Flovac, Inc. v. Airvac, Inc. , 817 F.3d 849 ( 2016 )

United States Court of Appeals
For the First Circuit
No. 15-1571
FLOVAC, INC.,
Plaintiff, Appellant,
v.
AIRVAC, INC. and MARK JONES,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Salvador E. Casellas, U.S. District Judge]
Before
Lynch, Selya and Lipez,
Circuit Judges.
Roberto Ruiz Comas, with whom RC Legal & Litigation Services,
P.S.C. was on brief, for appellant.
Zachary A. Madonia, with whom David M. Schiffman, Courtney A.
Hoffmann, Sidley Austin LLP, Rafael Escalera Rodriguez, and
Reichard & Escalera were on brief, for appellees.
April 4, 2016
SELYA, Circuit Judge. That an antitrust case may turn
on the definition of the relevant market is a common-sense
proposition. In this instance, the summary judgment record
disclosed a relevant market much broader than the plaintiff claimed
— a market in which the defendant lacked any semblance of market
dominance. Finding the plaintiff's antitrust claims wanting and
its companion claims equally impuissant, the district court
entered summary judgment in favor of the defendant. After careful
consideration, we affirm.
I. BACKGROUND
Plaintiff-appellant Flovac, Inc. (Flovac) and defendant-
appellee Airvac, Inc. (Airvac) both fabricate vacuum sewer
systems. Such systems are among the options available to transfer
sewage from various sources to wastewater treatment facilities.
There is money to be made in providing this essential
infrastructure to governmental units (especially municipalities)
and to developers.
In May of 2012, Flovac filed suit against Airvac and
Airvac's president, Mark Jones, in the United States District Court
for the District of Puerto Rico. Flovac sought relief under both
federal and Puerto Rico antitrust laws, see 15 U.S.C. §§ 1-2; P.R.
Laws Ann. tit. 10, §§ 258, 260, alleging that Airvac's conduct in
marketing its vacuum sewer systems was anticompetitive. The
specifics of the challenged behavior are irrelevant here; for
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present purposes, it suffices to say that the alleged
anticompetitive conduct occurred in the course of Airvac's
solicitation of municipalities interested in installing new sewer
systems. According to Flovac, Airvac lobbied those prospective
customers both to choose vacuum systems and to impose project
specifications favorable to its proprietary wares.
Flovac's complaint also contained claims of tortious
interference with advantageous economic relations, brought against
Airvac and Jones under Puerto Rico law. See P.R. Laws Ann. tit.
31, § 5141. These claims focused on a specific vacuum sewer system
installation in Toa Baja, Puerto Rico (the Ingenio Project). Both
Flovac and Airvac competed for that project; and though the Puerto
Rico Aqueduct and Sewer Authority (PRASA) solicited bids for a
vacuum sewer system with specifications modeled on Airvac's
system, the general contractor who won the bid chose Flovac to
provide the vacuum system components.
Airvac did not go quietly into this bleak night. The
Ingenio Project was funded in part through the American Recovery
and Reinvestment Act of 2009 (ARRA), Pub. L. No. 111-5, 123 Stat.
115, which contained certain "Buy American" provisions, mandating
that funded projects use only materials produced in the United
States, see id. § 1605. Jones — noting both the ARRA's mandate
and the stipulation in the project requirements that the component
parts for the system had to be purchased from a single manufacturer
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— wrote to PRASA in May of 2010 questioning the manufacturing
process for Flovac's system. PRASA halted Flovac's work
temporarily, but replied in June that it was satisfied that
Flovac's system complied with both the ARRA and the applicable
project requirements.
Airvac then raised the ARRA compliance issue in a letter
to the Environmental Protection Agency (EPA) — the agency tasked
with overseeing the "Buy American" requirements for the Ingenio
Project. EPA investigated the complaint and recommended that
Flovac implement some modifications to its manufacturing process.
Flovac complied. It thereafter completed the project, but not
without protracted delays (allegedly attributable to Airvac's
meddling).
After a series of discovery squabbles (not relevant
here), Airvac moved for summary judgment. See Fed. R. Civ. P.
56(a). Flovac opposed the motion. In a thoughtful rescript, the
district court granted summary judgment in Airvac's favor on all
claims. See Flovac, Inc. v. Airvac, Inc., 84 F. Supp. 3d 95, 107
(D.P.R. 2015). This timely appeal followed.
II. ANALYSIS
Our standard of review is de novo, which requires us to
take the facts in the light most agreeable to the summary judgment
loser and to draw all reasonable inferences from those facts in
that party's favor. See Tropigas de P.R., Inc. v. Certain
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Underwriters at Lloyd's of London, 637 F.3d 53, 56 (1st Cir. 2011).
Summary judgment is permissible only when examination of the record
in that light reveals "no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law." Fed.
R. Civ. P. 56(a).
A party moving for summary judgment must identify for
the district court the portions of the record that show the absence
of any genuine issue of material fact. See Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). Once such a showing is made,
"the burden shifts to the nonmoving party, who must, with respect
to each issue on which [it] would bear the burden of proof at
trial, demonstrate that a trier of fact could reasonably resolve
that issue in [its] favor." Borges ex rel. S.M.B.W. v. Serrano-
Isern, 605 F.3d 1, 5 (1st Cir. 2010). This demonstration must be
accomplished by reference to materials of evidentiary quality, see
Garside v. Osco Drug, Inc., 895 F.2d 46, 49 (1st Cir. 1990), and
that evidence must be more than "merely colorable," Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). At a bare minimum,
the evidence must be "significantly probative." Id. at 249-50.
The nonmovant's failure to adduce such a quantum of evidence
entitles the moving party to summary judgment. See Tobin v. Fed.
Express Corp., 775 F.3d 448, 450-51 (1st Cir. 2014).
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A. Antitrust Claims.
Flovac has asserted claims under two separate provisions
of the Sherman Act: Section 1, which forbids conspiracies in
restraint of trade, and Section 2, which bars monopolization or
attempted monopolization of a particular area of commerce. See 15
U.S.C. §§ 1-2. Since Flovac's Section 1 claim is explicitly
limited to the rule of reason, see, e.g., Leegin Creative Leather
Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 885-87 (2007), all of
its antitrust claims require proof that Airvac exercises or could
exercise a threshold degree of market power, see Spectrum Sports,
Inc. v. McQuillan, 506 U.S. 447, 456 (1993); E. Food Servs., Inc.
v. Pontifical Catholic Univ. Servs. Ass'n, Inc., 357 F.3d 1, 5
(1st Cir. 2004); Coastal Fuels of P.R., Inc. v. Caribbean Petroleum
Corp., 79 F.3d 182, 195 (1st Cir. 1996).1 This analysis demands
consideration of the defendant's market power, that is, its power
to lessen or eliminate competition in the relevant market. See
Spectrum Sports, 506 U.S. at 456; E. Food Servs., 357 F.3d at 5;
Coastal Fuels, 79 F.3d at 196.
1 With respect to matters relevant to this appeal, Puerto
Rico's antitrust statute is coterminous with the Sherman Act. See
Podiatrist Ass'n, Inc. v. La Cruz Azul de P.R., Inc., 332 F.3d 6,
16 (1st Cir. 2003); Coastal Fuels, 79 F.3d at 195; Pressure Vessels
of P.R., Inc. v. Empire Gas de P.R., 137 P.R. Dec. 497, 508-13
(1994) (official translation, slip op. at 8-14). Thus, the
antitrust claims separately brought under Puerto Rico law rise or
fall with Flovac's Sherman Act claims and do not warrant
independent analysis.
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The definition of the relevant market is ordinarily a
question of fact, and the plaintiff bears the burden of adducing
enough evidence to permit a reasonable factfinder to define the
relevant market. See Coastal Fuels, 79 F.3d at 197. The relevant
market has two components: the relevant geographic market and the
relevant product market. See Spectrum Sports, 506 U.S. at 459; E.
Food Servs., 357 F.3d at 5-6.
The first part of the relevant market inquiry is not
controversial here. The parties agree that the relevant geographic
market is the continental United States and Puerto Rico.
Consequently, the inquiry in this case reduces to what the evidence
shows — or fails to show — about the scope of the relevant product
market.
Determining the scope of a product market begins with
examining the universe of products that are considered "reasonably
interchangeable by consumers for the same purposes." United States
v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 395 (1956). The
market is established by examining both the substitutes that a
consumer might employ and "the extent to which consumers will
change their consumption of one product in response to a price
change in another, i.e., the 'cross-elasticity of demand.'"
Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 469
(1992) (quoting du Pont, 351 U.S. at 400).
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These abecedarian principles are sufficient to resolve
the case at hand. In the court below, Flovac offered only a single
definition of the relevant product market: a product market
restricted to vacuum sewer systems. Airvac argued, however, that
the relevant product market is composed of all sewer systems
(including both vacuum and non-vacuum varieties). This disparity
is significant because Airvac's market share within the narrower
market envisioned by Flovac is around 87%, while its share of the
broader market is closer to 2%. An 87% market share would almost
certainly be a clear indication of market dominance, but a 2%
market share would be too puny to provide any semblance of market
power. See, e.g., Grappone, Inc. v. Subaru of New England, Inc.,
858 F.2d 792, 797 (1st Cir. 1988) (concluding that market share of
5.6% does not demonstrate market power).
To establish the lack of any material fact dispute about
the relevant product market, Airvac cites to uncontested evidence
that there is a variety of sewer system options that all serve the
same basic purpose; that prospective customers routinely consider
those other systems (along with vacuum systems) when deciding what
system to purchase; and that, in virtually every instance in which
Airvac bid for a project, it competed against these alternatives.
See Flovac, 84 F. Supp. 3d at 101. This evidence suffices, at the
very least, to shift the burden of adducing contrary facts about
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product interchangeability and cross-elasticity of demand. See
Borges, 605 F.3d at 5.
In an attempt to carry this burden and generate a
contested issue of material fact, Flovac points mainly to two
pieces of evidence. First, it relies on a statement from its
president, Héctor Rivera, to the effect that "[v]acuum sewer
systems as a particular technology [are] more suitable for
particular geographical and topographical areas than gravity or
other technologies." Second, Flovac submits that a review of the
record will reveal a list indicating that Flovac has completed
more projects in certain states than in others. The district court
found these offerings insufficient to stave off summary judgment,
and so do we.2
The proffered evidence is probative only as to Flovac's
view of the relevant product market; it does not speak at all to
the perspective of consumers. Seen in this light, the evidence
has no bearing on the key questions of product interchangeability
and cross-elasticity of demand from the perspective of consumers.
2 Although our holding does not depend on these shortcomings,
we note that both of these proffers are intrinsically deficient.
Rivera's statement is an undated declaration that does not comport
with statutory requirements. See 28 U.S.C. § 1746; see also Bonds
v. Cox, 20 F.3d 697, 702 (6th Cir. 1994). Similarly, the list of
projects was not mentioned in Flovac's statement of disputed
material facts and, thus, was properly excluded from the summary
judgment record by the district court. See D.P.R. Civ. R. 56(c),
(e); see also Cabán Hernández v. Philip Morris USA, Inc., 486 F.3d
1, 7-8 (1st Cir. 2007).
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Without such evidence, a jury could not find as a fact that the
product market should be defined along the lines that Flovac
proposes. It is the consumer's options and the consumer's choices
among them on which relevant market analysis ultimately depends.
See George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc.,
508 F.2d 547, 551 (1st Cir. 1974) ("A market definition which is
confined to the seller's perspective is not meaningful. By
necessity, definition of [a] 'market' must also focus on [the]
attitudes and reactions of consumers." (citations omitted)).
At any rate, Rivera's statement is nothing more than a
generalized suggestion that, from his coign of vantage, vacuum
systems are better suited to some geographic areas than to others.
The statement provides no specifics about what factors drive that
suitability calculation or how the calculation affects the choices
consumers make when considering what kind of sewer system to
purchase.
Flovac's reference to the list of completed projects is
singularly unhelpful. The mere fact that Airvac has completed
more projects in some states than in others, without elaboration,
tells us nothing of value about the relevant product market.
In an eleventh-hour effort to undermine the granting of
summary judgment, Flovac makes three further arguments. All of
them are fruitless.
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To begin, Flovac attempts to rely on statements made by
Airvac employees, in the course of pretrial depositions, which it
claims substantiate its theory that vacuum systems are uniquely
suited to certain topographical settings. Any such reliance is
doubly mislaid. For one thing, Flovac did not bring any of these
statements to the district court's attention in its summary
judgment papers. Given that omission, Flovac cannot now attempt
to resurrect those statements on appeal. See Cochran v. Quest
Software, Inc., 328 F.3d 1, 11 (1st Cir. 2003) ("[A] party may not
advance for the first time on appeal either a new argument or an
old argument that depends on a new factual predicate.").
If more were needed — and we doubt that it is — the
belatedly identified statements suffer from the same basic
infirmity as the Rivera statement and the list of projects. None
of those statements is probative of either the interchangeability
of different types of sewer systems or the cross-elasticity of
demand.
We need not tarry over Flovac's contention that the
district court blundered in failing to consider whether vacuum
sewer systems make up a submarket of the broader product market
for sewer systems. Even assuming, for argument's sake, that this
contention is properly before us,3 characterizing Flovac's claims
3 Flovac did not brief this contention at all in the district
court but, rather, voiced it for the first time at oral argument
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as involving a submarket is smoke and mirrors. The requirements
for establishing a relevant submarket are no different than those
for establishing a relevant market. See, e.g., PSKS, Inc. v.
Leegin Creative Leather Prods., Inc., 615 F.3d 412, 418 (5th Cir.
2010); Geneva Pharm. Tech. Corp. v. Barr Labs. Inc., 386 F.3d 485,
496 (2d Cir. 2004). Therefore, the evidentiary flaws identified
above would operate to defeat the proffered submarket claim as
well.
Finally, Flovac insists that the district court
erroneously imposed an ironclad requirement that a plaintiff
provide expert testimony in order to establish the relevant market.
But this case does not require us to take a position on the need
for expert testimony in a Sherman Act case, and we express no
opinion on that matter. Instead, we reject Flovac's argument as
sheer persiflage.
The district court observed that other circuits have
imposed such a rule, see, e.g., Bailey v. Allgas, Inc., 284 F.3d
1237, 1246 (11th Cir. 2002), and that expert testimony is a common
and useful device for establishing a product market, see Flovac,
84 F. Supp. 3d at 102; see also U.S. Healthcare, Inc. v.
Healthsource, Inc., 986 F.2d 589, 599 (1st Cir. 1993) ("In
on Airvac's motion for summary judgment. The district court
concluded that the contention was not timely raised, but
nonetheless proceeded to spotlight its deficiencies. See Flovac,
84 F. Supp. 3d at 104 n.1.
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practice, the frustrating but routine question how to define the
product market is answered in antitrust cases by asking expert
economists to testify."). But the court stopped there: it
explicitly acknowledged that this circuit has yet to adopt such a
rigid rule and prudently eschewed the application of any such
requirement. Rather, the court's analysis relied on the wholly
anodyne notion that Flovac had a responsibility to "introduce some
type of economic evidence, even if not done through an economic
expert." Flovac, 84 F. Supp. 3d at 102. Because Flovac failed to
fulfill that responsibility, its opposition to summary judgment
failed.
That ends this aspect of the matter. The scanty evidence
that Flovac has assembled amounts to nothing more than a gesture
in the direction of a potential factual dispute; and we have made
pellucid that "[s]peculation about mere possibilities" cannot ward
off the swing of the summary judgment ax. Tobin, 775 F.3d at 452.
On this record, the district court appropriately jettisoned
Flovac's antitrust claims.4
B. Tortious Interference.
This leaves Flovac's claim of tortious interference with
advantageous economic relations. Those claims, which are premised
4Airvac has served up a salmagundi of other defenses to the
antitrust claims. Given Flovac's failure to establish the relevant
market that it proposed, it is unnecessary for us to consider those
other defenses.
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on Jones's interactions with PRASA and EPA concerning the Ingenio
Project, stumble at the threshold: they are stale.
Flovac brought the tortious interference claims under
Puerto Rico's general tort statute. See P.R. Laws Ann. tit. 31,
§ 5141. Claims under this statute are subject to a one-year
limitations period, which begins to run "from the time the
aggrieved person had knowledge" of the harm. Id. § 5298(2). In
computing that period, "knowledge" consists of "notice of the
injury, plus notice of the person who caused it." Rodriguez-Suris
v. Montesinos, 123 F.3d 10, 13 (1st Cir. 1997) (quoting Colón
Prieto v. Géigel, 15 P.R. Offic. Trans. 313, 331 (1984)). The
district court concluded that, interpreting the facts most
hospitably to Flovac, these prerequisites were satisfied no later
than June of 2010, once PRASA halted work on the Ingenio Project
(shortly after receiving Jones's letter). See Flovac, 84 F. Supp.
3d at 106. Flovac, however, did not commence this suit until May
16, 2012 (nearly two years later).
Flovac does not dispute that it had notice of both the
injury and its source by June of 2010. Nevertheless, it tries to
execute an end run around the effect of that notice by resort to
the "continuing damages" doctrine, asseverating that under that
doctrine the limitations clock did not begin to tick until the
damage was complete. This asseveration amounts to nothing more
than magical thinking.
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Continuing damages cases are still subject to the
general rule that a "plaintiff may 'not wait for his [or her]
injury to reach its final degree of development and postpone the
running of the period of limitation according to his [or her]
subjective appraisal and judgment.'" Rodriguez-Suris, 123 F.3d at
13 (alterations in original) (quoting Ortiz v. Municipio de
Orocovis, 13 P.R. Offic. Trans. 619, 622 (1982)). It follows
inexorably that, even in continuing damages cases, "[t]he
determining factor is the moment when occurrence of the damage
begins, and that should be considered the starting point for the
limitations period, assuming that the aggrieved parties were aware
of the damage as of that moment and that they could have instituted
a cause of action." Galib Frangie v. El Vocero de P.R., Inc., 138
P.R. Dec. 560, 575 (1995) (official translation, slip op. at 8).
Flovac offers no persuasive counterweight to this
luminously clear precedent. To be sure, Flovac has cited two
Puerto Rico cases — but it has done so without submitting certified
translations of either opinion. Thus, those cases can form no
part of our deliberations. See 1st Cir. R. 30.0(e); see also Deniz
v. Municipality of Guaynabo, 285 F.3d 142, 148 (1st Cir. 2002).
The only other Puerto Rico case that Flovac cites is far off point:
it addresses limitations and damages questions stemming from an
ongoing nuisance. See Seda v. Miranda Hnos. & Co., 88 P.R. 344,
349-50 (1963).
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The short of it is that, as the district court ruled,
Flovac's tortious interference claims are time-barred.
III. CONCLUSION
We need go no further. We conclude that, on this sparse
record, Flovac has failed to show the existence of a genuine issue
of material fact as to the scope of the relevant product market.5
We likewise conclude that Flovac's tortious interference claims
are time-barred. It necessarily follows that the district court's
entry of summary judgment in Airvac's favor is unimpugnable.
Affirmed.
5
We take no view as to whether, on a better developed record,
a narrower product market might be shown to exist. That is a
matter for another day.
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