Bona Law Secures Major Victory in Tenth Circuit Monopolization Appeal
September 7, 2023
The United States Court of Appeals for the Tenth Circuit overturned a district court decision dismissing a federal monopolization claim brought by Bona Law client Chase Manufacturing d/b/a Thermal Pipe Shields (TPS). In its published opinion, the Tenth Circuit held that the district court erred in granting summary judgment to monopolist Johns Manville (JM), which supplied nearly 100% of the relevant market and “threatened to stop selling needed products to its customers if they bought from a new market entrant offering a superior product for less money.”
That new market entrant is TPS, an insulation company that has been in business for decades and in 2018 sought to introduce a competing product to the market. Like JM, TPS sells calcium silicate (calsil), a specialized type of thermal pipe insulation—an “important product in American industry”—mainly to insulation distributors, who resell it to downstream purchasers. The Tenth Circuit pointed to the many superior attributes of TPS’s calsil, which it noted was priced “20 to 25% less than Johns Manville’s” and is “stronger and more flexible.” The Tenth Circuit quoted customers as saying that the “TPS product is a superior product” and “top of the line.” The decision also highlighted internal JM emails recognizing that JM’s calsil had no competitive edge over TPS’s “less expensive and superior calsil.”
When TPS challenged JM’s monopoly by competing on the merits of its product, JM responded by “threatening distributors that it would not sell to them if they bought TPS’s competing calsil.” These threats applied to JM’s calsil and a wide variety of other insulation products. JM also “denigrat[ed] the quality of TPS’s calsil to distributors by falsely raising concerns about asbestos and silica particles.”
Upon learning this, TPS sued JM alleging violations of federal antitrust laws. After several years of litigation, the district court granted summary judgment in JM’s favor. The Antitrust Division of the Department of Justice filed an amicus brief in the appeal, noting that the district court used an inapplicable legal standard to evaluate the threats JM made to its customers, which if allowed to stand would “handcuff antitrust courts and shelter anticompetitive conduct.”
In reversing and remanding to the district court, the Tenth Circuit ruled that TPS did meet its summary judgment burden to establish a monopolization claim against JM under Section 2 of the Sherman Act. Specifically, TPS presented “more than enough evidence,” including expert testimony, which showed that JM enjoys monopoly power and “controlled prices in the domestic calsil market.” The Tenth Circuit held that this power made it so that JM’s conduct “harms distributors and end customers alike,” because, as a result, “the supply chain had little choice but JM’s more expensive and inferior calsil.”
The Court also held that the evidence offered by TPS was sufficient to show that JM maintained or attempted to maintain its monopoly—not on the merits—but by engaging in exclusionary conduct. The Tenth Circuit noted JM’s “coercive behavior toward its distributors” and “pressure tactics” like threatening to terminate business with any distributor who purchased TPS calsil—and that these “threats had the desired effect.” The Tenth Circuit relied on evidence that JM “likely knew that its threats would spur its distributors into action,” and noted that JM lacked any explanation “how its conduct fostered competition.” And given the evidence showing JM’s coercion—any “procompetitive assumption” would be “thrown out the window” anyway.
The Tenth Circuit also rejected JM’s argument that no evidence showed that distributors stopped purchasing TPS calsil altogether: “what matters is not whether JM succeeded in totally excluding TPS from the calsil market but whether JM’s actions substantially foreclosed TPS from the market and impeded TPS’s market growth.” The Tenth Circuit added that the evidence and common sense dictate that “when the sole domestic manufacturer of a product in a two-firm market threatens to withhold that product from distributors, distributors will be wary to engage with the monopolist’s competitor.”
As for the relevant legal standard, the Tenth Circuit held that the district court improperly imported its legal standard from “refusal-to-deal-with-rivals caselaw.” But that standard had no bearing here and should not have been extended outside its context (like that in Aspen Skiing) because the Tenth Circuit has “never extended refusal-to-deal-with-rivals analysis outside that situation” and TPS’s case was not such a case. Instead, the Tenth Circuit agreed with TPS that the classic Supreme Court decision in Lorain Journal provides the appropriate framework within which to analyze JM’s threats.
Finally, the Tenth Circuit held that TPS had shown antitrust injury and harm to competition, citing an internal JM email stating that JM calsil “had no competitive quality or price advantage” over TPS’s product and that TPS could “significantly erode” its market share. Despite such acknowledgment, JM deprived customers of the choice to buy TPS’s calsil.
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Following publication of the Tenth Circuit’s decision, JM requested a rehearing en banc. That request was denied and the matter remanded for further proceedings in the district court.
Bona Law’s team representing TPS is led by Alexandra Shear and Luke Hasskamp. JM is represented in the case by Gibson Dunn.
You can read TPS’s opening brief here and its reply brief here.