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Case: 14-15562 10/02/2014 ID: 9264005 Dktentry: 18-1 Page: 1 of 78 Case: 14-15562 10/02/2014 ID: 9264005 DktEntry: 18-1 Page: 1 of 78 No. 14-15562 In the United States Court of Appeals for the Ninth Circuit ________________ AEROTEC INTERNATIONAL, INC., Plaintiff/Appellant, v. HONEYWELL INTERNATIONAL INC., Defendant/Appellee. _______________________________________________ On Appeal from the United States District Court for the District of Arizona, Cause No. CV 2:10-cv-00433-JWS DEFENDANT/APPELLEE’S ANSWERING BRIEF William J. Maledon, AZ Bar No. 003670 Richard G. Parker Brett L. Dunkelman, AZ Bar No. 006740 O’MELVENY & MYERS LLP Joseph N. Roth, AZ Bar No. 025725 1625 Eye Street, NW Eric M. Fraser, AZ Bar No. 027241 Washington, DC 20006 OSBORN MALEDON, P.A. (202) 383-5380 2929 North Central Avenue, 21st Floor [email protected] Phoenix, Arizona 85012-2793 (602) 640-9000 [email protected] [email protected] [email protected] [email protected] Attorneys for Defendant/Appellee Honeywell International Inc. Case: 14-15562 10/02/2014 ID: 9264005 DktEntry: 18-1 Page: 2 of 78 CORPORATE DISCLOSURE STATEMENT Honeywell International Inc. has no parent corporation. State Street Bank & Trust owns 10% or more of Honeywell International Inc. 2 Case: 14-15562 10/02/2014 ID: 9264005 DktEntry: 18-1 Page: 3 of 78 TABLE OF CONTENTS Page CORPORATE DISCLOSURE STATEMENT ......................................................... 2 TABLE OF AUTHORITIES ..................................................................................... 6 INTRODUCTION ................................................................................................... 10 JURISDICTION ....................................................................................................... 11 ISSUES .................................................................................................................... 11 STATEMENT OF THE FACTS AND CASE ........................................................ 13 A. APU Industry Overview ...................................................................... 13 B. The Marketplace for APU Repairs ...................................................... 16 C. Honeywell’s Agreements with Repair Customers .............................. 17 D. Honeywell Ensures That Its Repair Contracts Are Always Above-Cost .......................................................................................... 18 E. The Worldwide Parts Shortages .......................................................... 19 F. Honeywell’s Dealings with Aerotec ................................................... 21 G. Aerotec’s Lack of a Parts Inventory, Poor Credit, and Financial Exposure to Saudia Made Aerotec Especially Vulnerable to the Worldwide Parts Shortage ................................................................... 23 H. Aerotec’s Claim That Honeywell Intentionally Tied Up Aerotec’s Working Capital Ignores Undisputed Facts ....................... 26 I. Aerotec Complains That Honeywell Does Not Freely Give Its Intellectual Property to Aerotec .......................................................... 28 J. Aerotec Complains That Honeywell Engages in Price Discrimination in the Sale of Parts ...................................................... 29 STANDARD OF REVIEW ..................................................................................... 31 3 Case: 14-15562 10/02/2014 ID: 9264005 DktEntry: 18-1 Page: 4 of 78 SUMMARY OF ARGUMENT ............................................................................... 31 ARGUMENT ........................................................................................................... 33 I. Tying and Exclusive Dealing .............................................................. 33 A. Tying ......................................................................................... 33 1. Aerotec’s Tying Claim Fails Because It Has No Evidence That Honeywell Actually Ties APU Parts and Repair Services ............................................... 35 2. Aerotec Also Failed to Show Economic Coercion ......... 38 B. Exclusive Dealing ..................................................................... 42 1. As the District Court Held, Aerotec Cannot Show That Honeywell’s Agreements Actually Foreclose Competition .................................................................... 42 2. Honeywell Lacks Market Power Sufficient to Prove Actual Foreclosure ............................................... 45 3. As a Matter of Law, Honeywell’s Customer Agreements Are Procompetitive and Lawful ................. 46 II. Refusal to Deal .................................................................................... 48 A. The District Court Correctly Held That Aerotec’s Claim of “Onerous” Business Terms Is Not an Illegal Refusal to Deal ........................................................................................... 48 B. The District Court Correctly Held That Aerotec Cannot Meet Its Burden to Show Harm to Competition ....................... 51 C. Intent Alone Cannot Take the Place of Proof in a Refusal-To-Deal Claim ............................................................. 52 D. Honeywell Has Not Denied “Essential Facilities” to Aerotec ...................................................................................... 55 E. Aerotec’s “Unreasonable-Terms” Theory Fails as a Matter of Law for Additional Reasons ..................................... 56 4 Case: 14-15562 10/02/2014 ID: 9264005 DktEntry: 18-1 Page: 5 of 78 III. Bundled Pricing ................................................................................... 57 A. The District Court Properly Held That Aerotec’s Bundled Pricing Claim Fails Because Aerotec Cannot Meet Its Burden to Show Below-Cost Pricing ........................................ 58 B. Aerotec’s Bundled Pricing Claim Is an Invalid Price Squeeze Claim ........................................................................... 60 C. The Bundled Pricing Claim Also Fails Because the Discount Attribution Test Does Not Apply .............................. 61 D. Honeywell Did Not Set Prices Below Cost and Aerotec Cannot Show Any Possibility of Recoupment ......................... 63 IV. Price Discrimination ............................................................................ 64 A. The “In Commerce” Element.................................................... 65 B. The RPA Does Not Reach Transactions That Are Not Reasonably Comparable ........................................................... 65 C. Competitive Injury .................................................................... 70 V. Aerotec’s State Law Claims ................................................................ 73 CONCLUSION ........................................................................................................ 75 STATEMENT OF RELATED CASES ................................................................... 76 CERTIFICATE OF COMPLIANCE ....................................................................... 77 CERTIFICATE OF SERVICE ................................................................................ 78 5 Case: 14-15562 10/02/2014 ID: 9264005 DktEntry: 18-1 Page: 6 of 78 TABLE OF AUTHORITIES Page Cases A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d 1396 (7th Cir. 1989) .......................................................................66 Allied Orthopedic Appliances Inc. v. Tyco Health Care Grp. LP, 592 F.3d 991 (9th Cir. 2010) .................................................................. 43, 45 Am. Needle Inc. v. Nat’l Football League, 560 U.S. 183 (2010) ............................46 Angel v. Seattle-First Nat’l Bank, 653 F.2d 1293 (9th Cir. 1981) ...........................44 Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985)................................................................................ 49, 54 Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990) ..............................58 Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227 (1st Cir. 1983) ..............47 Brantley v. NBC Universal, Inc., 675 F.3d 1192 (9th Cir. 2012) ............................34 Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993).......................................................................... 55, 58, 63 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) ......................51 Capital Ford Truck Sales, Inc. v. Ford Motor Co., 819 F.Supp. 1555 (N.D. Ga. 1992) ................................................................66 Carmen v. San Francisco Unified Sch. Dist., 237 F.3d 1026 (9th Cir. 2001) .......................................................................72 Cascade Health Solutions v. PeaceHealth, 515 F.3d 883 (9th Cir. 2007) .................................... 38, 39, 41, 58, 59, 61, 63 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) ........................................... 50, 63, 68 Coalition for a Level Playing Field, LLC v. Autozone, Inc., 813 F. Supp. 2d 557 (S.D.N.Y. 2011) ...........................................................66 6 Case: 14-15562 10/02/2014 ID: 9264005 DktEntry: 18-1 Page: 7 of 78 Coastal Fuels of Puerto Rico, Inc. v. Caribbean Petroleum Corp., 990 F.2d 25 (1st Cir. 1993) ............................................................................66 Dahl, Inc. v. Roy Cooper Co., 448 F.2d 17 (9th Cir. 1971) ....................................55 Doe v. Abbott Labs., 571 F.3d 930 (9th Cir. 2009) .................................................60 Eastman Kodak v. Image Technical Servs., Inc., 504 U.S.
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