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District Court Rejects “Double Counting” Attack On Damages Theory In Meritor’s Exclusive Dealing Case

Posted  June 6, 2014

By Matthew L. Cantor and Allison F. Sheedy

Judge Sue L. Robinson of the U.S. District Court for the District of Delaware has denied a motion for summary judgment on damages in ZF Meritor LLC and Meritor Transmission Corporation v. Eaton Corporation, setting up the long-running antitrust case for a trial on damages that is slated to start on June 23, 2014.

Plaintiffs are now free to seek the full $800 million they claim as damages, which, after trebling, would total $2.4 billion.  Plaintiffs have already won a jury verdict on liability that found that Defendant Eaton Corporation, an electrical and hydraulic systems maker, violated Sections 1 and 2 of the Sherman Act by entering into unlawful exclusive dealing agreements.

The plaintiffs are Meritor Transmission Corp. and an extinct joint venture between Meritor and a German manufacturer, which sold manual transmission systems to truck manufacturers.  Plaintiffs claimed that Eaton excluded their joint venture from the market by entering into long-term arrangements with major American truck manufacturers.  Plaintiffs alleged that these long-term arrangements—which included loyalty “discounts” that plaintiffs claimed were pricing penalties—were actually unlawful exclusive dealing agreements.

The jury finding of violations of Sections 1 and 2 of the Sherman Act was upheld by the U.S. Court of Appeals for the Third Circuit.  After the case was remanded to the district court for a trial on damages, Eaton moved to preclude plaintiffs’ damages expert from testifying.  That motion was denied in December 2013.  Defendants then asked for another chance to narrow the case by again moving for summary judgment—now based on the viability of plaintiffs’ expert’s theory.  Defendants sought summary judgment on two grounds.

First, Eaton argued that it was improper to include as damages both future lost profits of the defunct joint venture and the going concern value of the joint venture for overlapping periods of time.  Citing the decision in Coastal Fuels of Puerto Rico, Inc. v. Caribbean Petroleum Corp., 175 F.3d 18, 27 (1st Cir. 1999), which rejected an arguably similar damages analysis, Eaton argued that lost profits must be limited to the period when a business was actually in business, and going concern value should be calculated as of the date a plaintiff went out of business.

Second, Eaton argued that plaintiffs’ damages theory inappropriately attempts to bolster its claim by intermixing the potential damages of the two plaintiffs, since liability was not based on separate claims.  Eaton asked the court to preclude any claim for damages allegedly sustained as a result of Meritor’s own market activity after the failure of the joint venture.

In a brief opinion, the court denied Eaton’s motion, finding that the standard for damages in antitrust cases is “lenient.”  The Court specifically permitted the damages claims from the “cumulative perspective” of an “overall anticipated business” involving the two plaintiffs.  Judge Robinson relied on the principle that damages “flow from conduct, not from legal theories,” as observed by the Third Circuit in Inter Medical Supplies Ltd. V. EBI Medical System Inc., 181 F3d 446, 462 (3d Cir. 1999).

Edited by Gary J. Malone

Tagged in: Antitrust Litigation,