motion. The district court considered GSRG’s objections but nonetheless

accepted the reports in a published order. See Gulf States Reorganization Group v.

Nucor Corp., 822 F. Supp. 2d 1201 (N.D. Ala. 2011).

      GSRG now appeals the grant of summary judgment in favor of Nucor. After

a thorough review of the parties’ briefs and the extensive record, and with the

benefit of oral argument, we affirm. We write on one of the issues relevant to

GSRG’s attempted monopolization claim, in order to explain why cross-elasticity

of supply is critical to defining the relevant market in this case. On all other issues

raised by GSRG, we affirm based on the special master’s reports and the district

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court’s order.

                                              I

       Because the special master and the district court catalogued the relevant

facts, we set out only those that are necessary for our discussion. Where the facts

are disputed, we of course view the evidence in the light most favorable to GSRG.

See, e.g., Ricci v. DeStefano, 557 U.S. 557, 586 (2009).

                                             A

       Depending on how it is processed and cooled, steel can have a variety of

forms. One popular type of steel, black hot rolled coil steel, is a form of plain black

sheet steel which is rolled into a coil for ease of storage, handling, and

transportation. When new black hot rolled coil steel is bathed in acid and coated

with oil, the resulting type of steel is called pickled and oiled steel. 1

       Nucor is a leading manufacturer of black hot rolled coil steel. In 1999, Gulf

States Steel, one of Nucor’s main competitors in the Southeast—a region that

GSRG defines as Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi,

North Carolina, South Carolina, Tennessee, and Texas—filed for bankruptcy under

Chapter 11. In 2000, after reorganization proved unsuccessful, the bankruptcy

1
  As described by some courts, the “pickling” process removes rust and scale and makes the
surface of the steel white. See Crucible Steel Co. v. United States, 132 F. 269, 270 (C.C.N.Y.
1904); Ohio Steel Tube Co. v. Limbach, 1987 WL 14301, *2 (Ohio Ct. App. 1987).

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court converted the Chapter 11 case into a Chapter 7 liquidation proceeding. This

conversion meant that the assets of Gulf States Steel—including a steel plant in

Gadsden, Alabama—would be sold.

      GSRG, a newly-formed entity, wanted to enter the black hot rolled coil steel

market by purchasing the assets of Gulf States Steel, and it decided to bid for those

assets at a bankruptcy auction. According to GSRG’s internal analysis, these assets

had a book value of at least $13.3 million.

                                          B

      At a bankruptcy auction held in May of 2001, GSRG purchased the non-

steel-producing assets of Gulf States Steel for almost $2 million. The steel-

producing assets of Gulf States Steel, however, went unsold because no one met

the reserve price of $7.1 million.

      In early July of 2002, GSRG signed a contract with the bankruptcy trustee to

purchase the steel-producing assets for $5 million unless another party submitted a

higher bid, in which case there would be a second public auction. When Nucor

found out about GSRG’s contract with the trustee, it executed a confidential

agreement (through its acquisition entity, Stenroh, Inc.) with Casey, an entity

which buys used steel-related equipment (for resale to steel manufacturers) and

develops industrial parks (i.e., areas zoned for industrial development).

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      The agreement between Nucor and Casey essentially required the two

entities to form a limited liability company, Gadsden Industrial Park, LLC.

Pursuant to the agreement, Park could bid up to $8 million, a sum which Nucor

would loan on a non-recourse basis, to buy the steel-producing assets of Gulf

States Steel. If Park won the auction, Casey would then sell the assets, pay 75% of

the proceeds to Nucor, and keep the remaining 25%. Casey would also be allowed

to recover the substantial costs of dismantling and loading the plant and the steel-

producing assets. Nucor could reject any sale to any domestic third-party

purchasers, and all other sales were subject to Nucor’s “reasonable approval.”

According to GSRG, the agreement gave Casey a far higher remuneration than the

average commission for such transactions.

      On September 12, 2002, Park bid $5.25 million for the steel-producing

assets, thereby triggering a second public auction. That auction was held four days

later, and this time Park bid $6.3 million in cash. GSRG bid $7 million, but its bid

did not conform with the auction’s rules because it included forgiveness of the

bankruptcy estate’s debt to GSRG. As a result, GSRG’s bid was rejected. Although

GSRG was given another opportunity to submit a bid that conformed with the

auction’s rules—and had the cash to make a conforming bid—it chose not to do so.

Park’s cash bid of $6.3 million therefore won the day. The bankruptcy court later

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rejected GSRG’s challenge to the result of the auction.

       After the auction, Casey sold the steel-producing assets to an Asian buyer

for $18 million (net of dismantling and loading costs, which totaled $9 million).

Park kept the bankruptcy estate’s land and transformed it into an industrial park. In

the end, Casey and Nucor made a total profit of almost $12 million from the sale of

the assets.

       GSRG sued Nucor, Casey, and Park, alleging that they contracted and

combined to purchase the steel-producing assets of Gulf States Steel in order to

block competition in the black hot rolled coil steel market, in violation of § 1 of the

Sherman Act, 15 U.S.C. § 1. GSRG also alleged that, through its actions, Nucor

created a dangerous probability that it would obtain monopoly power over the

black hot rolled coil steel market in the Southeast, which, if true, would constitute

an attempt to monopolize in violation of § 2 of the Sherman Act, 15 U.S.C. § 2.

Finally, GSRG alleged that Nucor, Casey, and Park conspired to monopolize that

same market, in violation of § 2.2

                                               II

       The Sherman Act, among other things, outlaws the “attempt to monopolize .

2
  GSRG, in the words of the district court, “resolved [its] differences” with Casey and Park. See
Nucor Corp., 822 F. Supp. 2d at 1219 n.17. We therefore have no occasion to address any of the
claims GSRG asserted against Casey and Park.

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. . any part of the trade or commerce among the several States, or with foreign

nations.” 15 U.S.C. § 2. As defined by the Supreme Court, “[t]he phrase ‘attempt

to monopolize’ means the employment of methods, means and practices which

would, if successful, accomplish monopolization, and which, though falling short,

nevertheless approach so close as to create a dangerous probability of it[.]” Am.

Tobacco Co. v. United States, 328 U.S. 781, 785 (1946). Thus, to establish a

violation of § 2 for attempted monopolization, “a plaintiff must show (1) an intent

to bring about a monopoly and (2) a dangerous probability of success.” Levine v.

Cent. Fla. Med. Affiliates, Inc., 72 F.3d 1538, 1555 (11th Cir. 1996) (internal

quotation marks omitted).

      A dangerous probability of success arises when the defendant comes close to

achieving monopoly power in the relevant market. See id. See also Spectrum

Sports, Inc. v. McQuillan, 506 U.S. 447, 459 (1993) (“We hold that petitioners

may not be liable for attempted monopolization under § 2 of the Sherman Act

absent proof of a dangerous probability that they would monopolize a particular

market and specific intent to monopolize.”). A plaintiff can show this dangerous

probability of success only if it can properly define the relevant market, which has

both product and geographic dimensions. See T. Harris Young & Assocs. v.

Marquette Elecs., 931 F.2d 816, 823 (11th Cir. 1991).

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       GSRG’s proposed relevant product market—black hot rolled coil steel—did

not account for the fact that manufacturers of pickled and oiled steel could, without

much difficulty or cost, switch their production to that of black hot rolled coil steel.

Therefore, the district court reasoned, GSRG did not define a proper product

market. See Nucor Corp., 822 F. Supp. 2d at 1235-36. We agree with the district

court’s analysis.

       Key to comprising a relevant market, a product market is defined in part by

whether a group of manufacturers, “because of the similarity of their products,

have the ability—actual or potential—to take significant amounts of business away

from each other.” U.S. Anchor Mfg. v. Rule Indus., 7 F.3d 986, 995 (11th Cir.

1993). GSRG steadfastly asserts that pickled and oiled steel is not the equivalent of

black hot rolled coil steel from the perspective of purchasers, but this assertion

misses the point. See, e.g., Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421,

1436 (9th Cir. 1995) (“[D]efining a market on the basis of demand considerations

alone is erroneous. A reasonable market definition must also be based on ‘supply

elasticity.’”) (internal citation omitted).

       One way to decide if producers or manufacturers can take business away

from a monopolist (or an attempted monopolist) is to analyze the concept of cross-

elasticity of supply, which “looks at competition from the production end instead

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of the consumer end.” Spectrofuge Corp. v. Beckman Instruments, Inc., 575 F.2d

256, 280 n.79 (5th Cir. 1978). See also Brown Shoe Co. v. United States, 370 U.S.

294, 325 n.42 (1962) (“The cross-elasticity of production facilities may also be an

important factor in defining a product market . . . .”). The black hot rolled coil

steel market, we conclude, has a high cross-elasticity of supply.

      Picked and oiled steel is essentially black hot rolled coil steel that a

manufacturer bathes in acid and coats with oil. A pickled and oiled steel

manufacturer necessarily produces black hot rolled coil steel and can, without

much or any cost (and maybe even at less cost), switch and produce black hot

rolled coil steel. That equates to a high cross-elasticity of supply, and a “[h]igh

cross-elasticit[y] of supply . . . deter[s] monopoly pricing.” Spectrofuge Corp., 575

F.2d at 280 n.79. As we explained in Spectrofuge Corp., a “‘very high cross-

elasticity of supply is a way of describing a condition in which the cost and

rapidity of new entry are such that a monopolist of the product would have

negligible power to increase its price above the competitive level. The increase

would evoke a prompt and substantial increase in the output of the product, as

manufacturers of other products switched to production of his product.’” Id.




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(quoting RICHARD POSNER, ANTITRUST 441 (1974)). 3

       Assume, for example, that Nucor obtains a monopoly of the black hot rolled

coil steel market. Through its monopoly, Nucor inflates prices (by, say, lowering

the supply of black hot rolled coil steel, which, given a constant demand, increases

the price). Such a move would present pickled and oiled steel manufacturers with

two options. They could continue to produce pickled and oiled steel at the same

cost and continue to sell that product at the same price. Or they could cut the

“pickling” processing short (thereby saving the costs of converting black hot rolled

coil steel into pickled and oiled steel) and sell the black hot rolled coil steel at the

higher price to earn significant profits. In a world of rational economic actors, see

U.S. Anchor Mfg., 7 F.3d at 997, one would expect that many, if not all, of these

manufacturers would choose the latter course. As the district court explained,

“[p]roducers of pickled and oiled hot rolled coil [steel] already have the

appropriate substitute product by simply foregoing the one additional process

3
   Although Spectrofuge Corp. is now 35 years old, its articulation of the concept of cross-
elasticity of supply remains sound. See JULIAN VON KALINOWSKI ET AL., 2 ANTITRUST LAWS
AND TRADE REGULATION § 24.02[1][c], at 24-55 (2d ed. 2012) (“Another important factor in
defining a product market is the ability of existing companies to alter their facilities to produce
the defendant’s product. The Supreme Court has long recognized the significance of this factor,
often referred to as cross-elasticity of supply.”) (footnote omitted); PHILLIP AREEDA, HERBERT
HOVENKAMP, & JOHN SOLOW, IIB ANTITRUST LAW ¶ 561, at 360 (3d ed. 2007) (“[I]f B producers
can costlessly switch production to product A in a short time and can readily distribute the
resulting output, they will constrain the prices of A firms in virtually the same way as another A
firm.”).

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required to produce the pickled and oiled product.” Nucor Corp., 822 F. Supp. 2d

at 1236.

      GSRG argues that the record is devoid of evidence to support the district

court’s analysis as to cross-elasticity of supply, but it is mistaken. One of Nucor’s

experts expressly opined that there was high cross-elasticity of supply between

black hot rolled coil steel and pickled and oiled steel, and one of GSRG’s own

experts conceded that, all things being equal, manufacturers of pickled and oiled

steel would produce black hot rolled coil steel if the latter product was selling at a

higher price. See, e.g., Report of Nucor’s Expert, Dr. Seth Kaplan, at 5 (“If black

bands become more profitable than processed downstream steel products,

producers will cease processing black band and sell the band on the commercial

market.”); Deposition of GSRG’s Expert, Dr. Michael Locker, at 61 (“Q: And if

the price of black were to change so that you could make more profit on black than

you could on, say, a pickled and oiled product, there is nothing that would prevent

the mill from saying, I’m just going to sell more black and cut back on producing

pickled and oiled, correct? A: As long as they could satisfy their customer base

that had been established and they wanted to retain, in black.”). GSRG simply did

not present evidence to create an issue of material fact with respect to the cross-




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elasticity of supply. 4

       In sum, GSRG’s definition of the product market is too restrictive, for it

refuses to acknowledge that pickled and oiled steel manufacturers could (and likely

would) enter the fray in order to enrich themselves on the inflated prices of black

hot rolled coil steel. That would, in turn, increase the supply, and lower the price,

of black hot rolled coil steel. It would also sap Nucor’s potential monopoly power.

GSRG ignores this “actual or potential” economic construct, U.S. Anchor Mfg., 7

F.3d at 995, and its failure to account for cross-elasticity of supply is fatal to the

attempted monopolization claim under § 2.

                                                   III

       We affirm the district court’s grant of summary judgment in favor of Nucor.

       AFFIRMED.




4
   We do not mean to suggest that companies always act to maximize profits in the short term.
Indeed, conduct that appears unprofitable—such as a dominant player flooding the market with
its product in order to bring prices down—may actually be rational and profit maximizing
because it is part of a large and/or long-term anticompetitive scheme to drive competitors from
the market or enforce cartel discipline. See, e.g., Christopher Leslie, Rationality Analysis in
Antitrust, 158 U. PA. L. REV. 261, 273, 274-85, 327-28 (2010).

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