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Gumwood HP Shopping Partners, L.P. v. Simon Property Group, Inc.

Area of Law:

Antitrust. Plaintiff alleged that defendant improperly prevented retailers from leasing at its new shopping center.

Grounds:

1. Defendant sought to preclude plaintiff’s expert’s testimony on the grounds that it was outside his area of expertise, not helpful to the jury, relied on insufficient facts, and did not articulate a reliable basis for its findings.
2. Plaintiff sought to preclude defendant’s expert’s testimony on the grounds that it would mislead the jury, that its scope went beyond what was necessary to respond to plaintiff’s expert, and that it did not properly define the relevant geographic market.

Outcome:

Both motions granted in part and denied in part.

Analysis:

Opinions of Dr. H.E. Frech III:

First, the court granted the motion to preclude the testimony of plaintiff’s expert, Dr. Frech, concerning tenant negotiations.  Defendant argued that Dr. Frech improperly offered narratives about the about the “parties’ negotiations with the retailers” and that this testimony would not be helpful to the jury.  Slip op. at 3.  The court agreed, noting that the presence of tying depended primarily of what was communicated between defendant and the retailers.  Id. at 4.  The parties would present evidence directly to the jury regarding whether there was coercion during these communications.  Id. at 5.  It was up to the jury to decide what evidence was more credible.  The court found that Dr. Frech’s expertise as an economist would offer no help to the jury in making credibility judgements and resolving factual disputes.  Id.  Further, the court noted that parties’ argument over whether Dr. Frech relied on sufficient facts illustrated “how admitting this type of testimony would actually distract instead of assist the jury” because it would require a detour into exploring Dr. Frech’s examination of the facts.  Id. at 6.  Thus, the court ruled that it would exclude Dr. Frech’s testimony concerning tenant negotiations under Federal Rule of Evidence 403 in addition to Rule 702.

As an independent basis for excluding Dr. Frech’s testimony concerning tenant negotiations, the court found that Dr. Frech’s definitions of tying and coercion were inconsistent with the law.  During his deposition, Dr. Frech defined tying and coercion broadly.  For example, he stated it would be “coercive for Simon to ‘ask a favor’ of a retailer.”  Slip op. at 8.  He also stated that “portfolio negotiation where nothing is final until everything is final would inherently constitute a tying arrangement.”  Id.  The court noted that such statements were “inconsistent with the definitions of tying and coercion in the context of tying claims,” and would not be allowed at trial.  Id. at 9-12.

Second, the court also granted the motion to preclude portions Dr. Frech’s testimony relating to market power.  Dr. Frech based his opinion that defendant had market power on two lines of analysis.   For a small portion of markets, he conducted a traditional market-structure analysis.  Id. at 15.  He also considered direct-effects evidence for any market that defendant used as leverage, including the small portion on which he performed market-structure analysis.  The court found that Dr. Frech had not “articulated a reliable basis for finding market power in any tying market based on direct-effects evidence.”  Slip op. at 18.  “[A]s a matter of law, direct-effects evidence alone cannot establish market power.”  Id.  Noting that “[n]ot all leverage is market power,” the court also found that Dr. Frech never articulated a “reliable basis on which to conclude that the source of Simon’s leverage was its market power in those markets, as opposed to some other form of leverage.”  Id. at 20.  Even if a party could rely entirely on direct-effects evidence, Dr. Frech’s testimony would be excluded because he did not reliably connect “the effects at issue here to the existence of market power in any tying market.”  Id. at 19.  However, the court did not exclude Dr. Frech’s opinion regarding market power that was based on market-structure analysis.

Opinions of Dr. Michael R. Baye:

Plaintiff moved to exclude two aspects of the opinion of Defendant’s expert, Dr. Baye:  his testimony about the economic requirements for an anticompetitive tie, and his testimony about the relevant geographic markets.

First, the court granted Plaintiff’s motion to preclude Dr. Baye’s testimony regarding the economic requirements for an anticompetitive tie.  The court found that Dr. Baye’s testimony interfered with the “Court’s duty to instruct the jury as to the elements of a per se tying claim and that, insofar as it is inconsistent with those elements, it would mislead the jury.”  Slip op. at 25.  Further, the court found that this testimony went beyond what was “necessary or appropriate to respond to” Dr. Frech’s general testimony about how tying can raise antitrust concerns.  However, the court did allow Dr. Baye to “offer opinions relating to the substance of . . . the elements of the per se tying test,” even though he could not opine about what those elements are.  Id. at 26.

Second, the court declined to preclude Dr. Baye’s testimony on the ground that it did not properly define the relevant geographic market.  It was “perfectly appropriate for Dr. Baye to offer a criticism that Dr. Frech’s analysis of the geographic market was incomplete and unreliable, without offering an affirmative opinion of his own[.]”  Id. at 27.  The court also overruled Plaintiff’s objection that Dr. Baye did not base his opinion of sufficient facts or data.  Dr. Baye did consider and cite to various pieces of evidence, so plaintiff’s argument was “nothing more than a disagreement with his conclusion.”  Id. at 27-28.