Recent-Case Supplement To Goetz & McChesney, Antitrust Law
© 2000, All  Rights Reserved

Virginia Vermiculite, Ltd. v. W.R. Grace & Co.

xx F.Supp. 2d xx, (W.D.Va,, 2000)

 MICHAEL, Senior District Judge.
…

I.

   The plaintiffs filed these antitrust cases for violations of sections one and two of the Sherman Antitrust Act…and related laws of the Commonwealth of Virginia. The plaintiffs’ claims arise out of a series of land donations from defendant W.R. Grace & Co. (“Grace”), to defendant The Historic Green Springs, Inc. (“HGSI”), a Virginia nonprofit organization dedicated to the preservation of land in Louisa County, Virginia. Plaintiff Virginia Vermiculite, Ltd. (“VVL”), Grace’s competitor, and plaintiffs Millard F. Peers, Jr. and Norma Peers (collectively, “M.F.Peers”), residents of Louisa County, attack the donations, inter alia, as conspiratorial efforts to drive VVL out of business, and to restrain trade and monopolize the industry in which VVL and Grace compete.

…

   …The plaintiffs complained that the 1992 and 1994 donations from Grace to HGSI removed over 80% of vermiculite mining rights from the “Louisa County mining rights market,” from 1993 to mid‑1994. VVL claims it participates in that market as a buyer of mining rights in Louisa County. The plaintiffs also allege that the transactions foreclosed over 40% of the raw vermiculite concentrate in the “North American vermiculite concentrates market,” from 1993 to mid‑1994. According to the plaintiffs, the donations and restrictive covenants prohibiting all future mining of vermiculite evidence a conspiracy between Grace and HGSI to restrain trade in the Louisa County mining rights market. The plaintiffs complain that the alleged conspiracy between Grace and HGSI, in which they agreed (expressly or implicitly) that no vermiculite mining will occur, hinders VVL (or other potentially interested parties) from acquiring Louisa County vermiculite mining rights, and forecloses the supply of raw vermiculite from Louisa County. The donations, the plaintiffs assert, were exclusionary acts employed by Grace, by which Grace achieved (or attempted to achieve) monopoly power in the North American vermiculite concentrates market. VVL alleges that the donations also evidence a conspiracy, entered into between both defendants, to monopolize the same. VVL claims that the Grace‑HGSI transactions caused it to suffer increased costs and lost profits. As a remedy, VVL seeks damages for past and future harm, and equitable relief entailing rescission of the conveyances and divestiture of Grace’s property interests….

…

 On April 22, 1997, the court…dismissed all claims against HGSI on the ground that, as a nonprofit organization engaged in non‑commercial activities, HGSI was exempt from liability under the Sherman Act. The Fourth Circuit Court of Appeals reversed in part, holding, inter alia, that it is the nature of the transaction, not the nature of the party to the transaction, that determines whether that party may be liable under the Sherman Act. See Virginia Vermiculite, Ltd. v. W.R. Grace & Co.Conn., 156 F.3d 535, 541 (4^th Cir.1998). The court of appeals further found that the plaintiffs’ complaints sufficiently alleged that the transactions between HGSI and Grace were “essentially commercial,” subjecting both parties to the antitrust laws. See id.

   …[O]n December 22, 1999, all of the parties filed motions for summary judgment.…On May 4, 2000, the court granted HGSI’s motion to exclude the report and testimony of the plaintiffs’ only proposed expert on antitrust economics, Mr. Seth Schwartz. As a result, the defendants’ principal ground for summary judgment is that, without an expert who can provide testimony on economic issues, there is an absence of evidence to support an essential element of the plaintiffs’ antitrust claims, i.e. the requirement that the plaintiffs define the relevant market in which they allege the wrongful conduct occurred.

II.

…

A. SHERMAN ACT § 1
...

1. EVIDENCE OF A CONTRACT, COMBINATION, OR CONSPIRACY

   The defendants contend that the plaintiffs do not have sufficient evidence to establish a contract, combination, or conspiracy under § 1. This element distinguishes between independent and concerted action. “Concerted action is the essence of a section 1 claim.” Terry’s Floor Fashions, 763 F.2d at 611. To survive summary judgment on this element, the plaintiffs have “a twofold evidentiary burden.” Laurel Sand & Gravel, Inc. v. CSX Trans., Inc., 924 F.2d 539, 543 (4^th Cir.1991). First, they must present direct or circumstantial evidence that reasonably tends to prove that the defendants “had a ‘conscious commitment to a common scheme designed to achieve an unlawful objective.’ “ Id. (quoting Monsanto Co. v. Spray‑Rite Serv. Corp., 465 U.S. 752, 764 (1984)). Second, this evidence must “tend[ ] to exclude the possibility that the alleged conspirators acted independently,” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) or “based upon a legitimate business purpose.” Laurel Sand & Gravel, 924 F.2d at 543.

(A) EVIDENCE OF A CONSCIOUS COMMITMENT TO A COMMON SCHEME, DESIGNED TO ACHIEVE AN UNLAWFUL OBJECTIVE

…

   The plaintiffs intend to prove that Grace and HGSI entered into a contract, combination, or conspiracy to restrain trade by providing evidence of: (1) Grace’s 1992 donation of the M.F. Peers properties to HGSI with restrictive covenants not to mine; (2) Grace’s 1992 donation of its remaining properties in Louisa County (except the A.D. Peers property) to HGSI with restrictive covenants not to mine; (3) Grace’s 1992 assignment of the Brandy A lease to HGSI with restrictive covenants not to mine; (4) Grace’s 1992 assignment of the Nininger lease to HGSI with restrictive covenants not to mine; (5) Grace’s 1994 donation of the A.D. Peers Parcel B property to HGSI with an accompanying sub rosa agreement not to mine Parcel B; and (6) a sub rosa agreement between Grace and HGSI to prevent VVL from mining its own property, Brandy B.

(1) 1992 DONATIONS

   All of the 1992 donations from Grace to HGSI—both the deed donations and lease assignments—contained express restrictive covenants not to mine the donated properties.…Grace concedes that the donations containing these restrictions satisfy the concerted action requirement of § 1. HGSI, however, argues that there is no evidence of concerted action besides the deeds themselves, and that merely engaging in these transactions is not evidence of concerted action. This argument ignores that these deeds and lease assignments do not simply evidence an agreement to transfer property rights; they also evidence an explicit agreement between the parties to prevent mining on the properties. Evidence of the donations containing restrictive covenants alone satisfies the plaintiffs’ burden of producing sufficient evidence to establish concerted action under § 1.

(2) 1994 A.D. PEERS DONATION

Although Grace concedes that the donations with restrictive covenants satisfy the concerted action requirement, it argues that the plaintiffs have no evidence that Grace’s 1994 donation of the A.D. Peers Parcel B property was accompanied by a sub rosa agreement between the defendants to prevent mining on the same. …The court is not convinced that the plaintiffs have no evidence of an A.D. Peers sub rosa agreement. On the contrary, there is substantial evidence that such an agreement does exist. The plaintiffs produced evidence that Grace issued a September 29, 1992 press release announcing a package of donations to HGSI, and that the original drafts of the 1992 donations included A.D. Peers among the donations subject to the written restrictive covenants. VVL produced a letter from HGSI to Grace indicating that the only reason the written restrictive covenant was abandoned from the A.D. Peers property was because the Brandy decision made clear that such written restrictions would not survive judicial scrutiny. A reasonable jury could conclude from this letter that the restriction itself was not abandoned, but only the written memorialization of that restriction.

 The plaintiffs also have evidence that the only reason the A.D. Peers donation did not occur with the rest of the 1992 donations was because HGSI and Grace agreed to delay the donation in an attempt to injure VVL. The 1973 agreement relating to A.D. Peers’s original sale of his properties to Grace included a provision whereby A.D. Peers had the option of buying back Parcel A of that property if Grace gave notice of its “intent to resell” the entire A.D. Peers property to a third party. The plaintiffs argue that the reason Grace did not donate the A.D. Peers property to HGSI in 1992 was because Grace believed that if the buy‑back provision were exercised, VVL would acquire the mining rights on Parcel A (as it ultimately did). The plaintiffs produced a Grace document to support their argument, which reads in part:

Grace did not donate ... [A.D. Peers] to [HGSI] because of an option which Peers holds to purchase back 37 acres designated as Parcel “A” if Grace sold the property ... Parcel “A” is thought to contain vermiculite reserves which Peers could lease to Virginia Vermiculite if he exercised the option to purchase the parcel.

VVL argues that the defendants delayed the A.D. Peers donation (and thus prevented VVL from mining Parcel A) to determine whether they could “starve” VVL out of reserves. In late 1992, VVL was attempting to procure permits to mine Brandy B, at that time its only other reserve besides Purcell. Whether a delay of the A.D. Peers donation would be effective depended on how long VVL’s permit would allow VVL to mine Brandy B. The plaintiffs produced several internal Grace memoranda which suggest this is exactly what Grace intended. One memorandum states, in relevant part:

Given the impact permits could have on the [Brandy B] reserves (two years versus ten years), I propose we enter into an understanding with [HGSI] to delay the donation of the Alfred Peers Property until such time as the permits are granted on [Brandy B] property. If the permits restrict [VVL] to a few years of reserves, a multi‑year delay on donating Peers could assure [VVL] does not mine Parcel “A” as well.

VVL also provided a memorandum indicating that once VVL obtained a permit to mine Brandy B, Grace no longer thought it important to withhold the A.D. Peers donation:

The availability of Parcel “A” to Virginia Vermiculite was deemed significant only if Virginia Vermiculite’s efforts to open a new mine on the adjacent [Brandy B] property was severely restricted by the pending use permit. A conditional use permit has subsequently been granted to Virginia Vermiculite which will not limit their mining activities substantially.... I recommend that we ... proceed with the donation of the Peer’s [sic] property to [HGSI].

Another Grace memorandum discusses a general “strategy of keeping the reserves out of the hands of our adjacent competitor (desirable)” and of “keeping the reserves off the market.” All of these memoranda, the initial draft deeds which included the A.D. Peers property in the 1992 donations, and the fact that the A.D. Peers property was not donated until 1994, all constitute circumstantial evidence that Grace and HGSI did reach a sub rosa  “understanding” to “assure [VVL] ... not mine” the A.D. Peers property. Therefore, summary judgment on this issue must be denied.

(3) SUB ROSA AGREEMENT TO PREVENT MINING ON BRANDY B

   VVL asserts that HGSI’s lawsuit to enjoin VVL from mining Brandy B was the outcome of a prior sub rosa conspiracy between both defendants to prevent mining on Brandy B. …

   To satisfy its burden of showing a dispute of material fact, VVL produced evidence that HGSI wrote to Grace requesting that Grace convey the properties adjacent to Brandy B to give HGSI “standing” before the Board of Supervisors to contest the granting of a Brandy B mining permit to VVL. One internal memorandum from Grace’s Mr. Walsh, in discussing VVL’s plans to obtain permitting for Brandy B, states: “Rae Ely and friends are determined to take on Virginia Vermiculite in what she labels as ‘the war of all holy wars’ “ against VVL. VVL also argues that the 1992 Brandy A lease assignment, which contained restrictive covenants requiring HGSI to make “reasonable efforts to prevent mining on the premises,” when considered in conjunction with Clause 12(E), obligated HGSI to prevent VVL from mining Brandy B. VVL points to a facsimile from HGSI to Grace, wherein HGSI requests that Grace “review and comment” on an HGSI letter attempting to enforce HGSI’s ostensible rights under Clause 12(E). VVL also has evidence that a Grace attorney reviewed and edited HGSI’s Brandy complaint. The plaintiffs allege they are not challenging the litigation itself or HGSI’s opposition to the Brandy B permit per se, but rather an ex ante agreement between the defendants “about how property and contract rights could be exercised to further their conspiracy.” HGSI’s opposition to the permit and HGSI’s filing of the Brandy lawsuit, the plaintiffs claim, are simply the ex post consequences of that agreement.

   The only justifiable inference that can be drawn in the plaintiffs’ favor is that the alleged sub rosa agreement was designed only to give HGSI standing to oppose VVL’s permit to mine Brandy B, and to prevent mining thereon through the use of a lawsuit. This argument is foreclosed by the Noerr‑Pennington doctrine, which immunizes from antitrust liability “anti‑competitive conduct undertaken to persuade or petition government entities, or to utilize judicial or quasijudicial mechanisms.” Ottensmeyer v. Chesapeake & Potomac Tel. Co., 756 F.2d 986, 992 (4^th Cir.1985). The Noerr‑Pennington doctrine is based on the First Amendment, protecting the rights to freely associate and petition the government. Courts have extended the doctrine to reach concerted acts occurring ex ante which ultimately result in actual petitioning of the government, see Costal States Marketing, Inc. v. Hunt, 694 F.2d 1358, 1367 (5^th Cir.1983) (“Given that petitioning immunity protects joint litigation, it would be absurd to hold that it does not protect those acts reasonably and normally attendant upon effective litigation.”); and concerted efforts to petition permitting boards, see Baltimore Scrap Corp. v. David J. Joseph Co., 81 F.Supp.2d 602, 603 (D.Md.2000) (holding that Noerr‑Pennington immunity extends to anticompetitive, clandestine attempts to contest the granting of zoning permit).

   Under this doctrine, seeking to avail oneself of government action only can violate the antitrust laws when the efforts to do so are a “sham.” See Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993) (holding that litigation is entitled to immunity from the antitrust laws unless it is “objectively baseless,” and that a litigant’s subjective motivation is otherwise irrelevant)…

   The plaintiffs do not claim that the “sham” exception to the Noerr‑Pennington doctrine applies. Although the evidence supports the plaintiffs’ position that the defendants entered into the Brandy A lease to block the permitting of Brandy B or to bring a lawsuit to prevent mining on Brandy B, such actions are not illegal under the antitrust laws unless they are undertaken as a sham, without a reasonable expectation of success. The plaintiffs do not allege or produce any evidence that suggests HGSI undertook to influence the permitting board or to bring the Brandy litigation without a reasonable expectation of obtaining a favorable ruling, or that HGSI’s efforts were objectively baseless. The plaintiffs present no evidence that the alleged sub rosa agreement, even if it existed, was anything other than an agreement to persuade the government to prevent mining on Brandy B.…Summary judgment on this issue must be granted in the defendants’ favor.

(B) EVIDENCE EXCLUDING INDEPENDENT ACTION AND A LEGITIMATE BUSINESS PURPOSE

The plaintiffs also must produce evidence that “excludes the possibility that the [defendants] ... acted independently or based upon a legitimate business purpose.” Laurel Sand & Gravel, 924 F.2d at 543. In this case, “it is not necessary that HGSI have shared Grace’s alleged anticompetitive motive in entering into a proscribed restraint; it is sufficient that HGSI, regardless of its own motive, merely acquiesced in the restraint with the knowledge that it would have anticompetitive effects.” Virginia Vermiculite, 156 F.3d at 541. HGSI argues that there is no evidence it acquiesced in the restraint with knowledge that it would have anticompetitive effects, and that the evidence only shows that HGSI acted with the legitimate purpose of preserving the Landmark. HGSI’s argument has little merit. The plaintiffs have come forward with substantial evidence that Grace had motives other than preservation, including: foreclosing the supply of Virginia mining rights; harming the business of VVL, its sole domestic competitor, by preventing it from acquiring further mining rights in Louisa County; and foreclosing the supply of Louisa County vermiculite concentrates. The plaintiffs also produced evidence that HGSI shared these unlawful motives or at least knew of and acquiesced in them.11

   The plaintiffs’ evidence begins with the restrictive covenants contained in the 1992 donations and lease assignments—entered into between both defendants—which specifically prohibited mining, “including, but not limited to, vermiculite” mining. These restrictions prevented mining even if restoration methods could be used to avoid problems with preservation. On May 26, 1994, HGSI and Grace signed a “Correction Quit Claim Deed of Gift,” which changed the restrictive covenants of two properties that originally were part of Grace’s 1992 donations. The corrected restrictive covenants precluded only the mining of vermiculite, but no other type of mining. The properties were not located in the historic area HGSI asserts it was attempting to preserve by entering into the covenants. This evidence tends to prove that Grace’s motive was to suppress mining in Louisa County, that HGSI knew of and acquiesced in this motive, and that HGSI’s motive was not simply to preserve the Landmark.

   The plaintiffs proffered further evidence that Grace’s donations were made with the unlawful motive of suppressing competition, including a Grace document outlining Grace’s options for the disposition of the Louisa County properties. That document contains questions and handwritten responses, and states in part, “How much would our vermiculite business benefit from Virginia [VVL] having to close down due to reserves? $1.5 million. ... What would be the financial impact on our business if they had our reserves? $230 [illegible] / yr.[;] $1.5 million disc.” Another document suggests these figures signify an after‑tax benefit of $230,000 per year, and a $1.5 million dollar benefit to Grace, discounted to present value. The plaintiffs also proffered the above‑referenced evidence of Grace’s “strategy of keeping the reserves out of the hands of an adjacent competitor,” evidence describing Grace’s continued payment of advanced royalties as “primarily a defensive measure serving to keep Virginia Vermiculite from securing those reserves,” and evidence Grace initially held onto its properties while “assessing Virginia Vermiculite’s ability to continue to operate.” The plaintiffs also have evidence that Grace analyzed the option of holding the reserves, and concluded the benefit would be to “[k]eep Virginia Vermiculite from gaining needed reserves.”

   Evidence that HGSI knew of and acquiesced in these motives, other than the express restrictions on mining, is found in statements made by HGSI’s president, Rae Ely. Ms. Ely testified in a deposition that, since 1972, she has conducted intensive research into the subject of vermiculite mining, and knows “a fair amount” about vermiculite mining in the United States. She sent a facsimile to Grace describing HGSI’s motivation to “ensure the preservation of the area and prevent future mining.” That same facsimile describes Grace and HGSI as having “joint and several goals,” as maintaining “the Grace/HGSI cooperative undertaking,” and as avoiding inclusion of third parties who might “defeat the original objectives.” The plaintiffs also claim that HGSI’s only motivation in leasing the Nininger property from Grace was to deprive VVL of vermiculite reserves. The plaintiffs allege that HGSI stopped making payments on its Nininger lease because the Brandy decision frustrated the defendants’ joint goal of driving VVL out of business, which was HGSI’s only purpose in retaining that property. The plaintiffs provide compelling evidence to this effect. Ms. Ely of HGSI wrote a letter to an attorney for Grace, stating that the effect of the Virginia Supreme Court’s denial of HGSI’s Brandy appeal, “is to open Parcel B AND Parcel A of the [Brandy] tract ... This appears to be enough reserve to keep VVL in business for the duration of the Nininger lease.” Shortly thereafter, HGSI stopped making payments on its Nininger lease. All of this evidence tends to exclude the possibility that VVL and Grace were acting independently, based on a legitimate business purpose. The defendants dispute the inferences that can be drawn from this evidence, but that is precisely when summary judgment should not be granted.

   …All of this evidence tends to exclude the possibility that Grace and HGSI acted independently or based on the purpose of preserving the Landmark, or some other potentially legitimate goal. The plaintiffs having proffered such evidence, it is unnecessary at this stage to determine whether the antitrust laws recognize preservation as a legitimate, procompetitive goal. The plaintiffs produced sufficient evidence to establish the existence of a contract, combination, or conspiracy to restrain trade in violation of § 1 of the Sherman Act. Accordingly, the defendants’ motions for summary judgment on this issue shall be denied, except as otherwise stated supra with regard to Noerr‑Pennington issues.

2. EVIDENCE OF AN UNREASONABLE RESTRAINT OF TRADE

   To sustain their § 1 claims, the plaintiffs also must have sufficient evidence to establish that the alleged contract, combination, or conspiracy unreasonably restrained trade….Neither party asserts that the per se rules apply in this case. The plaintiffs assert that the “quick look” analysis applies, and move for partial summary judgment (on both their federal and state antitrust claims) that the defendants’ conduct unreasonably restrained trade under that approach….

(A) ABBREVIATED RULE OF REASON

   In certain situations in which the anticompetitive nature of a restraint is apparent without elaborate market analysis, courts sometimes decide not to undertake a full‑scale rule of reason analysis, and instead apply an abbreviated rule of reason approach. If the restraint has obvious anticompetitive effects, the court may proceed directly to weighing the procompetitive and anticompetitive effects, “even in the absence of a detailed market analysis,” National Collegiate Athletic Ass’n, 468 U.S. at 110, and ultimately condemn a restraint that has a net anticompetitive effect. Cases applying the quick look approach have involved, for example, restrictions on both price and output which resulted in the “[p]rice [being] higher and output lower than they would otherwise be,” National Collegiate Athletic Ass’n, 468 U.S. at 107; “an absolute ban on competitive bidding,” National Soc’y of Prof’l Eng’rs., 435 U.S. at 692; and “a horizontal agreement among the [defendants] ... to withhold from their customers a particular service that they desire,” Federal Trade Comm’n v. Indiana Fed’n of Dentists, 476 U.S. 447, 459 (1986).

   The United States Supreme Court recently clarified when it is appropriate for a court to conduct a “quick look” analysis in lieu of a full‑scale rule of reason analysis. See California Dental Ass’n v. Federal Trade Comm’n, 526 U.S. 756, 764‑65 (1999). In California Dental, the Federal Trade Commission (“FTC”) brought a complaint against a nonprofit association of local dental societies, the California Dental Association (“CDA”), for violation of § 5 of the FTC Act, which “overlaps the scope of § 1 of the Sherman Act.” California Dental, 526 U.S. at 762 n. 3. The dentist members of the CDA were required to abide by a Code of Ethics, which restricted the type of advertising in which the dentists may engage….When a dentist engaged in “discount advertising,” she or he had to make certain disclosures, such as the dollar amount of the discount, the length of time a discount would be offered, and the identity of specific groups that qualified for the discount.…The FTC alleged that these provisions unreasonably restricted truthful, nondeceptive price advertising (particularly the advertising of “across‑the‑board discounts,”) and nonprice (quality) advertising.

   On review of the final decision of the FTC, …[t]he Ninth Circuit held that the price restrictions constituted a “naked” restraint on price competition, and that the proffered procompetitive justification “carried little weight because ‘it is simply infeasible to disclose all of the information that is required.” The Ninth Circuit also held that the nonprice restrictions were sufficiently anticompetitive to justify a quick look analysis, simply because they “are in effect a form of output limitation, as they restrict the supply of information about individual dentists’ services.”

   The Supreme Court vacated the judgment, finding it error to proceed to a quick look analysis without first “scrutiniz[ing] the assumption of relative anticompetitive tendencies.” The Court began by noting that, in its previous quick look cases, the anticompetitive effects were so obvious that “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.”… The Court then examined the restraints in question, finding it was not comparably obvious that they would have anticompetitive effects.…The Court added that it was not obvious a priori that the restraints would have any effect at all on competition, noting that whether an across‑the‑board discount would be more or less effective at conveying information than a discount that specified the information required by the disclosures was an empirical question. Nor was it obvious that the restraints would not have a positive effect on competition. “As a matter of economics this view may or may not be correct, but it is not implausible.”…Since the court of appeals simply presumed that the price restraints would have anticompetitive effects, the Supreme Court held it was error to take the next step, and “shift a burden to the CDA to adduce hard evidence of the procompetitive nature of its policy.” The court of appeals similarly erred when it found, with regard to the nonprice restrictions, that a mere restriction of supply constituted a “naked” restraint. The Supreme Court “question[ed] the logic of the Court of Appeals’s suggestion that the restrictions are anticompetitive because they somehow ‘affect output,’ ... absent further analysis ... it is not possible to conclude that the net effect of this particular restriction is anticompetitive.”

   The plaintiffs argue that a quick look analysis is appropriate in this case because “[a] restraint on market choice that is unclothed by plausible procompetitive justification is naked and thus illegal under the Rule of Reason without further market inquiry.”…The bulk of the plaintiffs’ analysis concerns the illegitimacy of the defendants’ possible procompetitive justifications….To follow the plaintiffs’ suggestion would violate the principles of  California Dental in two respects. First, as the Supreme Court made clear, the court cannot simply assume, without further analysis, that a restriction on output is prima facie anticompetitive. Second, the type of burden‑shifting advocated by the plaintiffs is exactly what the Supreme Court disapproved of in California Dental….The Court…clarified who bears what burdens in a “quick look” case:

[B]efore a theoretical claim of anticompetitive effects can justify shifting to a defendant the burden to show empirical evidence of procompetitive effects, as quick‑look analysis in effect requires, there must be some indication that the court making the decision has properly identified the theoretical basis for the anticompeti‑tive effects and considered whether the effects actually are anticompetitive. Where, as here, the circumstances of the restriction are somewhat complex, assumption alone will not do.

…

   The threshold inquiry, therefore, is whether an obvious anticompetitive effect is discernable a priori, such that “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.” …The court acknowledges that donation of at least 70% of the mining rights in Louisa County, at first glance, appears to be a naked restraint of trade requiring some procompetitive justification. However, the court cannot stop at a first glance. A second glance reveals the undisputed evidence that the price of mining rights in Louisa County has not risen at all since 1992. One possible explanation is that Louisa County is too narrow a geographic market for a restriction of supply to affect the price of mining rights. As in California Dental, this inquiry is subject to empirical, but not a priori, analysis. Given this evidence alone, it is not obvious that the restraints had an anticompetitive effect in an alleged Louisa County mining rights market. Further, whether such a market exists independent of the downstream market for vermiculite is highly suspect.…The plaintiffs’ evidence of a relevant market is discussed in greater detail below.

   Nor is it obvious that the donations caused injury to VVL, let alone a substantial adverse effect on competition “as a whole.” See Advanced Health‑Care Serv., Inc. v. Giles Mem’l Hosp., 846 F.Supp. 488, 493 (W.D.Va.1994). VVL never had any contractual or property rights to the land at issue; it is not obvious “whether Grace would have allowed mining in the absence of both the donation and the nonmining agreements,” Virginia Vermiculite v. W.R. Grace & Co., 156 F.3d 535, 539 (4^th Cir.1998), or whether Grace was “required to grant VVL access to its Virginia holdings, on the ground that failure to do so would constitute an improper unilateral refusal to deal.” While the court does address these questions below, it is unwilling to assume the answers under an abbreviated analysis. VVL also acknowledges that it currently has enough reserves to last until 2012‑‑over a decade from now. Though a substantial portion of the merchantable Virginian vermiculite reserves is foreclosed by the donations, it still may be possible for VVL to find and obtain other reserves in Louisa County‑‑specifically the Nininger property‑‑during the next decade.

   Finally, even if the plaintiffs’ claims are construed to be based on a  “leveraging theory,” which alleges the defendants unlawfully used their power in one market (i.e. the mining rights market) to gain a competitive advantage in another (i.e. the concentrates market), it is not obvious that the restraints had any anticompetitive effect in the downstream concentrates market. The price of small and ultra‑small concentrates has not increased since 1991, and while the price of mid‑size concentrates increased substantially, the cause of the increase is not discernable a priori. There is evidence in the record that demand for mid‑size concentrates and Grace’s costs both increased during the period of the price increase, either or both of which plausibly could account for the increase in price. Grace also has evidence that it lost sales of mid‑size concentrate to the customers who suffered the price increase.

   …The point is, the restrictions do not have an anticompetitive effect so manifest as to merit only a “quick look.”

(B) FULL‑SCALE RULE OF REASON ANALYSIS

…

   The plaintiffs’ initial burden is to produce sufficient evidence to establish that the defendants restrained trade in a “relevant market.”…The plaintiffs assert that the relevant market for their § 1 claims is the market for vermiculite mining rights (product market) in Louisa County, Virginia (geographic market).…The defendants move for summary judgment on the grounds that the plaintiffs failed to come forward with evidence sufficient to establish the existence of such a market, and that the undisputed facts show that such a market is legally and economically unsustainable….

   Market definition typically is a question of fact for the jury. Therefore, the court must determine whether the plaintiffs’ remaining evidence—after the exclusion of the report and testimony of the plaintiffs’ only antitrust economics expert, Mr. Schwartz—is sufficient to establish their definition of the relevant § 1 market.  The plaintiffs claim that the relevant § 1 product market is vermiculite mining rights.

   The defendants discharge their summary judgment burden both by pointing out that there is an absence of evidence to support the plaintiffs’ proposed product market definition, and by providing their own unrebutted evidence that negates the plaintiffs’ proposed definition.…The plaintiffs argued at the hearing that the exclusion of Mr. Schwartz is not fatal because the jury could apply the underlying facts to the Merger Guidelines. However, the Guidelines themselves state: “Because the specific standards set forth in the Guidelines must be applied to a broad range of possible factual circumstances, mechanical application of those standards may provide misleading answers to the economic questions raised under antitrust laws.” The court will not permit the jury to apply mechanically a testing method which, under its own statement of purpose, discourages mechanical application. Even armed with the Guidelines, no reasonable jury could define a relevant product market based solely on one affidavit stating that a vermiculite processing plant only can process vermiculite ore…

   Second, under the undisputed material facts in this case, the upstream market has no significance independent of the downstream vermiculite market (expanded and non‑expanded). The defendants proffered testimony from expert economists that the downstream market must be considered in the definition of the mining rights product market.…The defense experts testified that rights to mine vermiculite derive their value from the downstream vermiculite product, and that the downstream product competes with other downstream minerals such as polystyrene and perlite.…Although counsel for the plaintiffs assailed these economic conclusions at oral argument, the plaintiffs have no qualified antitrust economics witness to rebut this evidence….

   The defendants also have unrebutted evidence that downstream competition for vermiculite in fact constrains the price of upstream vermiculite mining rights. Lewis Hash, VVL’s first president, informed the Peers—sellers of mining rights—that perlite constrains the value of vermiculite mining rights; there also is evidence that Grace representatives informed the Purcells that the competitive position of vermiculite with other downstream minerals limited the royalty rate Grace would pay for vermiculite mining rights….The plaintiffs cannot rest on the affidavit of Mr. Gumble and argument from counsel to prove that the substitutes proffered by the defendants should not be included in the market.

   The plaintiffs claim that Federal Trade Commission v. Indiana Federation of Dentists, 476 U.S. 447 (1986), holds that evidence of a downstream market is unnecessary to prove a restraint of the upstream market.…The Court analyzed the complained‑of restraint under an abbreviated rule of reason analysis, and specifically found “actual, sustained adverse effects on competition ... even in the absence of elaborate market analysis.” As the court found an abbreviated rule of reason analysis to be inappropriate in this case…, Indiana Federation of Dentists is inapposite.

   The plaintiffs’ omission of the downstream market undermines their proposed definition on another ground. The plaintiffs’ contention that the defendants restrained trade in the mining rights market in order to monopolize the downstream concentrates market amounts to a “leveraging” claim.…[However,] a leveraging claim necessarily requires definition of two markets: the market that provides the leverage, and the “leveraged” market the defendants seek to restrain trade in or monopolize. …

   The plaintiffs assert that the relevant § 1 geographic market is Louisa County, Virginia.…VVL claims it is “locked in” to the Virginian mining rights market because sustaining a monopolistic price increase would be less costly than the alternative: mining in South Carolina, and either building a new processing mill there or processing South Carolinian ore in Virginia….[T]he only remaining evidence to support the plaintiffs’ proposed geographic market definition, after the exclusion of Mr. Schwartz’s testimony, concerns transportation, or “switching,” costs.…[T]he defendants claim that without the expert testimony of a qualified antitrust expert, the jury would have no means of drawing the necessary inferences from the remaining evidence to define the market that the plaintiffs propose.

   Since the exclusion of Mr. Schwartz, the plaintiffs rely primarily on M & M Medical Supplies and Service, Inc. v. Pleasant Valley Hospital, Inc., 981 F.2d 160 (4^th Cir.1993), to assert that they have met their burden of producing sufficient evidence to define a geographic market.…At oral argument, counsel for the plaintiffs stated that, in M & M, “the geographic market was sufficiently proven by one piece of evidence and that evidence was that county residents predominantly relied on local suppliers.” The plaintiffs claim that because they have evidence that consumers of Louisa County vermiculite mining rights (i.e. VVL) rely not only primarily, but exclusively, on local supply of those mining rights to process Louisa County vermiculite (due to transportation costs), they satisfy their burden of producing evidence sufficient to prove a geographic market limited to Louisa County. In M & M, however, it was not the bare facts supporting the affidavit that were sufficient to establish the relevant market; it was the affidavit itself, of an expert whose qualifications “[were] not questioned,” which sustained the plaintiff’s burden.…In other words, no reasonable jury presented solely with the plaintiffs’ remaining raw data could draw the economic inferences necessary to define Louisa County as the relevant geographic market.

   The defendants alternatively discharge their summary judgment burden by producing unrebutted evidence that the plaintiffs’ proposed geographic market definition suffers from fundamental flaws, and as a matter of economics is too narrowly drawn….

   Citing their remaining evidence that the cost of building a new mill would prevent VVL from closing its Louisa County mill and opening a new mill elsewhere, the plaintiffs argue that they were “locked in” to the Louisa County mining rights market, and that such evidence is sufficient to sustain their burden. The plaintiffs contend that the Supreme Court recognized lock‑in effects as creating a genuine dispute of material fact about the definition of a relevant market in Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, (1992).

…

   The plaintiffs contend that because they produced evidence that switching to another geographic market would be too costly, there is a genuine issue of material fact as to whether the Louisa County market is a properly‑defined relevant geographic market. Eastman Kodak is distinguishable because in that case it was the defendant who “locked in” the plaintiffs. Here, it is the plaintiffs who have locked themselves in….The plaintiffs in the case at bar entered the Louisa County mining rights market, if such a market exists, with advance knowledge that establishing a mill would entail lock‑in costs. This is evidenced by VVL’s own Mr. Gumble, who testified that “The plant must be located within a certain distance to the mining site that allows the cost of transporting the vermiculite ore to remain low enough that the vermiculite operation can be profitable.”

   A plaintiff cannot establish a relevant geographic market by claiming to be “locked in” a market that it entered knowing in advance that doing so would entail lock‑in costs and other economic risks. See Lee v. Life Ins. Co. of N. Am., 23 F.3d 14, 20 (1^st Cir.1994) (observing that “the timing of the ‘lock‑in’ at issue in Kodak was central to the Supreme Court’s decision”. The Third Circuit Court of Appeals addressed this issue in Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 439 (3d Cir.1997). In that case, franchisees of Domino’s Pizza brought an antitrust action alleging a relevant product market limited to supplies used in Domino’s Pizza stores. The district court dismissed plaintiffs’ suit for relying on an impermissibly narrow market. On appeal, the plaintiffs cited Eastman Kodak in claiming the market was not too narrow, due to lock‑in costs. Affirming the district court, the Third Circuit noted that the lock‑in evidence was relevant in Eastman Kodak because the change in policy that caused the “lock‑in” to Kodak service was not foreseeable by Kodak’s customers. The court of appeals distinguished the Queen City Pizza case because, as franchisees, the plaintiffs had the opportunity ex ante to “assess the potential costs and economic risks at the time they signed the franchise agreement.”

   The Queen City Pizza rationale can be applied to the present case. As Grace notes, when VVL began buying Louisa County mining rights in 1976, it knew that building a Virginia mill would result in lock‑in costs. VVL also knew that available vermiculite reserves in that region largely had been purchased by Grace, who likely would seek even more given its then‑expected internal vermiculite needs for its own end‑use products. The Fourth Circuit previously observed, “VVL entered into the vermiculite market by obtaining rights to one of the few Virginia deposits not already held by Grace.” Similar to the franchisees in Queen City Pizza, VVL began doing business in Virginia with its eyes wide open, fully able to “assess the potential costs and economic risks at the time.” Queen City Pizza, 124 F.3d at 440. VVL cannot now claim to be “locked in” to the Louisa County mining rights market. Even if it could, it has no antitrust economics expert who could testify why a lock‑in effect alone establishes a geographic market.

   A further distinction from Eastman Kodak is that the “ ‘commercial realities’ faced by consumers” was a disputed fact in that case. Here, evidence of the “commercial reality” of the market is undisputed: mining companies consider reserves available anywhere to them in determining where to establish a plant. The defendants proffered unrebutted expert testimony that, as a result, a properly‑defined mining rights market must take into account, at a minimum, reserves from South Carolina and Montana. The plaintiffs have no antitrust economics expert who could testify that their proposed market is not, as the defense experts contend, invalid. “Kodak does not hold that the existence of ... switching costs alone ... renders an otherwise invalid relevant market valid.” Queen City Pizza, 124 F.3d at 439. The plaintiffs’ proposed geographic market, therefore, is too narrow.

   Since the plaintiffs failed to produce sufficient evidence to establish a proper product and geographic market, their claims under § 1 of the Sherman Act must fail. Accordingly, it is unnecessary for the court to consider the remaining elements of § 1.

B. SHERMAN ACT § 2

   …The plaintiffs accuse Grace of monopolizing and attempting to monopolize the vermiculite concentrates market in North America, and accuse both defendants of conspiring to monopolize the same, all in violation of § 2.

1. MONOPOLIZATION

…The plaintiffs’ threshold burden under § 2 is to define a relevant market in which Grace allegedly exercises monopoly power. For their § 2 claims, the plaintiffs propose to define the relevant product market as vermiculite concentrates, including markets for three different grades of concentrates, “ultra‑small,” “small,” and “mid‑size.” The plaintiffs’ proposed relevant geographic market is North America, for all of their § 2 product markets.

   The defendants first challenge the plaintiffs’ proposed classification of vermiculite concentrates into separate product submarkets, claiming that although there may be different grades of vermiculite, each grade does not constitute a separate market….The defendants attempt to discharge their summary burden by providing evidence of reasonably interchangeable substitution between grades, and by pointing to an absence of evidence—specifically, any rudimentary cross‑elasticity analysis of these substitutes—to support a submarket definition of any particular grade that excludes the other grades. The defendants offer evidence from both parties that different grades of vermiculite can be used interchangeably for various end‑uses.

   For their theory that separate markets exist for each grade of vermiculite concentrate, the plaintiffs rely only on the now‑excluded expert report of Mr. Schwartz, evidence that the prices vary sharply between the different grades, and evidence that Grace raised the price of mid‑size concentrate by 55% (as adjusted for inflation) from 1993 to 1998….

   …Without an expert economist, the plaintiffs have no evidence that the inferences they draw from the price differences and price increase are economically sound….For example, Grace asserts that the price increase was due to an attempt to regulate “mine imbalance.” With increased mining costs and increased demand for mid‑size concentrate, Grace asserts that, of the ore it mined, the demand for mid‑size was disproportionate to the demand for small grade, resulting in waste of the small grade. As a result, there was excess production of small grade compared with mid‑size grade, requiring Grace to discard some production of small grade vermiculite. Grace calls this a demand‑ and cost‑induced price change. The defendants produced evidence that the reason Grace increased the price of mid‑size grade was to induce customers to buy more small grade.…While this evidence does suggest the price increase was not the result of market power—another inference the plaintiffs have no expert to challenge—at this stage the court is concerned more with the suggestion that mid‑size and small grade concentrates are interchangeable substitutes. If increasing the price of mid‑size vermiculite causes consumers to switch to small grade vermiculite, then the latter appears to be a substitute for the former. The point is not that these inter‑grade substitutes necessarily should be included in the plaintiffs’ proposed product market—that would be a question for the jury—rather, the point is that the plaintiffs have no evidence to show why the potential substitutes should not be so included.

…

   VVL claims that even if there are not separate markets for mid‑size, small, and ultra‑small grades of vermiculite, these all are “non‑coarse” grades of vermiculite, which would constitute a separate market, independent of the “coarse” grade of vermiculite. Its only evidence of such a “non‑coarse” market is the difference in price between “coarse” grade and other grades. As noted, such evidence alone is insufficient to define a relevant product market.

   In addition to challenging the existence of vermiculite submarkets, the defendants challenge the plaintiffs’ limiting the product market to vermiculite, and claim that vermiculite is part of a larger market composed of many different products, including non‑vermiculite products, that can be used for the same purposes. To discharge their burden, the defendants produce evidence of competition and reasonably interchangeable substitution between vermiculite and non‑vermiculite products for a variety of end‑uses, and point to an absence of evidence—again, a rudimentary cross‑elasticity analysis of these substitutes—to support a product market definition that excludes the non‑vermiculite substitutes.

   Both HGSI and Grace reported substitutes for vermiculite in most of the mineral’s uses. These substitutes were not accounted for in the plaintiffs’ analysis of the relevant product market. For instance, the defendants produced evidence that peat moss and perlite are substitutes for or complements of vermiculite used in professional soil mixes, and that polystyrene, mineral wool, and perlite can be used instead of vermiculite in spray‑on fireproofing for steel beams and columns. Grace itself substituted polystyrene for vermiculite in its lightweight concrete roofdeck and spray‑on fireproofing products. In fertilizer products, a large number of consumers eliminated vermiculite in favor of perlite, polystyrene, ground‑up corn cob, or other organic and liquid materials. A non‑party fertilizer producer testified that his vermiculite‑based fertilizer competes against other manufacturers’ non‑ vermiculite‑based fertilizer. The defendants produced evidence that sand‑based concrete can substitute for vermiculite in the production of swimming pool concrete aggregate, and that coarse sand is used as a substitute for vermiculite to produce the pool base of above‑ground plastic‑lined pools. Additionally, the defendants produced evidence that adding vermiculite to dry‑ wall is not required to satisfy a certain type of fire‑rating. Consequently, many dry‑wall manufacturers no longer use vermiculite in this product, but use fiberglass or clay instead, which serves the same purpose as vermiculite at a much cheaper cost.

   The defense experts conducted a basic cross‑elasticity analysis of these substitutes, and concluded that even if these substitutes do not cover all of the potential end‑uses for vermiculite, “The existence of a variety of substitutes in a variety of applications indicates that even a hypothetical monopolist supplier of vermiculite would be unable to profitably increase price.” Neither the plaintiffs nor their experts conducted any such analysis. Without a coherent cross‑elasticity analysis showing that these substitutes are not reasonably interchangeable with vermiculite and should be excluded from the market, the plaintiffs as a matter of law cannot carry an essential element of their § 2 monopolization case.

…

   To summarize, the plaintiffs failed to produce evidence of “the reasonable interchangeability of use or the cross‑elasticity of demand between the product itself and substitutes for it.” Brown Shoe Co. v. United States, 370 U.S. 294, 325, (1962). Therefore, the plaintiffs do not have sufficient evidence that the defendants’ proposed substitutes for vermiculite should be excluded from the definition of the relevant product market. Since no reasonable jury could limit the relevant § 2 product market to vermiculite concentrates or submarkets of vermiculite concentrates under the evidence in the record, summary judgment shall be granted in favor of the defendants on all of the plaintiffs’ § 2 claims that require market definition. This includes the plaintiffs’ monopolization claims.

2. ATTEMPTED MONOPOLIZATION

…In Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993), the United States Supreme Court held specifically that a defendant “may not be liable for attempted monopolization under § 2 of the Sherman Act absent proof of ... the relevant market.” Having insufficient evidence to establish the vermiculite concentrates market as a relevant product market for their § 2 claims, the plaintiffs are unable to prove that Grace attempted to monopolize any properly‑ defined market. Summary judgment shall be granted in favor of the defendants on the plaintiffs’ § 2 attempted monopolization claims.

…Th eonly remaining federal antitrust claim that the court must examine is VVL’s § 2 conspiracy to monopolize claim against both defendants.

3. CONSPIRACY TO MONOPOLIZE

   The elements of a § 2 conspiracy to monopolize claim are: (1) concerted action; (2) a specific intent to achieve an unlawful monopoly; (3) commission of an overt act in furtherance of the conspiracy, see Advanced Health Care, 910 F.2d at 150; and (4) antitrust injury. See NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 139 (1998). Unlike in an attempted monopolization claim, “it is not necessary that the committed acts, themselves, be predatory.” Advanced Health Care, 910 F.2d at 150. VVL claims that Grace and HGSI conspired to monopolize the alleged vermiculite concentrates market in North America.

(A) CONCERTED ACTION

   VVL challenges the same conduct for its § 2 conspiracy claim as it does for its § 1 restraint of trade claim. As discussed in Part II.A.1 supra, VVL produced evidence that sufficiently excludes the possibility that the defendants acted independently. Grace’s reliance on NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 139 (1998), is misplaced. There the Supreme Court held that the plaintiff could not establish that a vertical arrangement constituted a collective group boycott so as to merit application of the per se rule under § 1, that the plaintiff therefore showed no harm to the competitive process, and that a conspiracy to monopolize claim based on the same non‑collective behavior also failed to establish harm to the competitive process. In the instant case, the question is not whether a vertical arrangement resulted in a group boycott so as to merit application of the per se rule; the court already found in discussing the alleged § 1 conspiracy that VVL produced sufficient evidence that the defendants acted in concert, in what appears to be a type of horizontal arrangement, to harm VVL and to foreclose the Virginian vermiculite reserves. Therefore, NYNEX is inapposite.

(B) SPECIFIC INTENT AND OVERT ACTS

   The defendants argue that because VVL does not have sufficient evidence to establish a relevant market, VVL likewise is unable to establish any particular market in which the defendants allegedly intended to achieve an unlawful monopoly. VVL argues that proof of a relevant market is unnecessary to establish a conspiracy to monopolize claim, because § 2 conspiracies primarily are concerned with concerted action and intent, which does not require precise delineation of the market. Neither the United States Supreme Court nor the Fourth Circuit Court of Appeals has addressed directly whether rigorous economic proof of a relevant market, of the type discussed supra, is required for a § 2 conspiracy to monopolize claim.25

 The Supreme Court made clear, however, that it is not necessary to have as much proof to sustain a § 2 conspiracy claim as is required to sustain a monopolization claim. In American Tobacco Co. v. United States, 328 U.S. 781 (1946), the Court observed that a § 2 conspiracy claim “is a different offense from the crime that is the object of the conspiracy.” The Court emphasized that concert of action and intent are the principal elements of a § 2 conspiracy to monopolize claim: “Where the circumstances are such as to warrant a jury in finding that the conspirators had a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement, the conclusion that a conspiracy is established is justified.” A § 2 conspiracy claim does not require proof that the defendants “ever ... acquired the power to carry out the object of the conspiracy.” Rather, a party may be convicted of conspiring to monopolize “any part of the trade or commerce among the several states.” Similarly, in United States v. Yellow Cab Co., 332 U.S. 218 (1947), the Court reiterated that “it is enough if some appreciable part of interstate commerce is the subject of a ... conspiracy,” adding that the defendants’ “relative position in the field of ... production has no necessary relation to the[ir] ability ... to conspire to monopolize.” Id. at 225‑26.  See also United States v. Griffith, 334 U.S. 100, 107 n. 9 (1948) (noting that “a conspiracy to monopolize violates § 2 even though monopoly power was never acquired.”

   In Alexander v. National Farmers Organization, 687 F.2d 1173 (8^th Cir.1982), the Eighth Circuit held that because the essential elements of § 2 conspiracy claims are concerted action and intent to monopolize—not market power—and because a plaintiff only must establish that the conspiracy affected “some appreciable part of interstate commerce,” rigorous proof of the relevant market is not required for § 2 conspiracy claims. “A section 2 claim for conspiracy to monopolize ... generally does not require proof of a relevant market, at least not in the manner required in actual and attempted monopolization cases.” Id. at 1181. The court of appeals cautioned that § 2 conspiracies could not be based on abstract proof of bad intent:

[A] civil Section 2 conspiracy claim, standing alone, does require a minimal showing of product and geographic context—upon what and where the alleged conspiracy is focused—to ensure that a claim is not based upon some abstract showing of unlawful intent. The nature of such proof, however, is simply to show the context of the conspiracy. It need not be as rigorous as the relevant market showing for other Section 2 claims, because actual attainment or “dangerous probability” of monopoly power is not at issue in a conspiracy claim.

This view is supported by a recent Supreme Court case discussing attempts to monopolize. In Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993), the Supreme Court found that a relevant market determination was an essential element to prove the “dangerous probability” element of an attempt case, but also noted that evidence of unfair or predatory tactics alone, without proof of a relevant market, “may be sufficient to prove the necessary intent to monopolize” for a § 2 attempt case. If defining the relevant market is not required to show intent to monopolize for a § 2 attempt case, it follows that defining the relevant market is not required to show intent to monopolize for a § 2 conspiracy case. See also Monument Builders of Greater Kansas City, Inc. v. American Cemetery Ass’n, 891 F.2d 1473, 1484 (10^th Cir.1989) (“Conspiring to monopolize is a separate offense under section 2, requiring less in the way of proof than the other section 2 offenses.”; Olsen v. Progressive Music Supply, Inc., 703 F.2d 432, 438 (10^th Cir.1983) (holding that for a conspiracy to monopolize claim, “[a] relevant market need not be established”); United States v. Consolidated Laundries Corp., 291 F.2d 563, 573 (2d Cir.1961) (holding that the relevant market need not be proven in detail to establish a § 2 conspiracy because an accurate delineation of the market is not required to prove intent, the essential element for a § 2 conspiracy claim) (citing Yellow Cab, 332 U.S. at 225‑ 26).26

   The defendants argue that because VVL utterly failed to provide sufficient evidence that vermiculite concentrates constitute a relevant product market, and because there is substantial evidence that many other non‑vermiculite products should be included in the relevant product market, the defendants potentially could be held liable under § 2 for conspiring to monopolize a market that in fact does not exist. Factual impossibility, however, is not a defense to conspiracy. Under the common law, a person could be guilty of a conspiracy to commit a crime, even though it was impossible in fact to achieve the goal of the conspiracy. See United States v. Palmer, 203 F.3d 55, 64 (1^st Cir.2000) (observing that factual impossibility is not a defense to conspiracy). Even if it is factually impossible for the defendants to monopolize the vermiculite concentrates market, they still may be held liable for conspiring to do so. As stated above, a § 2 conspiracy claim “is a different offense from the crime that is the object of the conspiracy.” American Tobacco, 328 U.S. at 789.The reason that specific market delineation is important in § 1 claims, and in § 2 monopolization and attempted monopolization claims, is because the fact‑finder must be able to determine whether the defendants actually restrained trade, actually achieved and maintained monopoly power, or came dangerously close to actually achieving monopoly power. The same specific delineation of the market is unnecessary to prove a § 2 conspiracy, because its “essential elements ... are concerted action and specific intent to monopolize,” Alexander, 687 F.2d at 1182, and the required intent is simply intent to monopolize a product that “appreciabl[y][is] part of interstate commerce.” Yellow Cab, 332 U.S. at 225. Accordingly, the court finds that although a product and geographic context for the conspiracy must be established, a rigorous economic definition of the relevant market is not required to sustain a claim for conspiracy to monopolize under § 2.

   It is undisputed that Grace and VVL are the second‑ and third‑largest producers of vermiculite in the world (after South Africa’s Palabora), and that, until recently, Grace and VVL were the only domestic competitors in the production and sale of vermiculite concentrates. It also is undisputed that vermiculite concentrates are sold throughout the United States, i.e. in interstate commerce, and that, at minimum, North America is a relevant geographic context for vermiculite sales. This evidence is sufficient to establish vermiculite concentrates in North America as a product and geographic context and target of the alleged conspiracy between Grace and HGSI.

   The plaintiffs produced sufficient evidence to create a genuine dispute of material fact as to whether the defendants entered into a conspiracy with the specific intent—i.e. common design and purpose—that Grace monopolize vermiculite concentrates production and sales in North America, directed toward the exclusion of Grace’s only domestic competitor in that part of interstate commerce. See American Tobacco, 328 U.S. at 810 (holding that a conspiracy is established if the defendants had “a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement”); Williams v. 5300 Columbia Pike Corp., 891 F.Supp. 1169, 1175 (E.D.Va.1995) (“a conspiracy to monopolize must be one that is somehow rationally directed toward the exclusion of competitors.”). Internal Grace documents suggest that Grace believed vermiculite concentrates in North America constitute a distinct market. For instance, one Grace document states that “[t]he ability of new competitors to enter the vermiculite market is severely hampered by limited access to commercial vermiculite deposits ... The small number of competitors in the vermiculite market combined with the high barriers to entry for new competitors has limited the intensity of rivalry among competitors.” Another Grace document describes Grace’s vermiculite business as being “the leader in the North American vermiculite market.” In addition, the evidence described in the discussion of the § 1 conspiracy is sufficient to create a genuine dispute of material fact as to whether the defendants, acting in concert, conspired to eliminate VVL as Grace’s only domestic competitor, and thereby enable Grace to monopolize the production and sale of vermiculite concentrates in North America. That evidence includes, for example: evidence that Grace quantified the value to itself of VVL’s closing in Virginia due to a lack of reserves; evidence that Grace entered into the HGSI transactions with an eye toward keeping reserves from VVL; evidence that Grace and HGSI withheld the A.D. Peers donation until they could determine whether VVL would run out of Virginian concentrates; and evidence that HGSI stopped making payments on its Nininger lease when it realized VVL would continue to produce vermiculite in Virginia. This evidence, along with the letters exchanged between the defendants, indicating HGSI’s intent to mine and Grace’s intent to keep VVL from mining, also could lead a reasonable jury to find that HGSI stood to gain separately from Grace’s acquisition of monopoly power in the alleged market for vermiculite concentrates, and in that sense can be deemed to share in Grace’s alleged specific intent to obtain a monopoly. Alternatively, a reasonable jury could find, for example, that HGSI intended that Grace obtain a vermiculite concentrates monopoly so that HGSI would not be threatened by any mining company in Virginia: VVL would be out of business in Virginia, and Grace would not mine in Virginia pursuant its mutual agreement with HGSI. All of this evidence reasonably could establish that Grace and HGSI believed vermiculite concentrates in North America constitute a market, that Grace specifically intended to monopolize that alleged market, that HGSI stood to gain from such monopolization and shared Grace’s intent, and that the Grace‑HGSI transactions were conspiratorial efforts to eliminate the only other domestic producer of vermiculite concentrates, VVL, from that part of interstate commerce. Therefore, summary judgment on these issues shall be denied.

NOTES and QUESTIONS

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