On Appeal From The United States District Court For The Western District Of Pennsylvania.
Gibbons and Hunter, Circuit Judges and Stapleton, District Judge*fn*
Indian Coffee Corp. ("Indian Coffee") appeals from a judgment entered after the grant of a Fed. R. Civ. P. 50(a) motion against it at the end of its case in its suit charging that Folger Coffee Company ("Folger") violated section 2(a) of the Clayton Act, as amended by the Robinson-Patman Act. 15 U.S.C. § 13(a) (1982). Penn-Western Food Corp. ("Penn-Western"), a wholly-owned subsidiary of Indian Coffee, appeals from a summary judgment in favor of Folger on the same charge. Both plaintiffs allege that Folger, in the years 1971 through 1974, sold coffee in the geographic market in which Folger competed with them at prices lower than Folger charged in other geographic markets. We affirm the summary judgment against Penn-Western. We reverse the judgment against Indian Coffee and remand for a new trial, because on this record a directed verdict was improper.
The Parties and Proceedings in the Trial Court
Indian Coffee is a coffee roaster located in Pittsburgh, Pennsylvania, which for more than fifty years has marketed locally a brand of vacuum-packed coffee called Breakfast Cheer. That brand, until 1968, was marketed only in the greater Pittsburgh area, which includes parts of eastern Ohio. In 1968, Indian Coffee, having acquired greater plant capacity, extended its marketing of Breakfast Cheer to the Cleveland, Ohio area. Neither Indian Coffee nor its subsidiary, Penn-Western, competed outside these geographic areas. In its primary marketing area around Pittsburgh, prior to 1973, it competed with Maxwell House, Hills Brothers, Chase & Sanborn, and an assortment of private label brands.*fn1 Breakfast Cheer's market share was, in that geographic market, second only to that of Maxwell House.
Folger, prior to 1971, was a leading seller of branded coffee west of the Mississippi. Late in that year, for the first time, Folger commenced marketing its brand of coffee in Pittsburgh. Its efforts to gain market share in the geographic area in which for the first time it competed with Breakfast Cheer led to this lawsuit.
The theory of plaintiffs' case is that when Folger entered the Pittsburgh market area it sold coffee to retailers in that area at prices significantly lower than the prices which it charged in other geographic markets. For a time plaintiffs attempted to retain their market share by meeting the price concessions made by Folger. Because the plaintiffs sold only in the Pittsburgh and Cleveland geographic areas, however, they were unable to subsidize sales below cost in their sole marketing area with the profits derived from other geographic markets and were forced out of business. In April of 1974 they sold their coffee business. Thus, according to the plaintiffs, Folger's geographic price discrimination eliminated a theretofore vigorous primary line regional competitor.
Folger moved for summary judgment against Penn-Western on the ground that because Penn-Western had sold all its assets, including its possible claims against Folger, to Wechsler-Penn Coffee Corp. ("Wechsler"), Penn-Western lacked standing to bring this action.
Indian Coffee's claim against Folger proceeded to trial. Indian Coffee produced evidence that Folger, in the relevant markets, afforded to retailers various forms of allowances which were greater than the allowances offered in other geographic markets. In support of its claim that it was injured in its business and property, it produced the testimony of its president, James Deily, and the opinions of several experts. At the end of Indian Coffee's case the trial court struck the testimony of its experts, and directed a verdict against it. Absent the stricken testimony, the court held, there was insufficient evidence to create a jury question on the issue of harm to competition, insufficient evidence that Folger's pricing practices caused Indian Coffee injury, and insufficient evidence to support a non-speculative award of damages. This appeal followed.
Summary Judgment Against Penn-Western
We have reviewed the pleadings, affidavits, and depositions on file, and find no error in the trial court's conclusion that the unambiguous terms of the agreement of sale of Penn-Western's assets to Wechsler transferred to Wechsler any Penn-Western claim against Folger. The language of the agreement is unequivocal. Indian Coffee expressly reserved the right to prosecute antitrust claims for damages. Penn-Western did not. The parties' intention is manifested in the writing, and construction of the writing is a question for the court. E.g., Fogel Refrigerator Co. v. Oteri, 391 Pa. 188, 137 A.2d 225, 228 (1958); Chuy v. Philadelphia Eagles Football Club, 595 F.2d 1265, 1271 (3d Cir. 1979).
Directed Verdict Against Western Coffee
A Rule 50(a) directed verdict may be granted only if, as a matter of law, viewing all the evidence which has been tendered and should have been admitted in the light most favorable to the party opposing the motion, no jury could decide in that party's favor. Our review of the grant of such a motion is plenary. Thus our task on Indian Coffee's appeal is to determine (1) what evidence should have been admitted, and (2) whether in light of all such evidence a prima facie case has been made out.
The Court Erred in Striking Expert Opinion Evidence
In ruling on the admissibility of expert opinion testimony tendered by Indian Coffee, the trial court explicitly adopted the standard announced in Zenith Radio Corp. v. Matsushita Electric Industrial Co., 505 F. Supp. 1313, 1341 (E.D. Pa. 1980). That standard permits the trial court to exclude opinion evidence based not upon materials on which experts in the relevant field base their opinion, but upon the court's own judgment of the reliability of those materials.The opinion upon which the trial court relied was reversed.*fn2 In In re Japanese Electronic Products Antitrust Litigation, 723 F.2d 238, 277 (3d Cir. 1983), we held:
In substituting its own opinion as to what constitutes reasonable reliance for that of the experts in the relevant fields the trial court misinterpreted Rule 703. The court's approach involved fundamental legal error because, as a matter of law, the district court must make a factual inquiry and finding as to what data experts in the field find reliable. There is no discretion to forebear from making this inquiry and finding. Insofar as the district court substituted its own view of reasonable reliance for those of the experts, therefore, we review for legal error.
Nowhere did the trial court focus on the relevant inquiry as to what admittedly qualified experts in valuation of businesses relied upon. The court failed to make a finding as to what data experts in the field find reliable; instead it substituted its own judgment for that of the experts. This approach is prohibited by the governing case law interpreting Fed. R. Evid. 703. The excluded expert opinion evidence was clearly admissible. See Bauman v. Centex Corp., 611 F.2d 1115, 1120 (5th Cir. 1980); Baumholser v. Amax Coal Co., 630 F.2d 550, 553 (7th Cir. 1980).
Robert S. Kaplan, Dean of the business school at Carnegie-Mellon University, who qualified as an expert in the use of analytical models for valuation of businesses, made an analysis of the valuation of Indian Coffee at the end of 1972 for a reasonably knowledgeable observer. He testified that an expert in such valuations would, and he did, talk to Mr. Deily, an officer and director of the company, about its operations in order to become familiar with them so as to help interpret the financial numbers he would later study. He relied on the audited financial returns of the company through 1972, and drew his own conclusions. While he relied on those audited financial returns, he used supplementary data to corroborate the reasonableness of the estimates he obtained from his detailed study. Those financial statements, plaintiffs' exhibits 292 through 300, are in evidence. He also looked at unaudited internal statements, some of which had a more detailed breakdown of product lines and revenues, to get an overall feel for the pattern of sales and experience during the year, as well as the importance of product lines. He also examined summaries prepared by Dr. George Bodnar. That information, reflected in plaintiff's exhibit 304 in evidence, includes the percentage of coffee sales for Indian Coffee by three major categories, its brand Breakfast Cheer, its private label, and its institutional coffee sales. He was asked to evaluate the business as of December 31, 1972, and testified that the operations of the company for the years 1969 through 1972 were the ...