ZF Meritor LLC et al v. Eaton Corporation

Filing 373

MEMORANDUM. Signed by Judge Sue L. Robinson on 6/5/2014. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

ZF MERITOR LLC and MERITOR
TRANSMISSION CORPORATION,
Plaintiffs,
v.
EATON CORPORATION,
Defendant.

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) Civ. No. 06-623-SLR
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MEMORANDUM
At Wilmington this 5th day of June, 2014, having reviewed defendant Eaton
Corporation's ("Eaton") motion for summary judgment, the papers submitted in
connection therewith, and the arguments of counsel; the court issues its decision
consistent with the reasoning that follows:
1. Background. This case has a long history, virtually none of which will be
repeated here. Suffice it to say that plaintiffs ultimately prevailed in proving that they
suffered anitrust injury at the hands of Eaton, 1 and the trial on damages is scheduled to
commence on June 23, 2014. The pending motion for summary judgment is the latest
skirmish between the parties relating to the viability of plaintiffs' damages calculations.
More specifically, the parties dispute whether it is appropriate for plaintiffs' expert to
have considered damages from the cumulative perspective of an "overall anticipated

1

See ZF Meritor LLC and Meritor Transmission Corporation v. Eaton Corporation,
696 F.3d 254 (3d Cir. 2012) (hereafter, "ZFM v. Eaton").

business," as opposed to having calculated damages for each plaintiff based on its
individualized injuries. The court has jurisdiction to resolve this dispute pursuant to 28
U.S.C. § 1331.
2. Legal standard. As noted by the Third Circuit on appeal, "in the antitrust
context, a damages award not only benefits the plaintiff, it also fosters competition and
furthers the interests of the public by imposing a severe penalty (treble damages) for
violation of the antitrust laws." ZFM v. Eaton, 696 F.3d at 300. In calculating such an
award for a plaintiff who seeks recovery for injuries from a partial or total exclusion from
a market, courts have recognized that "damage issues in these cases are rarely
susceptible of the kind of concrete, detailed proof of injury which is available in other
contexts." Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 123 (1969).
Nevertheless, damages may not be determined by "mere speculation or guess," Story

Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563 (1931), but must
be grounded at a minimum on assumptions that rest on "adequate bases." Terrell v.

Household Goods Carriers' Bureau, 494 F.2d 16,24 (5th Cir. 1974).
3. In this regard, the parties are in agreement with
[t]he principle that an antitrust plaintiff may recover both actual lost
profits and diminution in the value of its business . . . . Where
plaintiff has been forced out of business, however, it is awarded its
going-concern value or its projected future lost profits, but not
both.

Coastal Fuels of Puerto Rico, Inc. v. Caribbean Petroleum Corp., 175 F.3d 18, 27 (1st
Cir. 1999) (citation omitted). The court in Coastal Fuels concluded that the better
damages model for a company no longer in business was a calculation of the business'

2

going-concern value "evaluated as of the time plaintiff goes out of business and actual
lost profits awarded only up to that date .... " /d. at 28.
4. Discussion. In the case at bar, it is apparent that plaintiffs' damages expert,
Dr. DeRamus, calculated damages on a cumulative basis for the plaintiffs, as noted by
the Third Circuit in its opinion:
To determine the damages suffered by Plaintiffs as a result of
Eaton's anticompetitive conduct, DeRamus conducted a two-part
analysis. He computed Plaintiffs' lost profits for the period between
2000 and 2009, as well as the lost enterprise value of Plaintiffs' HD
transmissions business. To calculate Plaintiffs' lost profits,
DeRamus first estimated the incremental revenues that Plaintiffs
would have earned "but for" Eaton's anticompetitive conduct, and
then subtracted from that figure the incremental cost that Plaintiffs
would have had to incur to achieve such incremental sales.

ZFM v. Eaton, 696 F.3d at 291-92. Even Eaton addressed the facts in terms of the
collective business enterprise: "Meritor competed in the market for heavy-duty
transmissions from 1989-2007; between 1999 and 2003, Meritor's participation was
through the ZFM joint venture." (See appellate citation in D. I. 371 at 2) Likewise, in his
supplemental expert report, DeRamus identified his damages model in terms of "ZFM,"
that is, the collective nomenclature for ZF Meritor LLC and Meritor Transmission
Corporation. (D.I. 359, ex. Bat 1-2)
5. I agree with Eaton that the case cited by plaintiffs during oral argument, Inter

Med. Supplies Ltd. v. EBI Medical Sys., Inc., 975 F. Supp. 681 (D.N.J. 1997), aff'd 181
F/3d 446 (3d Cir. 1999), is not compelling authority for the unusual facts at bar, 2 given
that the plaintiffs in that case were "wholly-owned, vertically-aligned subsidiaries that

2

lndeed, no case law directly on point has been identified by the parties.

3

participated in the same market at the same time and thus shared the same lost sales
at the same time." (D. I. 368) In contrast, the joint venture agreement ("the
Agreement") which aligned the plaintiffs at bar specifically provided that the joint
venture plaintiff - ZF Meritor LLC - "shall not be deemed to be an Affiliate of any other
Party or any of such other Party's Affiliates." (Agreement, Article

I,~

1.4) The

Agreement also provided that ZF Meritor LLC was to enjoy market exclusivity (vis a vis
the joint venture members) of those certain transmission products which were the
subject of the Agreement. (Agreement, Article

XIII,~

13.1) In the event of the

dissolution of ZF Meritor LLC, however, plaintiff Meritor Transmission Corporation was
to have "the first right to elect to acquire, and/or elect [to] have distributed in kind to it,
all or any part of the assets and business of [ZF Meritor LLC] that were contributed by"
Meritor Transmission Corporation, among other affilated companies. (Agreement,
Article

XII,~

12.2(h))

6. I am left to make my decision, then, on a record that has consistently treated
the two plaintiffs' injuries and resulting damages as cumulative, with no specific
objection to that aspect of the record until this last motion practice initiated by Eaton.
note that plaintiffs' approach is consistent with the observation by the Third Circuit in
Inter Medical Supplies, Ltd. v. EBI Medical System, Inc. 181 F.3d 446, 462 (3d Cir.

1999), that "[d]amages ordinarily flow from conduct, not from legal theories." As in the
Inter Medical Supplies case, all of plaintiffs' claims at bar arose from the same set of

facts surrounding Eaton's anticompetitive conduct. 3

3

Again, the Third Circuit in its opinion on appeal described the continuum of facts
as follows:
4

7. Conclusion. Although I recognize the general applicability of Eaton's legal
arguments that require each antitrust plaintiff to prove individualized injury and
damages, nevertheless, the record as described above in the context of the more
lenient damages standards for antitrust plaintiffs leads me to conclude that plaintiffs
have the better arguments. I conclude, therefore, that Eaton's motion for summary
judgment shall be denied. An order shall issue.

United States

1stnct Judge

By 2003, ZF Meritor determined that it was limited by the LT As [long-term
agreements] to no more than 8% of the market, far less than the 30%
that it had projected at the beginning of the joint venture. ZF Meritor
officials concluded that the company could not remain viable with a
market share below 10% and therefore decided to dissolve the joint
venture. After ZF Meritor's departure, Meritor remained a supplier of HD
Transmissions and became a sales agent for ZF AG to ensure continued
customer access to the Freedomline. However, Meritor's market share
dropped to 4% by the end of fiscal year 2005, and Meritor exited the
business in January 2007.

696 F.3d at 267.
5