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In re Mercedes-Benz Antitrust Litigation

July 26, 2006


The opinion of the court was delivered by: Walls, Senior District Judge



Defendants Mercedes-Benz USA, LLC ("MBUSA") and Mercedes-Benz Manhattan, Inc. ("MBM") move for summary judgment. The Court addresses these as well as various exclusionary motions filed by both plaintiffs and defendants.


The Court previously summarized the basic facts of this case in its opinion reported at 157 F. Supp. 2d 355 (D.N.J. 2001). In brief, plaintiffs allege that MBUSA, the national distributor of Mercedes-Benz automobiles, along with twenty-four of its dealers in the New York Region and the accounting firm Sheft Kahn & Co., LLP ("Sheft Kahn"), engaged in a per se unlawful price-fixing conspiracy to limit discounting of new automobiles sold or leased in the New York Region between February 1992 and August 1999. The New York Region includes dealers in New York City as well as suburban New York, New Jersey, and Connecticut. MBM is wholly-owned by MBUSA and is the only dealer-defendant in this case that is not an independent franchise. According to plaintiffs, The conspiracy had two central aspects. The first involved the Sheft Kahn Group, consisting of New York Region dealers, including MBM, which: 1) created detailed reports of members' gross profits and pricing-related information, which were widely shared and discussed among the allegedly competing members, and 2) held meetings, attended by MBM, and which attendance by other dealers was encouraged and directed by MBUSA, involving extensive pricing-related discussions of historical and anticipated gross profits among supposed competitors, which allowed the co-

Conspirators to Determine Price-Levels at Which New Mercedes-Benz Vehicles Were Sold or Leased

The second aspect involved MBUSA's communications and directives to its New York Region dealers, which included discussions regarding "gross profit per vehicle" by MBUSA officials directly with New York Region dealers during regular, in-person visits to the dealers. These communications were an essential means of implementing, monitoring, and enforcing compliance with defendants' overall conspiracy of maintaining the price of new Mercedes-Benz vehicles at artificially inflated levels. The overall goal was to insure that all New York Region dealers were selling vehicles at as close to list price as possible in order to meet MBUSA's and the dealers' mutual 10% retained gross profit target and eliminate competition among New York Region dealers. (Opp'n Br. at 1-2.)

Plaintiffs have survived a motion to dismiss and have received class certification pursuant to Fed. R. Civ. P. 23(b)(3). Discovery is complete and settlements have been finally approved for six dealer-defendants and preliminarily approved for sixteen dealer-defendants as well as Sheft Kahn. MBUSA, MBM, and dealer-defendant Beifus Motors have not agreed to settle.

MBUSA now makes the following motions: (1) Motion for Summary Judgment; (2) Motion for Leave to File a Motion for Partial Summary Judgment Dismissing Claims of C-Class Plaintiffs; (3) First Motion in Limine; (4) Motion to Strike the Affidavit of John C. Beyer, Ph.D. Regarding Impact of Lessors of New Mercedes-Benz Vehicles; (5) Motion to Strike the Testimony and Opinion of John C. Beyer; and (6) Motion to Strike the Testimony and Opinion of Harris L. Devor. MBM makes a Motion for Summary Judgment only. Plaintiffs have filed: (1) Motion to Exclude Defendants from Introducing the Expert Report and Testimony of James A. Anderson and (2) Motion to Strike the Expert Testimony of Richard H. Kotzen.

Summary judgment is appropriate where the moving party establishes that "there is no genuine issue as to any material fact and that [it] is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). A factual dispute between the parties will not defeat a motion for summary judgment unless it is both genuine and material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). A factual dispute is genuine if a reasonable jury could return a verdict for the non-movant and it is material if, under the substantive law, it would affect the outcome of the suit. Id. at 248. The moving party must show that if the evidentiary material of record was reduced to admissible evidence in court, it would be insufficient to permit the non-moving party to carry its burden of proof. Celotex v. Catrett, 477 U.S. 317, 318 (1986).

Once the moving party has carried its burden under Rule 56, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts in question." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). To survive a motion for summary judgment, a non-movant must present more than a mere scintilla of evidence in his favor. Woloszyn v. County of Lawrence, 396 F.3d 314, 319 (3d Cir. 2005). The opposing party must set forth specific facts showing a genuine issue for trial and may not rest upon the mere allegations or denials of its pleadings. Shields v. Zuccarini, 254 F.3d 476, 481 (3d Cir. 2001). At the summary judgment stage the Court's function is not to weigh the evidence and determine the truth of the matter, but rather to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. In doing so, the Court must construe the facts and inferences in the light most favorable to the non-moving party. Curley v. Klem, 298 F.3d 271, 277 (3d Cir. 2002).


I. The 10% Retained Gross Profit Issue

In its First Motion in Limine, MBUSA seeks to exclude "all evidence of MBUSA's 10% retained gross profit objective from consideration in summary judgment and, if necessary, trial." (MBUSA's Br. at 14.) The basis for the motion is this Court's unpublished decision of July 11, 2005, affirming recommendations of the Special Master appointed to this case and overruling objections to the same. The Special Master issued a recommendation on March 3, 2005 in response to defendants' application for sanctions for plaintiffs' failure to respond to certain interrogatories. The recommendation was that, with the exception of newly discovered evidence, plaintiffs "should be barred from introducing evidence not referred to or alluded to in their interrogatory answers." (emphasis added). In support of his recommendation, the Special Master said:

I am concerned about trial by ambush. A party should not be permitted to hold back information, evidence or contentions when appropriate interrogatories have been propounded. The time to seasonably amend interrogatory answers has passed, except for newly unearthed or produced information such as the outstanding depositions and expert reports. . . . I realize that the generality of plaintiffs' responses makes this recommendation difficult to enforce. My intent is to prohibit plaintiffs from coming forward with evidence, for example, that in February 1997 dealer X and dealer Y agreed not to discount certain models by more than 2 percent. The time to produce this kind of detailed information has pas[sed]. (Cooper Cert. Ex. 5 at 2.) In a supplemental recommendation of March 8, 2005, the Special Master further articulated his reservations:

My concern is that defendants not be confronted with the so-called "smoking gun" -a document not previously disclosed that provides clear, specific evidence of price fixing. As I see it, plaintiffs' case, as disclosed, consists of an effort to prove price fixing by reference to a variety of facts that, when linked together, provide reasonable support for the conclusion that price fixing occurred. Plaintiffs' interrogatory answers refer to and allude to the categories of such evidence.

(Cooper Cert. Ex. 6.) The Court's adoption of the Special Master's recommendation was made pursuant to Fed. R. Civ. P. 37(b)(2)(B) and 37(d), which allow the Court to sanction a party that fails to answer interrogatories with "such orders in regard to the failure as are just," including "[a]n order refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting that party from introducing designated matters in evidence." The question now presented to the Court, then, is whether plaintiffs' invocation of MBUSA's 10% gross profit objective is permissible at summary judgment and trial or whether it runs afoul of the Court's earlier restrictions and must be excluded.

MBUSA argues that "10%" appears nowhere in plaintiffs' interrogatory responses and that it was neither "referred to or alluded to" in those responses. MBUSA also contends that it has been "sandbagged," causing severe prejudice. There is apparently no dispute that plaintiffs did not explicitly cite the 10% figure in the interrogatory responses, so the Court must determine whether plaintiffs referred or alluded to this figure and whether there is a danger of "trial by ambush" that would unduly prejudice MBUSA.

In support of their invocation of the 10% retained gross profit objective, plaintiffs make a number of arguments. First, they argue that MBUSA cannot be ambushed by its own documents produced during discovery and well-known to it. Second, plaintiffs contend that the interrogatory answers do refer or allude to the 10% objective. Third, they argue that MBUSA opened the door to the issue by explicitly referring to the 10% objective in its brief in support of the summary judgment motion. Finally, plaintiffs claim that MBUSA is not prejudiced by the consideration of the 10% objective.*fn1 The Court examines each of these arguments in turn.*fn2

On the first point, plaintiffs argue that MBUSA produced documents that demonstrate the 10% gross profit objective, that MBUSA admits the objective, and that MBUSA attorneys were present at more than twenty depositions during which the objective was discussed. MBUSA's essential argument in response is that it has always known of and admits the 10% objective, but was unaware of plaintiffs' theory that the objective was also the goal of the alleged price-fixing conspiracy. Since no party argues that a unilateral objective of 10% retained gross profits on the part of MBUSA would constitute an antitrust violation, MBUSA's distinction is an important one. That MBUSA was well aware of its own 10% objective does not mean that plaintiffs had no responsibility to fully articulate their theory in interrogatory answers. Whether plaintiffs adequately fulfilled their responsibilities in responding to interrogatories and whether MBUSA is unduly prejudiced by any failure in this regard are the material questions before the Court.

In their second argument, plaintiffs contend that they "referred to or alluded to" the 10% figure in their interrogatory answers. Plaintiffs' material interrogatory response, stating the goals of the price-fixing conspiracy, reads:

The goals of the price-fixing conspiracy was [sic] to raise, fix, maintain and/or stabilize the price of all brands of new Mercedes-Benz vehicles sold or leased in the New York Region during the relevant time period (i.e., February of 1992 through August of 1999) above levels that would have applied but for the conspiracy, and to restrict or eliminate competition among New York Region MB Centers in the sale or lease of new Mercedes-Benz vehicles. (Cooper Cert. Ex. 4 at 5.) In response to another interrogatory, plaintiffs further describe the alleged conspiracy:

The price-fixing conspiracy was a single, overarching conspiracy to reduce, and if possible eliminate, discounting from MBUSA's manufacturers' suggested retail price by New York region MB centers in connection with the sale and leasing of all brands of new Mercedes-Benz vehicles. The participants of the price-fixing conspiracy did not specify in advance the precise amount or range of percentages by which discounting would be eliminated or reduced. The purpose and effect of the conspiracy was to reduce the overall level of discounting from defendant MBUSA's specified recommended retail price for all new Mercedes-Benz vehicles.

The defendant dealers, MBUSA and Sheft Kahn, collectively participated in this price-fixing conspiracy through various means and at various times, all as specified in Plaintiffs' Prior Interrogatory Answers. . . . (Cooper Cert. Ex. 4 at 2.) "Plaintiffs' Prior Interrogatory Answers" apparently did not cite the 10% figure, so the Court is left to determine whether these general answers reasonably refer or allude to the 10% theory. As the Special Master noted with prescience, "the generality of plaintiffs' responses makes [my March 3, 2005] recommendation difficult to enforce." His March 8, 2005 supplemental recommendation provides valuable explication, however: "As I see it, plaintiffs' case, as disclosed, consists of an effort to prove price fixing by reference to a variety of facts" and "Plaintiffs' interrogatory responses refer to and allude to the categories of such evidence." As this Court sees it, the 10% figure is one of the various facts which plaintiffs' interrogatory responses refer and allude to. While plaintiffs' responses lack detail, the Court previously accepted them subject to limitation. That limitation was primarily concerned with a "smoking gun" that would "ambush" defendants by providing "clear, specific evidence of price fixing." The Court does not believe that plaintiffs' 10% theory amounts to a "smoking gun," and it is in no way clear evidence of price-fixing. If plaintiffs' vague interrogatory responses have truly caused MBUSA to be "ambushed," however, the Court would consider enforcing its sanction. A successful ambush requires both surprise and resultant injury, so the Court must determine whether MBUSA has been both surprised and injured.

Plaintiffs' contend that MBUSA has feigned surprise and was well aware of plaintiffs' intention to use the 10% objective as an element of the price-fixing conspiracy. The primary argument made on this point is that MBUSA addressed the 10% objective in its summary judgment papers. MBUSA said the following in its summary judgment brief:

Plaintiffs' "evidence" of what they have termed MBUSA's "complicity" in the alleged price-fixing agreement seems to fall into three categories: (1) MBUSA's announcement of a 10% retained gross profit target for its national dealer network coupled with communications market managers had with dealers regarding dealership profitability; (2) MBUSA's enforcement of its nationwide guidelines regarding price advertising; and (3) MBUSA's connections to the Sheft Kahn group. (MBUSA's Summ. J. Br. at 30.) Obviously, MBUSA anticipated that plaintiffs would use the 10% objective to link it to the overall alleged price-fixing conspiracy, and admits as much:

MBUSA did anticipate that Plaintiffs might try to misuse the 10% target in an attempt to connect MBUSA to a price-fixing conspiracy for which Plaintiffs, hypothetically, might have proof. Thus, in its memorandum in support of its summary judgment motion, MBUSA briefly mentioned that there is no evidence that the 10% target was anything but aspirational and that communications of targets and pricing information between manufacturers and their dealers has been expressly sanctioned by the Supreme Court. (MBUSA's Br. at 13 n.6.) MBUSA cannot credibly argue that plaintiffs have suddenly produced a "smoking gun" that has taken it by surprise. Rather, it seems that plaintiffs have used facts well-known to MBUSA to refine the overall price-fixing conspiracy theory that was generally articulated in the interrogatory responses. No new evidence has been produced and plaintiffs' contention does not substantially alter the overall theory. The burden remains with the plaintiffs to link the admitted 10% objective to the alleged conspiracy. Because plaintiffs' interrogatory responses are undoubtedly vague, however, the Court will examine the nature of MBUSA's alleged injury to determine whether equitable concerns require exclusion.

MBUSA claims that the Court's consideration of the 10% theory would cause "severe prejudice" because defendants were unable to conduct discovery on the 10% theory, were denied the opportunity to evaluate and challenge the theory during the expert discovery phase, and were unable to challenge the theory "head-on" in their motion for summary judgment. Plaintiffs counter that MBUSA has suffered no injury because they did question plaintiffs' witnesses, including "star" witness Tamim Shansab, about the 10% objective; they could have asked plaintiffs' experts about it; and they did address it in their summary judgment papers. While the Court accepts that MBUSA would likely have spent more time addressing the 10% theory had plaintiffs articulated it in their interrogatory responses, the Court does not see how defendants have been substantially prejudiced. They have more fully responded to the theory in their reply brief, will have further opportunity to do so at trial, and have had the motivation throughout discovery to separate the admitted 10% objective from the alleged price-fixing conspiracy and to demonstrate that there was no agreed-upon target as part of the alleged price-fixing conspiracy. To the extent that MBUSA has suffered any injury, it is slight.

To conclude, the Court finds that the concerns underlying its earlier sanction are not substantially implicated here. While plaintiffs could have been more forthright in articulating their theory, they have not engaged in "trial by ambush." MBUSA has not been surprised or injured in a manner that would justify the exclusionary remedy that it seeks. MBUSA's First Motion In Limine is denied.

II. The Experts

Under Fed. R. Civ. P. 702, "[i]f scientific, technical, or other specialized knowledge will assist the trier of fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case." The Third Circuit has said that Rule 702 ...

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