Appeal from the United States District Court for the Eastern District of Pennsylvania (MDL No. 587) (D.C. Civil No. 84-02010) (MDL No. 587) (MDL No. 587) (D.C. Civil No. 84-02010) (MDL No. 587) (D.C. Civil No. 84-02012) (MDL No. 587) (D.C. Civil No. 84-02079) (MDL No. 587) (Civil No. 84-02134) (MDL No. 587) (D.C. Civil No. 84-02135) (MDL No. 587) (D.C. Civil No. 84-02138) (MDL No. 587) (D.C. Civil No. 84-02781) (MDL No. 587) (D.C. Civil NO. 84-05562) (MDL No. 587) (D.C. Civil No. 84-05760) (MDL No. 587) (D.C. Civil No. 84-02012) (MDL No. 587) (D.C. Civil No. 84-02079) (MDL No. 587) (D.C. Civil No. 84-02134) (MDL No. 587) (D.C. Civil No. 84-02135) (MDL No. 587) (D.C. Civil No. 84-02138) (MDL No. 587) (D.C. Civil No. 84-02781) (MDL No. 587) (D.C. Civil No. 84-05562) (MDL No. 587) (D.C. Civil No. 84-05760)
Before: Mansmann, Scirica and Roth, Circuit Judges.
Industries involved in the transportation and manufacturing of iron ore are the adversaries in this complex multi-district antitrust litigation. Five steel companies, three dock companies and three trucking companies filed civil actions in various federal district courts, alleging that the railroad companies serving the lower Lake Erie industrial region conspired in violation of federal and state antitrust laws to preclude potential competitors from entering the market of lake transport, dock handling, storage and land transport of iron ore.*fn1 The cases were consolidated and transferred to the United States District Court for the Eastern District of Pennsylvania for pre-trial proceedings.
The eventual trial was bifurcated into liability and damages phases. The liability jury reached a verdict against Bessemer and Lake Erie Railroad Company ("B&LE"), the sole remaining defendant, and in favor of all plaintiffs but one - David W. Reaney and Reaney Dock Co. The first jury was discharged and a new jury, empaneled for the damages phase, reached a verdict awarding all but one claim for damages. B&LE's motion for judgment n.o.v. was denied in most respects. Post-trial motions lodged by the Wills plaintiffs were likewise denied.
On appeal and cross-appeal, numerous issues have been raised. In its appeal, B&LE contends, as threshold arguments, that (1) the conduct complained of as violative of the antitrust laws was exempt from liability under the doctrine of Keogh v. Chicago & Northwestern Railway, 260 U.S. 156, 67 L. Ed. 183, 43 S. Ct. 47 (1922), and the statutory immunity conferred by section 5a of the Interstate Commerce Act, 49 U.S.C. § 5(b) (1970); (2) some plaintiffs lacked standing under Illinois Brick v. Illinois, 431 U.S. 720, 52 L. Ed. 2d 707, 97 S. Ct. 2061 (1977), and Associated General Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 74 L. Ed. 2d 723, 103 S. Ct. 897 (1983), to raise antitrust claims; and (3) the claims were time-barred by the federal statute of limitations and the doctrine of laches. B&LE also argues that the proof offered at trial did not establish that its misconduct caused damage to the plaintiffs. In addition, claims B&LE, the evidence of damages was too speculative to be sustained. Finally, as a post-verdict matter, B&LE asserts that post-judgment interest was calculated from the wrong date.
Cross-appeals include the issues of whether the district court erred in disallowing the steel companies' fraudulent concealment defense to toll the running of the statute of limitations and whether there was error in the district court's refusal to award prejudgment interest under Ohio law.
National Steel cross-appealed on the ground that judgment n.o.v. was improperly granted in favor of B&LE with respect to National Steel's investment cost damage claim.
Finally, the Wills plaintiffs claim that their Seventh Amendment right to a fair trial was violated because the district court allowed the damage phase jury to hear and evaluate liability evidence.
We will affirm, in most respects, the order of the district court. We will reverse the grant of judgment n.o.v. against National Steel and remand for entry of judgment for National Steel because the ground upon which it was based was not preserved by B&LE. We will also reverse the district court's denial of Wills' post-trial motions because as to these plaintiffs, the conduct of the bifurcated trial violated the Seventh Amendment. We will, therefore, remand for a new trial limited strictly to a calculation of damages suffered by the Wills plaintiffs.
The Interstate Commerce Act ("the ICA") governs "any individual or joint rate . . . charged . . ." by the railroads. 49 U.S.C. § 15(1) (1970) repealed, Pub. L. 95-473, § 4(b), (c), October 17, 1978, 92 Stat. 1466, 1470; Pub. L. 96-258, § 3(b), June 3, 1980, 94 Stat. 427.*fn2 The enforcement arm of the ICA, the Interstate Commerce Commission ("the ICC"), is charged with regulating the rates filed and charges levied by the railroads in a manner consistent with the purposes of the ICA. 49 U.S.C. § 15(1)(1976).
Under the ICA and directly contrary to activity forbidden in other industries, the railroads were legally permitted to engage in joint rate-making activity. However, in 1944 the inevitable tension presented by the ICC's policy of condoning concerted action and the general prohibition against industry consortia embraced in the antitrust laws prompted the Justice Department to invoke the provisions of the Sherman Act in an effort to enjoin some railroad rate-setting practices. See United States v. Association of American Railroads, 4 F.R.D. 510 (D.Neb. 1945) (denying defense motion to dismiss). In that same year, the State of Georgia alleged that an eastern railroad conspiracy in restraint of trade caused an increase in freight rates throughout its state. Georgia v. Pennsylvania Railroad Company, 324 U.S. 439, 89 L. Ed. 1051, 65 S. Ct. 716 (1945). Sitting as the court of original jurisdiction, the Supreme Court responded to the defendants' allegation that Georgia's complaint failed to state a cause of action, by holding that "regulated industries are not per se exempt from the Sherman Act," 324 U.S. at 456-47, and suit was permitted to proceed.
Congress responded by passing the Reed-Bullwinkle Act, ch. 491, 62 Stat. 472 (1948), (current version codified at 49 U.S.C. § 10706), authorizing the creation of rate bureaus which would provide a sanctioned forum for the railroads to set agreements on rates. In section 5a of the 1970 version of the Act, Congress expressly granted railroads antitrust immunity for any collective rate-making activity accomplished in accordance with the procedures described in the Act. 49 U.S.C. § 5(b). Unless and until "suspended or modified or set aside by the Commission or be disapproved . . . by a court," these rates are lawful as between the carrier and shipper. 49 U.S.C. § 15(2).
B&LE was a member of the Coal, Coke and Iron Ore Committee, an ICC-approved rate bureau. Through this vehicle the defendants established the rates of concern here. At issue is whether the railroads' rate-making activity occurred within the legal framework of the ICA. The plaintiffs do not challenge the original agreement or the defendants' right collectively to set rates pursuant to the terms and conditions of the agreement. Instead the anti-competitive activity charged here allegedly arises from the collective response of the members of the rate bureau to a technological innovation in the iron ore industry.
Given the jury verdict in favor of the plaintiffs, we review the evidence in a light favorable to their position.
The theory of the plaintiffs' case is that beginning approximately 25 years ago, B&LE conspired with its industry partners to eliminate competition and monopolize the transportation and handling of iron ore. The iron ore originates from mines in Michigan, Minnesota and eastern Canada. It is brought to the steel companies' plants by ship transport across the Great Lakes and is unloaded at railroad-owned docks along lower Lake Michigan, Lake Erie and the Detroit River.
The traditional method of unloading ore from the vessels, known as bulkers, was by the use of huletts, large cranes affixed to the docks. The huletts lifted the ore from the bulkers and either placed it in waiting railroad cars for immediate shipment or positioned it for later movement to a storage facility. Some of the docks are located directly adjacent to steel mills, but most of the ore was reloaded at the dock onto land-based transportation, most often railroads, for delivery to the inland mills. The non-railroad docks were not competitors for this segment of the ore business because they were not equipped with huletts.
A change in ore producing technology catalyzed a different method of moving iron ore across Lake Erie. In the 1950s, some iron ore producers began to "pelletize" their ore. As the term implies, instead of a mud-like form, the iron was formulated into pellets. This innovation made possible the transport of the ore by means of self-unloading vessels, capable of unloading cargo by means of a conveyor belt without the use of a hulett.
Self-unloaders could carry greater loads than the conventional bulkers and could unload in significantly less time at docks which did not require special handling equipment. Using self-unloaders, non-railroad docks could now compete as unloading sites for iron ore, and could receive, store and tranship ore from self-unloaders at lower cost than railroad hulett docks because they did not need land-based unloading equipment and crews. In addition, demurrage charges, the amount assessed while equipment stands idle, were reduced. The non-railroad docks, in combination with self-unloaders, were able to compete directly with the railroad-owned docks for the iron ore transport market. The plaintiffs contend that the railroads, perceiving the threat presented by the existence of the non-railroad docks and unwilling to jeopardize their substantial investment in the off-loading equipment, plotted to halt the progress of self-unloader technology to maintain the railroads' dominance in the iron ore transport market.
Because the railroads also controlled access to their docks and provided inland transportation of ore from the docks only by rail, the self-unloader/non-railroad dock system also compromised the railroads' monopoly on the inland transportation of iron ore. With self-unloaders discharging cargo at private docks, less costly trucks could haul the ore from the non-railroad docks and provide land transportation savings to the steel companies.
Roused by the possibility of the demise of the railroad industry as the literal mover and shaker of the iron ore transport business, its high ranking officials convened to discuss a course of action designed to circumvent the incorporation of self-unloaders into the iron ore industry. Railroad officials orally agreed that leases of railroad docks or facilities should be examined or modified to frustrate the efforts of non-railroad docks to handle ore from self-unloaders. They also agreed to refuse to provide competitively-priced inland rail service, i.e., to publish commodity line haul rates for moving ore from such docks. Finally, it was agreed that railroad docks should assess the same handling charges for unloading ore from bulkers as from self-unloaders, regardless of the extent of service performed.
The words were converted into action. To effectuate the goal of market preclusion, the railroads used coercion to enforce adherence to the agreement to foreclose competition from private docks. B&LE and its co-conspirators did indeed restrict the lease and sale of railroad-owned dock property and boycotted non-railroad docks. These activities eliminated much of the economic incentives to use self-unloaders. By impeding the progress of the private dock system, the railroads were also effective in foreclosing competition from trucks.
On October 13, 1981, a federal grand jury returned an indictment charging B&LE and other railroads operating docks and inland rail lines with criminal conspiracy in violation of section 1 of the Sherman Act. B &LE pled nolo contendere and was convicted and fined. The conviction was affirmed on appeal. United States v. Bessemer & Lake Erie Railroad Co., 230 U.S. App. D.C. 316, 717 F.2d 593, 602 (D.C. Cir. 1983).
After the indictment, between 1982 and 1984, the original complaints were filed in this civil action in various federal district courts. Seeking recovery under sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, section 4 of the Clayton Act, 15 U.S.C. § 15, and the Ohio Valentine Act, Ohio Revised Code §§ 1331.01-1331.99, the plaintiffs claimed that a conspiracy existed among the defendant railroads to delay the utilization of self-unloading vessels for the transportation of iron ore. On April 17, 1984, the Judicial Panel on Multidistrict Litigation consolidated the ten cases.
The steel company plaintiffs requested damages for the savings lost to them, alleging that the railroads' anti-competitive behavior generally denied them savings that would have resulted from swifter development of self-unloader technology. Specifically, the plaintiffs identified as compensable: (1) savings resulting from lower dock handling rates from private commercial docks had the self-unloader industry been more dynamic; (2) savings from lower dock handling rates at the railroad docks had there been competition from private docks; (3) savings from lower trucking rates had their market entry not been restrained; (4) savings lost because of the railroads' failure to publish commodity line haul rates and (5) in a catchall provision, the savings it would have enjoyed had the steel companies had the option to choose the most efficient and economical combination of transportation alternatives.
The dock company plaintiffs claimed injury due to the railroads' refusal to permit them entry into the iron ore unloading business. Their damage claims thus represented the profits that their industry would have realized had they been able to break into the market. The trucking companies' claim for damages is similar. Had they not been precluded from entering the market of the land transport of ore, they would have engaged in such operations and realized significant profits.
In a series of pre-trial rulings, the district court dismissed the steel companies' claims for the damages based on the allegation that, absent the conspiracy, these plaintiffs would have paid lower rates for costs associated with the transportation of ore. The court ruled that these claims were barred by Keogh v. Chicago & Northwestern Railway, 260 U.S. 156, 67 L. Ed. 183, 43 S. Ct. 47 (1922) (antitrust liability in private action cannot be predicated on rates approved by the ICC). The district court, however, permitted to proceed to trial those damage claims that resulted from "defendants' elimination of competitive non-railroad dock facilities." These claims were not considered rate-related, because they required proof that the defendants conspired to exclude low cost competitors from the market. The court determined that Keogh did not bar the damage claims of the dock and trucking companies because they were competitors, and not customers, of the railroads.
In motions to dismiss, the defendants challenged the standing of some classes of plaintiffs to pursue antitrust claims. The court dismissed the steel companies' damage claim that was based on the theory that had the conspiracy not delayed the use of self-unloading vessels, the steel companies would have paid vessel companies a lower rate for lake transportation. Applying Illinois Brick Co. v. Illinois, 431 U.S. 920 (1977), and Associated General Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 74 L. Ed. 2d 723, 103 S. Ct. 897 (1983), the district court concluded that claims for such lake freight savings were indirect, potentially duplicative and too speculative. The court held that because the steel companies were only potential customers of non-conspiring competitors, (the vessel companies), damages could be ascertained only by speculating when the vessel companies would have begun using self-unloaders absent a conspiracy. Assessment of damages would also require additional conjecture related to the rates the private docks would have charged to handle the self-unloaders.
Because the steel company plaintiffs had also pled that they were directly involved in the ownership and operation of self-unloaders, however, the court held that self-unloader damages could sustain a standing challenge. Similarly, the steel companies' damages resulting from the inability to use non-railroad docks were not barred because the court perceived that these damages arose from the inability to seek lower prices from competitors who were either denied participation or experienced entry delay in the relevant market due to the illegal conspiracy.
On the issue of whether application of the federal statute of limitations precluded recovery or whether the statute was tolled because the railroads fraudulently concealed the conspiracy, the district court granted B&LE's motion for summary judgment against the steel company plaintiffs and Erie but denied it against Wills and the trucking company plaintiffs. The court ruled that the steel company plaintiffs and Erie knew or should have known about the conspiracy, thereby denying the fraudulent concealment defense and limiting recovery to damages sustained within four years of the commencement of this suit. The period was, however, tolled during the pendency of the related criminal case.
The consolidated trial was bifurcated into liability and damage phases. After six weeks of trial, the liability phase concluded in a jury verdict in favor of all the plaintiffs except David W. Reaney and Reaney Dock Company. The jury's findings, as set forth on special verdict forms, are summarized as follows:
The conspiracy in which B&LE participated was a material cause of injury to each steel company plaintiff. Each injury resulted from foreclosure or delay in utilizing self-unloading vessels for the delivery of iron ore and from the inability to use non-railroad docks to handle iron ore.
With regard to the dock companies, the jury found, first, that Erie's injuries resulted from acts designed to prevent it from purchasing or leasing dock property at Erie, Pennsylvania, and from acts designed to foreclose competitive inland rail service from that dock. Second, the injury found that the Wills' injuries resulted from acts which precluded it from purchasing or leasing dock property at Toledo, Ohio and from trucking ore inland from that dock. The jury rejected Wills' claims that it had been injured by the railroads' refusal to sell or lease other dock property.
As to the trucking companies, the jury found that Ambrosia Trucking Company's injury resulted from acts which prevented or delayed the handling of iron ore by non-railroad docks which would have permitted the trucking of ore. The jury denied the recovery of damages on claims that B&LE interfered with Ambrosia's trucking from railroad docks and from one non-railroad dock in Ashtabula, Ohio.
The jury further found that Tauro Brothers Trucking Company's injury resulted from the foreclosure or delay in the utilization of self-unloading vessels to bring iron ore to docks that granted access to truckers, as well as the inability of steel mills to use to their fullest capacity non-railroad docks to which trucks were allowed access. The jury rejected Tauro's claim that it had been injured by unlawful acts designed to prevent trucking from railroad docks.
The court discharged the liability jury and subsequently empaneled a new jury for the damages phase. It reached a verdict awarding all but one claim of damages. The steel companies were awarded damages measured by the difference between the lower prices that would have been charged by the excluded competitors and the higher prices actually paid. Damages sustained by the docks and the trucking companies were measured by the profits that each would have earned on the businesses from which they had been excluded. Wills Trucking Company and Toledo World Terminal were awarded only nominal damages ($1) on their claim that the railroads refused to sell or lease dock property to them.
On February 27, 1991, the district court denied, in substantial part, B&LE's motion for judgment n.o.v., rejecting all of B&LE's arguments except that concerning National Steel's investment cost damage award. First, the court upheld the jury's determinations that 1) B&LE had violated the antitrust laws by conduct which was not immune, i.e., not protected by regulatory statutes or Supreme Court decisions, notably Keogh ; and 2) the plaintiffs' damages were attributable to this conduct.
The court next rejected B&LE's argument that the plaintiffs lacked standing to bring this action. Specifically, the court held that no serious standing issue arose with respect to the steel companies' dock handling awards nor with respect to the claims of the Erie or trucking company plaintiffs. The court, with admitted reservation ("although with less than complete confidence"), App. at 2108, also held that the steel companies had standing to seek self-unloader damages since the steel companies had assumed responsibility for financing and operating ore carrying vessels.
The district court also denied B&LE's argument that certain of the plaintiffs' Sherman Act claims were barred by the four-year statute of limitations and that laches barred all of the plaintiffs' Ohio Valentine Act claims. The court found that the injuries did not result solely from pre-limitations periods acts and that Zenith Radio Corp. v. Hazelton Research, Inc., 401 U.S. 321, 28 L. Ed. 2d 77, 91 S. Ct. 795 (1971), did not require plaintiffs to trace each item of damages to specific overt acts within the limitations period. The court ruled alternatively that the plaintiffs' Sherman Act claims fit within the Zenith exception that permits assertion of claims which were too conjectural to have been litigated earlier.
With respect to the Valentine Act claims, the district court held that under Ohio law, an equitable defense does not apply to actions at law for damages; but that, in any event, the jury's findings that the railroads acted affirmatively to conceal their conspiratorial activities, as well as B&LE's failure to show that significant prejudice attributed to any delay in filing suit, ruled out a laches defense.
The court further rejected B&LE's argument that plaintiffs' damages were not caused by the unlawful conspiracy. The court noted that throughout both phases of the trial B&LE vehemently argued and sought to prove that any damages actually sustained by the plaintiffs were attributable to economic factors other than the alleged conspiracy. The court stated that these factual issues were properly submitted to the jury and that viewing the record in the light most favorable to the verdict winner, there was no doubt that the evidence supported the jury's determinations.
B&LE has appealed the judgment of the district court. The plaintiff steel companies have cross-appealed on two issues: whether the district court erred in granting summary judgment in favor of B&LE on the statute of limitations concealment issue when it ruled that the steel companies, as a group, had knowledge of facts which would have reasonably given them notice of the conspiracy. Second, the plaintiffs argue that the district court erred in refusing to award them prejudgment interest under Ohio law. The Erie dock company and Ambrosia Trucking join in cross-appealing the issue of prejudgment interest.
As noted, the district court granted B&LE's motion for judgment n.o.v. with respect to National Steel's claim for investment cost damages. The court held that National Steel's claim was not recoverable under the antitrust laws because it represented inflation, a non-compensable loss. National Steel has cross-appealed on this issue.
The Wills plaintiffs, although prevailing on the issue of liability, were only awarded nominal damages. In their cross-appeal, the Wills plaintiffs contend that the district court impermissibly allowed the damage phase jury to re-examine a liability issue - the fact of damage of the Wills' antitrust claim - in violation of the Seventh Amendment. The Wills plaintiffs also argue that even if nominal damages were appropriate, the district court erred in not trebling them.
We turn now to Discussion of each of the issues presented, beginning with the appeal brought by B&LE.
Pursuant to Keogh v. Chicago & N. R. Co., 260 U.S. 156, 67 L. Ed. 183, 43 S. Ct. 47 (1922) and 49 U.S.C. § 5(b) (1970), railroads may engage in some joint activity which might otherwise run afoul of the antitrust laws. A major issue permeating this case is whether the railroads' activity, upon which the plaintiffs based their treble-damages causes of action, is protected by Keogh or by statute. It is a question of law over which we exercise plenary review.
In Keogh, a shipper sued a railroad carrier for participating in a conspiracy to fix rates in violation of the Sherman Act. The ICC had previously approved the rates. The Supreme Court held that even though the ICA does not immunize regulated carriers from government antitrust prosecution, it does preclude treble damage awards to private litigants. The Court gave a number of reasons for its holding. First, because the subject rates were accepted by the ICC, they were the "legal" rates. The Court believed it inconsistent that Congress, in enacting the ICA, would intend that carriers could be sued for price-fixing when they were charging the rates required by law. 260 U.S. at 162-63. Second, if Keogh were to prevail, he would receive a lower rate not available to other shippers. This situation would create, in effect, a discriminatory rebate, avoidance of which was one of the reasons for the ICA. Id. Third, to establish injury, Keogh would be put to the task of proving hypothetical lower rates which would have been charged in the absence of the conspiracy and the acceptability of those rates to the ICC. Additionally, Keogh would have to overcome the problem of speculative calculation of damages. Id. at 164.
The Court re-examined the Keogh doctrine in Square D Co. v. Niagara Frontier Tariff Bureau Inc., 476 U.S. 409, 90 L. Ed. 2d 413, 106 S. Ct. 1922 (1986). In Square D, shippers brought antitrust actions against motor carriers and their rate-making bureau, claiming that the carriers and the bureau had conspired to fix rates without complying with their ICC-approved rate agreement. The shippers claimed entitlement to the difference, trebled, between the rates actually paid and the rates which would have prevailed in an open market. The district court dismissed the actions under the authority of Keogh.
While the Court of Appeals for the Second Circuit affirmed the district court's principal ruling, Square D Co. v. Niagara Frontier Tariff Bureau, 760 F.2d 1347, 1349 (2d Cir. 1985), it noted a possible distinction between rate-making activity, shielded by Keogh, and other, unprotected, concerted activity. The Square D shippers had alleged that the defendant carrier rate bureau had: (1) used an unauthorized Committee to "set rates and inhibit competition"; (2) ignored "the notice, publication, public hearing, and recordkeeping requirements of its [freight agreement] and ICC regulations"; (3) strategized "threats, retaliation, and coercion against [rate bureau] members to inhibit independent actions"; and, (4) employed "pressures, threats, and retaliation to interfere with independent actions." Square D, 476 U.S. at 412-13.*fn3 The court of appeals identified these four allegations as potential support for a claim that the carriers jeopardized the shippers' economic health by blockading their ability to sell their goods. "Thus, on remand, appellants should be afforded an opportunity, if they believe the facts justify it, to amend their complaint to state a proper claim for damages." Square D, 760 F.2d at 1366.
On certiorari, the Supreme Court acknowledged that while the joint setting of rates is protected activity under 49 U.S.C. § 5(b), the "statute strictly limits the exemption to actions that conform to the terms of the agreement approved by the ICC." Square D, 476 U.S. at 413-14. The Court also recognized that "nothing in the language of the Interstate Commerce Act, moreover, necessarily precludes a private antitrust treble damages remedy for actions that are not specifically immunized within the terms of the Reed-Bullwinkle Act," 476 U.S. at 414. The Court nonetheless determined that, under Keogh, the Square D shippers could not bring a treble damages action because:
Keogh simply held that an award of treble damages is not an available remedy for a private shipper claiming that the rate submitted to, and approved by, the ICC was the product of an antitrust violation.
Id. at 422. The Court then affirmed the dismissal of the complaints, albeit without specific Discussion of whether Keogh protected the carriers from liability for concerted, non-rate activity.
Thus the question left unresolved by Square D remains for us to answer today: Does Keogh, with its reaffirmation in Square D, preclude treble-damage recovery for private litigants claiming that members of a regulated industry conspired to preclude competition in which ICC-approved rates played a role in thwarting market entry? As with many of the other issues before us, our response differs depending upon the particular group of plaintiffs and the damages sought.
a. The Steel Companies*fn4
The district court, without the benefit of the Supreme Court's Square D opinion, relied upon Keogh to dismiss the plaintiffs' original claims for damages based upon rates charged by the defendant railroads. According to the district court, two steel company antitrust claims survived this dismissal:
(1) [a claim] that [the steel companies] could have paid lower dock-handling rates (sooner) to the private docks than they did to the railroad docks if the railroads had not retarded the development of the self-unloader industry; and (2) [a claim] that [the steel companies] could have paid lower land transport rates (sooner) to the truckers, had the railroads not restrained competition by that industry and monopolized line-hauling from their docks. In my view, plaintiffs' generalized claims regarding savings they would have realized had defendants not impeded self-unloader development and had they been able to choose the most economic combination of transportation alternatives come within these two categories.
App. at 234 (footnote omitted).*fn5
In a subsequent order, the district court dismissed any damage claims that would require estimating what rates the ICC would have accepted, an estimation forbidden by Keogh. According to the district court, the sole remedy for these claims would be before the ICC. App. at 362-63.
As to the surviving claims, the district court reasoned:
With respect to Keogh. . . plaintiffs need not prove what prices, but for the conspiracy, defendants would have charged; plaintiffs need prove only that, in the context of tariffs that I must accept as legitimate, defendants' exclusionary activities and other antitrust violations slowed penetration of the relevant markets by defendants' competitors. Thus, plaintiffs' damages do not depend on proof of price-fixing by defendants, which Keogh would bar, but on proof that defendants conspired to exclude low cost competitors from the market, which does not implicate the ICC's exclusive jurisdiction and therefore is not barred by Keogh. In short, as Judge Friendly as explained, '[a] shipper may recover damages if it can show that carriers caused injury to the shipper's business or property other than by higher tariffs . . . .' Square D, 760 F.2d at 1365.
The district court also discussed Republic Steel's claims for damages emanating from the delay in the construction and use of Republic's own dock facilities. To apply Keogh to bar this complaint, opined the court, would allow a blockade of a competitor to escape scrutiny. This would overextend Keogh 's reach and could produce a rule that one who pays for services governed by ICC tariffs is foreclosed from asserting that antitrust violations prevented use of a less expensive, equivalent service.
Before the liability jury, the plaintiffs presented evidence of the railroads' agreements to restrict the sale and lease of dock property, boycotts of unregulated docks, refusals to handle self-unloaders in a way that would make economic sense for a steel company to utilize them, and coercion to prevent independent action. Indeed, the district court described the forcefulness of the evidence against B&LE as follows:
Literally thousands of documents, from the railroads' own files, establish beyond dispute the existence of an illegal conspiracy, dating back to at least 1950, to prevent self-unloading vessels, private docks, and trucking firms from gaining a foothold in the transportation of ex-lake iron ore. The record is so clear and complete, in fact, that it can be read to suggest that the participants may have genuinely believed that the antitrust laws did not apply to railroads at all.
We conclude that the district court correctly characterized B&LE's anti-competitive activity as market preclusion, and Keogh 's protective rule cannot apply to forbid recovery for the resulting economic detriment. As the Supreme Court has succinctly stated, Keogh merely prevents private shippers from sustaining an award of treble damages by claiming that ICC-approved rates were the product of an antitrust violation. Square D, 476 U.S. at 422. That statement of Keogh's protection does not preclude liability based on non-rate anticompetitive activity. Indeed, the steel companies' case involves damage claims based on non-rate activity that targeted potential low-cost competitors.
We recognize that the success of anticompetitive non-rate activity would coincidentally implicate rates promulgated under the jurisdiction of the ICC. It is fully consistent with Keogh, however, to accept these rates as lawful and nonetheless to conclude that through non-rate activities, particularly the restriction on the sale or lease of dock space and the refusal to deal with potential competitors, the railroads effectively retarded entry of lower cost competitors to the market. The instrument of damage to the steel companies was the absence of the lower-cost combination. In contrast, the Supreme Court in Keogh made it clear that "the instrument by which Keogh is alleged to have been damaged is rates approved by the Commission." 260 U.S. at 161. As a result,
the burden resting upon the plaintiff would not be satisfied by proving that some carrier would, but for the illegal conspiracy, have maintained a rate lower than that published. It would be necessary for the plaintiff to prove, also, that the hypothetical lower rate would have conformed to the requirements of the Act to Regulate Commerce. For unless the lower rate was one which the carrier could have maintained legally, the changing of it could not conceivably give a cause of action.
Keogh, 260 U.S. at 163-64.
The proof required to show the harm alleged here thus differs from that deemed objectionable in Keogh. In this case, the plaintiffs showed that the railroads conspired to protect their stronghold in the ore transport market by blocking entry by low-cost competitors, not that the railroads charged an unlawful rate.
The facts in Square D also differ from those proven at trial here. The Square D plaintiffs contended that unlawful conduct caused shipping rates to be higher than a freely competitive market. They sought treble damages measured by that difference. Thus, the Square D plaintiffs, like the plaintiff in Keogh, grounded their damage claims on the allegation that the motor carriers, a group regulated by the ICC, would have charged a lower rate absent the conspiracy. Here, the question of hypothetical lower rates is ancillary. If the self-unloader/private dock/trucking triad had been permitted to develop, conceivably the steel companies would no longer be captive customers of the railroads and the rates charged by them would not be so pervasive a consideration. Admittedly, to remain competitive, the railroads would no doubt be forced to lower their rates, but the goal of the antitrust laws is to provide an open and competitive market place. It was the railroads' hindering the development of the market which defines this antitrust litigation.
The opinion of the Court of Appeals for the Sixth Circuit in Pinney Dock and Transport Corp. v. Penn Central Corp., 838 F.2d 1445 (6th Cir. 1988), while not binding on us, does provide some guidance. The Pinney Dock case involves the same defendants and the same conspiracy at issue here. The plaintiffs were a dock company, Pinney, and a builder of self-unloading vessels, Litton. On motions to dismiss, the court of appeals held that Keogh would bar claims based on the handling and line-haul rates charged by the railroads. Id. at 1457. However, the court of appeals also deemed certain claims outside the scope of the Keogh doctrine. These claims included Litton's contention that the defendants refused to permit Litton to purchase, lease or use dock facilities that could have accommodated Litton's self-unloading vessels and the contention of both plaintiffs that "defendants used harassing tactics and spurious challenges to try to forestall legitimate business activities of competitors." Id. After a full trial, we are in a different procedural position than that of Pinney Dock. We have definite evidence of the railroads' refusal to handle self-unloaders at their docks, restrictions on the sale and lease of dock property to unregulated entities, boycotts of unregulated docks, and intra-industry coercion claims which mirror those deemed by the court of appeals in Pinney Dock to escape Keogh. Because the railroads derailed their potential competitors, the steel companies could not use alternative, lower-cost, private docks, and thus they lacked the economic incentive to develop self-unloaders. The by-product of this delay in introducing these vessels was that the steel companies were compelled to continue to pay the railroad fixed rates. Even strained to simplification, the railroads' anticompetitive behavior involved far more than the assessment of rates. The mere measure of damages, which begins with an ICC-approved rate, does not define the nature of the conspiracy.
Although we conclude from the evidence produced that the steel company plaintiffs proved at trial an antitrust conspiracy that was not grounded in rate-related claims, the question remains whether the district court properly instructed the jury concerning the types of rate activity protected by Keogh. In a liability segment of the trial, the district court charged on Keogh, in part, as follows:
What is forbidden by the antitrust law are joint actions, actions taken pursuant to an agreement which restrains trade unreasonably -- that is, which adversely affect competition -- and which are not within the protection, the immunity, granted by the rate bureau proceeding -- that is to say, which are not rate related.
But once a rate is being charged pursuant to a duly filed tariff which has not been disapproved by the Interstate Commerce Commission, then it is conclusively presumed so far as the law is concerned that the charge is a reasonable one. And what that means is that nobody can claim damages under the antitrust laws or any other law -- no shipper who pays railroad rates, who pays freight charges to a railroad -- can complain to have been damaged either by the antitrust laws or by other laws merely by the allegation that those charges were higher than they should have been.
The district court also instructed the jury concerning B&LE's good faith and regulatory climate defenses and informed the jury that, if the company's conduct was consistent with the overall policies of the ICC, it was not in violation of the antitrust laws. App. at 5002.
B&LE takes issue with the charge, arguing that, under the Keogh doctrine, no matter how unlawful the means to fix or maintain rates, and no matter how anti-competitive those means may be, the tariff rates are the legal rates and cannot give rise to liability for antitrust damages. We disagree. Keogh does not give ICC-regulated industries carte blanche to preclude competition. The instruction, as a whole, recognized this principle and so did not misinform the jury as to the scope of the Keogh doctrine's protection.
In sum, we conclude that Keogh and Square D, prohibiting treble-damage recovery for private litigants based upon rate-related activity, cannot be applied here to deny ...