Harrison “Buzz” Frahn
Simpson Thacher & Bartlett LLP
On July 5, 2019, Judge Thomas Hardiman, writing for a unanimous three-judge panel of the United States Court of Appeals for the Third Circuit (the “Panel”), affirmed the District Court of the Virgin Islands’ verdict dismissing all claims in Spartan Concrete Products, LLC v. Argos USVI, Corp., 929 F.3d 107 (3d Cir. 2019). The case involved a dispute over the sale of ready-made concrete in the U.S. Virgin Islands. Id. at 109. Beginning in 2010, Plaintiff Spartan Concrete Products, LLC (“Spartan”), a concrete vendor operating on the island of St. Croix, sought to displace a competitor named Heavy Materials as the sole provider of ready-mix concrete on the nearby island of St. Thomas. Id. After a bruising three-year price war between the competitors, Spartan sued Argos USVI, Corp. (“Argos”), a bulk cement vendor which sold to both companies, alleging that Argos violated § 2(a) of the Robinson-Patman Act, 15 U.S.C. § 13(a), by giving Heavy Materials, but not Spartan, a 10 percent volume discount. Id.
Following a bench trial, Judge Curtis Gómez of the US District Court for the District of the Virgin Islands entered judgment in favor of Argos on the ground that Spartan failed to prove an antitrust injury. Id. at 110. The district court likewise denied Spartan the chance to amend its pleadings, finding undue delay, prejudice, and futility. Id. On appeal, the Panel agreed with the district court’s finding with respect to the antitrust injury, found no abuse of discretion on the district court’s leave to amend ruling, and so affirmed the trial court’s decisions on both issues. Id.
In 2010, Spartan chose to expand its ready-mix concrete business from St. Croix to St. Thomas. Id. Doing so placed it in direct competition with St. Thomas’s sole ready-mix concrete supplier, Heavy Materials, and for the subsequent three years the companies engaged in a fierce price war. Id. During the price war, Argos sold cement to both companies, but gave Heavy Materials (whose purchases accounted for more than three-fourths of Argos’s bulk sales) a 10% volume discount. Id.
Throughout the price war, Spartan frequently reduced its prices—even when doing so caused it to operate at a loss—to compete with Heavy Materials. Id. The strategy was to a degree successful, with Spartan eventually achieving a 30% market share on St. Thomas by the end of 2011. Id. After three years, however, the price war became unsustainable for both Spartan and Heavy Materials, so they reached an agreement: Spartan would withdraw from St. Thomas and Heavy Materials would stop competing on St. Croix. Id.
The price war cost Spartan dearly—the company lost nearly $4 million in the three years it competed on St. Thomas, and the 10% discount it did not receive from Argos effectively amounted to 1.4% of the company’s total costs during that period. Id. at 110-11.
In January 2015, about one year after the truce with Heavy Materials, Spartan sued Argos alleging price discrimination in violation of § 2(a) of the Robinson-Patman Act. Id. at 111. The case was assigned to Magistrate Judge Ruth Miller, who in April 2015 set a schedule for pretrial discovery. Id. Over the next year, both parties repeatedly missed deadlines to propound and respond to discovery. Id.
As discovery proceeded at a glacial pace, Spartan filed two successive motions for leave to amend its complaint, seeking to add business tort claims and new factual allegations gleaned from depositions and discovery responses. Id. Argos too sought leave to amend its answer. Id. Judge Gómez, adopting the Magistrate’s Report and Recommendation, denied both parties leave to amend on the grounds that both had exercised undue delay, and noting that Spartan’s proposed amendments would prejudice Argos by fundamentally altering the nature of the case. Id. at 111, 117. The case thus proceeded on the Robinson-Patman claim only.
In July 2017 the District Court conducted a bench trial. Id. at 111. At the conclusion of Spartan’s evidence, Argos moved for a directed verdict, which the court granted on the basis that Spartan failed to provide sufficient evidence of an antitrust injury and damages. Id. at 111-12. Spartan thereafter appealed the district court’s leave to amend and directed verdict rulings. Id. at 112.
Spartan Failed to Show Antitrust Injury
The Panel first addressed the trial court’s grant of Argos’s motion for directed verdict. Id. at 112-15. To that end, the Panel began its analysis with the relevant legal standards.
The Robinson-Patman Act
Section 2(a) of the Robinson-Patman Act provides:
It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale . . . and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them.
15 U.S.C. § 13(a). Establishing a prima facie claim for a violation of Section 2(a) therefore requires a party to make four showings, namely that (1) “sales were made to two different purchasers in interstate commerce”; (2) “the product sold was of the same grade and quality”; (3) the “defendant discriminated in price between the two purchasers”; and (4) “the discrimination had a prohibited effect on competition.” Id. at 113 (citing Fessers, Inc. v. Michael Foods, Inc., 498 F.3d 206, 212 (3d Cir. 2007)).
If a plaintiff succeeds at making a prima facie showing, they must then establish a violation of the Clayton Act to prove an antitrust injury and recover damages. Specifically, they must make “some showing of actual injury attributable to something the antitrust laws were designed to prevent.” Id. at 113.
The District Court’s Decision
Reviewing Spartan’s evidence at trial, the district court found all four prima facie elements were satisfied—that is, Argos plainly made sales to two different purchasers of a product of the same grade and quality (Spartan and Heavy Materials), there was discrimination (the 10% discount), and Spartan suffered a competitive injury (suffered economic loss). Id. The decision therefore hinged on “whether Spartan satisfied the damages requirement by proving antitrust injury.” Id. Doing so required Spartan to “prove a causal connection between the price discrimination and actual damages suffered,” supported by at least “some direct evidence of injury.” Id.
Here, the district court assumed for the purpose of argument that Spartan suffered a competitive injury, but found that Spartan had failed to adduce sufficient evidence of a linkage between the competitive injury and an antitrust injury that led to damages. Id. “When pressed for an actual measure of damages,” the Panel summarized, “Spartan struggled and pointed only to its view of a generalized atmosphere that drove Spartan out of the marketplace.” Id. (internal quotation marks omitted).
Spartan lacking this necessary evidence, the district court found in Argos’s favor as a matter of law.
Spartan’s Appeal and the Panel’s Decision
On appeal, Spartan argued that the district court erred by discounting testimony of several Spartan witnesses relating to the fact that the price war created an environment where “there was an inverse relationship between Heavy Material’s [sic] sales and Spartan’s losses,” since customers chose whom to purchase from primarily on the basis of price. Id. at 113-14. The Panel disagreed.
In particular, the Panel noted that Spartan’s management consultant and key witness “could not point to any analysis he performed (or otherwise) to verify” his assertion that “90 percent of the jobs Spartan lost were ‘because of the cement price difference.’” Id. at 114.
Spartan likewise failed, the Panel found, to identify or provide testimony from lost customers as to why they did not buy from Spartan. Id. On this point the court cited Steelwagon Manufacturing for the proposition that a plaintiff cannot recover antitrust damages where it “failed to present any direct evidence of lost sales or profits caused by the discriminatory pricing.” Id. (citing Steelwagon Mfg. Co. v. Tarmac Roofing Sys. Inc., 63 F.3d 1267, 1275-76 (3d Cir. 1995)). Spartan, the Panel reasoned, “made the same errors” as the Steelwagon plaintiff by relying solely on employee testimony about the importance of price in the market and failing to present evidence of customers lost due to the price discrimination. Id. Indeed, the Panel noted that evidence presented at trial showed Spartan lost business due to reasons unrelated to the cement discount. Id. For example, one witness testified that Heavy Materials won many contracts based on product quality rather than price. Id.
The Panel also rejected Spartan’s argument that an antitrust injury could be found in the fact that Spartan was forced out of business by the discount, reasoning that Spartan competed for three years on St. Thomas before ultimately reaching the truce agreement to leave the island. Id. at 114-15.
The Panel therefore affirmed the district court’s judgment in favor of Argos. Id. at 115.
The District Court Did Not Abuse Its Discretion in Denying Spartan Leave to Amend
The Panel next considered whether the district court abused its discretion in denying Spartan’s first motion to amend the complaint. Id. at 115-17.
Background and Legal Standards Regarding Leave to Amend
Acknowledging that leave to amend is typically freely given, the Panel nonetheless recognized that “leave to amend may be denied when there is undue delay, bad faith, dilatory motive, prejudice, and futility.” Id. at 115 (citations omitted). This can apply, the Panel noted, where a movant delays discovery or where the proposed amendments would “fundamentally alter the proceeding and could have been asserted earlier.” Id. (citations omitted).
Here, Spartan sought to amend its complaint to add two tort claims—intentional interference with prospective business relations and civil conspiracy—based on two documents. Id. The first was an email from Argos’s General Manager explaining that the discount offered to Heavy Materials “must be kept confidential,” and the second was another Argos executive’s email offering Heavy Materials assistance “on getting ahead with the bidding vs. Spartan.” Id. at 116.
Detailing the many delays by both parties throughout discovery—including that neither party sought leave to amend until more than one and a half years after commencement of the suit, and after the completion of fact discovery—the Magistrate recommended that the district court deny the motion to amend on grounds of undue delay, prejudice, and futility. Id. The district court adopted the Magistrate’s findings and recommendations. Id.
The Panel’s Decision
On appeal, Spartan argued that there was neither undue delay nor prejudice. Id. Regarding undue delay, Spartan argued that its motion for leave came just ten days after Argos’s last production (which included the key documents), which was more than nine months before trial, and that Spartan should not have been punished for Argos’s misdeeds. Id.
Recognizing that Spartan’s arguments had some “superficial appeal,” the Panel still rejected them, explaining that “[a] thorough review of the record shows that both parties failed to meet court-ordered deadlines,” leading the Magistrate to conclude that “Spartan was equally responsible for the delay.” Id. The Panel also noted that Spartan “stood idle while discovery deadlines passed and did not move the District Court to compel compliance from Argos.” Id. at 117.
Ultimately, the Panel acknowledged that there were plausible arguments justifying the delay, but concluded that the facts were not so favorable to Spartan as to find an abuse of discretion. Id. Moreover the Panel held, contrary to Spartan’s arguments on appeal, Argos would have been prejudiced by the addition of the two new claims so late in the case. Id. Those claims—both tort claims unrelated to the original antitrust allegations—would require new discovery and involve new theories of recovery, which would have fundamentally altered the proceeding. Id.
For these reasons, and without addressing futility, the Panel affirmed the district court’s denial of Spartan’s motion for leave to amend. Id.
The Spartan Panel’s decision, while leaving Robinson-Patman Act precedent essentially unchanged, nonetheless serves as an important reminder to antitrust litigants that mere competitive harm is insufficient to show antitrust injury—a causal connection between the two must be established to carry a price discrimination claim. The case is similarly a cautionary tale on the perils of failing to pursue discovery diligently. As the district court recognized (and the Panel assented) dilatory practices can justify overcoming even the strong presumption in favor of amendment, undermining litigants’ potentially valid claims for relief.
 The Panel noted that pursuant to Fed. R. Civ. P. 50(a), in 1991 the term “directed verdict” was replaced with “judgment as a matter of law” (“JMOL”), and that JMOL may only be granted in jury trials. Id. at 111 n.1. Instead, the Panel explained that the district court should have ruled under Fed. R. Civ. P. 52, which governs judgment made during a bench trial. Id. Noting that this error alone could have warranted remand, the Panel nonetheless chose to address the merits, finding that “the facts are largely undisputed, as the parties focus on whether the evidence at trial was legally sufficient to prove antitrust injury.” Id. The Panel therefore chose to review the record akin to an appeal for summary judgment, reviewing “the record as a whole and in the light most favorable to [Spartan].” Id.