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THE AMERICAN v. LITTON INDUS.

May 26, 1982

The AMERICAN BEARING COMPANY, INC.
v.
LITTON INDUSTRIES, INC. and Litton Industrial Products, Inc.



The opinion of the court was delivered by: BRODERICK

This case comes before the Court on the post-trial motion of defendant Litton Industrial Products, Inc. for judgment notwithstanding the verdict or, in the alternative, for a new trial. The jury returned a verdict finding Litton liable for both monopolization and attempted monopolization in violation of § 2 of the Sherman Act and assessed damages in the amount of $ 958,691.00. For the reasons set forth below, the Court has determined to grant a new trial with respect to plaintiff's § 2 Sherman Act claims.

 Respect for the collective wisdom of the jury is sufficient in most cases to enable the judge to accept the findings of the jury regardless of his own doubts in the result reached by the jury. However, the trial judge must grant a new trial when his failure to do so would result in a miscarriage of justice. I find that there has been a miscarriage of justice in this case.

 I. BACKGROUND

 Plaintiff American Bearing Company, Inc. is a New Jersey corporation that was formed in 1970 by Ronald L. Roman and Robert A. Furchak. The offices and manufacturing facilities of American Bearing Co. are located in Fairfield, New Jersey. Defendant Litton Industrial Products, Inc. *fn1" is a Delaware corporation which manufactures a wide variety of industrial products and equipment and its Merriman Division, located in Hingham, Massachusetts, manufactures and sells a variety of bearings for use in construction and industrial applications (both Litton Industrial Products, Inc. and its Merriman Division will hereinafter be referred to collectively as Litton). The plaintiff American Bearing Co. (American Bearing) also manufactures bearings for use in construction and industrial applications. One type of bearing which they both manufacture is called a slide bearing.

 Among the structures which require the use of slide bearings are electrostatic precipitators and baghouses which are huge structures used to control pollution by removing harmful elements from industrial discharges. Due to the large size and high operating temperatures of these structures they require slide bearings which can operate at high temperatures and pressures. In early 1975 Litton began selling slide bearings for use under electrostatic baghouses and precipitators. Although other types of bearings were also being used in baghouses and precipitators, a teflon-coated bearing developed and patented by Litton became very popular for use in these structures because it could operate at high temperatures with a low coefficient of friction while under heavy load conditions. Because of its patent, Litton was virtually the only source of teflon-coated bearings.

 Sometime in 1975 American Bearing, a company formed by Ronald Roman and Robert Furchak, began developing a new method of producing a teflon-coated bearing. Beginning in or about June 1975, American Bearing began contacting potential purchasers of this bearing and distributed literature promoting its use. The literature distributed by American Bearing said that the bearing, which American Bearing called its "Hi-Load" bearing, would work at specifications of 400o F, 3000 pounds p.s.i., with a 3% coefficient of friction. In connection with the promotion of its bearing, American Bearing prepared 2" by 2" sample bearings for use as sales aids. American Bearing made its first sale and shipment of production bearings in May or June of 1976.

 In or about March 1976 one of Litton's salesmen obtained one of the American Bearing sample bearings. During the course of two days, Litton subjected the bearing to 16 hours of testing after first cutting the bearing in half. The results of the testing, together with a conclusion which stated "Therefore it is our opinion that this bearing cannot function at the specified load and temperature conditions", were set forth in a test report dated March 26, 1976. The conclusion stated in the report was based on the observation that the surface of the bearing exhibited some cracking and "extruding". Litton sent the test report to a number of precipitator and baghouse manufacturers and gave copies to their (Litton's) sales personnel for use in the field.

 On June 15, 1978, American Bearing initiated this suit alleging that Litton's test report was false and that its publication by Litton constituted product defamation. In addition, American Bearing asserted that Litton had attempted to monopolize and/or monopolized the market for slide bearings between 1976 and June 15, 1978.

 At trial, American Bearing presented testimony, the thrust of which was that Litton knew or should have known by the size of the bearing and the attendant circumstances that the tested bearing was a sample-a sales aid as opposed to a functional bearing and had not been manufactured with the intention that anyone would use it. Furthermore, it was testified that cutting the bearing in half, as Litton did for its tests, destroyed its structural integrity. In addition, Professor Roll, an expert testifying on behalf of American Bearing, stated that he had tested functional teflon-coated bearings produced by American Bearing and that they met the specifications stated by American Bearing.

 In addition to Professor Roll, American Bearing also presented the testimony of three other expert witnesses: Mr. Albert Hudson, Mr. Robert McIlvaine and Professor Gary Bowman (hereinafter "economist"). Mr. Hudson's experience in this field included a period of employment as the Head Mechanical Engineer for the Tennessee Valley Authority Fossil and Air Pollution Control Equipment in which capacity he organized and directed the largest air pollution retrofit program in the utility industry. Mr. Hudson supplied general information relating to the structure and purposes of baghouses and precipitators and the advantages inherent in the use of teflon-coated slide bearings in those structures. Mr. Hudson testified that although the actual operating temperatures of many baghouses and precipitators may be below 400o it was the practice in the industry to use a bearing capable of operating at 400o with a low coefficient of friction in order to allow an ample margin of safety. Mr. Hudson also testified that the relationship between the cost of slide bearings relative to the flange to flange cost of precipitators and baghouses is such that these bearings account for .3% of the flange to flange cost.

 Mr. Robert McIlvaine offered his expert opinions and conclusions with respect to the national market for "hot" precipitators and fabric fibers (baghouses), that is, precipitators and baghouses which operated in excess of 250o . Mr. McIlvaine presented figures representing the dollar value for the sales of "hot" precipitators and baghouses in the national market for the years 1976-80 with projections of sales through 1983 and testified as to the market shares of various baghouse and precipitator manufacturers.

 The economist whose testimony, together with that of Messrs. Hudson and McIlvaine, is discussed in greater detail later in this memorandum, testified with respect to a market study he conducted of the "thermal" bearing industry. The economist defined a "thermal" bearing as a bearing which operates at 400o F, at a pressure of 3000 pounds p.s.i., with a 3% coefficient of friction. He gave his opinion that a separate product market exists for thermal bearings for use in the support structures of baghouses and precipitators and that the geographical scope of the market is nationwide. Using the figures calculated by Messrs. Hudson and McIlvaine, he calculated the size of the relevant market in terms of the total dollar amount of sales of thermal bearings for the years 1976-1983. He also offered his opinion as to the share of the market American Bearing would have attained in the absence of any illegal conduct, as well as to the actual market shares of American Bearing and Litton for the years 1976-1980. The economist also testified that American Bearing's failure to achieve the projected market shares was attributable solely to Litton's circulation of a false test report. Lastly, he calculated the amount of profits American Bearing purportedly lost in the past and would continue to lose through 1983 as a result of Litton's circulation of the test report.

 Litton, on the other hand, offered evidence that it had manufactured sample bearings in the past, and that the bearings were functional and that Litton had performed tests on its sample bearings. Litton also offered evidence tending to show that baghouse and precipitator manufacturers did not as a routine practice designate specifications of 400o F, 3000 pounds p.s.i., and a 3% coefficient of friction when requesting bids for slide bearings to be used in their baghouses and precipitators and that bearings other than teflon-coated bearings could and, in some instances, were used in electrostatic precipitators and baghouses. In addition, Litton presented evidence that American Bearing's bids were rejected because of its failure to meet the requirements for bidders specified by the baghouse and precipitator manufacturers, such as bid submission deadlines or the submission of a test report pertaining to their bearing prepared by an independent library.

 On July 9, 1981, after three weeks of trial, the jury rendered a verdict on special interrogatories in which it found that Litton was not liable for product defamation, but was liable for both monopolization and attempted monopolization in violation of § 2 of the Sherman Act and assessed damages in the amount of $ 958,691.00. Pursuant to Section 4 of the Clayton Act, 15 U.S.C. § 15, the Court entered judgment in favor of American Bearing on June 10, 1981 in the trebled amount of $ 2,876,073.00. Litton then filed the motions now before the Court.

 II. STANDARDS FOR GRANTING MOTIONS FOR JUDGMENT N.O.V. AND NEW TRIAL

 In order to grant a motion for judgment n.o.v. the Court must find as a matter of law that the plaintiff failed to adduce sufficient facts to justify the verdict. Neville Chemical Co. v. Union Carbide Corp., 422 F.2d 1205, 1210 (3d Cir. 1970), cert. denied, 400 U.S. 826, 91 S. Ct. 51, 27 L. Ed. 2d 55 (1970). Such a motion "may be granted only when, without weighing the credibility of the evidence, there can be but one reasonable conclusion as to the proper judgment." 5A Moore's Federal Practice, P 50.07(2) at 50-77 (footnote omitted) (2d ed. 1974); Thomas v. E. J. Korvette, Inc., 476 F.2d 471, 474 (3d Cir. 1973). In making this determination "it is the duty of the trial court to take that view of the evidence most favorable to the party against whom the motion is made ..." 6A Moore's, supra, P 59.08(5) at pp. 59-152 (1979); Bonjorno v. Kaiser Aluminum & Chemical Corp., 518 F. Supp. 102, 105 (E.D.Pa.1981).

 Motions for a new trial require the exercise of discretion by the Court, whose "duty is essentially to see that there is no miscarriage of justice." 6A Moore's, supra P 59.08(5), at 59-160 (footnote omitted) (1974), Thomas v. E. J. Korvette, Inc., 476 F.2d 471, 474-75 (3d Cir. 1973). The jury's verdict may be set aside only if manifest injustice will result if it were allowed to stand. The Court may not substitute ...


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