Antitrust Summary Judgment
an interview with Luanne Sacks of Crosby, Heafey, Roach & May P.C.
Erik Loomis | University of California, Davis, School of Law

Posted Tuesday, January 1, 2002

Ms. Sacks has represented corporations in antitrust and complex litigation matters since 1985. She has litigated in state and federal trial and appellate courts across the country, and has significant mediation and arbitration experience. As a recognized expert in defending Section 17200 Unfair Competition Act claims, she will chair the August 2002 Practicing Law Institute Conference. She recently spoke about pertinent antitrust issues at the March 8, 2002 Practicing Law Institute Conference on Computer Law.

Ms. Sacks joined Crosby, Heafey, Roach & May P.C. as an equity director in February, 1999. Her practice there has focused on defense of consumer and competitor actions involving unfair and anti-competitive business practices, particularly class actions. She has also provided antitrust advice regarding the formation and operation of joint ventures by members of the computer, health care and container leasing industries.

Ms. Sacks co-authored two articles in conjunction with the March 8, 2002 Practicing Law Institute Conference on Computer Law: "Joint Ventures, Mergers, and the World Wide Web: US and EU Trade Regulation of B2B Exchanges and Internet Mergers and Acquisitions" and "The Microsoft Decision: A Vivid Reminder that Market Definition Can Make or Break Your Case." Ms. Sacks is also co-author of "California High Court Opinion Frowns on Nationwide Class Actions," Legal Backgrounder, June, 2001. In March, 2000, she co-authored "Recovery Under the Unfair Competition Act." In addition, she co-authored a chapter concerning antitrust issues pertinent to insurance brokers and agents in The Insurance Antitrust Handbook published in 1995 by the American Bar Association, Section of Antitrust Law.

She received a Juris Doctorate degree in 1985 and a Bachelor of Arts degree cum laude in 1982 from the University of Pennsylvania.

Aguilar Case:
The case brought under the Cartwright Act (CA analogy to Sherman Antitrust Act) involved a weaving of the opportunity that the CA producers of CARB Gas had to fix prices from the outset of the changeover from regular gas in 1996. The suit alleged the producers had entered into exchange agreements to coordinate production at the same time exchanging competitive information to fix the supply of gas and fix the gas price to the OPIS (Oil Price Information Service) spot price. It alleged information was further communicated through the gasoline manufacturer's trade association and through the use of common consultants. The defendant gas producers in the case (ARCO, Chevron, Exxon, Mobil, Shell, Texaco, Unocal, Tosco, and Ultramar) countered the allegations with denials from key executives and the case was granted summary judgment for the defendants. The court stated that if the plaintiff cannot show an illegal act directly (i.e. uses circumstantial evidence), he cannot avoid summary judgment if the actions are equally explicable by benign motivations on the part of the defendants.

Q: Tell me about your interest in antitrust law.

A: I was very interested in antitrust at the time I went to law school. We had to do a senior thesis at law school and I actually did mine on predatory pricing in the Ninth Circuit. I am fascinated by it, I think it is one of the more challenging and complex areas of the law and it is not something that you can pick up a book and find an easy answer to. Not only does it require synthesizing a lot of different decisions to figure out what sort of a consistent thread is and what some of the rules really are.
The Aguilar decision is a perfect instance of that, notwithstanding that the court went out and set forth what the precise standard is that should be applied, but when you set out to try to apply that it is sort of amorphous. There is going to be some room left for interpretation.

Q: When the court handed down the summary judgment ruling, were you surprised, was it something that you expected?

A: What happened here is that California has moved, almost completely, to the federal standard, the Matsushita Standard. I don't think it was surprising because, as the court noted in Aguilar, the California legislature has been moving and has directed new standards of summary judgment and it was just a matter of sort of flushing out by the courts, what that meant. If you think about what the antitrust laws are designed to do, which is to protect competition, not competitors, and competition with the notion that social welfare is served by a competitive, free marketplace, and competition can be a very vicious thing, but if true, free competition reigns, ultimately it is going to be best for everybody. We just want to make sure that, particularly in an oligopolistic market like they had in Aguilar, that this playing field is as level as possible and that companies don't obtain market power and all the ability to control prices and prices and output that comes with market power, through inappropriate means. If you go back to the Microsoft decision, you know the court found that Microsoft was guilty of maintaining a monopoly. They did not find that Microsoft was guilty of obtaining a monopoly. It is fine to get a monopoly if you do it just because you are better than everybody else, because your products are better and consumers like you. Its only if you undertake some kind of inappropriate conduct, either to get it, or to maintain it that the antitrust laws step in to provide a remedy. That was what had happened in Microsoft. You might have achieved this incredible market power though your acumen, through your product development and innovation, but you're sure not going to take this kind of predatory and heavy handed actions in a variety of different efforts; licensing and restrictive agreements, and use it to keep that monopoly.

Q: Do you think there might have been a ripeness issue in this case because it seemed like the companies were almost thrust into a position by the government's CARB gas production requirement to "create" a market?

A: Given that there are only so many companies that can only produce gas specific to one state you are necessarily going to have a narrow market. You always have to be careful with respect to oligopolistic markets. If you are a player in it or you are someone who is overseeing it, whether it is the Department of Justice or the California A.G. because it is more ripe for nefarious conduct. If you have a market with a thousand competitors in it, actions by a few of them are less likely to have dramatic market effect, especially if market share is spread very evenly or there is a very competitive market otherwise, than if you have two or three players. Then, any two getting together is going to dominate the market and when you think about an oligopolistic market and you think about pricing decisions, there is a real tendency to say, "why should we kill each other by price cutting, why should we engage in true, vigorous competition?" Because of the natural interdependence that exists in an oligopolistic market, if you reduce your price, I'm going to have to reduce my price, everybody else is going to have to reduce their price so then we are all going to have reduced profits. There is not going to be an increase in output to match the lower prices, its just going to be that we sell for less. So if you don't reduce your price, then I don't have to reduce my price. That is just the nature of the market. What you hope would happen is that if there is an oligopolistic market and there is price competition going on, then another player will come in. But if you have huge barriers to entry like you had in Aguilar and in the petroleum industry, then it is not as likely to occur, but it is certainly possible. The notion that members of an oligopolistic market might not engage in vigorous price competition is well recognized but that doesn't make it an antitrust violation.

Q: It seems like in what you are describing that even in the absence of an agreement, the market is such that it is easy to almost 'telegraph' a participant's intent without really making an anticompetitive agreement, would you say that is correct?

A: I don't think it goes so much that if somebody raises their price there is going to be a following increase in price. For instance, lets say there are three players in the market and one player is the more dominant player. It has better market penetration, better name recognition, whatever. It raises its price. That presents a real opportunity for the less dominant market players. I think it is the idea that there is little incentive to reduce prices in an oligopolistic market because if I drop my price I know my competitor is likely to drop his price too to meet it. I think that is why you don't see a lot of price competition. Look around at what is happening right now, suddenly we are back up to $1.89 (a gallon) for premium gasoline. Isn't it funny how that happens across the board? But that is a function of market economics and market analysis even without necessarily being a function of any kind of collusion.

Q: Is that something that the court was speaking to in Aguilar?

A: I think that there was a recognition that that is an economic consequence of the type of market, any time you have an oligopoly with significant barriers to entry. That is why the court wanted to make clear that they would require more evidence to get to trial then just the idea that you all acted similarly, you had an opportunity, you had a motive, and there was exchanges of information through what are typically legitimate means: the use of an independent third party. We are not going to say, "well gosh, that could be a conspiracy and therefore let you get to trial" because that could just as easily have not been a conspiracy. I though the court discussion of the lack of additional evidence offered by the plaintiff's expert in his declaration was interesting because it appears, obviously we don't have the declaration in front of us, but it sounds like what the expert did was he looked at the same categories of evidence that the court looked at an said, almost like a res ipsa loquitur argument, "well, what else could it be?" In one way that is the province of the court which experts aren't supposed to do, he's opining about inferences that you would draw from the evidence, and that is not the nature of an expert opinion, but it just doesn't add anything. That's not to say there aren't a lot of instances, and I would be hard pressed to find an instance where it's not appropriate to have expert testimony in connection with summary judgments in antitrust cases. The nature of the beast requires it.

Q: What do you think about the difficulties that a lot of antitrust plaintiff's attorneys have with such a standard because it seeds like a difficult hurdle to overcome?

A: I'm sympathetic to the idea that rarely these days do you find the smoking gun evidence, the email, the exchange between the three companies that says, "OK, we're going up, how about you?" Although I can tell you first hand, I have at times done antitrust compliance programs for companies, not in this industry, but other industries, where because folks hadn't been educated in antitrust laws, what is ok to do and what isn't, there was exactly that type of email between competitors in the industry. "Today we will be charging X." Ignorance is not a defense to the antitrust laws so that's one of the reasons why it is so important to have an antitrust compliance program and to educate your employees. To go back to the idea that rarely do you get the smoking gun evidence. If you think about what the purpose of the antitrust laws is, to protect competition, if you think about how long it takes to litigate an antitrust case and how much it costs to litigate an antitrust case, you have to take into account that we don't want to be strangling what is truly pro-competitive efforts. So I think, and my defense side characteristics and bias' come out on this, but I think it is appropriate to require the plaintiff to come forward and show that it is more likely to have been a nefarious, collusive agreement that caused these circumstantial inferences that we are drawing the inferences from, than not. You don't have to go all the way to carrying the burden of proof that you would have to carry at trial, you just have to say, if you could draw both inferences, it's more likely that this would be the inference you would draw if you were a trier of fact. It definitely sets a higher standard for summary judgment in California, but that's the standard that had been in effect in the Federal courts for a long time. That is one of the reasons you are seeing more and more California Cartwright Act cases that would have probably, before Solotex and Matsushita and Anderson, have been filed as federal antitrust cases. And we have now just raised the bar to be equal to the federal cases. This makes sense in a lot of ways because, if you think about it, the Cartwright act, even if it is not identical, it is very similar to the Federal laws in most ways with just a couple of distinct differences that have been legislated expressly, so it does make sense to have consistent standards between them.

Q: Can you tell me a little about how the Matsushita standard is going to affect future cases?

A: One of the things that happened in Aguilar is both the state and the federal investigators had looked at what happened to the pricing in the CARB gas production industry. Both had concluded that it was a result of market factors. They did not conclude there had been any antitrust violations. That is at least some indication to a private plaintiff to stop an think twice before investing a lot of resources. I think you will find that the converse is certainly true. If there has been state or federal law enforcement activity, then you see them all lead to civil actions. It happens all the time. IF the case is essentially made for you by the Department of Justice or by the state attorney general, a violation has already been determined by the courts and now you just say "now I get civil injuries for it." That is not going to be in any way changed that I can foresee, by a change in the summary judgment standard, but I do think that given what you might call a heightened summary judgment standard in state court, if there has been investigation by state or federal agencies, and they have concluded that there is not sufficient evidence or good reason to go forward with a challenge to it, you are probably going to have a hard time getting the evidence to meet the Aguilar Standard.

Q: Where would a private person get evidence like that?

A: Well you can't do a civil investigatory demand before you file. But if you are contemplating a serious antitrust case, the first thing you would do is get an expert who would look at what happened in the market and see if there is anything that is not economically rational because conduct that is not economically rational on its face makes you think "wait a minute, why would you act against your own interests unless you assumed that you had some reason to expect that, ultimately, it would be in your interest." That is the idea of predatory pricing. Why would I sell at a price so low that I am going to lose money on it? Well I would do it if I thought I could do it long enough, I could sustain it long enough, to drive everybody else out of the market because then, I have no competitors. Through discovery you can get evidence. One good source of possible evidence of a conspiracy or concerted activity is through trade associations, and that is why trade associations have to be so careful. If you think about it, let's put all of the competitors in an industry in a room together to talk about what's to come, what do we see challenging us, and what statistical information could we exchange that would be beneficial. Those are all good things and those are pro competitive things. But, if you think about a conspiracy as a wheel, you can see the trade association as being the hub. Trade associations have to be very careful to police themselves and to properly use a firewall, to use computer industry verbage. You have to have a firewall set up. Apparently the independent association that was at issue in the Aguilar case had that so that there wasn't a concern that the information was being exchanged improperly. Although they didn't go into a whole lot of discussion I can recall about the specifics of the information; in terms of exactly how it was done, my guess is that it was aggregate data, as opposed to data individually attributed to the particular members. It was probably more of the historical nature, certainly not projected information. That's all safer and that's all laid out in the Maplethorn? decision that they talked about. But if I thought that the industry was engaged in some kind of price fixing or market allocation the first thing that I would do is figure out if there was some sort of a trade association and investigate the trade association's activities. In a lot of the cases that I've defended, I've defended trade associations. You always sweat a little bit about it.

Q: How would you give advice to industry about preparing for avoiding antitrust complications?

A: Certainly you can't wait until you get sued to think about antitrust issues. The Microsoft decision, if it has taught us nothing else, taught us that thinking that the antitrust laws are something that you can ignore because you don't like them is not going to held anybody and certainly not going to help you defend your case if you actually do get sued. I call that "arrogance can kill your case". You have to be far thinking and you have to be farsighted, especially if you are in an oligopolistic market, you should always be thinking about the antitrust laws. If your going to do something like raise your price, and either your competitor has also raised his price recently or you think they're going to raise their prices in response, make sure that you document the legitimate rational reasons why you're doing it. That way as they did in Aguilar, if you are sued later, you can come forward with actual evidence of the independent thought process and if you can't articulate a rational logical reason for why you are doing something maybe it's not worth doing. So I would just say, especially if you're in an oligopolistic market have a good antitrust compliance program and follow it and educate your employees about it. If you can say that we're going to kill competitors, and do it in a very pro competitive way actually. That kind of comment came up in some of the emails from the Microsoft decision. They can really hurt you even though the probably really had no nefarious intent when they were made. Email etiquette - you have to teach it and you have to enforce it in the company. There's nothing worse than seeing that email blown up to a giant size on the board while you witness sits there and just crumbles because they are his or her words. You can't disavow them later, and they're hard to explain later. So if you just think about the fact that your potential audience may be a judge and a jury when you're writing information particularly about markets and market share and market power, you just want to be careful about how you say it, you can say the same thing. Don't say it in a way that hands the case to the other side.

Q:You mentioned providing documented rationale for pricing decisions, what level of authority does that have to be at?

A: No. I just think that whenever you make a decision that carries with it a potential antitrust implication, whether it's a decision to go into a joint venture, whether it's a decision to pull out of a marker, whether it's a decision to enter a market, whatever the nature of it is, it is best to actually physically document the thought process behind it and maintain that so that if you are ever in the position of having to justify what you did, nobody can say that you made the rationale up after the fact. This came up in one of the Kodak decisions, and I think the argument was that one of the reasons that Kodak had acted as it did was to protect its good will or trade marks or proprietary interests. There was nothing to suggest that anybody had ever thought about that in connection with this conduct, until there they were in summary judgment trying to explain it away. So it wasn't particularly persuasive to the court. Whereas if you actually document it, that's exhibit A attached to your manager's declaration.

Q: Do you have any particular expertise or experience that you want to share with defense attorneys?

A: I think that it is critical as we try to defend very, very high profile, very successful companies and their executives that we make sure that they understand not only the proper content of an answer in a deposition, but also the proper tone that should be adopted. I can't say this enough. When you go before a jury, you're evaluated on many standards, and this is particularly the case that I'm seeing right now, when so many companies are being run by very, very young individuals who gain tremendous success very quickly. The classic masters of the universe. They are fabulous business people. That doesn't mean that they know everything about how to respond to an antitrust lawsuit. And so one of the things that I've counseled some defense lawyers recently on, is it can be difficult to do to look your client in the eye and say, " You know what, I'm sorry, you're wrong, I'm right, and you're paying me to tell you how this should be done and you really have to listen to me. You cannot go into this deposition and beat the other side down." Tell them how it really is and just go off on a rampage, and if you have seen any of the excerpts from any of the depositions from the Microsoft case, you'd see what I'm talking about. It really was a free for all. Though it's incumbent upon you as the defense lawyer to really step up to the plate and explain to your client, "this is really not the time for you to explain to the United States government why the antitrust laws make no sense." So good deposition preparation - knowing your case and knowing what your clients are going to say and making sure they understand the appropriate tone will get you very far. One other suggestion I would like to make, to both plaintiff's and defense counsel alike, is that antitrust cases more than virtually anything that I can think of cry out for demonstrative items - good charts, good graphs, because this stuff is dry. There's no question about it. (Laugh).

Q: Do you have any advice for trial judges?

A: It's hard to say. I have real empathy and sympathy for state court judges who just have tremendously heavy calendars suddenly getting hit with just huge antitrust actions that they're supposed to manage. Some courts have complex litigation departments and other don't. In that case, this just gets piled on top of regular case load. The problem is, if you follow the Microsoft decision, you see the kind of effort that had to be put in by the trial court there, because we're talking about matters that the average layperson and certainly the average judge has no idea - just in terms of the technology, and that was one of the reasons that ultimately it was decided that a per se standard was not appropriate for use in that case, because we just don't know enough about this industry to just across the board say that these kinds of things are necessarily bad. I think that it's a good idea to have complex litigation departments and therefore have people who start to get used to seeing these kinds of cases. I think that it makes it more efficient it's one of the things that a Plaintiff's lawyer has to think about when he goes to file a case - is this a jurisdiction that sees many antitrust cases, because if it's not, I could really be walking into a quagmire. It's the same as if you're a Defendant, and you're thinking about possibly removing an antitrust case - Is the court that it's ultimately going to be removed to one that is going to likely to know how to deal with huge class action type, very large antitrust cases. You have evaluate that, because unfortunately, mistakes can happen, when people start applying very complex law that they're not familiar with to very technical industry issues that they're not familiar with. Judges only have so many hours in the day to learn every case. So it does help when you have experienced jurists.

Q: Appellate Judges?

A: Well, the appellate courts, by and large, tend to see more of this complex litigation because a lot of that ends up getting up there. But if you look across the country, particularly at state antitrust appellate decisions, you sometimes can't believe that they're all dealing with the same law. You can take the same set of facts and the same law and come out with a completely different result because sometimes there's just a real lack of understanding. I remember being in a state court in Florida once on an antitrust case and it was a summary judgment motion, and it was a judge who had an incredible heavy docket, and had never had any antitrust cases before, and he just hadn't been able to grasp the principles of the complexity of it. When you have to read twenty cases to understand one basic rule or principle, that's the nature of the beast. At that point your hope is the appellate court, and typically you can get relief from those kinds of just lack of familiarity with the laws. But it's out job to explain it to the judge as well as to the jury. So you can't blame it just on the audience. In actual trial you have to do a couple different things. In terms of an antitrust trial to a jury, you have to make it as simple as possible. The economic issues are very complex, the legal standards are very complex, you're often dealing with thousands and thousands of documents and lots of witnesses and you really better have a simple case. You have got to be able to pare it down. When you're dealing with a summary judgment motion on the other hand to a judge, you can go to a much more sophisticated level of explanation. You have to make sure though that it's presented in a concise manner.