El Aguila Food Prod, et al v. Gruma Corp, et al

United States Court of Appeals
Fifth Circuit
F I L E D
May 17, 2005
Charles R. Fulbruge III
Clerk
In the
United States Court of Appeals
for the Fifth Circuit
_______________
m 04-20125
_______________
EL AGUILA FOOD PRODUCTS, INC.; LA RANCHERA FOOD PRODUCTS, INC.;
LA RENIA, INC.; ANITA’S MEXICAN FOODS CORP.; LA ESPIGA DE ORO, INC.;
GILBERT MORENO ENTERPRISES, INC.,
DOING BUSINESS AS LA MONITA;
LA FAVORITA INCORPORATED; MEX-PRO, INC.; LA TAPATIA TORTILLERIA, INC.;
MARBROS LLC,
DOING BUSINESS AS EL RANCHO;
FOOD-O-MEX CORP.,
DOING BUSINESS AS EL DORADO MEXICAN FOOD PRODUCTS;
R AND M PARTNERSHIP,
DOING BUSINESS AS CAPISTRAN TORTILLAS;
WALTER MOLINA,
DOING BUSINESS AS DOS MOLINOS TORTILLA HEAVEN;
CALIFORNIA MEXICAN FOODS, INC.; MEXICAN FOOD SPECIALITIES, INC.; SANITARY
TORTILLA MANUFACTURING, LTD.;
JFCW, INC.,
DOING BUSINESS AS CALIENTE DISTRIBUTORS;
AND
LOMPOC TORTILLA SHOP,
Plaintiffs-Appellants,
VERSUS
GRUMA CORPORATION, ET AL.,
Defendants,

-- 1 of 6 --

2
GRUMA CORPORATION,
INDIVIDUALLY DOING BUSINESS AS MISSION FOODS CORPORATION;
GRUMA CORPORATION TEXAS;
MISSION FOODS CORPORATION;
GUERRERO MEXICAN FOOD PRODUCTS, INC.;
AND
AZTECA MILLING LP,
Defendants-Appellees.
_________________________
Appeal from the United States District Court
for the Southern District of Texas
m 4:03-CV-427
_________________________
Before DAVIS, SMITH, and
DEMOSS, Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
The plaintiffs in this antitrust suit, seventeen
manufacturers of tortillas, appeal a take-
nothing judgment entered in favor of Gruma
Corporation (“Gruma”), a manufacturer of
tortillas and related food products, two of its
corporate divisions, and a related entity.
Because the plaintiffs failed to offer evidence
of damages and causation sufficient to sustain
a rational judgment in their favor, we affirm.
I.
The nature of this suit and the conduct
alleged to be anticompetitive are set forth in
the district court’s opinion,1 so we only briefly
summarize them here. Plaintiffs challenge
Gruma’s conduct downstreamSSits efforts to
obtain shelf and display space in retail outlets
and to induce retailers to promote and adver-
tise its tortillas. Specifically, plaintiffs chal-
lenge Gruma’s use of marketing agreements
with retailers whereby Gruma pays up-front
fees to retailersSSso-called “slotting fees”SSor
provides other price reductions or financial
incentives to obtain (and in part manage) shelf
space, advertising, and product promotion, as
well as Gruma’s conduct as it acts as a “Cate-
gory Captain,” a designation given a particular
* Pursuant to 5TH CIR. R. 47.5, the court has de-
termined that this opinion should not be published
and is not precedent except under the limited cir-
cumstances set forth in 5TH CIR. R. 47.5.4.
1 El-Aguila Food Prods., Inc. v. Gruma Corp.,
301 F. Supp. 2d 612 (S.D. Tex. 2003).

-- 2 of 6 --

3
product manufacturer by a retailer enabling the
manufacturer to assist the retailer in display
and promotional operations.2 Plaintiffs charge
Gruma with exclusive dealing in violation of
section 1 of the Sherman Act and section 3 of
the Clayton Act, monopolization and
attempted monopolization in violation of
section 2 of the Sherman Act, price discrimi-
nation in violation of the Robinson-Patman
Act, and violations of state antitrust laws.
Before trial, Gruma moved for summary
judgment, contending that plaintiffs could not,
as a matter of law, establish any antitrust
violations. Gruma also moved to exclude, on
Daubert grounds,3 the plaintiffs’ designated
expert witnesses on damages and causation.
The district court did not rule on Gruma’s
summary judgment motion before trial; it
entered an order indicating the motion would
be carried with trial. The court summarily
denied the motions to exclude but reserved the
right to reconsider the question on a renewed
objection at trial.
The case proceeded to trial before a jury.
After plaintiffs presented their fact witnesses,
they offered their damages expert, Kenneth
McCoin, to opine on the profits allegedly lost
as a consequence of Gruma’s challenged
conduct. Gruma renewed its Daubert objec-
tion, and after a complete proffer and extended
voir dire examination, the court sustained the
objection and excluded McCoin from
testifying. Plaintiffs then called their expert on
causation and antitrust injury, Gregory
Gundlach, to opine on the causal link between
Gruma’s challenged conduct and the damages
claimed; Gruma renewed its objection to his
testimony, and after another proffer and
examination, the court excluded Gundlach
from testifying.
The plaintiffs having no admissible evidence
of antitrust damages or causation on which a
verdict could be based, the court dismissed the
jury. Gruma moved for judgment as matter of
law and moved the court to consider its
pending motion for summary judgment.
Thereafter, in a published opinion, the court
articulated its reasons for excluding the
experts and granted a take-nothing judgment
in favor of Gruma, concluding that plaintiffs’
claims for money damages and injunctive relief
fail as a matter of law.
II.
Because the district court granted Gruma’s
motion for summary judgment and its motion
for judgment as a matter of law, our review is
de novo, and we may affirm on any basis
supported by the record.4 Private antitrust
liability under § 4 of the Clayton Act requires
a plaintiff to show (1) a violation of the anti-
trust laws, (2) the fact of damage, and (3)
some indication of the amount of damage.
E.g., Nichols v. Mobile Bd. of Realtors, Inc.,
675 F.2d 671, 675-76 (5th Cir. 1982). The
fact of damage requirement is one of causa-
tion; the plaintiff must show that the defen-
dant’s unlawful conduct was a material cause
of injury to its business. If the requisite causal
link is proven, “a more relaxed burden of proof
obtains for the amount of damages than would
2 See FEDERAL TRADE COMMISSION STAFF
REPORT, SLOTTING ALLOWANCES IN THE RETAIL
GROCERY INDUSTRY 12-13 (Nov. 2003).
3 See Daubert v. Merrell Dow Pharms., Inc.,
509 U.S. 579 (1993).
4 See Hugh Symons Group, plc v. Motorola,
Inc., 292 F.3d 466, 468 (5th Cir. 2002); Phillips
ex rel. Phillips v. Monroe County, 311 F.3d 369,
373 (5th Cir. 2002); LLEH, Inc. v. Wichita
County, Tex., 289 F.3d 358, 364 (5th Cir. 2002).

-- 3 of 6 --

4
justify an award in other civil cases.” Eleven
Line, Inc. v. N. Tex. State Soccer Ass’n, 213
F.3d 198, 207 (5th Cir. 2000). Though
relaxed, the standard for proving the quantum
of damages is not without bounds, for antitrust
damages may not be determined by guesswork
or speculation; “we must at least insist upon a
‘just and reasonable estimate of the damage
based on relevant data.’” Lehrman v. Gulf Oil
Corp., 464 F.2d 26, 46 (5th Cir. 1972)
(quoting Bigelow v. RKO Radio Pictures, 327
U.S. 251, 264 (1946)).5
III.
We do not pause to consider the district
court’s conclusion that the plaintiffs failed, as
a matter of law, to establish any harm to
competition rather than competitors in any
properly defined market and thus any violation
of the antitrust laws. Instead, affirmance is
compelled on more narrow grounds: the fail-
ure of proof on damages and causation.
A.
To prove actual damages, plaintiffs chiefly
relied on McCoin’s damages model. He used
a yardstick measure of lost profits whereby he
compared plaintiffs’ sales history with sales
data and growth projections from trade associ-
ation studies of national tortilla markets; he
applied a uniform gross margin to each of the
plaintiffs’ firmsSSthe major assumption being
that, absent Gruma’s illegal conduct, each of
the plaintiffs would have performed to the rate
of the market as a whole. See El-Aguila, 301
F. Supp. 2d at 624 n.14. The district court
found this model wholly unreliable insofar as it
attributed all of the measured lost profits to
the alleged antitrust injury and irrelevant
insofar as it was not in any respect anchored to
the specific agreements or marketing practices
challenged by plaintiffs. See id. at 624-26.
A district court has broad discretion in
deciding to admit or exclude expert testi-
mony,6 and excluding McCoin’s testimony was
anything but an abuse of discretion. Indeed,
McCoin made no effort to demonstrate the
reasonable similarity of the plaintiffs’ firms and
the businesses whose earnings data he relied
on as a benchmark.7 Similarly, McCoin did not
consider whether the plaintiffs’ firms were
even capable of handling the excess capacity
the projected rates of return necessarily entail.
Moreover, by characterizing all variances
between the trade association earnings data
and plaintiffs’ respective earnings as “lost
profits,” no allowance was made for losses
caused by any other factorSSincluding, for
example, reductions in shelf space attributable
to other dominant firms or new entrants into
the relevant markets, the plaintiffs’ own failure
to compete for shelf space on the terms sought
by retailers, and their lack of capacity or
efficiency relative to other firms.
In any event, even if McCoin’s testimony
5 Plaintiffs do not brief any salient differences
in the requirements under state law, opting to tie
the fate of their state law claims to their federal law
claims.
6 See Gen. Elec. Co. v. Joiner, 522 U.S. 136,
142 (1997); Guy v. Crown Equip., 394 F.3d 320,
325 (5th Cir. 2004).
7 Cf. Eleven Line, 213 F.3d at 208 (“An anti-
trust plaintiff who uses a yardstick method of de-
termining lost profits bears the burden of demon-
strating the reasonable similarity of the business
whose earnings experience he would borrow.”);
Lehrman v. Gulf Oil Corp., 500 F.2d 659, 667
(5th Cir. 1974) (“Although allowances can be
made for differences between the firms, the busi-
ness used as a standard must be as nearly identical
to the plaintiff’s as possible.”).

-- 4 of 6 --

5
had been admitted, it would not have provided
a sufficient basis on which the jury could have
arrived at a reasonable and just estimate of
actual damages.8 And the plaintiffs did not
present additional evidence sufficient to prove
damages. Because plaintiffs failed to offer
substantial evidence on which a principled
award of money damages could be based, the
district court did not err in granting judgment
in favor of Gruma on the claims for money
damages.
B.
Nor did plaintiffs provide sufficient evi-
dence to demonstrate that Gruma’s conduct
was a material cause of actual or threatened
damage (much less of the sort the antitrust
laws were designed to prevent).9 To prove
causation, plaintiffs relied primarily on Gund-
lach, whose view was that Gruma’s marketing
agreements and practice of paying slotting fees
resulted in exclusivity and permitted
preferential shelf-space and display positions in
a manner inconsistent with sales and thus
restricted competitors from the market.
The district court did not question Grund-
lach’s qualifications but excluded his testimony
because his opinions amounted to abstract
conclusions not adequately grounded in the
facts of the case. See El-Aguila, 301 F. Supp.
2d at 620-24. We cannot say this was an
abuse of discretion, for the record indicates
that Gundlach did not examine sales data from
retailers in the relevant markets to determine
whether space allocation among the various
brands was disproportionate to their sales, nor
did he attempt to tie space allocation to retail-
ers with which Gruma had marketing agree-
ments or paid slotting fees, or to quantify
either the extent of exclusivity Gruma alleg-
edly obtained or the extent of market foreclo-
sure allegedly caused by Gruma’s challenged
conduct.10 Moreover, Grundlach failed ade-
quately to account for alternative causes of
plaintiffs’ reduction in shelf space, most
notably their failure to compete for shelf space
by offering similar incentives to reduce the net
price paid for tortillas by retailers as well as
the growing success of retailers’ own private
lines of tortillas.
Beyond their designated expert, plaintiffs
point to circumstantial evidence and argue that
the jury could have inferred causation.
Though jury inferences of causation are in
some instances permissible, “the required
causal link must be proved as a matter of fact
and with a fair degree of certainty.” Alabama
v. Blue Bird Body Co., 573 F.2d 309, 317 (5th
Cir. 1978). And this is especially so where
plaintiffs admittedly lost shelf space (and thus
sales) because of salient factors distinct from
the challenged conduct such as increasing
competition in the tortilla category and their
refusal even to seek shelf space in some retail
8 Cf. MCI Communications v. Am. Tel. & Tel.
Co., 708 F.2d 1081, 1162 (7th Cir. 1983) (“When
a plaintiff improperly attributes all losses to a
defendant’s illegal acts, despite the presence of sig-
nificant other factors, the evidence does not permit
a jury to make a reasonable and principled estimate
of the amount of damages. This is precisely the
type of speculation or guesswork not permitted for
antitrust jury verdicts.”) (internal marks omitted).
9 See 15 U.S.C. § 26; Cargill, Inc. v. Monfort,
Inc., 479 U.S. 104, 113 (1986).
10 Cf. Joiner, 522 U.S. at 146 (stating that a
district court “may conclude that there is simply
too great an analytical gap between the data and
the opinion proffered”).

-- 5 of 6 --

6
outlets where Gruma’s products were sold.11
In sum, because plaintiffs failed to present
substantial evidence demonstrating that Gru-
ma’s conduct was a material cause of its actual
or threatened injury as well as evidence on
which a jury could base a reasonable award of
money damages, their claims fail as a matter of
law. Accordingly, the judgment in favor of
defendants is AFFIRMED.
11 Cf. Taylor Pub. Co. v. Jostens, Inc., 216
F.3d 465, 485 (5th Cir. 2000) (requiring tighter
demonstration of causation where other factors
contributed to plaintiff’s losses).

-- 6 of 6 --