DuPont Is No Monopoly but Has Lost Massive Verdict

(CN) - Unraveling a $920 million verdict for DuPont, the 4th Circuit found that a federal judge abused his discretion in excluding evidence material to the defense.

The 4th Circuit upended the trade-secrets verdict for E.I. du Pont de Nemours & Co. in an unpublished ruling, while publishing a second ruling that affirms summary judgment against DuPont's courtroom adversary, Kolon Industries, on the latter's antitrust claims.

A new federal judge should steer the retrial, according to the unpublished ruling, even though the court found no error in the second ruling with that judge's refusal to recuse himself.

Kolon had contended that U.S. District Judge Robert Payne had a conflict of interest because of his former partnership in the law firm now known as McGuireWoods.

This firm had previously represented Kolon's adversary DuPont in this trial as well as in a previous case.

The two-judge majority noted in the published ruling that the parties had 20 days to object to Payne after they were notified in May 2009 that McGuireWoods still made small payments to the judge for rent of furnishings.

Neither party objected to the judge's continued participation in the case at the time. Instead Kolon filed its recusal motion in November 2011 - two months after a jury had ordered the Korea-based Kolon to pay DuPont $919.9 million.

Payne denied the motion as untimely early the next year.

In affirming the jury's verdict, the appellate majority found no issue with the denied recusal.

"Kolon knew every fact that eventually predicated its recusal motion almost a year before it first suggested recusal might be appropriate, in July 2011, and over a year before it finally filed its first recusal motion, in November 2011," Judge Albert Diaz wrote for the panel, "On this record, Kolon quite clearly failed to 'raise the disqualification ... [of the judge] at the earliest moment after [its] knowledge of the facts.'"

Judge Dennis Shedd dissented on this point, in the published ruling.

"At the end of the day, the majority's determination that Kolon's recusal requests were untimely means that a district judge who, by the majority's own determination, is no longer permitted to conduct further proceedings involving the trade secrets claims, presided over a trial that ended in a one billion dollar verdict and a twenty-year worldwide production shutdown injunction," he wrote (emphasis in original). "Such a result does not, I think, inspire public confidence in the judiciary. The majority's rule leaves judges with no enforceable duty to remove themselves from cases absent action by a party. This result cannot be squared with the statute's purpose or language."

Recusal was required in this case because "the district judge had more than a 'tangential' relationship" to the proceedings, Shedd added.

In the unpublished ruling that vacates the nearly $920 million verdict, the judges were unanimous.

"We reject summarily Kolon's contention that it should be awarded judgment as a matter of law, but we find that a new trial is warranted," the lead opinion states. "In light of our remand for a new trial, we need not and do not address the remaining procedural and evidentiary issues raised by Kolon, as those issues may or may not arise upon remand and, in any event, may arise in a decidedly different posture."

The litigation stems from a dispute over the para-aramid fiber that DuPont invented in 1965. Delaware-based DuPont controlled the entire U.S. market with its Kevlar fiber until Teijin Aramid introduced its competing Twaron fiber to the market in 1987. Now the market is highly concentrated between Dupont and Teijin, which together account for 99 percent of U.S. sales.

Kolon began selling its Heracron fiber in the United States in 2005. It claimed that DuPont considered its market entry to be a threat and, therefore, began executing multiyear supply agreements with high-volume customers, requiring them to purchase most or all of their para-aramid requirements from DuPont.

Blaming DuPont's allegedly anticompetitive practices, Kolon said it could not achieve more than a de minimis market share of fiber sales in the United States.

DuPont, on the other hand, argued that Kolon failed because it made only a "feeble effort" to establish a U.S. foothold. In defending its multiyear agreements with customers, it said consumer demand had driven that development because of Teijin's use of such practices.

While DuPont accused Kolon of theft and misappropriation of its Kevlar trade secrets, Kolon counterclaimed over DuPont's alleged monopoly of the U.S. para-aramid market.

In granting DuPont summary judgment on the antitrust issues, the court found that evidence undermined the contention that DuPont controlled more than 70 percent of the relevant market.

Indeed Kolon's own expert put DuPont's maximum share at 59 percent during the relevant time period, during which time the figure decreased to 55 percent.

The appellate majority cited these findings as well in affirming last week.

"This decline in DuPont's market share, combined with Teijin's corresponding ascendance and the fact that DuPont was charging lower prices in the United States than in Europe (which Kolon identified as a comparable market), led the court to its conclusion," Diaz wrote (parentheses in original).

A market share below 60 percent does not necessarily foreclose a finding of monopoly power, but it weighs heavily against it, according to the ruling.

"Quite simply, this percentage falls significantly short of where we have previously drawn the line for monopoly power," Diaz wrote.

Similarly, a showing of DuPont's "market" power is not itself sufficient to prove that DuPont also possesses "monopoly power," the 42-page lead opinion states.

The Richmond, Va.-based court also noted the uncontested facts that DuPont experienced a steady, decades-long loss in market share to Teijin.

"Ultimately, in light of DuPont's reduced market share and lack of durable market power, the evidence cannot sustain a jury finding that DuPont had the 'power to control prices or exclude competition,' or was 'truly predominant in the market' during the relevant period," Diaz wrote.

DuPont's supply agreements with certain high-volume customers furthermore did not have the probable or actual effect of foreclosing competition, the court found.

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