ZF Meritor LLC et al v. Eaton Corporation

Filing 279

MEMORANDUM OPINION. Signed by Judge Sue L. Robinson on 8/4/2011. (nmf)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

ZF MERITOR LLC and MERITOR
TRANSMISSION CORPORATION,

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Plaintiffs,

v.
EATON CORPORATION,
Defendant.

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) Civ. No. 06-623-SLR
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)

Karen V. Sullivan, Esquire of Drinker Biddle & Reath LLP, Wilmington, Delaware.
Counsel for Plaintiffs. Of Counsel: R. Bruce Holcomb, Esquire of Adams Holcomb
LLP. Jennifer D. Hackett, Esquire, Paul R. Taskier, Esquire, Peter J. Kadzik, Esquire
and Lauren H Barski, Esquire of Dickstein Shapiro LLP. Charles E. Luftig, Christopher
H. Wood, Esquire, E. Michelle, Tupper, Ann-Marie Luciano, Esquire and Meredith
Graham Robinson, Esquire.
Donald E. Reid, Esquire of Morris Nichols, Arsht & Tunnell LLP, Wilmington, Delaware.
Counsel for Defendant. Of Counsel: Andrew D. Lazerow, Esquire and Curtis J.
LeGeyt, Esquire of Howrey LLP. Erik T. Koons, Esquire, William C. Lavery, Esquire
and Joseph A. Ostoyich Esquire, of Baker Botts LLP. Theodore B. Olson, Esquire and
Thomas G. Hungar, Esquire of Gibson Dunn.

MEMORANDUM OPINION

Dated: August ~ ,2011
Wilmington, Delaware

R~~dge

I. INTRODUCTION
Plaintiffs IF Meritor LLC ("lFM") and Meritor Transmission Corporation
("Meritor") (collectively, "plaintiffs") filed this action against defendant Eaton Corporation
("defendant") on October 5, 2006, alleging violations of §§ 1 and 2 of the Sherman
Antitrust Act, 15 U.S.C. §§ 1-2, and § 3 of the Clayton Act, 15 U.S.C. § 14. (D.1. 1) At
all times relevant prior to trial, plaintiffs and defendant were rival manufacturers of Class
8 commercial truck transmissions. Following a trial, defendant was found to have
violated §§ 1 and 2 of the Sherman Antitrust Act and § 3 of the Clayton Act. (D.1. 226)
The issue of damages was not tried. (Id.) Currently before the court is plaintiffs' motion
for reconsideration (D.I. 158) of the court's order (D.1. 145) excluding the damages
opinion testimony of plaintiffs' expert, Dr. David W. DeRamus ("DeRamus"). For the
reasons stated below, plaintiffs' motion is denied.
II. BACKGROUND
The court incorporates by reference its Daubert opinion of August 20, 2009.
(D.I. 144, 145) In that opinion and its accompanying order, the court granted
defendant's motion to exclude DeRamus' expert report on damages because it was
based on faulty underlying data: a single page from the "Revised Strategic Business
Plan." (D.I. 144 at 7) However, the court found that the nature of defendant's conduct
(in terms of antitrust injury) was adequately addressed by DeRamus and, therefore, the
case was bifurcated, and trial on liability was conducted during the subsequent weeks.
On October 8, 2009, the jury found that defendant had violated §§ 1 and 2 of the
Sherman Antitrust Act, and § 3 of the Clayton Act. (D.1. 217) After trial, defendant
renewed its motion for judgment as a matter of law (D.I. 245), which was denied by the

court on March 10, 2011. (0.1. 259, 260) Plaintiff's motion for reconsideration of the
court's Daubert order was then administratively closed as moot.
As it turns out, the court was in error to not decide the merits of plaintiffs' motion
for reconsideration, as the issue of damages must be resolved before a final judgment
is entered, see DL Resources, Inc. v. FirstEnergy Solutions, Corp., 506 F.3d 209, 213
(3d Gir. 2007) (citing Uberty Mutual Ins. Co. v. Wetzel, 424 U.S. 737, 744 (1976)), and
trial on the issue of damages cannot go forward in the absence of expert testimony.
Therefore, the court has "resurrected" the motion in order to substantively rule on
plaintiffs' contentions that the court should reconsider its ruling to exclude Deramus'
expert testimony under Daubert.

III. LEGAL STANDARD
The purpose of a motion for reargument or reconsideration is to correct manifest
errors of law or fact or to present newly discovered evidence. Max's Seafood Cafe ex
reI. Lou-Ann, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Gir. 1999). Accordingly, a court
should alter or amend its judgment only if the movant demonstrates at least one of the
following: (1) a change in the controlling law; (2) availability of new evidence not
available when the court issued its order; or (3) a need to correct a clear error of law or
fact or to prevent manifest injustice. See /d.; see a/so, Schering Corp. v. Amgen, Inc.,
25 F. Supp. 2d 293, 295 (D. Del. 1998).
A motion for reargument is not properly premised on a request that a court
rethink a decision already made. Glendon Energy Co. v. Borough of Glendon, 836 F.
Supp. 1109, 1122 (E.D. Pa. 1993). Motions for reargument may not be used "to argue
new facts or issues that inexcusably were not presented to the court in the matter

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previously decided." Brambles USA, Inc., v. Blocker, 735 F. Supp. 1239, 1240 (D. Del.
1990). Reargument, however, may be appropriate where "the court has patently
misunderstood a party, or has made a decision outside the adversarial issues
presented to the court by the parties, or has made an error not of reasoning but of
apprehension." Id. at 1241.

IV. DISCUSSION
A. Motion for Reconsideration
Plaintiff's motion for reconsideration is divided into two parts: the first was filed
before trial (0.1. 158), and the second is a modification of the first in light of
developments at trial. (0.1. 227) Plaintiffs make several arguments in support of
admitting DeRamus' expert report. First, they argue that the report is admissible in its
current form because the Strategic Business Plan on which it is based is reliable in view
of the testimony of witnesses at trial. (Id. at 5-7) Next, plaintiffs argue that the report is
admissible in its current form because the Strategic Business Plan itself was admitted
at trial, and experts are allowed to rely on evidence that is admitted at trial in forming
their opinions. (Id. at 7-11) Finally, plaintiffs argue that DeRamus should be allowed to
modify his report to reflect reliance on different data (such as ZFM profits) because the
court found only that the data he relied on was flawed, not his underlying methodology.
(Id. at 11-14)

1. Reliability of the Strategic Business Plan in view of witness
testimony
Plaintiffs argue that witness testimony established the reliability of the Strategic
Business Plan and, therefore, DeRamus should be allowed to rely on it in his expert

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report. (0.1. 227 at 5-7) However, there is nothing new in the witnesses' testimony that
provides the court with a reason to reverse its previous finding. The witnesses'
testimony only states that the Strategic Business Plan was prepared at the behest of
Martello, and was revised several times. (/d.) It says nothing about the plan's
accuracy, or the reasonableness of its estimates. Furthermore, the court was already
well aware of the circumstances surrounding the creation of the plan as DeRamus had
testified to its source during an evidentiary hearing, and wrote about it in his declaration.

(0.1. 158 at 3)

2. DeRamus' ability to rely on the Strategic Business Plan after it
was admitted into evidence during trial.
Plaintiffs misinterpret the effect of the admission of the Strategic Business Plan
on DeRamus' ability to rely on it in his expert report. While plaintiffs are generally
correct that experts are allowed to rely on admissible evidence, its admissibility does
not change its sufficiency or reliability under Rules 702 and 703 of the Federal Rules of
Evidence. A court still has a duty to "conduct an independent evaluation in to the
reasonableness" of the expert's reliance on the evidence. In re Paoli RR Yard PCB
Litig., 35 F.3d 717,748 (3d Cir. 1994). The fact that the Strategic Business Plan was

part of plaintiffs' "story" does not mean, ipso facto, that it is the type of reliable evidence
upon which an expert can base millions of dollars' worth of damages. Here, the court
found that the Strategic Business Plan was insufficient and unreliable and, therefore,
could not form the basis of DeRamus' opinion. Admissibility did not change this
calculus.

3. Modification of DeRamus' report to rely on different underlying
data

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Plaintiffs' request to modify DeRamus' report to rely on different underlying data
would be tantamount to reopening expert discovery. DeRamus would need to be
deposed once again, and defendant would need to prepare another rebuttal expert
report. The court would then be subject to another Daubert motion, and DeRamus'
report could be found faulty once again. Furthermore, when the court gave plaintiffs
leave to move for clarification as to what DeRamus could testify, leave was granted to
show that DeRamus' report already contained an alternate damages calculation. (0.1.
161 at 3) Plaintiffs had a chance to espouse alternate damages calculations when they
first prepared DeRamus' report and, instead, they chose to rely on data that generated
wildly inflated numbers. At this stage of litigation, the court will not give plaintiffs
another opportunity to modify their damages estimation.

B. Permanent Injunction
While the plaintiffs are unable to prove monetary damages due to a lack of
expert testimony, monetary damages are not the only form of relief that a court can
grant in an antitrust action. In the case at bar, the jury found that defendant had
engaged in conduct that violated §§ 1 and 2 of the Sherman Antitrust Act, as well as § 3
of the Clayton Act, that is, the use of Long Term Agreements (tiLTAs") that contained
discounts linked to market penetration targets. (0.1. 216, 259) Under both of these
acts, the court has broad discretion to issue an injunction preventing defendant from
engaging in such anticompetitive conduct.

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1. Standard of review
In determining whether to grant a request for a permanent injunction, the court
must consider whether:
(1) the moving party has shown actual success on the merits;
(2) the moving party will be irreparably injured by the denial of injunctive
relief;
(3) the granting of the permanent injunction will result in even greater harm
to the defendant; and
(4) the injunction would be in the public interest.
Gucci Am., Inc. v. Daffy's, Inc., 354 F.3d 228, 236-37 (3d Cir. 2003); Shields v.
Zuccarini, 254 F.3d 476,482 (3d Cir. 2001).

2. Discussion
a. Actual success on the merits
In the case at bar, actual success on the merits has already been shown. As
discussed supra, defendant has been found liable for violating §§ 1 and 2 of the
Sherman Antitrust Act, as well as § 3 of the Clayton Act. Therefore, this factor favors a
injunction.

b. Irreparable harm
The irreparable harm factor can be more difficult to show in the antitrust context
as the antitrust laws "were enacted 'for the protection of competition not competitors.'"
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977) (citations

omitted). Here, competition was effectively excluded from the marketplace, which
constitutes "antitrust injury, which is to say injury of the type the antitrust laws were
intended to prevent and that flows from that which makes defendant['s] acts unlawful."
Id. at 489. See also Xerox Corp v. Media Sciences Intern., Inc., 511 F. Supp. 2d 372,

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383 (S.D.N.Y. 2007) (plaintiff adequately alleged an antitrust injury for defendant's
alleged use of loyalty rebates to exclude plaintiff from the market.). Some courts have
considered this to be irreparable harm. See Christian Schmidt Brewing Co. v. G.
Heileman Brewing Co. Inc., 600 F. Supp. 1326, 1331 (D.C. Mich. 1985). Therefore, this
factor slightly favors an injunction.

c. Injunction will not cause greater harm to defendant
Defendant's harm is, at most, minimal. The court's injunction only prohibits
defendant from linking discounts to market penetration targets. It does not prohibit
defendant from giving other forms of discounts such as volume discounts. Defendant
will still be able to operate its business as usual with the caveat that it cannot exclude
others from the market. Therefore, this factor favors an injunction.

d. Public interest
Antitrust law is one of the few instances in civil actions where the public interest
factor may have as much, if not more, weight as any other factor in the balancing test.
The reason for this is simple. "A claim under the antitrust laws is not merely a private
matter. The Sherman Act is designed to promote the national interest in a competitive
economy; thus, the plaintiff asserting his rights under the Act has been likened to a
private attorney-general who protects the public's interest. ..." Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 655 (1985) (emphasis added)
(citations omitted).
In the case at bar, the public has a substantial interest in strong competition in
the truck transmission market. As originally written, the LTAs constituted de-facto
exclusive dealing contracts which had the effect of excluding others from the market,

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thus creating a situation where prices could be raised in the future and innovation could
be stifled. Therefore, this factor heavily favors an injunction.

3. Conclusion
Given the strong public interest in promoting competition, the minimal harm to
defendant, and plaintiffs' showing of success on the merits, defendant is enjoined from
linking discounts or other benefits to market penetration targets.

V. CONCLUSION
For the reasons stated herein, plaintiffs' motion for reconsideration (0.1. 158) of
the court's order excluding the damages opinion testimony of DeRamus is denied.
Furthermore, defendant is enjoined from linking discounts to market penetration
targets. 1 An appropriate order shall issue.

While plaintiffs are no longer in business and are unable to directly benefit
from an injunction, here, an injunction is appropriate because of the public's interest in
robust competition and the possibility that plaintiffs may one day reenter the market.
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