931 F.2d 816
1991-1 Trade Cases 69,440, 33 Fed. R. Evid. Serv. 413
T. HARRIS YOUNG & ASSOCIATES, INC., a Florida corporation,
Plaintiff-Counter Defendant-Appellant/Cross-Appellee,
v.
MARQUETTE ELECTRONICS, INC., a Wisconsin corporation,
Defendant-Counterclaim - Appellee/Cross - Appellant.
T. HARRIS YOUNG & ASSOCIATES, INC., a Florida corporation,
Plaintiff-Appellant, Cross-Appellee,
v.
MARQUETTE ELECTRONICS, INC., a Wisconsin corporation,
Defendant-Appellee, Cross-Appellant.
Nos. 90-3252, 90-3364.
United States Court of Appeals,
Eleventh Circuit.
May 20, 1991.
Eli H. Subin, John M. Brennan, Subin, Shams, Rosenbluth & Moran, P.A., Orlando, Fla., for T. Harris Young & Associates, Inc.
Paul E. Slater, Christopher J. Murdoch, Sperling, Slater & Spitz, Melvin S. Newman, Schoenberg, Fisher & Newman, Ltd., Mark P. Cohen, Schoenberg, Fisher & Newman, Ltd., Chicago, Ill., for Marquette Electronics, Inc. in 90-3252 and 90-3364.
Davisson F. Dunlap, William D. Palmer, Carlton, Fields, Ward, Emmanuel, Smith & Cutler, Orlando, Fla., for Marquette Electronics, Inc. in 90-3364.
Appeals from the United States District Court for the Middle District of Florida.
Before HATCHETT and DUBINA, Circuit Judges, and HILL, Senior Circuit Judge.
HILL, Senior Circuit Judge.
This appeal concerns an antitrust and tortious interference with business action. Plaintiff T. Harris Young & Associates, Inc. ("THY") sued defendant Marquette Electronics, Inc. ("Marquette"), alleging an illegal tying arrangement, attempted monopolization, and tortious interference with business because of certain alleged false claims. The jury returned a verdict in favor of THY on all three claims. The district court granted a judgment notwithstanding the verdict on the two antitrust claims. Plaintiff appeals this grant, while defendant appeals the failure to grant such a judgment on the tort claim. We affirm the judgment notwithstanding the verdict on the antitrust claims and reverse the denial of a judgment notwithstanding the verdict on the tort claim.
I. BACKGROUND
A. Factual History
Marquette, a Wisconsin corporation, manufactures electrocardiograph ("EKG") and stress testing machines for sale to medical clinics, doctors' offices, and hospitals. There are approximately nine manufacturers of EKG machines in the United States, and eighteen of stress testing equipment. The equipment utilizes heat sensitive recording paper that displays a graphic line when moved across a heated printhead. Marquette also sells this paper for use in its machines.
THY distributes Marquette recording paper in the southeastern United States, an area including Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, and portions of Virginia and Tennessee. THY has no written distribution agreement with Marquette, and the relationship is terminable at will. Despite the instant lawsuit, the relationship continues to this day. Until 1987, THY was the only seller of Marquette paper in the southeast. In 1986, Marquette informed THY of its intention to reduce the discount on supplies it sold THY at wholesale, and THY informed Marquette of its intention to add a competitive generic paper line (Clinical Health Products ("CHP") paper). Marquette then began directly selling its paper in the southeast in 1987.
THY attempted to establish at trial, and argues on appeal, that in attempting to sell its own paper Marquette told customers that non-Marquette paper would damage their machines and that the Marquette equipment warranties would be void if the customers used non-Marquette paper. On appeal, Marquette denies its employees made such statements, but admits they told customers that if defective non-Marquette paper damaged a Marquette machine, Marquette would not repair it for free. No evidence was presented at trial that Marquette ever voided a warranty or service contract.
At trial, THY sought to define the relevant market for paper customers. THY defined the geographic market for paper as the aforementioned nine-state area comprising Young's sales territory as a Marquette distributor. The evidence adduced at trial was that paper prices inside and outside this territory were virtually the same. Furthermore, all suppliers relied on UPS or a similar common carrier for delivery, and while the delivery costs for outside sellers varied from 36.1% higher to 11.7% higher, delivery costs as a percentage of the total cost of the paper were very small. Of the 13 companies supplying Marquette or Marquette-compatible paper to customers in the nine-state area, six were from outside the area, and three of those six sold Marquette brand paper. Young testified, however, that a customer preference for regional service existed because of the need for emergency deliveries and because the end user pays for transportation costs.
THY defined the product market for paper as hospitals with 200 or more beds, despite the sale of identical products to smaller customers. The evidence at trial indicated that the 200+ beds customers accounted for approximately 80% of both plaintiff's and defendant's sales, and that in general approximately 80% of the purchases by hospitals are made by those customers.
B. Procedural History
Young brought suit against Marquette, alleging a tying arrangement in violation of Section 1 of the Sherman Act, attempted monopolization in violation of Section 2 of the Sherman Act, and tortious interference with business. The jury found for Young on all three counts. Using a special verdict form, the jury specifically found that the relevant market for EKG recording paper consisted of hospitals of 200+ beds in the southeastern area of the United States consisting of Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, and portions of Virginia and Tennessee. The jury awarded $1.4 million on the tying claim, $1.8 million on the monopoly claim, and over $3 million on the tort claim ($1.25 million compensatory damages plus $1.8 million punitive damages).
Marquette moved for a judgment notwithstanding the verdict and for a new trial on all three counts. The district court gave two reasons for granting the motion on the tying claim: first, THY failed to define the relevant market for the tying product (EKG and stress testing machines); and second, a product market for paper of hospitals with 200+ beds was insufficient as a matter of law. The court granted Marquette's motion on the attempted monopoly claim also because it found the product market to be insufficient as a matter of law. The district court did not grant Marquette's alternative motions for new trial on these two counts.
Regarding the Florida common law tort count, the district court found that there was ample evidence from which the jury could have concluded that Marquette tortiously interfered with THY's business, and that the interference was intentional and had the destruction of THY's business as its purpose. Accordingly, the district court denied Marquette's motions for JNOV and new trial on this count.
II. STANDARD OF REVIEW
A motion for a JNOV tests the sufficiency of evidence supporting a jury verdict. Hessen v. Jaguar Cars, Inc., 915 F.2d 641, 644 (11th Cir.1990). Because sufficiency of the evidence is a question of law subject to de novo review, we review the district court's grant or denial of a JNOV under the same standard as the district court applied. Id.
All of the evidence presented at trial must be considered "in the light and with all reasonable inferences most favorable to the party opposed to the motion." A motion for judgment n.o.v. should be granted only where "reasonable [people] could not arrive at a contrary verdict...." Where substantial conflicting evidence is presented such that reasonable people "in the exercise of impartial judgment might reach different conclusion, [sic]" the motion should be denied.
Castle v. Sangamo Weston, Inc., 837 F.2d 1550, 1558 (11th Cir.1988) (citations omitted).
The district court's evidentiary rulings are discretionary, and we will not disturb them absent a clear showing of an abuse of discretion. Hessen, 915 F.2d at 644.
III. DISCUSSION
A. The Antitrust Claims
1. The Tying Claim: Where there is no Tie, there is no Claim
As an initial matter, defendant argues that plaintiff failed to prove that a tying arrangement existed at all. Defendant contends that, for a tying arrangement to exist, a seller must condition the sale of the tying product on the purchase of the tied product. As plaintiff states in its briefs, the tying product in this case would be "electronic medical equipment," and the tied product would be "electrocardiographic recording paper." Defendant argues that it did not condition the sale of equipment on the purchase of paper, and thus no tie existed. Plaintiff, by contrast, maintains that it must show only coercion by the seller that forced the buyer to purchase the tied product, and that the coercion need not consist of the withholding of the tying product. In other words, plaintiff maintains that if it shows such coercion, then it has shown a tie and that tie is illegal.
This view is not correct. This circuit has clearly stated that "a tying arrangement is 'an agreement by a party to sell one product [the tying product] but only on the condition that the buyer also purchases a different (or tied) product.' " Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1502 (11th Cir.1985) (emphasis added) (quoting Northern Pacific Ry. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958)), cert. denied, 475 U.S. 1107, 106 S.Ct. 1513, 89 L.Ed.2d 912 (1986). See also Tic-X-Press, Inc. v. Omni Promotions Co., 815 F.2d 1407, 1414 (11th Cir.1987); Midwestern Waffles, Inc. v. Waffle House, Inc., 734 F.2d 705, 711 (11th Cir.1984); Kypta v. McDonald's Corp., 671 F.2d 1282, 1284 (11th Cir.), cert. denied, 459 U.S. 857, 103 S.Ct. 127, 74 L.Ed.2d 109 (1982). In other words, for a tie to exist a seller must withhold product A unless the buyer also selects product B. Only after the existence of a tie is shown is it necessary to determine whether an illegal tying arrangement exists. A tying arrangement will be per se illegal if: (1) the seller possesses sufficient economic power in the tying product market to force the buyer to accept the tied product; and (2) a "not insubstantial" amount of interstate commerce in the market of the tied product is involved. Tic-X-Press, 815 F.2d at 1414.
Affirmance of a JNOV is proper even if based on a rationale different from that of the district court. Wilson v. Bicycle South, Inc., 915 F.2d 1503, 1506 (11th Cir.1990). THY does not even allege that Marquette withheld or threatened to withhold electronic medical equipment unless its customers selected Marquette electrocardiographic recording paper. Because THY has presented no evidence that a tie exists, we affirm the grant of JNOV on the tying claim.
2. The Monopoly Claim: Where there is no Market, there is no Monopoly
The offense of monopolization under section 2 of the Sherman Act contains two elements: "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 86 S.Ct. 1698, 1704, 16 L.Ed.2d 778 (1966). The offense of attempted monopolization requires specific intent on the defendant's part to bring about a monopoly and a dangerous probability of success. Quality Foods v. Latin Am. Agribusiness Dev. Corp., 711 F.2d 989, 996 (11th Cir.1983). Furthermore, like the monopolization offense itself, the attempt must happen in a defined relevant market. Id. The relevant market is defined by both a product and a geographic dimension. Spectrofuge Corp. v. Beckman Instruments, Inc., 575 F.2d 256, 276 (5th Cir.1978), cert. denied, 440 U.S. 939, 99 S.Ct. 1289, 59 L.Ed.2d 499 (1979); Heatransfer, 553 F.2d at 980.
It is the analysis of the relevant market for electrocardiographic recording paper that is dispositive of the monopoly claim in the case before us. The district court denied Marquette's motion for JNOV based on the insufficiency of the geographic market, but granted the motion based on the insufficiency of the product market. We will assess both potential bases for granting the JNOV. Because the relevant market is essentially a question of fact, the jury's findings concerning the market will be overturned only if clearly erroneous or where there is no evidence to support them. Associated Radio Serv. Co. v. Page Airways, Inc., 624 F.2d 1342, 1348-1349 (5th Cir.1980), cert. denied, 450 U.S. 1030, 101 S.Ct. 1740, 68 L.Ed.2d 226 (1981).
We first address the evidence on the geographic dimension. The geographic dimension is the area in which the product or its reasonably interchangeable substitutes are traded. L.A. Draper & Son v. Wheelabrator-Frye, Inc., 735 F.2d 414, 423 (11th Cir.1984). Price data and such corroborative factors as transportation costs, delivery limitations, customer convenience and preference, and the location and facilities of other producers and distributors must be considered in determining the relevant geographic market. Id. A geographic market is only relevant for monopoly purposes where these factors show that consumers within the geographic area cannot realistically turn to outside sellers should prices rise within the defined area. Id. at 424.
The evidence presented at trial on the geographic market is reviewed above at page 820. The district court found THY's evidence sufficient to present a jury question because of the testimony that a customer preference for regional service existed because of the need for emergency deliveries and because the end user pays for transportation costs. On appeal, THY also relies on this evidence to prove the geographic market for recording paper. Such evidence, however, is not sufficient to present a jury question. THY presented no evidence that could support an inference that consumers within the nine-state area could not turn to outside sellers if the prices increased within the nine-state area. In fact, the evidence indicated that consumers could and did turn to outside suppliers. As discussed in Section I.A. above, the prices inside and outside the territory were virtually the same, all suppliers relied on UPS or a similar common carrier for delivery, and delivery costs had little effect on the total cost of the merchandise. Moreover, 6 of the 13 suppliers of Marquette or Marquette-compatible paper to customers in the nine-state area were from outside the southeast area, and two of those outside sellers besides Marquette actually sold Marquette brand paper.
We thus find that, even viewing the evidence in the light most favorable to THY, a JNOV was proper on the monopoly claim because of the failure to define the geographic dimension of the market.
Even if THY had sufficiently defined a geographic dimension, the JNOV would still be proper because THY failed to provide sufficient proof of the product dimension of the market.
[T]he outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it. However, within this broad market, well-defined submarkets may exist which, in themselves constitute product markets for antitrust purposes.... The boundaries of such a submarket may be determined by examining such practical indicia as industry or public recognition of the submarket as a separate economic entity, the product's peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors.
Heatransfer, 553 F.2d at 980 (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 82 S.Ct. 1502, 1523-24, 8 L.Ed.2d 510 (1962)). Citing several cases, THY contends that 200+ bed hospitals, which account for approximately 80% of the purchases by hospitals, constitute such a submarket and are the relevant product market in this case.
While a relevant product market can be limited to a portion of customers, such a limitation must be based on a distinction in the product sold to those customers. If, for example, a product is specially designed for a certain group of purchasers and the suppliers concentrate their efforts almost exclusively on those purchasers, as in Heatransfer, 553 F.2d 964, the product dimension may be limited to the sale of that product to those purchasers. 6] Similarly, where one product is distinct from another because of its salability, as in International Boxing Club of New York, Inc. v. United States, 358 U.S. 242, 79 S.Ct. 245, 3 L.Ed.2d 270 (1959), the relevant market can consist solely of that product. Additionally, where a type of purchaser is relevant because the defendant is such a purchaser, the market can be limited to a type of product that such a purchaser would buy.
THY has failed to provide evidence that the market for EKG recording paper should be limited to 200+ bed hospitals because of a distinction in the paper sold to those hospitals. Rather, from this record it appears that the paper used by 200+ bed hospitals, smaller hospitals, clinics, and doctors' offices does not differ. We thus conclude that, even viewing the evidence in the light most favorable to THY, a JNOV on the monopoly claim was proper also because of THY's failure to define the product dimension of the market.
B. The Tort Claim: Without Tortious Interference, there is no Tort
THY's tort claim relates to damages for lost CHP sales. THY Reply B. at 40 n. 9. The claim for tortious interference with business is a Florida common law claim. To prevail on a claim of tortious interference with a business relationship under Florida law, a plaintiff must establish four elements: "(1) the existence of a business relationship, not necessarily evidenced by an enforceable contract; (2) knowledge of the relationship on the part of the defendant; (3) an intentional and unjustified interference with the relationship by the defendant; and (4) damage to the plaintiff as a result of the breach of the relationship." Tamiami Trail Tours, Inc. v. Cotton, 463 So.2d 1126, 1127 (Fla.1985) (emphasis added). Where the damages are for lost profits, there must be "some standard by which the amount of damages may be adequately determined." W.W. Gay Mechanical Contractor, Inc. v. Wharfside Two, Ltd., 545 So.2d 1348, 1351 (Fla.1989).
THY argues that "[e]vidence of Marquette's extensive region-wide interference with Young's business through its telemarketing and service representatives who contacted Young's customers followed by Young's lost sales and decreasing profitability was sufficient to show causation." THY Reply B. at 40. If THY has not really provided evidence of tortious interference by Marquette "telemarketing and service representatives who contacted Young's customers," then the third element obviously fails, and we need not even reach the causation question in the fourth element. We thus must analyze the evidence regarding this alleged interference by Marquette employees.
Although THY claims that Marquette's interference was "extensive," THY only introduced evidence regarding statements by Marquette employees at a small number of hospitals in the nine-state southeast region. For six of the hospitals, the evidence THY introduced was the testimony and notes of THY telemarketer Cynthia Cherry and THY general manager William Lofdahl, who allegedly spoke with hospital employees who allegedly spoke with Marquette employees. Because of the importance of this evidence to THY's case, we will discuss in detail why this evidence is inadmissible hearsay.
Hearsay "is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." Fed.R.Evid. 801(c). The rationale behind the hearsay rule is the untrustworthiness of hearsay statements. United States v. Brown, 548 F.2d 1194, 1205 n. 19 (5th Cir.1977). Hearsay presents substantial risks of insincerity and faulty narration, memory, and perception. Id. (quoting Morgan, Hearsay Dangers and the Application of the Hearsay Concept, 62 Harv.L.Rev. 177, 218 (1948)).
At trial, Cherry testified that she had spoken to a Mr. Brinkley at the V.A. Hospital in Asheville, North Carolina. According to Cherry's testimony, Brinkley told her that he "wanted to try the new brand of CHP paper," but "was told [by Marquette employees] that the printheads would be damaged" and that "the warranty would be completely voided if he used anything but Marquette brand paper." R24-301. A note from Cherry to Lofdahl introduced as an exhibit also indicated the same Marquette statements to Brinkley. THY argues that the statement by Brinkley was not hearsay because it was not offered for the truth of the matter asserted; in fact, THY contends that it specifically denied the truth of the content of the statements.
THY misunderstands the hearsay analysis of this evidence. We begin our analysis by noting that the witness (Cherry) was testifying to what another person said outside of court. That other person (Brinkley) is thus the out-of-court declarant. We next address the "matter asserted"--that is, we determine the matter that the declarant (Brinkley) asserted. If the matter asserted were "non-Marquette paper will damage Marquette equipment and void the warranty," THY would be correct in arguing that hearsay does not exist because THY was not trying to prove the truth of the matter asserted; instead, THY was trying to prove that Marquette employees made the comments. Brinkley, however, did not make the above assertion. Rather, the matter Brinkley asserted was (simplified for analysis) "Marquette employees said that non-Marquette paper will damage Marquette equipment and void the warranty." This distinction is critical because THY did try to prove that "Marquette employees said ...;" that is, THY did try to prove the truth of the matter asserted by the declarant. While Brinkley could have testified to what Marquette told him, Cherry's testimony and note are inadmissible hearsay. Because Cherry's testimony and notes regarding the other four hospitals that she contacted follow the same pattern, this evidence is also inadmissible hearsay.
The evidence from William Lofdahl suffers from the same fault as the evidence from Cherry. Lofdahl also testified to a conversation he allegedly had with Mr. Brinkley at the V.A. Hospital in Asheville, North Carolina, stating that Brinkley said "that MEI said it [CHP paper] would possibly damage the machine, they wouldn't service the machine if he used our product." R24-326. Lofdahl further testified that he talked to a Sally Morrell from Davie County Hospital in North Carolina, who told him "that MEI service ... told them that CHP-020 paper has a wax coating on it and would damage their new ... systems. And, if they continued to use it MEI would not extend warranty service." PX 50; R24-325. Again, THY has tried through this evidence to prove that "Marquette employees said...." THY has thus in both instances tried to prove the truth of the matter asserted by the out-of-court declarant, and the evidence is consequently inadmissible hearsay.
THY also introduced the testimony of Michael Marrow, director of bio-medical engineering at Wake Medical Center in North Carolina, and a phone survey allegedly containing statements by hospital employees. As with Cherry's and Lofdahl's testimony, Marrow testified that another person said to him that a Marquette employee said "[t]hat the warranty might be void if the use of non-Marquette--if we use non-Marquette paper." R13-339-241. We need not repeat our analysis to conclude that this testimony is inadmissible hearsay. In the phone survey, the interviewers allegedly wrote down what hospital employees said Marquette employees said. Neither the hospital employees nor the interviewers are identified, and it is not even clear whether the hospital employees themselves actually spoke with Marquette employees. Again, this evidence is offered to prove that "Marquette employees said ...," and it is inadmissible hearsay.
THY argues that even if its evidence is hearsay, the evidence fits under the state of mind exception to the hearsay rule in Fed.R.Evid. 803(3). Fed.R.Evid. 803(3) reads in part as follows:
The following are not excluded by the hearsay rule ...:
(3) Then existing mental, emotional, or physical condition. A statement of the declarant's then existing state of mind ... (such as intent, plan, motive, design, mental feeling, pain, and bodily health), but not including a statement of memory or belief to prove the fact remembered or believed.
Before a statement can be admitted under Rule 803(3) to show the declarant's then existing state of mind, the declarant's state of mind must be a relevant issue. Prather v. Prather, 650 F.2d 88, 90 (5th Cir. Unit A July 1981). Here, THY admits that it was trying to prove that Marquette employees had made tortious comments. The relevant issue is thus whether Marquette employees made those comments, not the state of mind of the hospital employees. Rule 803(3) is also of no avail to THY because THY tried to use the alleged statements "of memory or belief" by the hospital employees "to prove the fact remembered or believed." That is, THY tried to use the out of court statements that "Marquette said ..." to prove that "Marquette said...." The prohibition against such use of statements "is necessary to avoid the virtual destruction of the hearsay rule." Fed.R.Evid. 803, notes of advisory committee on 1972 proposed rules.
The evidence is not admissible under the hearsay exception in Fed.R.Evid. 803(6), either. Fed.R.Evid. 803(6) reads in part as follows:
6) Records of regularly conducted activity. A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the memorandum, report, record, or data compilation.
For this exception to be available, all persons involved in the process must be acting in the regular course of business--otherwise, an essential link in the trustworthiness chain is missing. Fed.R.Evid. 803, notes of advisory committee on 1972 proposed rules. See also Florida Canal Indus., Inc. v. Rambo, 537 F.2d 200, 202-03 & n. 5 (5th Cir.1976) (decided under the former version of the Federal Business Records Act); McCormick on Evidence Sec. 310, at 879 (3d law. ed. 1984). Because it was not the regular course of business for the various out-of-court declarants to report to Cherry, Lofdahl, or the survey interviewers, Rule 803(3) is of no avail to plaintiff.
THY conducted a seven-day jury trial that produced reams of trial transcripts and evidence. Nevertheless, THY failed to produce admissible evidence sufficient to support a rational jury determination of tortious interference with business. We thus reverse the district court's denial of Marquette's motion for a JNOV and set aside the jury verdict on the tort claim.
IV. CONCLUSION
For the foregoing reasons, the district court's grant of JNOV on the tying claim and on the monopoly claim is AFFIRMED. The district court's denial of JNOV on the tort claim is REVERSED.