1998-2 Trade Cases P 72,307, 12 Fla. L. Weekly Fed. C 217 City of Tuscaloosa Municipal Utilities Board of Albertville, Auburn Water Works Board Jasper Water Works and Sewer Board, Inc., Plaintiffs-Intervenors-Appellants v. Harcros Chemicals, Inc. Jones Chemicals, Inc.

In the instant case, thirty-nine Alabama municipal entities brought suit in the United States District Court for the Northern District of Alabama, alleging that five defendant chemical companies engaged in a conspiracy to fix prices for repackaged chlorine in Alabama in violation of both federal and state antitrust law. The plaintiffs also asserted claims for fraud under Alabama law. In a memorandum opinion, the district court ruled much of the plaintiffs' evidence inadmissible and granted summary judgment to all five defendants on the antitrust claims and the fraud claims. See City of Tuscaloosa v. Harcros Chems., Inc., 877 F.Supp. 1504 (N.D.Ala.1995). We review the district court's evidentiary rulings, reversing in part and affirming in part. We then review the district court's summary judgment rulings. We reverse the district court's entry of summary judgment with regard to three of the five defendants on the antitrust claims, and remand for further proceedings. We also vacate the district court's entry of summary judgment on most of the fraud claims, and remand for further proceedings.

The plaintiffs and plaintiffs-intervenors in this case are thirty-nine Alabama municipal entities that purchase repackaged chlorine for the treatment of drinking water, sewage, and swimming pools. Repackaged chlorine is liquid chlorine that has been pressurized and stored in containers for delivery to, and use by, chlorine consumers. The five defendant corporations are chemical companies that repackage or distribute chlorine in Alabama.1

At the core of the plaintiffs' claims are their allegations that the defendants colluded with each other to set prices for repackaged chlorine distribution contracts. During the period of the alleged collusion, many Alabama municipal entities purchased chlorine by auction.2 An entity seeking to purchase chlorine would solicit sealed bids from companies that had submitted bids in the past. Once the bids were received, the buyer would publicly open the bids and announce what each competitor had bid. The buyer would then award its contract to the lowest bidder. The plaintiffs allege that the defendants submitted sealed bids based on "list prices" previously determined amongst themselves, and in this way allocated the repackaged chlorine contracts as they wished.

Following investigations of the chlorine industry in the Southeast by the United States Department of Justice and the State of Florida,3 Alabama's former Attorney General requested authority from a number of Alabama municipal entities to bring an antitrust action against chlorine companies on their behalf. His successor, however, changed course and declined, on behalf of the state, to participate in the proposed litigation. See Harcros, 877 F.Supp. at 1511 n. 19.

Fifteen Alabama municipal entities then decided to proceed independently and brought this action in July 1992. Numerous other municipal entities intervened, and several original plaintiffs withdrew from the case. The complaints filed by the final thirty-nine plaintiffs,4 as amended, presented four counts. The first count alleged that the defendants had engaged in a conspiracy to fix prices, allocate customers or markets, and rig bids in violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1994).5 The second count asserted that the defendants had engaged in a conspiracy to monopolize the chlorine market in Alabama in violation of section 2 of the Sherman Act, 15 U.S.C. § 2 (1994).6 The plaintiffs sought treble damages as relief on these federal antitrust claims pursuant to section 4 of the Clayton Act, 15 U.S.C. § 15 (1994), and requested a permanent injunction preventing future collusion pursuant to section 16 of the Clayton Act, 15 U.S.C. § 26 (1994).7

The third count of the complaints asserted that the defendants conspired to restrain trade in violation of Alabama Code § 8-10-1 et seq. (1993). The plaintiffs sought actual damages and $500 in statutory liquidated damages for each instance of injury or damage resulting from the alleged conspiracy pursuant to Alabama Code § 6-5-60 (1993).8 The fourth count of the plaintiffs' complaints asserted fraud claims under Alabama law. See Ala.Code § 6-5-100 et seq. (1993). The plaintiffs sought compensatory and punitive damages for these claims.

After discovery, the defendants moved to exclude the testimony of two of the plaintiffs' three expert witnesses, and to exclude several pieces of evidence that they asserted were inadmissible hearsay. The defendants also moved for summary judgment.

The district court, in a lengthy memorandum opinion, excluded the purported hearsay testimony, see Harcros, 877 F.Supp. at 1518-21, 1538, and much of the plaintiffs' expert testimony. See id. at 1524-30, 1532. The district court then granted summary judgment for the defendants on all claims. See id. at 1521-24, 1532-38. The plaintiffs now appeal, asserting that the district court improperly excluded their proffered evidence and that summary judgment was erroneously entered.

We first review the district court's rulings on the admissibility of the purported hearsay evidence. Rulings on the admissibility of evidence are reviewed for abuse of discretion. See Walker v. NationsBank of Fla. N.A., 53 F.3d 1548, 1554 (11th Cir.1995) ("The admissibility of evidence is committed to the broad discretion of the district court, and the decision to exclude certain evidence will be reversed only upon a clear showing of abuse of discretion."); see also Hines v. Brandon Steel Decks, Inc., 886 F.2d 299, 302 (11th Cir.1989) (applying abuse of discretion standard to hearsay admissibility determination). "A district court by definition abuses its discretion when it makes an error of law." Koon v. United States, 518 U.S. 81, 100, 116 S.Ct. 2035, 2047, 135 L.Ed.2d 392 (1996). Thus, when the district court misinterprets the Federal Rules of Evidence or controlling case law, our review is plenary. Cf. Joiner v. General Elec. Co., 78 F.3d 524, 529 (11th Cir.1996), rev'd on other grounds, 522 U.S. 136, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997).

The factual findings of the district court that underlie its decisions regarding the admissibility of the purported hearsay evidence--such as its findings regarding whether a statement was made in furtherance of a conspiracy, or whether a particular document is a regular business record--are reviewed for clear error. See United States v. Bazemore, 41 F.3d 1431, 1434 (11th Cir.1994); United States v. Turner, 871 F.2d 1574, 1581 (11th Cir.1989). A finding of fact is clearly erroneous when, after reviewing the entirety of the evidence, the reviewing court "is left with the definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)).

After reviewing the district court's rulings on the admissibility of the purported hearsay evidence, we turn to that court's rulings on the admissibility of the plaintiffs' expert testimony. The Supreme Court recently has clarified the standard of review applicable to appellate consideration of determinations regarding the admissibility of expert testimony. See General Elec. Co. v. Joiner, 522 U.S. 136, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997), rev'g 78 F.3d 524, 529 (11th Cir.1996). In Joiner, the Court noted that a district court's evidentiary rulings are reviewed for abuse of discretion. See id. at ----, 118 S.Ct. at 517. The Court then held that Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), did not alter this long-standing rule in the specific context of expert testimony, and in fact did not address the standard of appellate review of such rulings at all. See Joiner, 522 U.S. at ----, 118 S.Ct. at 517. The Court went on to note that a court of appeals should apply this abuse of discretion standard of review uniformly, without regard to whether the district court ruling under review allowed or disallowed the expert testimony at issue. Id. We therefore review the district court's rulings excluding the plaintiffs' expert testimony for abuse of discretion. To the extent that a ruling of the district court turns on an interpretation of a Federal Rule of Evidence or on the court's decision to apply Daubert, however, our review is plenary. See Joiner v. General Elec. Co., 78 F.3d at 529, rev'd on other grounds, 522 U.S. 136, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997); Carmichael v. Samyang Tire, Inc., 131 F.3d 1433, 1435 (11th Cir.1997), cert. granted sub nom. Kumho Tire Co. v. Carmichael, --- U.S. ----, 118 S.Ct. 2339, 141 L.Ed.2d 711 (1998).

Having examined the district court's evidentiary rulings, we finally proceed to review the district court's entry of summary judgment on the basis of the admissible evidence. This review proceeds de novo. See Southern Card & Novelty, Inc. v. Lawson Mardon Label, Inc., 138 F.3d 869, 873 (11th Cir.1998); Uniforce Temp. Personnel, Inc. v. National Council on Compensation Ins., Inc., 87 F.3d 1296, 1299 (11th Cir.1996). "Summary judgment is proper 'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.' " Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)). "The party seeking summary judgment [must] identify[ ] for the district court those portions of the record 'which it believes demonstrate the absence of a genuine issue of material fact.' " Cohen v. United Am. Bank of Cent. Fla., 83 F.3d 1347, 1349 (11th Cir.1996) (quoting Cox v. Administrator United States Steel & Carnegie 17 F.3d 1386, 1396 (11th Cir.1994) (in turn quoting Celotex Corp., 477 U.S. at 323, 106 S.Ct. at 2552)). "There is no genuine issue for trial unless the non-moving party establishes, through the record presented to the court, that it is able to prove evidence sufficient for a jury to return a verdict in its favor." Cohen, 83 F.3d at 1349.

We consider first the district court's rulings regarding the admissibility of testimony that the defendants moved to exclude as inadmissible hearsay. We reverse in part and affirm in part.

The plaintiffs proffered testimony regarding an alleged admission by the late Robert Jones ("Jones"), the former chairman, chief executive officer, and president of defendant Jones Chemicals. Loraine and Peter Cassassa, friends of Jones during the period of the alleged conspiracy, testified in depositions that on several occasions in the mid-1980s, Jones admitted to them that he was at that time involved in fixing chlorine prices in the Southeast. Loraine Cassassa testified that Jones told her that he "got together with the people [who were] submitting the bids and they knew what each other were going to bid before that bid was ever submitted." She also testified that Jones told her that he knew such conduct was illegal, but that "[t]hat's how big business goes." Peter Cassassa gave substantially identical testimony.

The district court excluded the testimony of the Cassassas as "hearsay." See infra note 10; Harcros, 877 F.Supp. at 1518-19, 1538. We conclude that the court erred as a matter of law by making this determination and therefore abused its discretion. Accordingly, we reverse the ruling excluding that testimony.

Under the Federal Rules of Evidence, " '[h]earsay' 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). In general, "[h]earsay is not admissible except as provided by [the federal] rules...." Fed.R.Evid. 802. A "statement by [a] party's agent or servant concerning a matter within the scope of the agency or employment, made during the existence of the relationship," however, is deemed an admission by a party opponent and is excluded from the definition of hearsay. Fed.R.Evid. 801(d)(2)(D); see Zaben v. Air Prods. & Chems., Inc., 129 F.3d 1453, 1456 (11th Cir.1997).

Robert Jones, as president of Jones Chemicals from 1986 to 1989, and as the chairman and CEO of the company from 1986 to 1993, clearly was an "agent or servant" of the company.9 Moreover, the record on appeal establishes that Jones set chlorine prices for Jones Chemicals throughout the period of the alleged conspiracy. His purported statements regarding Jones Chemical's chlorine pricing practices thus "concern[ed] a matter within the scope of [his] agency or employment, made during the existence of the relationship." See, e.g., Guccione v. Hustler Magazine, Inc., 632 F.Supp. 313, 320 (S.D.N.Y.), rev'd on other grounds, 800 F.2d 298 (2d Cir.1986) (statements made by chief executive officer of defendant corporation, within scope of his authority, held admissible). Jones' purported statements to the Cassassas are therefore admissible as non-hearsay party admissions under Fed.R.Evid. 801(d)(2)(D).10

The appellants argue that the Cassassas' testimony ought also to be admitted against the other defendants, on the ground that Jones' purported statements were made "during the course and in furtherance of the conspiracy" and therefore fall within the exemption contained in Rule 801(d)(2)(E). Declarations by one defendant in a conspiracy case may be admissible against other defendants as non-hearsay upon sufficient showing that the statement was made by a co-conspirator during the course and in furtherance of the conspiracy. See Fed.R.Evid. 801(d)(2)(E); Bourjaily v. United States, 483 U.S. 171, 175-76, 107 S.Ct. 2775, 2778-79, 97 L.Ed.2d 144 (1987); United States v. Young, 39 F.3d 1561, 1571 (11th Cir.1994). "For a declaration by one defendant to be admissible against other defendants ..., the [plaintiffs] must establish by a preponderance of the evidence: (1) that a conspiracy existed, (2) that the defendant and the declarant were members of the conspiracy, and (3) that the statement was made during the course and in furtherance of the conspiracy." United States v. Van Hemelryck, 945 F.2d 1493, 1497-98 (11th Cir.1991); see also, e.g., United States v. Byrom, 910 F.2d 725, 734 (11th Cir.1990); United States v. Allison, 908 F.2d 1531, 1533 (11th Cir.1990) (citing Bourjaily, 483 U.S. at 175, 107 S.Ct. at 2778-79). In determining the admissibility of co-conspirator statements, the court may consider both the co-conspirator's hearsay statement and independent external evidence. See Bourjaily, 483 U.S. at 181, 107 S.Ct. at 2781; United States v. Chestang, 849 F.2d 528, 531 (11th Cir.1988).

This circuit applies "a liberal standard in determining whether a statement is made in furtherance of a conspiracy." United States v. Santiago, 837 F.2d 1545, 1549 (11th Cir.1988). The statement need not be necessary to the conspiracy, but must only further the interests of the conspiracy in some way. See United States v. Caraza, 843 F.2d 432, 436 (11th Cir.1988) (per curiam). Statements made to solicit membership or participation in the conspiracy, for example, see United States v. Montes-Cardenas, 746 F.2d 771, 780 (11th Cir.1984), or statements explaining the conspiracy to a new member, see United States v. Reyes, 798 F.2d 380, 384 (10th Cir.1986), are made in furtherance of the conspiracy. The determination of whether a statement is made in furtherance of a conspiracy is a finding of fact subject to review for clear error. See United States v. Ayarza-Garcia, 819 F.2d 1043, 1050 (11th Cir.1987).

Jones' purported statements do not satisfy even this liberal standard. The purported statements were made to friends, who were neither involved in the alleged conspiracy nor invited to participate therein, over drinks or on the golf course. The statements could not have furthered the interests of the alleged conspiracy in any way. A statement that merely discloses the existence of a conspiracy to a non-conspirator, that merely "spills the beans," with no intention of recruiting the auditor into the conspiracy does not further the conspiracy. See United States v. Posner, 764 F.2d 1535, 1538 (11th Cir.1985) (holding that a letter written by a co-conspirator, containing preliminary appraisals of real estate, was not made in furtherance of a conspiracy to overvalue the real estate and thus was not admissible as the statement of a co-conspirator because the letter was not written to conceal the conspiracy and served only to disclose the scheme); see also United States v. Moss, 138 F.3d 742, 744 (8th Cir.1998) (holding that "[a] statement made in furtherance of a conspiracy 'must somehow advance the objectives of the conspiracy, not merely inform the listener of the declarant's activities,' " in order to be admissible under Rule 801(d)(2)(E) (citation omitted)).

We conclude that the district court did not err in finding that Jones' purported statements were not made in furtherance of the alleged conspiracy, and that the Cassassas' testimony is therefore not admissible against the alleged co-conspirators. Because Jones' purported statements were non-hearsay party admissions, however, we conclude that the statements do fall within the exception contained in Rule 801(d)(2)(D), and that the Cassassas' testimony is therefore admissible against Jones Chemicals.

The district court also excluded as inadmissible hearsay a typewritten notation on a bid tabulation compiled by one of the appellant municipal entities, the Board of the Mobile Water and Sewer Commission. The bid tabulation lists the bids received by Mobile for a chlorine contract in April of 1987, and shows that Industrial Chemicals and Jones Chemicals submitted tie bids for the contract in question. The typewritten notation on the bid tabulation sheet, which appears next to the Industrial bid, reads: "This is a complimentary bid for Jones. As per O.W. Caine, Sales Manager, pass contract on to Jones Chem." Caine was a sales manager for Industrial. The appellants assert that this notation reflects Caine's, and hence Industrial's, intention to forgo the Mobile contract in order to maintain the distribution of contracts established by the alleged conspiracy.11

The district court excluded the notation as hearsay, apparently on the ground that it did not qualify as a party admission. See Harcros, 877 F.Supp. at 1520. We do not reach the question of whether the district court erred in excluding the notation, because the notation adds nothing to Caine's affidavit testimony, discussed infra, for purposes of summary judgment.12

The district court also excluded an affidavit offered by Caine, and provided numerous reasons for doing so. See Harcros, 877 F.Supp. at 1520. Portions of the affidavit, the court stated, were "ambiguous" because "none of [the affidavit] testimony establish[ed] conspiracy." The court also concluded that "[t]he other portions of Mr. Caine's affidavit add[ed] nothing" because they were "inadmissible hearsay" and because the affidavit could not "stand alone."

All of these grounds for excluding Caine's affidavit testimony are erroneous. Questions regarding the weight of the affidavit testimony, such as whether the affidavit is "ambiguous," are not matters for consideration by the court on summary judgment. The factfinder at trial will decide whether to lend credence to the affidavit information. With regard to the portions of the affidavit that the court ruled were "inadmissible hearsay," we believe the court erred in its determination. As noted in part II.A.1, supra, " '[h]earsay' 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.Ev

id. * 561 801(c). No part of Caine's affidavit fits this definition. Caine testifies in his affidavit regarding the withdrawn Mobile bid, bidding practices at Industrial, and bidding practices at Harcros--all matters in which he personally participated or which he personally observed. At no point in theaffidavit does Caine relate any statement made by anyone that constitutes inadmissible hearsay.13 The district court therefore abused its discretion in excluding Caine's affidavit testimony. Consequently, we conclude that this testimony is admissible in its entirety.

The district court also excluded the testimony of Barbara Krysti, who offered testimony against Harcros. See Harcros, 877 F.Supp. at 1520-21. Barbara Krysti is the widow of Lloyd Krysti, who was a sales manager at Harcros. Barbara Krysti stated in an affidavit that

[i]n 1987 or 1988, Lloyd found out that Joe Ragusa [ (Harcros' vice-president for the Southeast) ] was getting together with his competitors and fixing the price of chlorine before bids were submitted. Lloyd's reaction to me was that Joe was crazy for doing this and that it was illegal and that he could go to jail.... Lloyd first told me about the price fixing in 1988. We talked about it several times after that.

The proffered testimony is double hearsay; Barbara Krysti relates Lloyd Krysti's account of what Joe Ragusa said.14 Such "hearsay included within hearsay is not excluded under the hearsay rule if each part of the combined statements conforms with an exception to the hearsay rule provided in these rules." Fed.R.Evid. 805; see, e.g., Mahlandt v. Wild Canid Survival and Research Ctr., Inc., 588 F.2d 626, 630 (8th Cir.1978). Because chlorine pricing and sales were within the scope of Joe Ragusa's employment with Harcros, Ragusa's statements to Lloyd Krysti clearly fall within the party admission exception to the hearsay rule.

Lloyd Krysti's statements to Barbara Krysti, however, do not fall within any exception to the hearsay rule. The record establishes that chlorine pricing was not substantially within the scope of Lloyd Krysti's employment. Lloyd Krysti was involved in the pricing and sales of other chemicals and was rarely and only ministerially involved in chlorine sales. Lloyd Krysti did not set prices for chlorine. Indeed, the plaintiffs themselves assert that Joe Ragusa was solely responsible for setting chlorine prices in Alabama, and none of the many Harcros documents in the record indicate otherwise. On the contrary, in a 1984 memorandum, Ragusa severely upbraided several Harcros sales managers who set chlorine prices without his approval.

Because the content of Lloyd Krysti's statements did not concern a matter within the scope of his employment or agency, they do not fall within the party admission exception in Rule 801(d)(2)(D). See Wilkinson, 920 F.2d at 1565-66. In addition, Lloyd Krysti's statements were not made in furtherance of the alleged conspiracy, but "merely informed" Barbara Krysti--a non-conspirator--of the existence of the alleged conspiracy. See Moss, 138 F.3d at 744; cf. Fed.R.Evid. 801(d)(2)(E). Because Lloyd Krysti's statements to Barbara Krysti do not fall within any exception to the hearsay rule, we affirm the district court's ruling excluding the testimony of Barbara Krysti.

We next turn to the district court's rulings on the admissibility of the plaintiffs' proffered expert testimony. The district court excluded the testimony of Perry Garner, a certified public accountant. Garner offered data and testimony regarding costs borne and profits garnered by the defendants in the Alabama chlorine market, and also verified the data included in a database prepared by another of the plaintiffs' experts, statistician James McClave. McClave offered data showing, and testimony regarding the statistical significance of, market shares in the Alabama chlorine market, incumbency rates (i.e., the frequency with which companies retained chlorine contracts with particular municipalities from year to year), the frequency of tie bids in the market, prices bid by the defendants, winning bid prices, and costs borne by the defendants. The district court excluded McClave's testimony, in its entirety, as well. The data compiled by McClave were also used by Dr. Robert Lanzillotti, an economist who offered deposition testimony as well as a report regarding the economic structure of the Alabama chlorine market and the likelihood, from an economic standpoint, that a price-fixing conspiracy existed in that market. The district court criticized Lanzillotti's testimony at length, see Harcros, 877 F.Supp. at 1524-28, 1530-32, but did not exclude the evidence. See id. at 1538. The defendants do not challenge the district court's denial of their motion to exclude Lanzillotti's testimony.

Federal Rule of Evidence 702,15 as explained by the Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589, 113 S.Ct. 2786, 2794-95, 125 L.Ed.2d 469 (1993), and its progeny, controls determinations regarding the admissibility of expert testimony. Expert testimony may be admitted into evidence if: (1) the expert is qualified to testify competently regarding the matters he intends to address; (2) the methodology by which the expert reaches his conclusions is sufficiently reliable as determined by the sort of inquiry mandated in Daubert;16 and (3) the testimony assists the trier of fact, through the application of scientific, technical, or specialized expertise, to understand the evidence or to determine a fact in issue. See Fed.R.Evid. 702; Daubert, 509 U.S. at 589, 113 S.Ct. at 2794 (holding that "under the [Federal] Rules the trial judge must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable."); Joiner v. General Elec. Co., 78 F.3d at 529-30, rev'd on other grounds, 522 U.S. 136, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997) (stating that Rule 702 requires that the expert be qualified and that his testimony assist the trier of fact); see also Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2