UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF NEW YORK
August 8, 1978
BERKEY PHOTO, INC., Plaintiff,
EASTMAN KODAK COMPANY, Defendant
The opinion of the court was delivered by: FRANKEL
ON MOTIONS FOR NEW TRIAL AND FOR REARGUMENT OF MOTION FOR JUDGMENT N.O.V.
Defendant moves variously for a new trial, to amend the judgment, and for reargument of its motion for judgment notwithstanding the verdict. Some of the contentions made in this fashion are merely stated, not argued in any substantial sense, and may be left for full airing elsewhere. The questions that seem to merit treatment here, and their resolution, are as follows.
Perhaps the headiest of the subjects now presented, for the first time in this long litigation, is a cluster of constitutional issues as to Section 2 of the Sherman Act and Section 4 of the Clayton Act, on their face to some degree but more particularly as applied in this case.
In its broadest form, defendant's attack on § 2 of the Sherman Act as void for vagueness on its face would rewrite nearly a century of history, solid precedent, and scholarship. The refutation of this most sweeping position is amply outlined in plaintiff's opposing papers. The court sees no benefit in tarrying over the principles and authorities that seem so decisively opposed to defendant's views.
Approaching the narrower, more pointed effort to show that § 2 must be held void for vagueness in its application to this private action, defendant says that it "does not here challenge the application of the antitrust laws in cases like Alcoa
or United Shoe,
nor * * * contend that the results reached there were necessarily unconstitutional."
Those were decisions by judges, defendant argues, and involved merely equitable relief, not huge damage claims. It is one thing the argument runs, to have Judges manipulate concepts like "honestly industrial," "exclusionary," and "anticompetitive," for purposes of decreeing future changes in the lives of large corporations. It is something quite different to unleash a Jury under such concepts to consider large money claims "that Retrospectively punish conduct newly found to violate the law."
In light of defendant's steady insistence upon the limited capacities and understanding of lay jurors, it is fair to recall again at this final stage that the preference for a jury was defendant's, not plaintiff's. As for the notion of "retrospectivity," however close defendant now comes to accepting Alcoa and United Shoe as not "necessarily unconstitutional," both were clearly more striking glosses on existing law than anything decided in this case. Yet even as to Alcoa, and its In haec verba endorsement by the Supreme Court in American Tobacco Co. v. United States, 328 U.S. 781, 66 S. Ct. 1125, 90 L. Ed. 1575 (1946), the claim that a fundamental alteration in the law of monopolization was effected has been squarely rejected. See, Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 495-502, 88 S. Ct. 2224, 20 L. Ed. 2d 1231 (1968). In the latter decision, rejecting the contention that damages could be awarded only from the date of American Tobacco, the Court stressed the basic historical continuity in the interpretation of the Sherman Act, stretching back to 1912, and found ancient precedent for the rule that the conduct element of the monopolization offense does not require proof of conduct not honestly industrial. Id. at 496, 88 S. Ct. 2224. The Court concluded that there had been no "sharp break" with the line of earlier authority, and that there were no prior decisions justifying potential antitrust defendants'
"thinking that then current antitrust doctrines permitted them to do all acts conducive to the creation or maintenance of a monopoly, so long as they avoided direct exclusion of competitors or other predatory acts." (Footnote omitted.)
Id. at 499, 88 S. Ct. at 2234.
The Court therefore found it unnecessary to consider whether criminal due process doctrines, such as those relied upon by the present defendant, barred an award of damages for years prior to 1946, there being no
"clearly declared judicial doctrine upon which * * * (the defendant) relied and under which its conduct was lawful, a doctrine which was overruled in favor of a new rule according to which conduct performed in reliance upon the old rule would have been unlawful."
Id. at 496, 88 S. Ct. at 2233. Similarly we need not consider whether the present case denied defendant due process, for no radical or even significant transmutation of the law was worked herein.
The court's instructions to the jury in the instant case reflect a direct application of the principles of Alcoa and United Shoe. The novelty of this application, which the defendant protests so vigorously, lies only in the set of facts to which these principles are applied. As defendant itself argues, antitrust offenses are at root an outgrowth of the law of torts. It is a fundamental tenet of tort law that the application of settled general rules to novel or unique fact situations by a trier of fact does not create any constitutional infirmity. Triers of fact, including most commonly juries, routinely determine civil liabilities by deciding whether a general standard such as reasonable care was observed or breached by a particular course of conduct. No one would seriously tender the argument that a tort judgment was infirm because no precedent gave warning that the particular factual pattern would be deemed grounds for liability.
Defendant's constitutional thesis about what "lay jurors or business people" must be deemed incapable of understanding would draw into desperate question a large portion of the grave business to which jurors attend daily in our system. The complaints as defendant makes them, about the lack of "objective or explicit standards,"
about the jury's being commissioned "to consider and weigh in an undefined manner" an array of evidentiary factors,
about the "subjective" form in which terms like "exclusionary" and "anticompetitive" were used
such complaints, if accepted, would have meant a jury trial of a case like this one was doomed from its inception for fatal vagueness. It would also mean that much else that juries do is unacceptable like compendious findings on a host of evidentiary factors, often with the gravest consequences, as to whether there has been proof of states like "malice," "willfulness," or "negligence," "recklessness," "wantonness," and "good faith."
The modest extrapolation of the settled principles of Alcoa and United Shoe to new facts could not have astonished defendant's legal advisors. Our record reveals that Kodak's counsel warned of potential liability for practices involving gratuitous use of photographic systems. Such practices in fact constitute the central core of the conduct supporting the monopolization verdicts in this case. More generally, Kodak had plenty of experience and advice from which to imagine, more than vaguely, that its powers as a monopolist, previously questioned in court by both the Government and private parties, should be used with care and consideration.
Kodak invokes Mr. Justice Frankfurter's observation, in dissent, that "(t)he vagueness of the Sherman Law was saved by imparting to it the gloss of history." F.T.C. v. Motion Picture Advertising Service Co., 344 U.S. 392, 405, 73 S. Ct. 361, 369, 97 L. Ed. 426 (1953). History did not stop in 1912. The years since then are marked by a familiar process of gradually shifting interpretation of the Sherman Act, without any radical breaks, as the Court observed in Hanover Shoe, supra. As frequently happens, defendant cheerfully accepts old cases that made new law, but urges strenuously that the course of organic growth had to stop before this case.
The general suggestion of differences between cases in equity where divestiture, deep changes like bans on leasing machinery, and other drastic measures may be taken and damage suits is scarcely compelling on the question of what may be void for vagueness. Not only is the point unpersuasive as an original abstraction; it is actually premised upon an inaccurate supposition that there is a sharp dichotomy between suits in equity and damage claims. As plaintiff reminds us, United Shoe, pressed by defendant as a major example of the gentler equity sanctions, served in fact as predicate for private damage awards. Hanover Shoe v. United Shoe Machinery Corp., 245 F. Supp. 258 (M.D.Pa.1965), vacated in part on other grounds, 392 U.S. 481, 88 S. Ct. 2224, 20 L. Ed. 2d 1231 (1968). And that is, of course, a standard course of events, explicitly charted by statute, 15 U.S.C. § 16 (1976).
Further elaborating the claim that it met an unforeseeable fate under a vague statute unpredictably applied in this case, Kodak urges that the standards under which the jury decided were insufficiently "objective." In fact, Kodak says, the jury proceeded without "any ascertainable standard * * * ."
The court, it is claimed, acted "legislatively and defined a new violation of Section 2"
leading to a verdict which must be condemned as "subjective determination" and a "legislative act."
The settled terms of familiar antitrust precedents cannot be constitutionally administered in a jury trial, defendant argues, because they are unintelligible to those they govern. "Whatever meaning words and phrases like "anticompetitive,' "exclusionary,' "honestly industrial' and "thrust upon' might have to judges and specialists in arcane antitrust law, they could have no comprehensible meaning to lay jurors or business people."
As is recurrently true in the motion papers now before the court, these contentions include some remarkable post-verdict novelties. Repeatedly in its own requests to charge Kodak employed words "anticompetitive," "exclusionary," "substantial," "isolated," "significant," "trivial" that it now assures us are too imprecise to achieve a constitutional minimum of guidance for jurors. The revealing significance of such an altered stance, even apart from the technical waiver of the new arguments, is clear without extended comment.
In any event, if it were permissible at this late juncture, the claim of vagueness of the offense as applied in this case would have to be evaluated in the setting of the charge as a whole, not by conjuring with a handful of words, stripped of the context intended to give them meaning. Some 24 legal-size pages were devoted to the explication and definition of exclusionary conduct in the court's charge to the jury. The merits or errors to be found in the full charge, along with the contributions or non-contributions to the final product by the parties in the long hours of consultation and study by court and counsel, will ultimately have to be decided by a higher tribunal. It is pertinent, however, to protest that the court defined the applicable legal standards as precisely, objectively, and intelligibly as it could. When asked for suggestions to tighten any remaining ambiguities, defense counsel was only able to suggest language wholly withdrawing the central factual questions from the jury, by instructing that introduction of new products and the failure to predisclose them could under no circumstances be found to be wrongful conduct. The court's reasons for rejecting these proffered rules of Per se nonliability are set out in the Memorandum on Post-Trial Motions and need not be repeated here. Viewed in this light, however, it becomes clear that the true gravamen of defendant's argument is not the assertedly vague definition of the offense, but the court's interpretation of § 2 of the Sherman Act in light of the major precedents.
In any event, defendant's submission that it has been entrapped by a vague statute into an astonishing judgment nobody could have predicted presents a remarkably truncated and inaccurate view of the proceedings. Defendant argues its constitutional position much of the time as if the verdict rested on the simple and fantastic proposition that a manufacturer must disclose in advance new products or product systems. If that were the case, one would be hard put to know how or why defendant spent more months than plaintiff putting on its evidence to avoid liability. Actually, of course, there never was or could have been any such finding. At other times, ricocheting to another unreal extreme, defendant complains that it was condemned for its mere "status" as a monopolist, finding it possible in that context to cite as relevant authority the protection from such a fate given for a narcotics addict in Robinson v. California, 370 U.S. 660, 82 S. Ct. 1417, 8 L. Ed. 2d 758 (1962). But, of course, this case, and settled law, involves neither "status" nor conduct Alone. What the jury was permitted to consider was a claim that the proof showed (1) an awesome degree of monopoly power, (2) an array of arguably anticompetitive actions in the exertion or maintenance of that power, and (3) resulting injury to plaintiff. The question of predisclosure, albeit a prominent subject, was only one of a number of matters to be considered in deciding the second element. It is thus neither accurate nor useful to insist starkly that the case stands for some vague, general requirement of predisclosure. It is as if United Shoe were read to outlaw long-term leases of machinery, Alcoa to forbid systematic expansion of productive capacity, or United States v. Griffith, 334 U.S. 100, 68 S. Ct. 941, 92 L. Ed. 1236 (1948), to condemn bargaining for first-run movie exhibition rights.
Another barrage of new constitutional ideas following the verdict is aimed at the award of treble damages. As will appear below, many of these contentions, if they had merit, would be foreclosed because all of them, including those that do not flatly reverse prior positions, should have been offered as requests to charge the jury.
Defendant's broad submission is that the statutory authorization of treble damages in § 4 of the Clayton Act offends against at least three protections of the Bill of Rights (in the Fifth, Sixth, and Eighth Amendments). The argument begins with the proposition, quoting a phrase from an 1890 debate, that the provision is "purely penal and punitive."
Even on the level of labels, if they were decisive, defendant would not get very far with this point. The cases, including several quoted by defendant, are agreed that § 4 is not "penal" in any sense useful to defendant. Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477, 97 S. Ct. 690, 50 L. Ed. 2d 701 (1977); Cf. City of Atlanta v. Chattanooga Foundry & Pipeworks, 127 F. 23, 28-29 (6th Cir. 1903), aff'd, 203 U.S. 390, 27 S. Ct. 65, 51 L. Ed. 241 (1906); Leonia Amusement Corp. v. Loew's Inc., 117 F. Supp. 747, 756 (S.D.N.Y.1953); Winkler-Koch Engineering Corp. v. Universal Oil Products Co., 100 F. Supp. 15, 29 (S.D.N.Y.1951). The fact that some authorities also indicate that the trebling of damages serves a punitive function in addition to its compensatory, deterrence, and remedial functions, does not vindicate defendant's constitutional thesis. The idea of punitive damages, and, specifically, treble damages, in civil cases, to be assessed by the court, not the jury, is no novelty. See Seymour v. McCormick, 57 U.S. (16 How.) 480, 487-88, 14 L. Ed. 1024 (1853). Nor is the principle affected by the large size of the verdict in this case against a self-described "giant." It is worth noting in this connection that our record reflects the difficulty confronting a plaintiff seeking to prove actual damages in a monopolization case. The task, as plaintiff's counsel aptly described it, is to attempt the reconstruction of "a world that never was." In some instances the court was required to disapprove all plaintiff's proposals for measuring particular categories of damages, despite the fact that no alternative was presented by the defendant and despite the probability that some injury, however uncertain in amount, had been inflicted upon the plaintiff. Thus the trebling of damages is compensatory in the special sense that it tends to ensure, albeit in a rough fashion, that wrongs do not go unredressed because of the inherent difficulty or impossibility of proving all items of damages.
We turn to a series of arguments based upon constitutional theories which the court will dismiss on the grounds, Inter alia, that they contradict positions taken before the charge and verdict or inject novel views of the law that the court was never given timely opportunity to consider for inclusion in the jury's instructions. Taking these in order, the first is not the least astonishing: the court was required to charge, Kodak says, that the jury must find specific intent to monopolize, like the Mens rea required in most criminal offenses. Not only was this never suggested earlier; even as late as its motion for judgment notwithstanding the verdict, Kodak was complaining that the court had erred in allowing the jury to consider intent in any way at all on the charge of monopolization. See the court's Memorandum on Post-Trial Motions of June 16, 1978, pp. 16-19. Changes of position so late and breathtaking are an imposition upon the court and opposing counsel.
Defendant's contention is in any event devoid of merit. The opinion in United States v. United States Gypsum Co. 438 U.S. 422, 436 at n. 13, 98 S. Ct. 2864, 57 L. Ed. 2d 854 (1978), which held that Mens rea was an element of the criminal offense under § 1 of the Sherman Act, as a matter of common law doctrine concerning criminal offenses but not as a matter of constitutional law, expressly noted that no such requirement applies to civil antitrust offenses.
Similar to the new thought about Mens rea are defendant's complaints that plaintiff was not required to prove its case beyond a reasonable doubt, that Kodak was entitled to a presumption of innocence, and that Kodak was entitled to indictment by grand jury as a prerequisite to trial on the claims in this action. Defendant never raised any of these exotic thoughts before. They are not tendered, however, as complaints about the instructions actually given, but to implement the thesis that the judgment in this case imposes what amount to criminal sanctions. They are not significant additions to the basic point, which has been considered earlier.
Finally, defendant now opines that the Seventh Amendment required the jury, not the court, to assess treble damages if they were allowable at all. Kodak took the pre-verdict position everyone else has taken until now that the question was for the court, not the jury. This is undisputedly the law, and reflects a clear congressional intent that trebling of damages be automatic. Noble v. McClatchy Newspapers, 533 F.2d 1081, 1091 (9th Cir. 1975), vacated on other grounds, 433 U.S. 904, 97 S. Ct. 2966, 53 L. Ed. 2d 1088 (1977); Cf. Lehrman v. Gulf Oil Corp., 500 F.2d 659, 667 (5th Cir. 1974), cert. denied, 420 U.S. 929, 95 S. Ct. 1128, 43 L. Ed. 2d 400 (1975); Herald Co. v. Harper, 293 F. Supp. 1101 (E.D.Mo.1968), aff'd, 410 F.2d 125 (8th Cir. 1969).
Defendant's arguments on liability and the amounts of the several damage awards retrace for the most part terrain that has been traversed repeatedly at several stages of this lengthy case, both before and after the verdicts. Many of the arguments were recognized throughout to be substantial, and their force has not diminished in the process of further refinement and rethinking. Some of the arguments now made are novel, were not presented (or certainly not presented in their present shape) at earlier stages, and may come too late for this reason. In any event, having studied each contention, the court finds no sufficient reason either for granting a new trial or for modifying the judgment. Nor does it seem useful to add to the Nisi prius literature with repetitions or elaborations of views heretofore recorded.
It should be acknowledged, however, that at least two of the contentions now made with special cogency have given the court special pause: (1) the argument against film damages prior to the 110 camera introduction, and (2) the argument for reduction of film damages on grounds of non-comparability of other manufacturers' film. It is a close question indeed whether the relevant evidence of anticompetitive conduct within the limitations period preceding March 1972 supports the award for that period. And the evidence of comparability in two or three categories is scarcely imposing. Nevertheless, having tarried at some length over these problems, the court arrives in the end at a reaffirmation of the judgment as it was entered.
Without responding here in any detail to the characteristically full memoranda of the parties, the court recalls one or two basic thoughts. First, there was enough evidence of conduct the jury could have found anticompetitive carrying over from before 1969 into and through the period in suit. While conduct preceding 1969 could not be, and was not, allowed as grounds for liability in itself, its continuation was available and presented to the jury with respect to the succeeding times open for judgment. A second, related point is the court's premise, contrary to defendant's, that the heart of the offense denounced in Sherman § 2 is the monopoly power enabling its possessor to block competition and exact an excessive, monopolist's price. On this premise, while proof of anticompetitive conduct in acquiring or maintaining the power has been held by the court (contrary to plaintiff's view) to be essential to complete proof of the offense, plaintiff is not required to show either that this conduct in itself accounts for the excessive price or was in itself the Sine qua non to continuation of the monopoly power during a particular period under scrutiny. If this premise is wrong, the verdict may well be infirm. Having reconsidered it once again, however, the court adheres to it.
The court has similarly revisited doubts concerning the extent of the jury's award on film, particularly on the issue briefed effectively by defendant concerning comparability Vel non of other makers' films as the basis for computing the excessiveness of defendant's price. Again, however, the court finds the evidence sufficient in the last analysis to sustain the jury's award. Where a monopolist, like Kodak in this case, comes close to having the whole national market, the proof of comparability is a large challenge. If the whole subject were narrowed to this focus, plaintiff might be deemed to have failed with respect to some categories of film products.
It is to be remembered, however, that the measure of damages starts from a thorough demonstration that defendant was exercising unlawful monopoly power and charging prices yielding clearly monopolistic returns. Where the competition was so thin as to approach nonexistence, we might plausibly have started with Kodak's remarkably huge rate of return on investment on film (ranging from 61% To 70% Over the years in question), considered the evidence as to sharply lower rates of return on non-monopolized products (demonstrated with respect to some of Kodak's lines), and employed the difference as a basis for computing the unlawful excess. Indeed, plaintiff proposed several such means of computing film overcharge damages. Two were withdrawn after the court intimated an adverse ruling, and the third and final one, PX 6257 for identification, based on application of Kodak's roughly 30% Return on investment on x-ray film sales, was not allowed by the court to be placed before the jury. The damages computed on PX 6257, $ 25,181,000, far exceed the more generous of the two price comparison measures the jury was permitted to consider, and would be more than double the actual award.
Kodak urged, and the court agreed, that comparisons with other manufacturers' prices would yield a more appropriate approximation on a matter for which approximations are, after all, the best we can achieve. Starting from this base, the jury was admonished that plaintiff would recover nothing on account of higher Kodak prices resulting from "circumstances and conduct on Kodak's part that were lawful and permissible such factors as higher quality, better marketing methods, superior service, customer preference and elements urged by defendant."
The jury was also instructed that it could accept or reject Berkey's contentions regarding comparability in whole or in part. In awarding a sum $ 3,203,000 less than the maximum claim Berkey was allowed to place before it, the jury may well have exercised judgment as to the imperfect comparability of competing film with Kodak film. A finding of differences in film quality would not require a conclusion that they account for the entire price difference. Nor does the scarcity of comparable film in some market sectors demonstrate the absence of injury. Recalling the vastly more generous award that would result from comparison to the non-monopolized x-ray film market, while standing behind the ruling eschewing unnecessary speculation, and granting that the basis for finding comparability (even though all the evidence points to identical species of consumer uses) is hardly conclusive, the court does not find that the actual sum awarded must be condemned as unreasonable.
Taking the pertinent evidence as a whole, and stressing again the familiar principle that an injured antitrust plaintiff is often unable, and is not required, to prove damages with close precision, the court concludes once again that the film damage award, if undoubtedly generous, was within the range of permissible jury judgment.
The trial began with a jury of six and six alternates. As a result of a procedural modification initiated by the court on its own motion, defendant's liability was eventually determined by a unanimous jury of ten rather than six.
Much later, after six days of deliberations on liability, one juror was excused by the court in a telephone call in the wake of a snowstorm that had closed the courthouse (and the City) when she complained of chest pains that had persisted for some days and insisted she had to go to the hospital. Two hours after this had happened and about 1 1/2 hours after being informed, defense counsel said he was "concerned" that the court had "acted hastily" in excusing the juror with asserted chest pains, but made no such suggestion as is now made, that the episode should be deemed an error warranting a mistrial.
On the same day of paralyzing weather, when there was a general comedy of errors that amused nobody in assembling our jury, the court, with counsel's consent, went to the jury room to notify the jurors about meal arrangements, why we were waiting, and what the schedule would be. Seeking to set aside the verdict returned on the afternoon of the next day and citing the distinguishable criminal law precedent of United States v. United States Gypsum Co., 438 U.S. 422, 98 S. Ct. 2864, 57 L. Ed. 2d 854 (1978), defendant urges that these episodes require a new trial of this case that took some seven months to try the first time. Beyond the Gypsum citation, there is no effort to brief the law or the facts involved. There is no suggestion of how Kodak might have been prejudiced by any of these incidents. There is no indication, and the court knows of no reason to believe, that the juror who was excused and who would have been an excused alternate but for the court's prior intervention mentioned above might have had a special place in her heart or mind for Kodak. It is difficult to know how defendant now imagines there is merit in complaining about the excused juror or the other attendant events. See United States v. Houlihan, 332 F.2d 8, 13 (2d Cir.), cert. denied, 379 U.S. 828, 85 S. Ct. 56, 13 L. Ed. 2d 37 (1964); United States v. Pacente, 503 F.2d 543 (7th Cir.), cert. denied, 419 U.S. 1048, 95 S. Ct. 623, 42 L. Ed. 2d 642 (1974). See also United States v. Rodriguez, 545 F.2d 829 (2d Cir. 1976), cert. denied, 434 U.S. 819, 98 S. Ct. 58, 54 L. Ed. 2d 74 (1977); United States v. Diggs, 173 U.S.App.D.C. 95, 522 F.2d 1310 (1975), cert. denied, Floyd v. U. S., 429 U.S. 852, 97 S. Ct. 144, 50 L. Ed. 2d 127 (1977); United States v. Maxwell, 383 F.2d 437, 443 (2d Cir. 1967), cert. denied, 389 U.S. 1057, 88 S. Ct. 809, 19 L. Ed. 2d 856 (1968); United States v. Woodner, 317 F.2d 649 (2d Cir.), cert. denied, 375 U.S. 903, 84 S. Ct. 192, 11 L. Ed. 2d 144 (1963).
In these circumstances, with all deference to distinguished counsel, it may be that this bare assertion of fatal error at this time in this civil case by this party is unlikely to be remembered as an ornament in the judicial process.
Defendant's motions are in all respect denied.
It is so ordered.