Thanks for visiting! Welcome to a new way to research case law. You are viewing a free summary from Descrybe.ai. For citation and good law / bad law checking, legal issue analysis, and other advanced tools, explore our Legal Research Toolkit — not free, but close.
Optronic Technologies, Inc. v. Ningbo Sunny Electronic Co.
Citation: Not availableDocket: 20-15837
Court: Court of Appeals for the Ninth Circuit; December 5, 2021; Federal Appellate Court
Original Court Document: View Document
The United States Court of Appeals for the Ninth Circuit reviewed the case of Optronic Technologies, Inc. (Orion) against Ningbo Sunny Electronic Co. Ltd. and Sunny Optics, Inc., regarding alleged violations of federal antitrust law and California laws. The panel affirmed in part and vacated in part the district court’s judgment following a jury trial. Orion claimed that Sunny conspired with Suzhou Synta Optical Technology Co. Ltd. and other related entities to fix prices and allocate the telescope market. The court upheld the admission of expert testimony from Drs. Jose Sasian and J. Douglas Zona, while excluding rebuttal testimony from Jeffrey Redman. It found no abuse of discretion in the district court's mid-trial curative instruction limiting Dr. Celeste Saravia's testimony on damages. The evidence was deemed sufficient to support the jury's verdict on Sherman Act § 1 claims, confirming that Sunny conspired with Synta to acquire Meade and fix prices or credit terms. Further, the court supported the jury's findings of attempted monopolization and conspiracy to monopolize under Sherman Act § 2, rejecting any improper joint monopoly theory. Orion effectively defined the relevant market, and the jury found that Sunny showed intent to monopolize. The panel affirmed the jury’s verdict on the Clayton Act § 7 claim, indicating a reasonable likelihood that Sunny’s acquisition of Meade would harm competition. Sunny was denied a new trial on § 7 liability, as the evidence of antitrust injury was sufficient, and the jury's damage findings were not excessive or speculative. The panel determined that the district court acted within its discretion when it imposed injunctive relief against Sunny under Clayton Act § 16. Substantial evidence supported the finding that the conspiracy between Sunny and Synta persisted after 2016. Sunny was not granted judgment as a matter of law regarding Orion's entitlement to damages incurred post-September 2016. However, the panel found that the district court improperly excluded a declaration from Dr. Saravia concerning the valuation of a settlement set-off, leading to a partial vacate and remand for further proceedings. In Orion's cross-appeal, the panel upheld the district court’s summary judgment favoring Sunny regarding claims that Sunny caused Orion’s failure to acquire Meade Instruments. Orion, an American telescope marketing company, alleged that Sunny, a Chinese telescope manufacturer, violated federal and California antitrust laws through illegal collaboration with various Synta entities, major competitors in the telescope market. The case resulted in a jury verdict awarding Orion $16.8 million in damages, which Sunny appealed. The court affirmed the verdict, discussing the legal standards applicable to pre-and-post-trial motions in antitrust cases. In the telescope manufacturing sector, Celestron, Meade, and Orion were key distributors, while Sunny, Synta, and Meade were significant manufacturers. Sunny and Synta together represented up to 80% of telescope imports into the U.S. since 2012. Historical context included FTC interventions to prevent monopolistic practices in the market, notably blocking Celestron and Meade's proposed joint venture in 1991 and a failed asset acquisition by Meade in 2002. Synta acquired Celestron's assets in 2005, relocating manufacturing to China. Meade became available for purchase in early 2013, and although Orion initially offered $4.5 million, Meade opted for a competing offer from Jinghua Optics. In May 2013, Sunny submitted an unsolicited bid of $5.87 million, leading to the termination of the JOC merger and acceptance of Sunny's offer. Sunny formed a holding company, Sunny Optics, for the acquisition. Orion alleged collusion between Sunny, Celestron, and Synta to facilitate this acquisition, asserting that Sky Rainbow, jointly owned by Sunny's Peter Ni and Synta's David Shen, financed the deal. Sunny admitted to soliciting Celestron for expedited payment on previously purchased telescopes. In 2014, Hayneedle planned to sell its 'Haystack Assets,' including the critical telescopes.com, and Orion submitted the highest bid. However, Synta cut off Orion’s credit, warning that their acquisition would pose a risk, which led to the collapse of Orion’s deal with Hayneedle. Procedurally, Orion entered into Settlement and Supply Agreements with the Synta Entities in September 2016 to resolve related antitrust claims before sending a demand letter to Sunny, which resulted in Sunny ceasing telescope sales to Orion. Orion filed a lawsuit on November 1, 2016, with claims including price-fixing and collusion under the Sherman Act, attempted monopolization, violations of the California UCL, and collusion under the Cartwright Act. Orion sought various forms of relief, including damages and injunctive relief. The district court denied Orion's summary judgment motion but granted in part Sunny's, ruling that Orion lacked standing to claim conspiracy under Sherman Act § 1, as it would not have acquired Meade without Sunny's alleged misconduct. However, the court acknowledged potential harm to Orion from Sunny’s acquisition due to market concentration and identified material factual issues regarding harmful agreements between Sunny and Synta. Sunny also achieved summary judgment on claims of below-cost pricing and refusal to deal. Prior to trial, Orion designated expert witnesses, while Sunny only disclosed rebuttal experts after the deadline. Cross-motions to exclude expert testimonies were filed by both parties, resulting in the district court denying Sunny's motion but granting Orion's motion to exclude Mr. Redman's testimony and partially granting the exclusion of Dr. Saravia's testimony. A six-week jury trial ensued, during which Dr. Saravia testified, but Orion objected to her offering affirmative damages testimony. The district court upheld this objection, instructing the jury to disregard her testimony regarding damages. After Orion rested its case, Sunny moved for judgment as a matter of law, which the district court denied. On November 26, 2019, the jury found Sunny liable on all claims and awarded $16.8 million in damages. Following Sunny and Meade's bankruptcy filing on December 4, 2019, litigation against them was stayed. The district court entered a partial judgment against Sunny on December 5, 2019, encompassing claims under the Sherman Act, Clayton Act, California UCL, and Cartwright Act, which were termed the "Damages Claims." The court subsequently trebled the jury's damages award under the Clayton Act, resulting in a total of $50.4 million awarded to Orion. Sunny's renewed motion for judgment as a matter of law and motion for a new trial were denied, as was its motion to alter the judgment to offset settlement values, although the court deducted $3.1 million from the award but did not offset profits from the Supply Agreement due to Sunny's failure to meet the burden of proof with admissible evidence. Orion's motion for equitable relief on its UCL claim was granted, imposing a reduced injunction requiring Sunny to supply Meade and Orion under non-discriminatory terms for five years and to refrain from unlawful communications. After receiving permission from the Bankruptcy Court, the district court entered a final judgment against Sunny and Meade on April 15, 2020. Sunny subsequently appealed. The standards of review for the case include abuse of discretion for evidentiary rulings, substantial evidence for jury verdicts, and de novo review for legal analysis and renewed motions for judgment as a matter of law. Sunny appeals for reversal based on three alleged erroneous evidentiary rulings regarding expert testimony. First, Sunny contests the admission of Dr. Sasian’s testimony, arguing it is 'junk science' due to his limited factory visit and reliance on publicly available data. However, the court found that Dr. Sasian's analysis, based on product specifications from both Sunny and Synta, was relevant as it supported the inference of horizontal competition, pertinent to allegations of price-fixing and market allocation, which are per se antitrust violations. Sunny's claim against Dr. Sasian's report being overly influenced by counsel was dismissed, as the court noted that the report's advisory notes permit counsel assistance and that Dr. Sasian confirmed its accuracy. Sunny also questioned Dr. Sasian's qualifications due to his limited telescope manufacturing experience, but the court determined his extensive academic and professional background in optical sciences justified his expert status. Sunny further challenges the admission of Dr. Zona’s testimony, asserting it lacked factual grounding since it relied on theoretical models rather than actual data. Dr. Zona employed both direct and structural methods for damage calculations, utilizing market data to estimate overcharges, which he argued were not directly observable. The district court upheld both experts’ testimonies, affirming that the rulings were logical and supported by the evidence presented. Cartel overcharges were measured by comparing the telescope market with similar markets, with Dr. Zona suggesting his estimates could be conservative due to the small number of buyers in the telescope market. He applied the Cournot Equilibrium model, which indicated that the two main colluders, Sunny and Synta, controlled over 70% of the market, confirming the results from his previous cartel analysis. Dr. Zona calculated damages through a structural method to verify his direct method calculations. The district court admitted Dr. Zona’s expert report and testimony as sufficiently connected to the case facts. Sunny contested the exclusion of rebuttal expert Mr. Redman’s testimony, arguing his experience qualified him despite not being an accountant or economist. However, Mr. Redman lacked understanding of key terms and concepts used by Dr. Zona, had no experience with antitrust damages, and admitted that the structural model was beyond his expertise. The district court correctly excluded his testimony due to these deficiencies. Additionally, Sunny challenged the mid-trial curative instruction limiting Dr. Saravia’s testimony, who, as a rebuttal expert, analyzed Dr. Zona’s damages calculations by substituting parameters with alternatives she deemed more accurate. Her testimony indicated that her adjustments significantly lowered Dr. Zona’s damage estimates. Orion objected to Dr. Saravia exceeding her rebuttal role, leading the district court to strike her alternative damages estimates but allowed her to critique Dr. Zona’s methods. The court instructed the jury to disregard her lower damages estimate while still permitting her criticisms of Dr. Zona’s methodology. Sunny’s counsel clarified during the direct examination of Dr. Saravia that she was only presenting her sensitivity analysis regarding damages, not an alternative measure. The district court's curative instruction concerning Dr. Saravia’s testimony was deemed appropriate, aligning with the discretion granted to courts in jury instruction matters, as supported by case law. Sunny sought to overturn the jury’s verdict in favor of Orion regarding Sherman Act § 1 claims, asserting insufficient evidence for three specific components. However, the court upheld the jury’s findings, reiterating that Section 1 prohibits any contracts or conspiracies that restrain trade, with specific elements needing to be met: a conspiracy must be demonstrated by evidence excluding the possibility of independent action among alleged conspirators. Orion presented substantial evidence indicating that Sunny conspired with competitor Synta to acquire Meade, aiming to protect their market share and block competitor JOC from acquiring it—a scenario classified as a per se violation under Section 1. Evidence included emails among Synta executives discussing the acquisition strategy and financial support provided by Synta to Sunny, such as significant prepayments and interest-free loans. The jury also viewed evidence suggesting that executives from Celestron, a Synta subsidiary, were deeply involved in Sunny’s acquisition of Meade. Additionally, communications from Celestron’s former CEO highlighted a collaborative vision among Sunny, Synta, Celestron, and Meade to dominate the telescope market, further supporting the jury’s conclusion of a conspiracy despite prior prohibitions from federal regulators. Lupica advocated for a unified senior management team for Meade and Celestron, indicating awareness of the FTC's previous rejections of merger attempts due to potential monopolistic outcomes. The jury found substantial evidence that Sunny and Synta conspired to acquire Meade to maintain their market share and prevent competition. Sunny contested the jury's findings regarding price-fixing conspiracies with Synta, which were supported by evidence of Synta’s control over Good Advance, a company allegedly involved in the conspiracy. Evidence included communications where Sunny was instructed to adjust prices to match Synta's rates and documentation showing Sunny charged higher prices to Orion compared to Celestron for identical products. The jury's conclusion that this constituted a per se violation of Section 1 was upheld. Additionally, the jury inferred that Sunny and Synta fixed credit terms in retaliation against Orion for outbidding them for Hayneedle assets. Emails terminating Orion's credit line, which mirrored communications from Synta, supported this inference. The jury's finding of a violation of Section 1 for fixing credit terms was also affirmed. Sunny's argument against the jury's conclusion regarding an agreement not to compete or to divide markets was rejected, as such agreements are considered per se violations of antitrust law. Orion presented substantial documentary evidence and expert testimony, particularly from Dr. Sasian, indicating that Sunny possessed the technical capability to manufacture telescopes equivalent to Synta’s but opted not to. Internal communications revealed attempts to avoid conflicts with Celestron and an agreement between Sunny and Synta to divide their customer bases. A specific email highlighted a strategy to refrain from bidding against each other to maintain market stability. This behavior constitutes clear evidence of a market allocation conspiracy, supporting the jury's verdict that Sunny engaged in per se illegal market allocation with Synta. Sunny sought to overturn the jury's verdict regarding violations of Sherman Act § 2, which prohibits monopolization or conspiracy to monopolize trade. The distinction between Sections 1 and 2 is noted, with Section 1 addressing concerted actions and Section 2 focusing on independent actions. The jury found Sunny liable for attempted monopolization and conspiracy to monopolize, which requires intent, anticompetitive conduct, and a likelihood of success. The court dismissed Sunny's claim that Orion improperly utilized a "joint monopoly theory," emphasizing that the jury instruction on conspiracy was agreed upon by Sunny without objection. There was ample evidence suggesting that Sunny was close to monopolizing the telescope market. The jury’s conclusion of Section 2 liability did not hinge on a joint monopoly theory. Sunny's argument regarding the failure to define the relevant market was also rejected, as defining the market involves assessing both geographic scope and competing products. The relevant market is defined as the commodities that consumers can interchangeably use for the same purpose. Market definitions are treated as factual findings, reversible only if evidence overwhelmingly contradicts the jury's verdict. Orion established its market definition through expert testimony from Dr. Zona, which Sunny challenged by arguing that Dr. Zona failed to analyze cross-elasticity of demand, conduct a SSNIP analysis, or independently assess the necessity of a SSNIP approach. A SSNIP analysis involves defining a narrow market and expanding it until a hypothetical monopolist could profitably increase prices. Dr. Zona contended that such an analysis was unnecessary due to the broad scope of the global telescope and accessory market and focused instead on barriers to entry for new manufacturers. Dr. Sasian corroborated that Sunny and Synta could produce both high- and low-end telescopes, negating the need for Dr. Zona to independently verify this aspect. Dr. Zona also included telescope accessories in his market definition because they are commonly sold with telescopes. He argued that there is no true substitute for telescope manufacturing, and the proposed market would be profitable for a hypothetical monopolist. Sunny's claim that there was "no evidence" of intent to monopolize was rejected; specific intent can be shown through direct evidence of unlawful design or circumstantial evidence of illegal conduct, which can arise from actions that unreasonably restrain trade under the Sherman Act. Substantial direct evidence supports the jury's finding that Sunny had a specific intent to monopolize the telescope and accessory manufacturing market through its acquisition of Meade. An email from Sunny indicated that the purchase aimed to prevent JOC, the third-largest competitor, from strengthening its market position. Furthermore, evidence suggested Sunny unlawfully conspired with Synta to thwart JOC's acquisition of Meade. Orion presented additional evidence showing that Sunny misled the FTC regarding Shen's involvement in the acquisition, despite links to Sky Rainbow, which partially funded the deal. This conduct indicates a specific intent to monopolize, relevant to Section 2 liability. Sunny's argument that Synta lacked motive to assist in the acquisition is unconvincing, as Synta, being a horizontal competitor, would benefit from price increases enabled by Sunny's monopoly power. The jury could infer that Synta anticipated favorable pricing from Sunny's acquisition, consistent with Orion’s claims of market allocation. Evidence also showed Celestron's awareness of potential anticompetitive perceptions, as demonstrated by its $7.2 million in prepayments to Sunny and its intention to continue business practices to mitigate suspicion. The jury's verdict indicating Sunny demonstrated specific intent to monopolize is supported by substantial evidence. Sunny's contention that the evidence did not show it was close to monopoly power is dismissed; monopoly power encompasses the ability to control prices or exclude competition. Evidence can be direct or circumstantial, requiring the definition of the relevant market, proof of dominant market share, and demonstration of significant entry barriers. A market share of 65% typically indicates monopoly power, while shares as low as 44% can suffice if high entry barriers exist and competitors cannot quickly increase output. Orion presented compelling evidence at trial, including expert testimony from Dr. Zona, demonstrating that Sunny's market share was approximately fifty percent, peaking at sixty-three percent in 2013. Sunny's reference to a reduced market share of about thirty-three-and-a-half percent in 2017 is deemed irrelevant, as its market share rebounded to over forty-nine percent by 2018, exceeding the recognized threshold of forty-four percent indicative of a dangerous proximity to market power. Dr. Zona highlighted the high entry barriers and concentration in the telescope manufacturing market, further supported by a decade without new entrants. Following its acquisition of Meade, Sunny became the world's largest telescope manufacturer, with a plausible increase in its market share had it optimized Meade's operations. The jury's finding that Sunny was perilously close to achieving monopoly power warranted liability under Section 2 of the Sherman Act, and Sunny's attempts to contest the verdict were unsuccessful, leading to the affirmation of the Section 2 verdict. In relation to Orion's Clayton Act Section 7 claim, the jury established a reasonable likelihood that Sunny's acquisition of Meade would significantly hinder competition or create a monopoly. Sunny's request for a new trial, based on an alleged lack of proof of damages from this violation, was rejected, as Section 7 prohibits mergers that substantially lessen competition or create monopolies. The court clarified that establishing a prima facie case requires defining the relevant market and demonstrating the merger's likely anticompetitive effects. A new trial is justified only if no evidence supports the verdict. Orion successfully demonstrated antitrust injury, arguing that Sunny's acquisition diminished the number of major manufacturers from three to two, thereby increasing market concentration as measured by the Herfindahl-Hirschman Index (HHI) by over 1,000 points, which is significantly above the threshold for presumptive anticompetitive effects. Sunny's acquisition of Meade enhanced its control over telescope manufacturing, allowing Sunny and its competitors to impose supracompetitive prices, which negatively affected Orion through overcharges in their transactions. Sunny misrepresented Dr. Zona's testimony, which indicated that while Orion's damages calculation excluded losses from not acquiring Meade, it did not claim that Orion was unaffected by the supracompetitive pricing resulting from the merger. Orion successfully demonstrated antitrust injury, and the jury's damage findings were deemed reasonable, thus denying Sunny's request for a new trial regarding Section 7 liability. The district court issued an injunction against Sunny under the Clayton Act and the Unfair Competition Law (UCL), which Sunny argued was overly broad. The standard of review for permanent injunctions is for abuse of discretion, and the legal basis for any underlying antitrust violations is not subject to de novo review. Section 16 permits injunctions to prevent threatened losses from antitrust violations, requiring a clear causal connection between the enjoined conduct and the violation. The court may impose broader remedies to ensure future compliance and restoration of competition. Sunny's choice to stop supplying Meade demonstrated intent to restrain competition, which would lead to increased market concentration. Consequently, the district court's order for Sunny to supply Meade on non-discriminatory terms is upheld as a valid measure to prevent future monopolization. Sunny asserts that the district court improperly granted relief regarding Orion's refusal-to-deal claim, which was dismissed on summary judgment, by mandating that Sunny supply Orion on non-discriminatory terms. The court has the authority to impose conduct remedies to prevent future antitrust violations and mitigate their impacts. A jury found that Orion suffered inflated prices due to Sunny and Synta's market power following the unlawful Meade acquisition. Consequently, the district court's order aimed at remedying the harm caused by Sunny's monopolistic actions was appropriate. Sunny argues, referencing Kodak, that the non-discriminatory supply order is unsuitable as it may lead to a windfall for Orion and potentially create an oligopoly. However, in Kodak, the court upheld injunctive relief requiring non-discriminatory sales to competitors, establishing that such relief is valid to prevent Sherman Act violations. Sunny's position suggests that this relief should only apply to all market participants, a requirement not specified in Kodak. The district court appropriately determined that limiting the injunction to Orion and Meade would promote competition rather than hinder it and acted within its broad discretion to tailor the relief to the case's specific circumstances. Additionally, Orion and Synta entered into Settlement and Supply Agreements in 2016, with Synta agreeing to supply Orion on most favored customer terms, while Sunny ceased supplying Orion that same year. Sunny contests the district court's conclusion that its conspiracy with Synta could have persisted post-2016, seeking judgment on whether Orion is entitled to damages incurred after September 2016. Despite differing views on the burden of proof, Orion presented considerable evidence indicating that the conspiracy continued beyond 2016, as Synta's overcharging of Orion prevented it from receiving the agreed-upon rates, resulting in higher costs for telescopes. This evidence suggests ongoing collusion between Sunny and Synta. Orion is entitled to recover damages incurred after 2016, despite the conspiracy between Sunny and Synta to eliminate Meade as a competitor ending in 2016. The continued economic harm to Orion stems from the anticompetitive effects of the conspiracy, which successfully concentrated the telescope market, reducing competition and increasing prices for Orion. The legal precedent cited establishes that a plaintiff does not need to prove that the antitrust violation was the sole cause of injury; evidence that it was a material cause suffices. The conspiracy’s objective was to prevent JOC from acquiring Meade, ultimately leading to a higher concentration of market power and costs for competitors. After Sunny ceased supplying Orion, Synta leveraged its market dominance to raise prices, forcing Orion to purchase the majority of its telescopes from Synta due to a lack of alternatives. Dr. Zona's testimony corroborated that the structural changes in the market, resulting from the conspiracy, continued to impose costs on Orion post-2016. The court determined that even if the conspiracy ended, the residual effects could still lead to damages, affirming that defendants remain liable for ongoing injuries linked to their unlawful actions. The district court's ruling that Sunny was not entitled to judgment as a matter of law on post-2016 damages was upheld, allowing for the possibility that the conspiracy persisted beyond 2016 or that its effects continued to harm Orion. Additionally, Sunny's challenge regarding the exclusion of Dr. Saravia's declaration in a post-trial motion was deemed valid by the district court, which ruled it inadmissible based on timeliness under Federal Rules of Civil Procedure. Rule 26 requires parties to disclose expert witnesses in a timely manner, supporting the court's decision to exclude the declaration. Experts must be disclosed according to the court's scheduling order, which mandated a May 31, 2019 deadline for rebuttal expert disclosures. Sunny complied by timely disclosing Mr. Redman and Dr. Saravia, providing written reports as required. Orion's motion to exclude Dr. Saravia's testimony was based on her report, negating grounds for exclusion under Federal Rules of Civil Procedure 26 and 37 for failing to disclose. The district court's exclusion of Dr. Saravia's declaration was deemed an abuse of discretion, and the matter is remanded for further evaluation. Orion cross-appealed against the district court's summary judgment favoring Sunny regarding Orion's claim of failing to acquire Meade due to Sunny's actions. For antitrust standing, Orion needed to demonstrate injury directly linked to Sunny’s alleged unlawful acts. The timeline shows that after Meade chose a higher initial offer from JOC, and later reopened bidding, Orion opted not to submit another bid when the exclusive agreement with JOC was lifted. Despite Orion's belief that it could have outbid JOC, the decision not to submit a bid creates a presumption that Orion would not have acquired Meade regardless of Sunny's involvement. The court found no genuine material dispute on whether Sunny's actions prevented Orion from acquiring Meade, leading to a partial vacatur on settlement valuation and affirmation on other issues. Costs on appeal were awarded to Orion.