United States District Court, S.D. New York
January 13, 2005.
AVENTIS ENVIRONMENTAL SCIENCE USA LP, f/k/a AGREVO ENVIRONMENTAL HEALTH, INC., Plaintiff,
SCOTTS COMPANY, SCOTTS' MIRACLE-GRO PRODUCTS, INC., OMS INVESTMENTS, INC., and MONSANTO COMPANY Defendants.
The opinion of the court was delivered by: LORETTA PRESKA, District Judge
OPINION AND ORDER
RoundUp "No Root No Weed No Problem" has been the dominate
non-selective herbicide for many years. This action questions the
manner in which RoundUp has retained that dominance: have the
defendants in this case acted to drive competitors from the
market while depriving the plaintiff the benefit of its bargain,
or have defendants simply made sound business decisions that are
neither illegal nor violate the letter or spirit of the contracts
at issue? Though there is insufficient evidence to support some
of plaintiff's claims, genuine issues of material fact remain for
a jury to decide. Accordingly, the parties' motions for summary
judgment are denied in part and granted in part, and the case
shall proceed to trial. BACKGROUND
I. The Facts
A. The Parties
Plaintiff Aventis Environmental Science USA LP ("Aventis ES")
is a Delaware limited partnership and the alleged successor to
the assets and liabilities of the original plaintiff to this
action, AgrEvo Environmental Health, Inc. ("AgrEvo EH") and its
affiliates. (Defendants' Joint Statement Pursuant to Civil Rule
56.1 of Undisputed Facts Material to Plaintiff's Antitrust Claims
("Def's Antitrust 56.1") ¶ 1; Third Am. Compl. ¶ 3, 8-10.)
Aventis ES was acquired by Bayer AG in June 2002 and merged
Aventis ES and Aventis ES's parent company, Aventis CropScience
SA, into Bayer CropScience.*fn1
Defendants Scotts Company and Scotts' Miracle-Gro Products,
Inc. are Ohio corporations with their principal places of
business in Marysville, Ohio and Port Washington, New York,
respectively. (Def's Antitrust 56.1 ¶¶ 2-3.) Defendant OMS
Investments, Inc. is a Delaware corporations (Def's Antitrust
56.1 ¶ 4.) Scotts Company, Scotts' Miracle-Gro Products, Inc. and
OMS Investments, Inc. are herein collectively referred to as
"Scotts". Defendant Monsanto Company ("Monsanto") is a Delaware corporation with its principal place of business in St. Louis,
B. The Finale Agreement
In 1994, AgrEvo EH developed a non-selective herbicide ("NSH"),
glufosinate ammonium ("GA"), which it marketed and sold to
consumers under the trade name "Finale." (Def's Antitrust 56.1 ¶
4; Plaintiff's Amended Counter Statement of Disputed Material
Facts in Opposition to Defendants' Motions for Summary Judgment
("Pl's Antitrust Opp. 56.1") ¶ 10.) On May 15, 1998, AgrEvo EH,
entered into an Asset Sales Agreement (the "ASA") with Scotts'
Miracle-Gro Inc. and OMS Investments, Inc. that sold to Scotts
"certain rights, title and interest" in AgrEvo EH products,
including Finale, which were part of AgrEvo EH's Home and Garden
Consumer Products Business.*fn2 (ASA p. 1-2.) Enumerated
product registrations, title to trademark registrations and
applications, customer lists, and other assets were also sold.
(ASA p. 1-2.)
In conjunction with the ASA, AgrEvo EH and Scotts entered into
an Exclusive GA Supply Agreement (the "GA Supply Agreement" or
"GASA") whereby AgrEvo EH would manufacture and supply Scotts'
requirements of GA, the active ingredient in Finale. (GASA p. 1.)
The GA Supply Agreement contained a "Take or Pay Obligation" that required Scotts either to purchase $12.6 million of GA
during the first three years of the GA Supply Agreement or to pay
50% of the difference between the $12.6 minimum purchase
commitment and the amount of actual GA purchased. (GASA § 2.3.)
Scotts' maximum obligation to AgrEvo EH pursuant to the this
provision (the "take-or-pay provision"), the amount Scotts would
owe if Scotts purchased no GA from AgrEvo EH, was thus $6.3
million. (Def's Antitrust 56.1 ¶¶ 41-42.)
In conjunction with the ASA, Scotts and AgrEvo EH also entered
into a Non-Exclusive Insecticide Supply Agreement (the
"Insecticide Supply Agreement" or "ISA"). The Insecticide Supply
Agreement set forth the terms by which Scotts would become the
non-exclusive distributor of AgrEvo EH's insecticide products and
AgrEvo EH would supply all of Scotts' requirements for the
C. The Roundup Agreement
Monsanto developed a proprietary NSH, glyphosate, in 1984, and
Monsanto began manufacturing and marketing glyphosate to
consumers under the name RoundUp. (Def's Antitrust 56.1 ¶ 9; Pl's
Antitrust Opp. 56.1 ¶ 9.) Since Monsanto's introduction of the
product, RoundUp has been very successful, indeed the
best-selling residential NSH in the United States. Though much of
this case depends on the characterization of Monsanto's actions
and motivations in deciding to sell some or all of its interest in RoundUp, Monsanto contends that in late 1997 it decided to
concentrate on the "life sciences" business and began looking to
sell its consumer lawn and garden division, called Solaris, which
included RoundUp. (Def's Antitrust 56.1 ¶ 12.) Scotts initially
indicated to Monsanto that it was interested in the RoundUp
business, but in early 1998 Monsanto entered into exclusive
negotiations with another company for the sale of Solaris. (Def's
Antitrust 56.1 ¶ 19.)
Monsanto's exclusive negotiations, however, collapsed, and in
April 1998, potential purchasers of the Solaris division,
including Scotts, were again contacted. (Def's Antitrust 56.1 ¶¶
30-34.) On June 15, 1998, Scotts submitted a bid to purchase the
non-RoundUp assets of the Solaris division and to become
Monsanto's exclusive agent and marketer of RoundUp in the United
States. (Def's Antitrust 56.1 ¶ 52.) Monsanto evaluated the bids
it had received, and on June 24, 1998, Monsanto and Scotts signed
a letter of intent to enter into an exclusive agency and
marketing agreement for the sale of consumer RoundUp, which was
then executed on September 30, 1998 (the "RoundUp Agreement").
(Def's Antitrust 56.1 ¶¶ 61-62.)
D. Scotts Divests the Finale Assets to Farnam
In 1993, Monsanto had entered into a consent decree with the
Federal Trade Commission (the "FTC") upon acquiring the Ortho
product line from the Chevron Corporation. Under the terms of the consent decree Monsanto agreed not to acquire any direct
or indirect interest in any competing NSH until 2003. (Def's
Antitrust 56.1 ¶¶ 44-46.) Monsanto asserts that it informed
Scotts that under the terms of the consent decree with the FTC,
Monsanto believed that it would not be able to enter into the
RoundUp Agreement with Scotts until Scotts divested its interest
in the Finale assets recently acquired from AgrEvo EH. (Def's
Antitrust 56.1 ¶ 47.) Scotts asserts that based on what it was
told about the consent decree by Monsanto, Scotts began looking
to divest the Finale assets. (Def's Antitrust 56.1 ¶ 47.)
Regardless of Scotts' stated reasons for divesting the Finale
assets, which AgrEvo EH contends do not reflect Scotts' true
motivations (Pl's Antitrust Opp. 56.1 ¶¶ 44-51), Scotts did in
fact divest some of its interest in Finale.*fn3 The parties
dispute Scotts' characterization of its offer of the Finale
business back to AgrEvo EH and Scotts' efforts to try to find
prospective buyers for the Finale assets, but the parties do
agree that Scotts did eventually divest at least some of the
Finale assets to Farnam Companies, Inc. ("Farnam") on February
15, 1999. (Def's Antitrust 56.1 ¶¶ 66-79; Pl's Antitrust Opp.
56.1 ¶¶ 66-79.) As a result of this divestiture, Farnam became
the seller and marketer of Finale (Def's Antitrust 56.1 ¶¶
83-86), though Scotts retained the take-or-pay obligation and
paid almost $6 million in May 2002 pursuant to that provision of the
GA Supply Agreement (Def's Antitrust 56.1 ¶¶ 99-102).
II. Procedural History
AgrEvo EH filed the original complaint in this action on June
3, 1999, which was then amended on August 16, 1999. A second
amended complaint was filed by AgrEvo EH on May 17, 2000.
Following oral argument, on June 19, 2000, I denied Scotts' and
Monsanto's motions to dismiss the second amended complaint, with
the exception of my dismissal of AgrEvo EH's claim for tortious
interference with contract, which I held did not sufficiently
plead an intentional procurement of breach. AgrEvo EH was granted
permission by the Honorable Theodore Katz, United States
Magistrate Judge, to file the Third Amended Complaint, which was
filed on September 7, 2001. On March 31, 2003, I upheld Judge
Katz's decision to permit the filing of the Third Amended
Complaint. On October 26, 2001, Monsanto filed a motion to
dismiss the claims of AgrEvo EH's affiliates for lack of
standing, which is converted into a motion for summary judgment
and addressed herein.
On May 3, 2004, Scotts and Monsanto filed various motions for
summary judgment to dismiss AgrEvo EH's claims in the Third
Amended Complaint. Scotts and Monsanto filed joint motions for
summary judgment to dismiss AgrEvo EH's antitrust claims for lack
of standing and antitrust claims on the merits. Scotts filed a motion for summary judgment to dismiss AgrEvo EH's
contract claims, and Monsanto filed a motion for summary judgment
to dismiss AgrEvo EH's claim for tortious interference with
business relations. Also on May 3, 2004, Monsanto and Scotts
filed a joint motion to preclude the expert testimony of AgrEvo
EH's damage expert.
On May 3, 2004, AgrEvo EH filed a motion for partial summary
judgment on its antitrust claim for liability pursuant to Section
1 of the Sherman Antitrust Act. AgrEvo EH also filed a motion to
preclude the expert testimony of four of defendants' experts on
Oral argument on the motions was held in the morning and
afternoon of September 21, 2004, and on October 25, 2004, I
issued a Memorandum and Order granting in part and denying in
part Scotts' and Monsanto's motions for summary judgment; denying
AgrEvo EH's motion for partial summary judgment; and denying the
motions by both sides to preclude expert testimony. This Opinion
and Order comports with the holdings in my October 25, 2004
Memorandum and Order and further explains those holdings.
Pursuant to Federal Rule of Civil Procedure 56(c), summary
judgment shall be rendered forthwith if the pleadings,
depositions, answers, interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law. Fed.R.Civ.P.
56(c); see Anderson v. Liberty Lobby, 477 U.S. 242, 250
The moving party has the initial burden of "informing the
district court of the basis for its motion" and identifying the
matter that "it believes demonstrate[s] the absence of a genuine
issue of material fact." Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). The substantive law determines the facts that
are material to the outcome of a particular litigation. See
Anderson, 477 U.S. at 250; Heyman v. Commerce & Indus. Ins.
Co., 524 F.2d 1317, 1320 (2d Cir. 1975). In determining whether
summary judgment is appropriate, a court must resolve all
ambiguities, and draw all reasonable inferences against the
moving party. See Matsushita Elec. Industr. Co. v. Zenith
Radio Corp., 475 U.S. 574, 586 (1986) (citing United States v.
Diebold, Inc., 369 U.S. 654, 655 (1962)).
If the moving party meets its burden, the burden then shifts to
the non-moving party to come forward with "specific facts showing
that there is a genuine issue for trial." Fed.R.Civ.P. 56(e).
The non-moving party must "do more than simply show there is some
metaphysical doubt as to the material facts." Matsushita,
475 U.S. at 586. However, only when it is apparent that no rational
finder of fact "could find in favor of the non-moving party
because the evidence to support its case is so slight" should summary judgment be granted. Gallo v. Prudential
Residential Servs., Ltd., 22 F.3d 1219, 1223 (2d Cir. 1994).
I. ANTITRUST CLAIMS
The undisputed relevant product market is the residential NSH
market, which consists of NSH products for use by consumers for
the general control of brush, weeds, and grasses in their homes
and gardens, and the relevant geographic market is the United
States. (Def's Antitrust 56.1 ¶¶ 6-7.) With respect to the
antitrust allegations contained in the Third Amended Complaint,
Defendants have moved for summary judgment on the basis that
AgrEvo EH lacks standing to assert antitrust claims, on behalf of
itself and its related entities, Hoechst Schering AgrEvo GmbH
("AgrEvo GmbH"), AgrEvo EH's parent company, and AgrEvo USA.
Defendants have also moved for summary judgment on the basis that
AgrEvo EH has failed to submit facts upon which a reasonable jury
could find that Scotts and Monsanto acted anticompetitively in
order to harm competition, in violation of Sections 1 and 2 of
the Sherman Act.
A. Antitrust Standing
1. Appropriateness of AgrEvo EH as Plaintiff
Defendants argue that by consummating the transaction with
Scotts for Finale, AgrEvo EH exited the residential NSH market,
became a mere supplier of an ingredient for use in Finale and, therefore, lacks standing to assert antitrust
claims.*fn4 As Defendants point out, it is well-settled that
a plaintiff who exits the market does not retain standing to
assert antitrust claims for anticompetitive behavior occurring
within the market. See, e.g., McDonald v. Johnson &
Johnson, 722 F.2d 1370, 1373-79 (8th Cir. 1983); Chrysler Corp.
v. Fedders Corp., 643 F.2d 1229, 1235 (6th Cir. 1981); A.D.M.
Corp. v. Sigma Instruments, Inc., 628 F.2d 753, 754 (1st Cir.
1980); Argus Inc. v. Eastman Kodak Co., 612 F. Supp. 904,
908-14, 916 (S.D.N.Y. 1985), aff'd, 801 F.2d 38 (2d Cir. 1986).
It is equally well-established that mere suppliers of products to
the targets of antitrust violators do not have standing to assert
antitrust claims. See, e.g., Billy Baxter, Inc. v. The
Coca-Cola Co., 431 F.2d 183, 189 (2d Cir. 1970); Midwest Gas
Serv., Inc. v. Indiana Gas Co., 317 F.3d 703, 710-11 (7th Cir.),
cert. den'd, 124 S. Ct. 82 (2003); Asahi Glass, Ltd. v.
Pentech Pharm., Inc., 289 F. Supp. 2d 986 (N.D. Ill. 2003).
In this case, there are certainly facts that suggest AgrEvo EH
did exit the relevant market. Most significantly, the fact that
AgrEvo EH and Scotts entered into a sales agreement for the
Finale business, the Asset Sales Agreement, certainly implies an exit from the market. Additionally, the Asset Sales Agreement
contains a covenant not to compete for a period of ten years,
which further suggests AgrEvo EH was no longer competing in the
market. (ASA § 2(i).) Similarly, none of the parties disputes
that following the Finale transaction in May 1998, AgrEvo EH
became the supplier of GA to Scotts. Therefore, it is certainly
not incorrect to characterize AgrEvo EH as a "supplier" within
the ordinary meaning of the word. Yet, simply to categorize
AgrEvo EH as a former competitor that exited the market and
became a mere supplier would ignore the substance and effects of
the transaction with Scotts and the intent of the antitrust laws.
The Court of Appeals has provided a two-part test for
determining whether a plaintiff has antitrust standing. See
Balaklaw v. Lovell, 14 F.3d 793, 797 n. 9 (2d Cir. 1994).
First, a court must determine whether the plaintiff has suffered
an antitrust injury. Second, if that prong is satisfied, the
court must next "determine whether any of the other factors,
largely relating to the directness and identifiability of the
plaintiff's injury, prevent the plaintiff from being an efficient
enforcer of the antitrust laws." Id. Under this test,
therefore, not all plaintiffs who suffer an injury causally
linked to an antitrust violation have standing. See Associated
Gen. Contractors of California, Inc. v. California State
Council, 459 U.S. 519, 540-41 (1983); Volvo North America Corp v. Men's Intern.
Professional Tennis Council, 857 F.2d 55, 66 (2d Cir. 1998).
In order to determine whether a plaintiff has suffered an
"antitrust injury" a court must determine whether the injury
alleged has had an adverse effect on competition, not just on the
competitor asserting the claim. Balakaw, 14 F.3d at 797. As
discussed in the subsequent section addressing the merits of
AgrEvo EH's antitrust claims, I find that AgrEvo EH has proffered
facts sufficient to raise a material question of fact as to the
adverse effect Defendants' conduct had on competition, not just
on AgrEvo EH, and I address here the question of the
appropriateness of AgrEvo EH as a plaintiff in this action.
Courts evaluate the suitability of a plaintiff as an enforcer
of the antitrust laws by looking to the following nonexhaustive
list of factors adapted from the Supreme Court's holding in
Associated General: (1) the directness or indirectness of the
asserted injury; (2) the existence of an identifiable class of
persons whose self-interest would normally motivate them to
vindicate the public interest in antitrust enforcement; (3) the
speculativeness of the alleged injury; and (4) the difficulty of
identifying damages and apportioning them amongst direct and
indirect victims so as to avoid duplicative recoveries. Volvo
North America Corp., 857 F.2d at 66; see also Associated
Gen., 459 U.S. at 540-45 (1983); Crimpers Promotions, Inc. v.
Home Box Office, Inc., 724 F.2d 290 (2d Cir. 1983) (adopting the
Associated General test). Most relevant to the issues in this
case is the first factor, which inquires whether a plaintiff has
been directly injured by anticompetitive behavior. Those cases
precluding recovery for those who have exited the market and are
no more than suppliers are consistent with the desire to limit
antitrust injury to those not merely tangentially affected by an
antitrust violation. Yet, while those cases may establish a
general rule regarding the directness of a plaintiff's injury,
not every plaintiff who has sold some assets or could reasonably
be characterized as a "supplier" lacks standing.
In this case, rather than having exited the market and become a
mere supplier, AgrEvo EH remained a competitor "in every relevant
economic sense." See Information Resources, Inc. v. The Dun
and Bradstreet Corp., 294 F.3d 447, 450 (2d Cir. 2002) (quoting
2 Phillip E. Areeda et al., Antitrust Law: An Analysis of
Antitrust Principles and Their Application, ¶ 348f1, at 404 (2d
ed. 2000)). AgrEvo EH was not supplying a minor ingredient for
the use in Finale but was supplying the only active ingredient,
GA, and it was supplying it to Scotts in fully formulated
ready-to-use ("RTU") form. This RTU formula was then packaged and
sold to retailers by Scotts without any further alteration.
Later, AgrEvo EH began supplying Manufacturing Use Product
("MUP"), which was easily converted by adding water and a few inert ingredients into an RTU formula, a concentrate
formula, or super-concentrate formula. It is undisputed that
whether AgrEvo EH was supplying RTU or MUP, the GA it supplied
did not change in form as it descended the manufacturing chain.
See Areeda, supra, ¶ 348f3, at 405.
Similar cases have held that antitrust standing is proper for
the supplier of the product when the supplied product is passed
along relatively unchanged. In Sanitary Milk Producers v.
Bergjans Farm Dairy, Inc., 368 F.2d 679, 688-89 (8th Cir. 1966),
the Eighth Circuit held that raw milk producers, who did not sell
directly to retailers or consumers, had standing to press
antitrust claims against milk processors who were alleged to have
sold milk to retailers at predatory prices. The court held that
because the raw milk supplied by plaintiffs was virtually the
same product ultimately sold to retailers through a sales
company, the raw milk producers were not "mere suppliers" and
were properly characterized as actual competitors of the
defendants. See also South Carolina Council of Milk Producers
v. Newton, 360 F.2d 414, 418 (4th Cir. 1966) (holding plaintiff
properly had antitrust standing because "the item sold by by
plaintiffs is not simply an ingredient of the corresponding
commodity sold by defendants but . . . is essentially the
equivalent commodity."). Similarly, in Karseal Corp v. Richfield
Oil Corp., 221 F.2d 358, 362-65 (9th Cir. 1955), the court held that the supplier, Karseal, that furnished car wax to wholesalers
in the same condition the wax would be sold to the retail
consumer had antitrust standing. See also Sulmeyer v. Seven-Up
Co., 411 F. Supp. 635, 638-39 (S.D.N.Y. 1976) (holding that the
producer of soft drink concentrate had standing in a suit
alleging anticompetitive activity in the marketing and
distribution of soft drinks).
Though the cases cited in the previous paragraph predate the
factors set forth in Associated General and Volvo North
American Corp., their logic comports with the logic and purpose
of the more modern test seeking to limit antitrust recovery to
those directly injured. See IRI, 294 F.3d at 450 (citing the
above cases). Moreover, in Crimpers Promotions, Inc. v. Home Box
Office, Inc., 724 F.2d 290, 294 (2d Cir. 1983), the Court of
Appeals applied the Associated General test and held that
antitrust standing was proper since plaintiff was "not just a
`supplier' of a competitor, to whom standing is generally
denied," and additional cases have also held that suppliers are
not necessarily precluded from standing. See Amarel v.
Connell, 102 F.3d 1494, 1509-10 (9th Cir. 1997); Morris Elec.
of Syracuse v. Mattel, Inc., 595 F. Supp. 56, 61 (N.D.N.Y.
1984). Though he denied standing to the plaintiff in Asahi Glass
Co., Ltd. v. Pentech Pharm., Inc., 289 F. Supp. 2d 986, 991
(N.D. Ill. 2003), holding that the plaintiff was a mere supplier
whose antitrust injury was too remote, Judge Posner also stated that the result
might have been different had plaintiff been the "target" of the
antitrust violation. Had the plaintiff been the target the
plaintiff would have been more directly injured and might have
had standing. Id. Here, AgrEvo EH has proffered evidence,
which, if believed would demonstrate that it was the target of
the alleged antitrust violations by Scotts and Monsanto.
Because AgrEvo EH was not a mere supplier of one unimportant
component of Finale, but instead supplied a product that was
nearly complete and identical to the product ultimately delivered
to consumers by Scotts, it cannot be said that AgrEvo EH simply
exited the market and, therefore, lacks standing. The cases
relied upon by Defendants such as McDonald v. Johnson &
Johnson, 722 F.2d 1370, 1378 (8th Cir. 1983), in which
plaintiffs sold their stock and accepted an earnout under the
contract, for the proposition that plaintiffs who exit the market
lack antitrust standing are inapposite. In cases like McDonald,
the plaintiffs did not continue to participate in the market in
any meaningful manner. This is quite dissimilar from the
situation here, where AgrEvo EH continued to manufacture and
supply GA, the critical and virtually only ingredient in Finale,
The second factor in the test for assessing the suitability of
a plaintiff also weighs in favor of finding standing for AgrEvo
EH, since other potential plaintiffs seem unlikely to vindicate the public interest. Obviously, Scotts as
an alleged co-conspirator is not going to pursue antitrust claims
against itself and Monsanto. See Freeman v. San Diego Ass'n of
Realtors, 322 F.3d 1133, 1145-46 (9th Cir. 2003). Given some of
the allegations, it also seems unlikely that Farnam would pursue
the antitrust claims, since, as discussed below, to do so Farnam
would have to adopt the position that it is an ineffective
competitor and marketer. Though NSH consumers might arguably have
a strong desire to vindicate the public interest, in order for
consumers to pursue such a claim there must be some likelihood
that the increased costs to NSH consumers are significant enough
for them to undertake an expansive, and expensive, antitrust
lawsuit. There has been no such showing.
As to the third factor, AgrEvo EH's alleged lost profits as a
result of Defendants' alleged antitrust violations are not
speculative. See Crimpers, 724 at 297 (holding that lost
future profits are not too speculative for antitrust damage
calculations). If AgrEvo EH's allegations are proved, the profits
AgrEvo EH would have earned as a result of its sales of GA are
sufficiently calculable by AgrEvo EH's damages expert, as
discussed in more detail below, and reflect the damages AgrEvo EH
suffered as a result of having been excluded from the market.
The concern over duplicative recovery, the fourth factor, also
weighs in AgrEvo EH's favor, since, as discussed above, Scotts as a co-conspirator is unlikely to pursue any
claims, as are any other potential plaintiffs.
In sum, three of the four factors clearly weigh in favor of
conferring antitrust standing upon AgrEvo EH, and the factor
looking to the directness of AgrEvo EH's injury ultimately
supports standing as well.
Accordingly, Defendants' motion for summary judgment for lack
of antitrust standing is denied.
2. AgrEvo EH's Standing on Behalf of Affiliates
AgrEvo EH was not the only AgrEvo entity involved in the
production of GA. AgrEvo GmbH and AgrEvo USA were also involved
in the manufacture and sale of GA. On October 26, 2001, Monsanto
moved to dismiss the Third Amended Complaint on the basis that
AgrEvo EH did not have standing to assert claims on behalf of the
other AgrEvo entities despite the fact that the affiliates
allegedly transferred their claims to AgrEvo EH for the purposes
of this action. (Third Am. Compl. ¶¶ 8-9.) The Defendants now
jointly renew the arguments contained in Monsanto's motion to
dismiss and further contend that, like AgrEvo EH, AgrEvo GmbH and
AgrEvo USA exited the market and lack antitrust standing.
With respect to the contention that the AgrEvo entities
withdrew from the market as a result of the Asset Sales Agreement with Scotts and thus lack standing, as discussed above, that
contention is rejected.
As to the assertion that AgrEvo EH does not have standing to
assert claims on behalf of the other two entities, AgrEvo EH has
proffered evidence which, if believed, would demonstrate that all
three AgrEvo entities were acting as a single enterprise and
shared a complete unity of interests. Similar conclusions were
reached in In re Vitamins Antitrust Litig., 2001 WL 755852, at
*3 (D.D.C. June 7, 2001) and Farmland Dairies, Inc. v. New York
Farm Bureau, Inc., 1996 WL 191971, at *4 (N.D.N.Y. Apr. 15,
1996), where both courts held that a parent could bring antitrust
claims on behalf of its subsidiary when their interests were the
same and they were treated as the same entity.*fn5 I am
persuaded by the reasoning in those cases, and thus, on the
record here, AgrEvo EH may assert claims on behalf of its parent
AgrEvo GmbH and affiliate AgrEvo USA.
Accordingly, Monsanto's motion to dismiss the claims of AgrEvo
EH's affiliates is denied. B. Substantive Antitrust Claims
Not surprisingly, AgrEvo EH and the Defendants characterize the
conduct at issue in this case differently. In the Third Amended
Complaint AgrEvo EH alleges that Scotts and Monsanto, through the
RoundUp Agreement and other actions, unlawfully conspired to
eliminate what they saw as a threat to the RoundUp monopoly in
the residential NSH market. AgrEvo EH argues that the evidence
supports its contention that Monsanto, with the help of Scotts,
was trying to eliminate the horizontal competition presented by
Finale, which elimination harmed competition and, ultimately,
consumers.*fn6 Conversely, Scotts and Monsanto contend that
the RoundUp Agreement, and their related actions, were legitimate
business activities between entities at different levels of the
distribution chain. Defendants argue that there is no evidence to
support AgrEvo EH's allegations that they were in any way acting
anticompetitively in an effort to foreclose Finale from the
market. The evidence proffered by the parties can support either
characterization, and thus the characterization of Defendants'
conduct is best left to the jury. 1. AgrEvo EH's Sherman Act § 1 Claims
Section 1 of the Sherman Act makes illegal "[e]very contract,
combination in the form of trust or otherwise, or conspiracy, in
restraint of trade or commerce among the several States, or with
foreign nations." 15 U.S.C. § 1. To establish such a claim
plaintiff must show: "`(1) a combination or some form of
concerted action between at least two legally distinct economic
entities; and (2) such combination or conduct constituted an
unreasonable restraint of trade either per se or under the
rule of reason.'" Virgin Atlantic Airways Ltd. v. British
Airways PLC, 257 F.3d 256, 263 (2d Cir. 2001) (quoting Tops
Mkts., Inc. v. Quality Mkts, Inc., 142 F.3d 90, 95-96 (2d Cir.
Two cases are particularly instructive here. In Palmer v. BRG
of Georgia, Inc., 498 U.S. 46 (1990), two state bar review
course providers competing in Georgia entered into an agreement
whereby one of the providers was granted the exclusive license to
market the other provider's material in Georgia and to use its
trade name, "Bar/Bri." The Supreme Court held that the agreement
effectively eliminated one of the two competitors in the market,
resulted in raised prices, and that the District Court's grant of
summary judgment in defendants' favor was, therefore, improper.
Id. at 49. Similarly, in Glen Holly Entertainment, Inc. v.
Tektronix, Inc., 352 F.3d 367 (9th Cir. 2003), the Ninth Circuit held that when two competitors entered into an "alliance,"
whereby one competitor ceased manufacturing and selling its film
editing system and became a distributor of its competitor's
editing system, such that "[i]nterbrand competition was dead," a
jury could find that there had been a violation of Section 1.
See also Engine Specialties, Inc. v. Bombardier Ltd.,
605 F.2d 1 (1st Cir. 1979).
Defendants here contend that the RoundUp transaction was a
vertical exclusive dealing agreement that is presumptively
lawful. See Pepsico, Inc. v. Coca-Cola Co., 315 F.3d 101, 110
(2d Cir. 2002). They argue that Monsanto was free to choose the
parties with whom it conducted business, exclusive dealing
arrangements may be substantially procompetitive, Monsanto only
had an arrangement with Scotts and was not tying up multiple
distributors to keep other NSHs from the market, and other
distributors could and did distribute Finale.
Defendants are correct that, all other things being equal,
exclusive dealing arrangements, like the RoundUp Agreement, are
presumptively lawful. However, Defendants largely ignore the fact
that at the time Scotts and Monsanto entered into the RoundUp
Agreement, Scotts was also the exclusive distributor of Finale
facts closer to Palmer and Glen Holly Entertainment than to
Pepsico. There is evidence from which a jury could find that
Finale was the only significant competition to RoundUp and that, as a result of the RoundUp Agreement, Finale could no
longer be distributed by Scotts. Even though the RoundUp
Agreement itself, viewed narrowly, was a vertical arrangement,
there is evidence from which a jury could find that the
transaction resulted in a diminution of horizontal competition
and that it was the result of anticompetitive behavior.
Though the evidence of a violation of Section 1 is not
undisputed, such that summary judgment for AgrEvo EH is
appropriate, AgrEvo EH has submitted evidence from which a jury
could find that Scotts and Monsanto were acting to foreclose
Finale from the market and restrain trade, specifically that
Monsanto was worried about the competition that Finale, then in
the hands of Scotts, might pose to RoundUp and that Monsanto
chose to enter into the RoundUp Agreement with Scotts to
eliminate Finale as a competitor. For example, Monsanto prepared
a "Competitive Assessment" of Scotts' Finale six days after the
ASA was executed. The May 21, 1998, document noted Finale's
comparable efficacy and safety to RoundUp, noted Scotts'
abilities as a marketer, and stated there was an "opportunity" to
"[s]top Scotts before they gain a foothold." (Neagle Decl. Ex.
F.) Though not dispositive, a jury could certainly view the
"Competitive Assessment" as tending to prove that Monsanto was
considering trying to foreclose Finale from the market. AgrEvo EH also proffers evidence that Scotts entered into the
Finale transaction solely to improve its negotiating position
with Monsanto and, therefore, that Scotts was planning to work
with Monsanto to eliminate Finale from the market. Notes of a
meeting held on April 6, 1999, report that Scotts' Chief
Financial Officer said that Scotts "bought rights for GA/Finale . . .
to leverage Scotts into a better position on RoundUp
negotiation, wow, implied the only reason they acquired Finale
rights was to secure the deal, better deal with Monsanto on
RoundUp." (Neagle Decl. Ex. EE (Tr. of Joshua Hines Weeks Depo.)
at 181-82.; Ex. V (Tr. of Leonard Castillo) at 58-59.)*fn7
Also, there is at least some evidence from which a jury could
find Scotts assigned its distribution rights to Farnam because
Scotts believed that Farnam would not be able to market and
distribute Finale as successfully as Scotts. Cf. United States
v. Visa U.S.A., Inc., 163 F. Supp. 2d 322, 379 (S.D.N.Y. 2001)
(holding that there could be an unlawful restraint of trade even
if other distribution channels still existed), aff'd,
344 F.3d 229 (2d Cir. 2003). Despite Defendants' characterization of the
RoundUp Agreement as vertical, their actions may not be analyzed
in a vacuum, and the proffered evidence could support a jury's
finding that Scotts and Monsanto acted in conjunction with one
another and that their actions constituted an unreasonable restraint of
While AgrEvo EH has presented evidence raising a genuine issue
as to whether Defendants acted in concert and unlawfully in order
to foreclose Finale from the market and restrain trade, the
evidence does not justify summary judgment on the Section 1
claim. There remain material questions of fact that should be
evaluated by the jury pursuant to the rule of reason, such as
whether Defendants' actions increased competition.
Though AgrEvo EH argues that the Defendants' actions ought to
be evaluated as a per se illegal restraint, in order to be
considered a per se violation the practice must appear on its
face "to be one that would always or almost always tend to
restrict competition and decrease output," rather than one
designed to "increase economic efficiency and render markets
more, rather than less, competitive." Broadcast Music, Inc. v.
Columbia Broadcasting Sys., 441 U.S. 1, 19-20 (1979).
Additionally, "there is a presumption in favor of a
rule-of-reason standard," Bus. Elecs. Corp. v. Sharp Elecs.
Corp., 485 U.S. 717, 725 (1988), and there is no reason to
depart from that presumption in this case. See also Bogans v.
Hodgkins, 166 F.3d 509, 514 (2d Cir 1999) ("Only `manifestly
anticompetitive" conduct, however is designated per se
illegal. The majority of allegedly anticompetitive conduct continues to be examined under
the rule of reason.") (internal citations omitted). As was the
case in Palmer, Glenn Holly Entertainment, and Engine
Specialties, cited above, there may have been some horizontal
effect on competition; unlike in those cases, however, that
effect may be a permissible ancillary restraint growing out of a
lawful vertical arrangement. See also Generac Corp. v.
Caterpillar Inc., 172 F.3d 971, 977 (7th Cir. 1999); Polk
Bros., Inc. v. Forest City Enters., Inc., 776 F.2d 185, 189 (7th
Cir. 1985). A jury may ultimately find that Scotts and Monsanto
did act unlawfully to restrain trade, but under the circumstances
of this case, Defendants' actions cannot be said to fit into that
narrow category of activity that is so pernicious and universally
anticompetitive that it should be evaluated under the per se
2. AgrEvo EH's Sherman Act § 2 Claims
To establish a claim of monopolization in violation of Section
2 of the Sherman Act, a plaintiff must demonstrate: "(1) the
possession of monopoly power in the relevant market, and (2) the
willful acquisition or maintenance of that power as distinguished
from growth or development as a consequence of a superior
product, business acumen, or historic accident." Pepsico,
315 F.3d at 105. The Supreme Court has recently helped clarify the
second element by stating that: "the possession of monopoly power will not be found unlawful unless it is
accompanied by an element of anticompetitive conduct." Verizon
Communications, Inc. v. Law Office of Curtis V. Trinko, LLP,
540 U.S. 398, 124 S. Ct. 872, 879 (2004). To demonstrate an attempted
monopolization claim under Section 2, a plaintiff must establish:
"(1) that the defendant has engaged in predatory or
anticompetitive conduct with (2) a specific intent to monopolize
and (3) a dangerous probability of achieving monopoly power."
Pepsico, 315 F.3d at 105 (quoting Spectrum Sports, Inc. v.
McQuillan, 506 U.S. 447, 456 (1993)).
For the purposes of their motion for summary judgment,
Defendants concede Monsanto's market power. (Def's Merits Br. at
24 n. 7.) Therefore, the only questions remaining relate to the
legality of Monsanto's actions, since a "monopolist may not, of
course, use its market power, whether obtained lawfully or not,
to prevent or impede competition in the relevant market." United
States Football League v. National Football League,
842 F.2d 1335, 1360-61 (2d Cir. 1988). As stated above, AgrEvo EH has
offered evidence such that a reasonable juror could find that
Monsanto was acting to preclude its nearest competitor from the
market and preserve its conceded monopoly power. For example, as
noted above, the May 21, 1998 Monsanto memordandum written six
days after Scotts became the exclusive marketer for Finale
states that Monsanto saw an opportunity to "stop Scotts" from distributing Finale before it got a "foothold." (Neagle Decl. Ex.
F.) Monsanto may be able to convince a jury that its actions were
not anticompetitive, but a jury might also reasonably infer that
Monsanto's conduct was a willful maintenance, or attempt to
retain, its monopoly. In light of the conflicting evidence,
summary judgment on AgrEvo EH's Section 2 claims is
3. Adverse Effects on Output, Quality and Price
As to Defendants' contention that even if Scotts and Monsanto
foreclosed Finale from the market there is no evidence of
damages, this is also a question for the jury.
It is an oft-stated tenet that the antitrust laws are meant to
protect competition and not competitors. See Balaklaw v.
Lovell, 14 F.3d 793, 797 (2d Cir. 1994). In other words, if
AgrEvo EH was harmed as a result of Scotts' and Monsanto's
actions, but NSH consumers suffered no ill effects, then there
would be no violation of the antitrust laws. To demonstrate harm
to competition, a plaintiff must show that there has been an
adverse effect on prices, output, or quality of goods in the
relevant market as a result of the challenged actions. See
Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 31
(1984); Capital Imaging Assocs. v. Mohawk Valley Med. Assocs.,
996 F.2d 537, 541 (2d Cir. 1993). Though predicting what would have happened had the challenged
actions of Defendants never occurred is well nigh impossible,
AgrEvo EH's expert has provided evidence to support the
contention that competition was harmed. An allegedly improved
version of RoundUp being developed by Monsanto was never
introduced to the market. Evidence of such a retardation of
innovation and subsequent decrease in the quality of NSHs
potentially available to consumers, if believed, could qualify as
a harm to competition and consumers. Likewise, if a decrease in
the price of RoundUp would have occurred as result of Finale's
growth in the market, then that effect on price could also
qualify as a harm to competition. Defendants' contention that new
NSH products have entered the market may certainly be relevant to
their argument that competition has not been substantially
foreclosed. However, the conflicting evidence proffered on the
effects of competition make summary judgment inappropriate.
Accordingly, Defendants' motion for summary judgment on AgrEvo
EH's Section 1 and 2 antitrust claims on the merits is denied,
AgrEvo EH's motion for partial summary judgment on its Section 1
claim is denied, and AgrEvo EH's antitrust claims shall be
evaluated at trial pursuant to the rule of reason analysis. II. STATE CLAIMS
A. Scotts' Motion for Summary Judgment on Plaintiff's Contract
1. Alleged Breaches of the Glufosinate Ammonium Supply
a. Breach of the Implied Best Efforts Clause
Under the terms of the GA Supply Agreement, AgrEvo EH was to
supply Scotts with its requirements of GA for use in Finale for
five years. The first three years of the GA Supply Agreement were
on an exclusive basis, and AgrEvo EH contends that this
exclusivity triggered an implied "best efforts" clause under
Delaware law, which obligates a buyer to use its best efforts in
promoting the sale of the goods purchased from the seller on an
exclusive basis. See 6 Del. Code § 2-306(2). AgrEvo EH alleges
that by abandoning its efforts to promote and sell Finale, after
entering into the RoundUp Agreement with Monsanto, this implied
"best efforts" clause of the GA Supply Agreement was breached by
Similarly, AgrEvo EH alleges that Scotts' abandonment of its
efforts to promote and sell Finale was a breach of Scotts'
obligations, allegedly created prior to the parties' execution of
the GA Supply Agreement, to market Finale effectively.
Specifically, AgrEvo EH contends that Scotts had represented that
it would invest $15 million per year in advertising Finale, would
capture a 25% market share, and would "dethrone" RoundUp as the leading NSH. According to AgrEvo EH, these representations define
what would have occurred had Scotts fulfilled its "best efforts"
obligations under the GA Supply Agreement.
While there is no dispute that the Delaware statute implies a
"best efforts" clause in exclusive dealing contracts for the sale
of goods, parties are free to enter into contracts that eliminate
this implied duty: "A lawful agreement by either the seller or
the buyer for exclusive dealing in the kind of goods concerned
imposes unless otherwise agreed an obligation by the seller to
use the best efforts to supply the goods and by the buyer to use
best efforts to promote their sale." 6 Del. Code 2-306(2)
(emphasis added). It is quite clear that the take-or-pay
provision of the GA Supply Agreement demonstrates that the
parties "otherwise agreed" to preclude the implied "best efforts"
The "best efforts" doctrine was created to protect one party
who is at the complete mercy of another party in an exclusive
dealing contract, but the doctrine is no longer necessary when
the parties to an exclusive dealing contract have expressly
negotiated provisions in the contract to protect the parties'
financial interests. See 2-6 Corbin on Contracts § 6.5 ("the
principal pillar of the finding of a reasonable efforts
obligation was the senselessness of granting exclusivity without
the reasonable expectation of receiving a commitment in return."). Section 1.11 of the GA Supply Agreement obligated
Scotts to purchase $12.6 million worth of GA during the first
three years of the contract. In addition to this $12.6 "Minimum
Dollar Commitment" requirement, however, pursuant to the
take-or-pay provision in § 2.3 of the GA Supply Agreement, Scotts
was also permitted to pay AgrEvo EH fifty cents for each dollar
short of the "Minimum Dollar Commitment" in its purchases of GA.
Simply put, Scotts could fulfill its full purchase requirement by
"taking" $12.6 million worth of GA from AgrEvo EH or, if Scotts
chose not to purchase any GA, "paying" $6.3 million to AgrEvo EH.
In light of the take-or-pay provision, AgrEvo EH was hardly at
the mercy of Scotts under the GA Supply Agreement AgrEvo EH was
guaranteed to gross either $12.6 million from sales of GA or
profit $6.3 million.*fn8 With the inclusion of the
take-or-pay provision in the contract, AgrEvo EH was
well-protected, and the implied "best efforts" clause was
Perhaps surprisingly, there appear to be no reported Delaware
cases addressing the statute that implies the "best efforts"
clause in contracts for the sale of goods unless "otherwise
agreed." See Textile Biocides, Inc. v. Avecia, Inc., 2001 WL
1855059 (Pa. Com. Pl. 2001) ("there appears to be no published case addressing UCC § 2-306(2) under Delaware law").
However, cases addressing the similar common law doctrine of
implied "best efforts" in exclusive dealing contracts have held
that no such clause is implied if, like here, provisions in the
contract guarantee payments. See 2-6 Corbin on Contract § 6.5
(noting that Wood v. Lady, Duff-Gordon, 222 N.Y. 88 (1917), in
which Justice Cardozo created the "best efforts" doctrine to
protect a party to an exclusive dealing contract otherwise at the
mercy of the other party, "is clearly the ancestor of Uniform
Commercial Code ("U.C.C.") 2-306."). In Emerson Radio Corp. v.
Orion Sales, Inc., 253 F.3d 159 (3d Cir. 2001), for example,
Emerson and Orion entered into an exclusive trademark licensing
contract with a term of three years. Emerson sued Orion claiming
that in light of the exclusive nature of the contract Orion had
an implied obligation to use "reasonable efforts" to sell and
market the Emerson products, which the district court rejected.
The Court of Appeals, agreeing with the district court's
reasoning in granting summary judgment, held that because Orion
was required to make a minimum $4 million annual royalty payment,
there was no implied obligation to use "best efforts." Id. at
166. Since the minimum royalty payment protected Emerson from the
possibility that Orion would not use its best efforts to sell or
market the Emerson products, there was no reason to imply a "best
efforts" obligation. Id. at 169 (distinguishing Wood v. Lucy, Lady Duff-Gordon). See also Permanence Corp. v.
Kennametal, 908 F.2d 98, 101-02 (6th Cir. 1990) (no "best
efforts" obligation to exploit patents implied when $150,000 was
paid for the exercise of the option for grant of exclusive agency
and $100,000 was paid in advance royalties); Vacuum Contrete
Corp. of America v. American Mach. & Foundry, 321 F. Supp. 771,
773-774 (S.D.N.Y. 1971) (holding that there was no implied "best
efforts" clause in an exclusive dealing contract when there was a
guaranteed royalty payment and right to terminate the contract).
In addition to the inclusion of the take-or-pay provision to
protect AgrEvo EH's financial interests, further evidence that
the parties "otherwise agreed" not to have a "best efforts"
clause in the GA Supply Agreement comes from the fact that,
unlike some of the preliminary discussions leading up the
agreement, the final GA Supply Agreement does not contain any
marketing or promotional obligations. Scotts' non-binding letter
of intent did contain specific advertising budgets and market
share projections, and AgrEvo EH representatives proposed market
share requirements during negotiations leading up to the GA
Yet, any mention of money to be spent on advertising by Scotts
or market shares to be attained by Scotts is conspicuously absent
from the GA Supply Agreement. Rather than demonstrate what Scotts
should have attained had it fulfilled the implied "best efforts" clause, as AgrEvo EH contends, the failure to
include terms in the GA Supply Agreement pertaining to the
proposed 25% market share requirement and $15 million annual
advertising budget for Finale is more properly viewed as evidence
that such obligations were considered and rejected. See
Eastern Elec., Inc. v. Seeburg Corp., 427 F.2d 23, 27 (2d Cir.
1970) ("It is surely of some significance in deciding whether an
agreement contains an implied obligation that the party so
arguing tried to make the obligation explicit and failed."). The
position that no promotional obligations were meant to be
included in the final agreement is further bolstered by the
integration clause contained in Section 18.1, which states: "This
Agreement contains all the terms and conditions of sale and
purchase between the parties hereto and supersedes any oral or
other agreements between the parties relating to the subject
matter hereof." See HML Corp. v. General Foods Corp.,
365 F.2d 77, 82 (3d Cir. 1966) (when a contract contains an explicit
statement that it incorporates the entire agreement "the
agreement cannot be altered by the plaintiff's effort to show a
parol representation that defendant would exert additional effort
to promote the product."); J.A. Moore Constr. Co. v. Sussex
Assocs. Ltd. P'ship, 688 F. Supp. 982, 987 (D. Del. 1988) (a
merger clause is "conclusive evidence that the parties intended
the written contract to be their complete agreement"); see also Permanence
Corp., 908 F.2d. at 102.
Other aspects of the GA Supply Agreement suggest that the
parties intended not to have a "best efforts" clause for the
marketing and selling of Finale included in the contract. For
instance, numerous sections of the GA Supply Agreement explicitly
state that the parties are to use their "best efforts" in
performing certain obligations, such as Section 5.3 which
requires that AgrEvo EH use its "best efforts" to deliver the
quantities of GA ordered. See also GASA §§ 5.1, 11.2 & 7.5.
Reading the contract as a whole, the failure to include an
explicit "best efforts" clause for the alleged obligation of
Scotts to promote and sell Finale, when the parties have included
"best efforts" clauses for other obligations, suggests that the
parties chose not to bind Scotts by such an obligation. Finally,
the "sole remedy" provision in Section 17.1 of the GA Supply
Agreement also suggests that the take-or-pay provision was the
only recourse available to AgrEvo EH should Scotts choose not to
perform its obligations in a way that satisfied AgrEvo EH. To
permit the possibility of recovery beyond what is calculated in
accordance with the take-or-pay provision would be to permit a
contractual recovery directly at odds with the sole remedy
provision contained in the GA Supply Agreement. That Scotts and AgrEvo EH discussed market share predictions
and promotional requirements during negotiations is undisputed.
That in entering into the GA Supply Agreement AgrEvo EH assumed
Scotts would purchase large quantities of GA, aggressively market
and advertise Finale, and work to achieve a larger market share
for Finale can also hardly be doubted. However, AgrEvo EH's
assumptions are irrelevant in light of a GA Supply Agreement that
quite clearly did not transform these assumptions into
obligations for Scotts.
b. Breach of the Implied Covenant of Good Faith
In a manner that parallels its opposition to the imposition of
a "best efforts" clause, Scotts opposes the notion that the
implied covenant of good faith can create certain marketing and
sales obligations that the parties chose not to include in the GA
Supply Agreement. Yet, while AgrEvo EH's claims based on the
implied "best efforts" obligations are properly characterized as
an attempt to recapture obligations explicitly rejected by the
parties, the claims based on the alleged breach of the implied
covenant of good faith are somewhat different. See Emerson
Radio Corp., 253 F.3d at 172 (dismissing plaintiff's claims for
breach of the implied "best efforts" covenant but permitting a
claim based upon an alleged breach of the implied covenant of
good faith to proceed based upon a question of fact as to whether
defendant acted in bad faith to decrease plaintiff's sales and increase its own sales). AgrEvo
EH's claims based on the implied covenant of good faith do not
relate to the issue of whether Scotts complied with specific
terms of the GA Supply Agreement but rather relate to the way in
which the parties dealt with one another during the life of the
GA Supply Agreement. As discussed below, even if the parties
agreed not to include a best efforts obligation, there is a
genuine issue of material fact as to whether Scotts acted in bad
faith in deciding to purchase no more than a de minimus
amount of GA.
Delaware statutes, modeled after the U.C.C., impose an
obligation of good faith for all contracts for the sale of goods,
and this duty may not be disclaimed by agreement. See 6 Del.
Code §§ 1-201(19), 1-203, 1-302(b) & 1-304. More specifically,
Section 2-306(1) imposes an obligation of good faith in output
contracts like the GA Supply Agreement. 6 Del. Code. § 2-306(1).
Though cases applying the good faith statutes derived from the
U.C.C. in exclusive dealing or requirements contracts are
limited, Delaware courts addressing the implied covenant of good
faith in other contexts have held that while the implied covenant
"cannot contravene the parties' express agreement and cannot be
used to forge a new agreement beyond the scope of the written
contract," the implied covenant is designed to protect the spirit
of the agreement and to keep one party from using "oppressive or underhanded tactics to deny the other side the fruits of the
parties' bargain." Chamison v. HealthTrust, Inc., 735 A.2d 912,
921 (Del.Ch. 1999). Though the doctrine of good faith is to be
used sparingly, the implied covenant of good faith is applicable
even when no express term of the agreement has been violated.
Id. at 920, 921 n. 33.
As discussed in the preceding subsection, under the terms of
the GA Supply Agreement Scotts did have the right not to purchase
any GA from AgrEvo EH. This was not, however, an absolute right
that would excuse bad faith performance by Scotts. Though the
concept of what constitutes a breach of good faith is somewhat
amorphous, if a jury were to find that Scotts was motivated not
to purchase any GA in an effort to destroy Finale as a competitor
to RoundUp or was motivated to enter into the GA Supply Agreement
solely to harm AgrEvo EH and increase Scotts' bargaining position
with Monsanto, then a jury could find that Scotts did breach the
implied covenant of good faith. Judge Posner discusses such a
situation in the leading case on good faith in requirements
contracts, Empire Gas Corp. v. American Bakeries Co.,
840 F.2d 1333, 1339 (7th Cir. 1988) (applying analogous Illinois law based
on the U.C.C.), and notes that if the defendant reduced its
purchases of plaintiff's goods in order to harm plaintiff,
perhaps because plaintiff was a competitor in some other market,
that could qualify as a bad faith performance and contractual breach. Conversely, Judge Posner also explains
that if a defendant had a business reason for reducing its
purchases, such as a drop in demand for plaintiff's product, then
defendant would not be acting in bad faith and would not breach
the contract. Id. Therefore, in spite of the fact that the
results for plaintiff would be the same reduced sales to
defendant there must be an inquiry into the subjective
motivations behind the defendant's decision to purchase a reduced
amount of goods. The question remaining in this case, therefore,
is not simply whether Scotts had the right to reduce its purchase
of GA it did but whether Scotts did or did not act in bad
faith in reducing its purchases of GA to virtually nothing. This
is not a question that I may answer. Instead an evaluation of
Scotts' subjective motivations is a question of fact that must be
submitted to a jury. See MDC Corp. Inc. v. John H. Harland
Co., 228 F. Supp. 2d 387, 396-97 (S.D.N.Y. 2002) (applying New
York's version of the U.C.C.).
Additionally, unlike in the "best efforts" context, the "sole
remedy" provision of Section 17.1 of the GA Supply Agreement
cannot be used to limit Scotts' liability should a jury find that
Scotts did breach the implied covenant of good faith. Consistent
with Section 1-302(b), which prevents parties from being able to
disclaim the implied covenant of good faith by agreement, and the
general contract principle recognized by Delaware courts that a party may not protect itself from
liability for fraudulent actions or bad faith, the "sole remedy"
provision does not preclude AgrEvo EH's claim based upon breach
good faith from going forward. See J.A. Jones Constr. Co. v.
Gen. Elec. Co., 372 A.2d 540, 545 (Del.Super.Ct.
Accordingly, Scotts' summary judgment motion is granted as to
AgrEvo EH's claims based upon the implied "best efforts"
obligation in the GA Supply Agreement but denied as to AgrEvo
EH's claims based upon the implied covenant of good faith and
2. Improper Assignment of the Contract to Farnam
Though Scotts contends that the GA Supply Agreement was not
assigned to Farnam, I find it difficult to characterize the
transaction that occurred as anything but an assignment. Though
Scotts did retain the obligation to satisfy the take-or-pay
provision for any shortfalls, and in fact did satisfy that
obligation, Scotts entered into an "Asset Purchase Agreement"
with Farnam (the "Farnam APA"), which provided that Farnam "shall
have the right, but not the obligation, to make purchases of [GA] under the AGREVO SUPPLY AGREEMENT [a/k/a the "GA Supply
Agreement"]," and that Farnam "may solicit and sell GA to other
PERSONS." (Farnam APA § 7.10.)
Even though the transfer of the right to purchase GA pursuant
to the GA Supply Agreement and to sell a GA-based NSH was not a
transfer of every last right and obligation enumerated in the GA
Supply Agreement, the transfer of these particular rights is
sufficient to qualify as an assignment. See 29 Richard A. Lord,
Williston On Contracts § 74.10 (4th ed. 2003). This comports
with the GA Supply Agreement, which explicitly prohibited Scotts
from assigning "rights" and was not limited to a prohibition
against the contemporaneous assignment of every right and
obligation in the contract. (GASA § 12.1.)*fn10 To find that
there was no assignment of rights to Farnam by Scotts would run
counter to the facts in the record.*fn11
Despite holding that Scotts did assign at least certain rights
to Farnam, however, AgrEvo EH has not demonstrated any damages
based on this assignment. As discussed above, the GA Supply Agreement was a supply agreement, and did not incorporate
the promotional or market share obligations that had been
discussed during negotiations. Therefore, the sole remedy
available for any failure to purchase the minimum amount of GA
under the GA Supply Agreement was limited to the amount set forth
pursuant to the take-or-pay provision. (GASA § 17.1.) AgrEvo EH
may not now expand the scope of its available recovery based on
the assignment of certain rights to Farnam. Pursuant to the
take-or-pay provision, AgrEvo EH was entitled to was 50% of the
difference between actual purchases and the minimum dollar
commitment, and whether Farnam or Scotts was the party not
purchasing GA was irrelevant to AgrEvo EH's entitlement. Scotts
satisfied the take-or-pay obligation, and, therefore, no damages
are left to be recovered.
Accordingly, Scotts' motion for summary judgment is granted as
to AgrEvo EH's claims based upon Scotts' assignment of the GA
Supply Agreement to Farnam.
3. Alleged Breaches of the Insecticide Sales Agreement
Similar to allegations regarding Scotts' breach of the implied
covenant of good faith in the GA Supply Agreement, AgrEvo EH
alleges that Scotts breached the implied covenant of good faith
in the Insecticide Supply Agreement. For reasons similar to those
stated above, AgrEvo EH has raised a genuine issue of material fact as to whether the implied covenant of good faith
was breached with regard to the Insecticide Supply Agreement.
Unlike the GA Supply Agreement, however, there is an ambiguity
as to whether the Insecticide Supply Agreement was merely a
supply agreement or included marketing obligations for Scotts,
and there is an additional ambiguity whether some minimum
purchase was required under the contract. Further, if such
obligations existed, there is then a question of fact as to
whether Scotts' performance breached those requirements.
An ambiguity exists when the language in a contract permits two
or more reasonable interpretations. Hallowell v. State Farm
Mutual Auto. Ins. Co., 443 A.2d 925, 926 (Del. 1982). If an
ambiguity exists as to the contract, then the interpretation and
resolution of the ambiguity is a question of fact, and summary
judgment is inappropriate. See Kysor Indus. Corp. v. Marguax,
Inc., 673 A.2d 889, 898 (Del.Super.Ct. 1996); see also
Boston Five Cents Sav. Bank v. Department of Hous., 768 F.2d 5,
7-8 (1st Cir. 1985) (Judge Breyer, now Justice Breyer of the
United States Supreme Court, wrote "an argument between parties
about the meaning of a contract is typically an argument about a
`material fact,' namely, the factual meaning of the contract.").
In the Insecticide Supply Agreement, Section 4.1(4) states
"Purchase Prices set forth in Exhibit 1.12 reflect Buyer's and Seller's anticipation of growth in [Scotts'] demand for
Supplied Products to total volumes of purchases of insecticides
equivalent to twenty percent (20%) of Market Share by the end of
the Term." Section 17.4 addresses what the parties are to do
should third parties introduce insecticides that compete with the
products being supplied by AgrEvo EH to Scotts. In the context of
the entire agreement, these provisions make it unclear whether
Scotts was obligated to try to attain a market share of 20% or
whether the 20% market share provision and third party entry
provision are related only to renegotiation of prices. Viewed in
conjunction with other provisions in the contract, these sections
also raise a question whether the Insecticide Supply Agreement
contemplated that Scotts might not purchase any insecticide
products or was meant to obligate Scotts to purchase a certain
minimum amount of insecticide products.
Unlike the GA Supply Agreement, the Insecticide Supply
Agreement could reasonably be read to be more than a mere supply
agreement. There is no provision comparable to the take-or-pay
provision that clearly demonstrates that the parties intended to
permit Scotts the option to purchase no product. Additionally,
the discussion of market shares in the actual agreement, rather
than in pre-agreement non-binding letters of intent,
distinguishes the Insecticide Supply Agreement from the GA Supply
Agreement and raises the possibility that the Insecticide Supply Agreement was meant to include certain marketing obligations for
Scotts. Therefore, because there are questions of fact related to
the interpretation of the Insecticide Supply Agreement, summary
judgment is inappropriate as to what obligations were imposed on
Scotts by the Insecticide Supply Agreement and whether those
obligations, if they existed, were breached.
Accordingly, Scotts' motion for summary judgment is denied as
to AgrEvo EH's claims based upon alleged breaches of the
Insecticide Supply Agreement.
4. Alleged Obligation to Enter Into Good Faith Negotiations
AgrEvo EH contends that Section 20(ii) of the Asset Sales
Agreement obligated the parties to engage in negotiations and
that Scotts' failure to enter into negotiations pursuant to this
provision was a breach. Section 20(ii) of the Asset Sales
Agreement states that the parties were "to use best efforts . . .
within 90 days of Closing to have met and begun good faith
negotiations intended to reach agreement on those matters set out
in Exhibit 20(ii) attached hereto." Exhibit 20(ii) is a list of
products to be potentially supplied by AgrEvo EH to Scotts.
It is classic hornbook law that a mere "agreement to agree" or
"a contract to contract" in the future is a legally unenforceable
provision. See Hammond & Taylor, Inc. v. Duffy Tingue Co.,
161 A.2d 238, 239 (Del.Ch. 1960). Such agreements are too
indefinite to bind parties, and Scotts submits that Section 20(ii) is too indefinite to create an obligation for it
Though standing alone Section 20(ii) is indefinite, AgrEvo EH
submits that Scotts' letter of intent ("LOI"), dated March 24,
1998, set forth sufficiently definite terms to make Section
20(ii) more than a mere agreement to agree. Specifically, the
most relevant portion of the March 24, 1998, letter states:
Subject to confirmation of product efficacy and
negotiation of pricing and other terms, Scotts
Consumer Lawns business unit is willing to
discontinue advanced negotiations with another
supplier and enter into exclusive negotiations to
make AgrEvo its exclusive supplier of pyrethroids.
Our Consumer Lawns business unit expects to purchase
between 20,000 and 25,000 pounds of Deltamethrin per
year once replacement of our entire line of organo
phosphate based combination products is completed,
potentially as early as fiscal year 1999.
(LOI at 3.)
Though true that this letter did mention one essential term,
quantity, other essential terms are lacking. See Hindes v.
Wilmington Poetry Soc'y, 138 A.2d 501, 503 (Del.Ch. 1958). Most
notably, Scotts explicitly conditioned its desire to begin
discussions about entering into an agreement regarding pyrethroids on a demonstration of efficacy. Thus, similar to the
situation in Arcadian Phosphates, Inc. v. Arcadian Corp.,
884 F.2d 69, 72 (2d Cir. 1989), this is not a situation in which the
parties must merely work out a few details or formalize an
agreement on essential terms after manifesting an intent to be
bound. Similar to Arcadian Phosphates, a reasonable juror could
not interpret Scotts' statement in the letter of intent as
anything more than a statement that Scotts was contemplating the
possibility of discussing entering into binding supply agreements
at some undefined future date. Id. This is an example of a mere
agreement to agree and is unenforceable. Compare Itek Corp. v.
Chicago Aerial Indus., Inc., 248 A.2d 625, (Del. 1968) (holding
that where the parties met and orally agreed to the essential
terms, a trier of fact could reach the conclusion that defendant
had failed to exercise reasonable effort to agree on final terms
of the contract).
Accordingly, Scotts' motion for summary judgment based upon
AgrEvo EH's claims that Scotts failed to enter into good faith
negotiations pursuant to the Asset Sales Agreement is denied.
B. Tortious Interference With Business Relations
AgrEvo EH alleges in the Third Amended Complaint that Monsanto
interfered with AgrEvo EH's business relations with Scotts by
engaging in "practices designed to foreclose and exclude Plaintiff from the market." (Third Am. Compl. Count IX.)
AgrEvo EH is essentially arguing that by entering into the
RoundUp Agreement with Scotts, Monsanto was interfering with the
relationship between AgrEvo EH and Scotts to sell Finale in
other words, but for Monsanto's meddling, AgrEvo EH would have
sold a lot more GA to Scotts and made a lot more money.
The elements of a claim for tortious interference with business
relations, also known as tortious interference with prospective
business relations, are: (1) business relations with a third
party; (2) the defendant's interference with those business
relations; (3) the defendant acted with the sole purpose of
harming the plaintiff or used dishonest, unfair, or improper
means; and (4) there was a resultant injury to the business
relationship. Nadel v. Play-By-Play Toys & Novelties, Inc.,
208 F.3d 368, 382 (2d Cir. 2000). Though AgrEvo EH recognizes the
difficulty, and makes a good faith effort to deal with the
problem, AgrEvo EH cannot get past the fact that regardless of a
whether the elements above can be satisfied, in a claim for
tortious interference with business relations there is an
additional requirement that the interfered-with business
relations have not become actual, fully executed contracts. See
Lazar's Auto Sales, Inc. v. Chrysler Fin. Corp.,
83 F. Supp. 2d 384, 391 n. 1 (S.D.N.Y. 2000); D'Andrea v. Rafla-Demetrious,
3 F. Supp. 2d 239, 250 (E.D.N.Y. 1996), aff'd, 146 F.3d 64 (2d
Cir. 1998). AgrEvo EH may dispute what rights and obligations are
created by the Asset Sales Agreement, the GA Supply Agreement and
Insecticide Supply Agreement, but there can be no doubt that
those agreements are actual, fully executed, and binding
contracts. Accordingly, a claim for tortious interference with
contract against Monsanto cannot stand.
Perhaps realizing the difficulty of maintaining a claim for
tortious interference with business relations, in its opposition
to Monsanto's motion for summary judgment AgrEvo EH asks that its
claim for tortious interference with contractual relations be
reinstated. (Pl's Tortious Interf. Opp. Br. at 16.) I dismissed
that claim following oral argument on the defendants' motions to
dismiss the Second Amended Complaint holding that AgrEvo EH had
failed adequately to plead an intentional procurement of a breach
by Monsanto. Agrevo Envtl. Health, Inc. v. Scotts Co., 99 CV
4015 (LAP), 2000 U.S. Dist. Lexis 9544, at *49-50 (S.D.N.Y. June
20, 2000). A request in an opposition brief to a motion for
summary judgment marshaling new facts is an improper means for
requesting reinstatement of a previously dismissed claim, and I
decline to entertain such a request.*fn13 See Katona v. Federal Express Corp., 95 Civ. 10951 (JFK),
1999 WL 13635, at *3 (S.D.N.Y. January 12, 1999) (Rule 6.3
precludes a party from introducing new evidence on a motion for
reconsideration without a court order so as to prevent a party
from "`plugging the gaps of a lost motion with additional
matters'") (quoting Carolco Pictures, Inc. v. Sirota,
700 F. Supp. 169, 170 (S.D.N.Y. 1988)).
Accordingly, Monsanto's motion for summary judgment on AgrEvo
EH's tortious interference claims is granted.
III. Expert Testimony
Federal Rule of Evidence 702 provides:
If scientific, technical, or other specialized
knowledge will assist the trier of fact to understand
the evidence or to determine a fact in issue, a
witness qualified as an expert by knowledge, skill,
experience, training, or education, may testify
thereto in the form of an opinion or otherwise, if
(1) the testimony is based upon sufficient facts or
data, (2) the testimony is the product of reliable
principles and methods, and (3) the witness has
applied the principles and methods reliably to the
facts of the case. Fed.R. Evid. 702. Under Daubert v. Merrell Dow
Pharms., Inc., 509 U.S. 579 (1993), district courts
retain their role "as the gatekeeper for expert
testimony." Raskin v. Wyatt Co., 125 F.3d 55, 66
(2d Cir. 1997). Rule 702 requires a trial court to
make an initial determination as to whether the
proposed witness qualifies as an expert. If this
threshold requirement is met, then a court must
inquire into whether the scientific, technical or
other specialized testimony provided by that expert
is both relevant and reliable. See Kumho Tire Co.
v. Carmichael, 526 U.S. 137, 152 (1999); see
also F.D.I.C. v. Suna Assocs., Inc., 80 F.3d 681,
686 ("It is well-established that `expert testimony
must be based upon reliable theories or principles.'"
(quoting Glen Weissenberger, Federal Evidence 346 (2d
The proponent of expert testimony bears the burden of
establishing its admissibility by a preponderance of the
evidence. See, Baker v. Urban Outfitters,
254 F. Supp. 2d 346
, 353 (S.D.N.Y. 2003) (citing Cayuga Indian Nation v.
Pataki, 83 F. Supp. 2d 318
, 322 (N.D.N.Y. 2000)). Though the
weight given to expert testimony should be left to the finder of
fact, expert testimony should be excluded altogether if it is
"speculative" or "conjectural" or if it is based on assumptions
"so unrealistic and contradictory as to suggest bad faith." See
Boucher v. U.S. Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir.
1996). Moreover, the Supreme Court has emphasized, in addressing the distinction
between methodology and conclusions, that:
[N]othing in either Daubert or the Federal Rules of
Evidence requires a district court to admit opinion
evidence which is connected to existing data only by
the ipse dixit of the expert. A court may conclude
that there is simply too great an analytical gap
between the data and the opinion proffered.
Gen. Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997).
A. Defendants' Motion to Exclude the Testimony of Dr. Ronald L.
AgrEvo EH's damages expert, Dr. Martin, submitted his original
expert report on April 25, 2003, which calculated AgrEvo EH's
damages to be $70 million (the "Original Report"). Following the
submission of reports by Defendants' experts, Dr. Martin
submitted a rebuttal report on October 3, 2003, in which he
reduced his calculation of AgrEvo EH's damages to $49 million
(the "Rebuttal Report"). Defendants' motion contends that Dr.
Martin's Rebuttal Report is not admissible because it contains
improper rebuttal or supplemental testimony, because it relies on
an entirely new methodology and because Dr. Martin's damages
calculations are flawed to such a degree that Daubert and
Kumho Tire require his testimony be precluded.
As to Defendants' contention that Dr. Martin applied a whole
new methodology in his Rebuttal Report, I do not find that to be
the case. The changes reflected in the Rebuttal Report related to the MUP price, profit margins, and mitigation do not
constitute in wholesale alterations of Dr. Martin's methodology.
Instead, viewing Dr. Martin's methodology as the damage equation,
the changes about which Defendants' complain are more analogous
to changes to the numbers plugged into that equation. While Dr.
Martin may be precluded from coming up with a completely
different equation in his Rebuttal Report, a revision of the
numbers is permissible under Rule 26 of the Federal Rules of
Civil Procedure. See Fed.R.Civ.P. 26(b)(4)(A); Blue Cross &
Blue Shield of N.J. v. Philip Morris, Inc., 199 F.R.D. 484,
486-87 (E.D.N.Y. 2001).
Defendants are free to challenge the basis and source for Dr.
Martin's numbers, but a challenge to the facts or data relied
upon by Dr. Martin does not go to the admissibility of his
testimony, but only to the weight of his testimony. See
Concise Oil & Gas P'ship v. Louisiana Interstate Gas Corp.,
986 F.2d 1463, 1476 (5th 1993); MacQuesten Gen. Contracting, Inc. v.
HCE, Inc., 2002 WL 31388716, at *2 (S.D.N.Y. Oct. 22, 2002).
Defendants may cross-examine Dr. Martin at trial regarding his
assumptions and the information that was reported to him but they
have failed to show any reason why Dr. Martin's damage testimony
should be precluded. Additionally, unlike cases precluding
rebuttal testimony on the basis of prejudice to the opposing
party or procedural gamesmanship, Dr. Martin's Rebuttal Report was submitted more than a year before the scheduled trial date,
and Defendants had the opportunity to depose Dr. Martin for an
additional two days following the submission of the Rebuttal
Report. Compare Salgado v. Gen. Motors Corp., 150 F.3d 735,
737-78 (7th Cir. 1998) (expert reports filed late after repeated
warnings and extensions containing no basis for their conclusory
opinions excluded); Akeva L.L.C. v. Mizuno Corp.,
212 F.R.D. 306, 310 (M.D.N.C. 2002) (rejecting expert rebuttal testimony,
which included an entirely new test, because the testimony was
not supplemental under Rule 26(e) and for failure to comply with
court ordered discovery plan); In re Omeprazole Patent Litig.,
2002 WL 287785, at *4 (S.D.N.Y. Feb. 27, 2002) (expert testimony
precluded when new reports relying on previously undisclosed
documents were submitted after trial had commenced).
As to Defendants' argument that Dr. Martin's testimony, based
on the Rebuttal Report, will be so speculative that I should
exercise my "gatekeeper" function and exclude his damage
testimony, I see no basis for such an exclusion. Dr. Martin's
sales forecasts, mitigation calculations, profit margin
assumptions, and assumptions as to the number of years that
Scotts would have purchased GA but for Defendants' actions are
not immutable facts to be blindly accepted by the jury, nor are his damage calculations so speculative that they should be
stricken.*fn14 A jury is fully capable of assessing such
Dr. Martin's calculations based upon sales forecasts do not
lack a rational basis. See FH Krear & Co. v. Nineteen Named
Trustees, 810 F.2d 1250, 1260 (2d Cir. 1987). The sales
projections, prepared not by AgrEvo EH but by Scotts, are not so
speculative that they are unreliable. See Care Travel Co. v.
Pan Am. World Airways, Inc., 944 F.2d 983, 994-95 (2d Cir.
1991); see also Sir Speedy Inc. v. L & P Graphics, Inc.,
957 F.2d 1033, 1040 (2d Cir. 1992). Similarly, profit margin
calculations based upon documentary evidence and conversations
also have a rational basis for reliance. On the issue of
mitigation of damages through sales by Bayer CropScience ("BCS"),
because BCS was the successor to AgrEvo EH an evaluation of BCS's
sales was not inappropriate, and Dr. Martin's assumptions do not
appear irrational or unreliable.
As to Dr. Martin's assumption that Scotts would have purchased
GA for a duration of 10 years, any assumption as to what would
have happened in a "but for" world is necessarily speculative.
However, in light of the fact that Scotts had projected that it
would not receive a positive return on its investment until the fifth year, assuming purchases for 10 years
does not seem inordinately speculative. I am required to act as a
gatekeeper in order to prevent a jury from being overwhelmed by
speculation cloaked as "expertise", but I need not censor every
assumption, calculation, or opinion capable of being challenged
by opposing counsel. As discussed below, certain testimony may be
limited at trial, but Defendants have offered no reason to
preclude Dr. Martin from testifying.
B. AgrEvo EH's Motion to Exclude the Expert Testimony of Dr.
Janusz Ordover, Dr. Gary L. Roberts, Mr. David A. Kaplan & Mr.
Martin M. Levy
1. Dr. Ordover
AgrEvo EH seeks to exclude the testimony of Monsanto's
antitrust liability expert, Dr. Ordover, on the grounds that his
testimony, as contained in his expert report and deposition
testimony: is based on an inappropriate standard for assessing
whether Defendants' actions were anticompetitive; usurps the role
of the Court; and usurps the role of the jury. While Dr.
Ordover's testimony should be limited, his testimony should not
be excluded in toto.
In Dr. Ordover's report he writes "Monsanto's selection of
Scotts was not anticompetitive if that choice made business sense
irrespective of the effects on competition in general and on
Finale in particular" and "the negative effect on competition is
not by itself an issue, unless such adverse effect is the result of conduct that would otherwise make no legitimate
business sense." (Ordover Report ¶¶ 63, 42.) Stated this way, Dr.
Ordover's testimony runs counter to the applicable law and usurps
my role in instructing the jury as to the appropriate legal
framework for evaluating the lawfulness of the Defendants'
conduct. In United States Football League, 842 F.2d at 1360,
the Court of Appeals upheld the district court's jury instruction
for determining whether Section 1 had been violated, pursuant to
the rule of reason analysis, which stated that a "Rule-of-Reason
case requires the fact finder to balance the procompetitive and
anticompetitive effects of any restraint." If, as Dr. Ordover
states, a business decision were permissible under the Sherman
Act "irrespective" of the decision's effect on competition, it is
difficult to see how the required balancing of pro- and
anticompetitive effects could be performed by a jury.
As to the USFL's Section 2 claim, the Court of Appeals upheld
the jury instruction stating that "[a] monopolist may not, of
course, use its market power, whether obtained lawfully or not,
to prevent or impede competition in the relevant market." Id.
at 1360-61. Similar to the difficulties in applying Dr. Ordover's
standard to the Section 1 claims, it is hard to imagine how a
jury could appropriately analyze whether Monsanto used its
monopoly power to prevent or impede competition if all that Monsanto is required to demonstrate is that its actions "made
business sense irrespective of the effects on competition."
A business justification of a company's actions is certainly
relevant to antitrust analysis. If, for example, a monopolist
engages in predatory pricing foregoing short term profits to
drive out a competitor the fact that the decision to lower
prices and forego profits does not make business sense, but for
the attempt to drive out competition, is certainly relevant.
Having read Dr. Ordover's report and deposition testimony, and
having heard counsel's explanation at oral argument, I am
convinced that Dr. Ordover does not intend his test to run
counter to the appropriate tests established for Sections 1 and 2
analysis, and I am convinced that he can testify in an
appropriate manner. However, Dr. Ordover's "irrespective"
language, and other similar language, will inevitably confuse
jurors and impinge on my ability to instruct the jury as to what
standards it is required to use in evaluating the antitrust
claims. At trial, Dr. Ordover must testify in a manner that does
not run counter to the established rule of reason analysis or
that runs the risk of confusing the jury as to the appropriate
Additionally, like the testimony of Defendants' other experts
discussed below, some of Dr. Ordover's testimony comes very close
to usurping the role of the jury, for example, in attributing subjective motivations to the parties. Such testimony
is beyond the scope of expert testimony and will be precluded at
2. Dr. Roberts, Mr. Kaplan and Mr. Levy
Although an expert may testify both as to questions of fact and
mixed questions of fact and law, Fiataruolo v. United States,
8 F.3d 930, 941 (2d Cir. 1993), AgrEvo EH contends that the
testimony of Dr. Roberts, Mr. Kaplan and Mr. Levy will usurp the
role of the jury. AgrEvo EH contends that each has stated in his
respective report and deposition testimony conclusions that are
ultimately to be found by the jury. I agree that some of the
testimony, like that of Dr. Ordover in drawing conclusions about
the state of mind of the Defendants, should be limited because
such testimony is within the capabilities of an average juror and
not a proper subject of expert testimony. To allow an expert to
testify as to Defendants' subjective intentions such as Dr.
Roberts' statement in his expert report that "competition from
Finale was not a factor in the development of Monsanto's business
strategy or choice of potential partners" (Roberts Report ¶ 23)
creates the possibility that the jury, fully capable of reaching
such a conclusion by itself, might give undue deference to the
expert's conclusion. Also, such opinion is not within Dr.
Roberts' expertise. Even though Fiataruolo, 8 F.3d at 941,
recognized that an expert is not prohibited from adopting the ultimate conclusion in his or her testimony, pursuant to Rule 704
of the Federal Rules of Evidence, and as the Advisory Committee
Notes to the rules of evidence make clear, I am to guard against
admission of opinions that would simply tell the jury what result
to reach. Some of the proposed expert testimony goes too far and
usurps the proper role of the jury.
Finding, however, that the majority of Dr. Roberts', Mr.
Kaplan's, and Mr. Levy's testimony is appropriate for the jury to
consider, they will not be prevented from testifying. Given
counsels' agreement not to introduce the written expert reports
into evidence, any limitations on the testimony can be dealt with
sufficiently at trial.
Accordingly, the parties' motions to preclude each others'
experts from testifying at trial are denied. The written reports
of each expert shall not be introduced at trial, and the
testimony of each expert shall be limited in such a manner so as
not to usurp my role of instructing the jury or usurping the
jury's role as fact-finder.
For the reasons stated above, and as So Ordered in the October
25, 2004, "Memorandum and Order" (docket no. 237), it is hereby
1) Defendants' motion for summary judgment for lack
of standing is denied; 2) Monsanto's motion to dismiss the AgrEvo EH's
affiliates' claims is denied;
3) Defendants' motion for summary judgment on the
merits on AgrEvo EH's antitrust claims is denied;
4) AgrEvo EH's motion for partial summary judgment on
its Section 1 claim is denied;
5) AgrEvo EH's antitrust claims shall be evaluated at
trial by the jury pursuant to the rule of reason
6) Scotts' motion for summary judgment on AgrEvo EH's
contract claims is denied in part and granted in
7) Monsanto's motion for summary judgment on the
claim for tortious interference with business
relations is granted and AgrEvo EH's request that its
claim for tortious interference with contract be
reinstated is denied;
8) Defendants' motion to preclude the expert
testimony of Dr. Martin is denied;
9) AgrEvo EH's motion to exclude the expert testimony
of Defendants' experts Dr. Ordover, Dr. Roberts, Mr.
Kaplan and Mr. Levy is denied;
10) the written reports prepared by plaintiff's and
defendants' experts shall not be submitted to the
11) although no expert is precluded from testifying,
no expert shall be permitted to testify at trial in a
manner that usurps the fact-finding role of the jury,
in any way instructs the jury as to the law, or invites
confusion as to the applicable legal tests.
Trial shall commence as scheduled on February 23, 2004 at 10:00
a.m. on a five-day per week schedule, although that date remains
subject to continuation of a criminal trial. Counsel may check
status with Jeanette Grimwade, Courtroom Deputy, at (212)
805-0116 as the date approaches.
The Clerk of the Court shall mark the docket entries 189-196,
disposed of by this Order.