Gerald R. Powell

2525 Old Oaks Drive

Waco, Texas 76710 

Hon.. Blake A. Hawthorne, Clerk
Supreme Court of Texas
201 West 14th Street, Room 104                                                                          Austin, Texas 78701 

Re:       No. 03-0737; The Coca-Cola Co., et al. v. Harmar Bottling Co., et al.; In the Supreme Court of Texas, Austin, Texas

Dear Mr. Hawthorne:

     Enclosed for your receipt are an original and 11 copies of this Letter Brief of Amicus Curiae Gerald R. Powell in support of Respondents Harmar Bottling Company et al.  Please bring this Letter Brief to the attention of the Court.

STATEMENT OF INTEREST

     I submit this Amicus Curiae brief because of my interest in the preservation of the right to trial by jury.  I am a Professor of Law at Baylor Law School, where I teach Practice Court – Texas procedure and evidence law.  I have taught Evidence and Advanced Evidence as the Abner V. McCall Professor of Evidence Law for the past 20 years.  I submit these comments, however, in my personal capacity, and the views expressed here are not offered on behalf of, nor intended to express the views of, Baylor University.  I have not been paid, nor will I ever be paid, by anyone to work on the Harmar case, and do not submit this comment on behalf of any party.  I humbly submit this filing pro bono, on behalf of the public interest.

ARGUMENT

 The Importance of the Right to Trial by Jury

     The right to a jury trial is a fundamental right granted to all United States citizens by the Seventh Amendment of the United States Constitution[1] and to all Texas citizens by Article 1, Section 15[2] and Article 5, Section 10 of the Texas Constitution.[3]  The right to trial by jury was so sacred to our founding fathers that it almost prevented ratification of America’s Constitution.[4]  Only after a promise to add a bill of rights, which included a right to trial by jury, was the Constitution ratified.[5]

     The fundamental right to trial by jury is even more precious in Texas.  In the Texas Declaration of Independence, Grievance Three complains that the Mexican Government “has failed and refused to secure, on a firm basis, the right of trial by jury that palladium of civil liberty, and the only safe guarantee for the life, liberty, and property of a citizen.”[6]  To safeguard against this intrusion into a citizen’s individual rights, the Texas Constitution references the right to trial by jury in six sections, whereas the Federal Constitution makes reference to this right only one time.[7]  The right to a jury trial is of vital interest to the public.

The Vanishing Jury Trial 

The number of jury trials is decreasing significantly in Texas and elsewhere, and legal scholars have begun debating the reasons.[8]  This is a development in our legal system that members of this Court have found troubling.[9]  In his recent Texas Bar Journal article, Justice Hecht cautions that the decrease in the number of jury trials is a precursor to significant changes in the entire civil justice system.[10]  Justice Hecht warns that the repercussions of the dwindling involvement of juries in the justice system will include, among other consequences, a decreased need for trial lawyers and appellate judges.[11]  More significantly, however, Justice Hecht predicts that the vanishing jury trial will result in irreversible changes to the United States’ unique and revered justice system.[12]  Justice Hecht cites several factors that he believes have played a role.[13]  These factors include the rising expense of trial, the growing preference for arbitration and recent changes in substantive and procedural law.[14]  I agree with Justice Hecht, but, ironically, I also find that the Majority’s decision in this case exemplifies another reason that trial by jury is endangered. 

The Role of Appellate Courts in the Vanishing Jury Trial

     Every time a court takes away a jury verdict the bedrock beneath the right to trial by jury shudders ever so slightly. The tremors are now felt with increasing frequency. 

     To what degree we can tolerate such rumblings is a subject of debate and point of view.  Without question, our courts are obligated to review jury verdicts and to reverse them when they are unjust.  That too is an important component of the foundation of our court system.  When a court of appeals reverses on factual insufficiency grounds, the public interest is served because the jury returned a verdict so unreasonable that justice demands consideration of the evidence anew by a different jury.  The tremor rumbling from the courthouse soon subsides, a new trial easing the shock to our legal system.  Our Constitution entrusts such a decision to the courts of appeal, in their limited fact-finding authority.

     When, however, the Supreme Court reverses on legal insufficiency grounds there is not the safeguard of consideration by another jury – the matter is done, and justice has run its course, right or wrong.  Of course, there are indeed cases in which justice demands reversal and rendition.  To uphold a verdict that has utterly no basis in the evidence would be equally as unjust as taking away a verdict that did have such support.  But, the fault line is a fine one in many cases.  My point is only that such a decision should not be made so readily, especially when the case is close and when so many reasonable people differ on the evidence.  And when justice does demand rendition against a jury’s verdict, the reasons for the decision should be very clear and well explained.  It should at least be, when such a tremor occurs, that we can all know and understand its reason.  Otherwise the fissure in the foundation of trial by jury widens. 

     What is troubling about this Majority opinion is that five justices on the Court – all learned and reasonable people – found the evidence so clearly, unequivocally and resoundingly lacking that reasonable and fair-minded people could not disagree, and that judgment should accordingly be rendered against the verdict. Yet twelve jurors listened and watched for two months, and then deliberated for two days, returning a verdict finding serious violations of our law.  A learned trial judge, after hearing and seeing the same evidence, concluded there was legally sufficient evidence to support the jury’s verdict.  The court of appeals, all capable and reasonable justices sitting as judges of law and fact, found there was both factually and legally sufficient evidence to support the verdict.  Four justices of this Court – all reasonable and fair-minded people – concluded there was legally sufficient evidence to support this verdict.  Justice Calvert predicted this precise situation as “theoretically possible” and Justice Brister reminded us of it in City of Keller v. Wilson.[15]   

      By any fair measure the question in this case is at least a close one, and the public interest deserves a clear explanation for this rumble in the foundation.  This is true in all cases involving no evidence review and is especially true in this case.  This is not just a private suit among private parties.  Rather, monopoly cases involve substantial issues of general public harm.  This Court’s opinion has far-reaching implications that will affect every person and every business in Texas.  Without a much better explanation for the Court’s decision, the public, as well as public enforcement agencies, will be left wondering why this conduct is permitted.

Consider the following:[17]  

Misallocation of Space-to-Sales Ratio: Both the Majority[18] and the Dissent[19] incorrectly state that Coke allocated overall product space in accordance with its market share.  Rather than considering whether Coke properly allocated its “shelf space,” the Court should have considered whether Coke properly allocated the “space-to-sales ratio.”[20]  This ratio takes into account shelf space, as well as display space, when determining whether a product receives the proper amount of space in accordance with its market share.[21]  Coke’s category manager for the region admitted that Coke did not take into account product promotional display space in calculating shelf space[22] and admitted that one foot of display space was effectively the same as five feet of shelf space.[23]  He testified that to calculate shelf space, Coke used a factor of 30 percent of all “core brand” CSD sales to represent display sales,[24] but admitted that 30 percent was an arbitrary number.[25] Coke could have accurately calculated the space-to-sales ratio by using a multiple of five times the actual display space.  Instead, Coke’s arbitrary factor under-represented display sales.[26] Further, there was other testimony that after Coke instituted its CMA program, it reset both grocery and convenience stores, cutting back space allocated to the Bottlers.[27] Thus, there was some evidence that Coke’s products received a greater amount of total CSD space than its already dominant market share.  Coke did not just buy the most conspicuous or the preferred locations to display its products as the Majority concludes.  Instead, there was evidence that Coke bought all of that, plus exclusive advertising and an amount of total CSD space disproportionate to its already dominant market share.   

“Virtually Every Major Retailer”: The Court acknowledged that the evidence proved that “Coke had CMAs with most retailers, including virtually every major retailer other than Wal-Mart” that “generally covered 42-52 weeks per year.”[28]  Actually, the evidence was that Coke had CMAs with virtually every retailer including every major retailer other than Wal-Mart.[29]   

Exclusive Advertising Requirements: The Court stated that, among their various provisions, “Coke’s CMAs prohibited or limited retailer advertising of competing national brands.”  In fact, Coke’s CMAs did not merely limit retailer advertising:  Every one of Coke’s CMAs contained nonnegotiable exclusive advertising restrictions that prohibited any advertising of competitor brands both inside and outside of the stores.[30]  There was further evidence, which the Court did not acknowledge or credit, that these advertising restrictions effectively foreclosed the ability of Coke’s rivals to communicate with the public.   

Price-Fixing Agreements: The Court cited evidence showing that Coke’s CMAs sometimes forced distributors “to charge higher prices for competing products than they otherwise would have” in order for Coke’s products to be priced less than its competitors.[31]  The Majority dismisses this evidence as “isolated instances.” However, in the Paris and Sulphur Springs, regions of Texas, every one of Coke’s CMAs required that retailers price Coke’s competitors’ products higher than Coke’s products.[32]

Exclusive Flavor Agreement: The Court acknowledges that, under the CMAs, Coke would give bonuses to retailers who did not carry competitors’ root beer, orange and grape-flavored sodas.[33]  The Court also dismisses this evidence as an “isolated instance.”  However, this type of provision pervaded in the Southern Arkansas region, such that it was virtually impossible to find Coke’s competitors’ root beer, orange and grape-flavored sodas.[34] 

Delta Beverage Study: Plaintiffs produced evidence of a study performed by Delta Beverage, the Pepsi distributor in the area.  The study concluded that Coke’s exclusive advertising restrictions in CMAs caused higher prices for both Coke’s products and those of its competitors.[35]  The study further showed that Coke’s exclusive advertising requirements reduced overall CSD output.[36]  The Court ignores this evidence.

Price Increases: The court ignored and failed to credit or distinguish evidence showing that prices increased generally in the region after Coke instituted its CMAs.  There was testimony that the price of carbonated beverages increased generally in the four-state region after Coke began negotiating exclusionary CMAs.[37]  These price increases in the region occurred at the same time CSD prices were declining significantly on a national basis.[38]  Additionally, a Coke executive admitted that Coke increased its prices in the Texarkana region and, although soft drink sales as a whole were down in that region, Coke saw a marked increase in profits.[39]  Finally, the record reflects after Coke implemented its CMAs in the Paris, Texas, Sulphur Springs, Texas, and Southern Arkansas regions, prices increased generally in those regions.[40]  

Other Types of Injury to Competition: The Majority ignores evidence of injury to competition other than increased prices, including, decreased output,[41] increased profit margins,[42] artificial barriers to entry,[43] eliminating competitors,[44] increased monopoly market share,[45] decreased choice,[46] decreased quality,[47] and raising rivals’ costs.[48]  Each is sufficient to show injury to competition; yet, the Majority ignores them all.

Inferences Drawn Against the Verdict: In response to evidence of per se conduct, price fixing, boycotts and exclusive advertising agreements, the Court states, “Remarkably, the dissent would hold Coke liable for per se violations of the antitrust laws—price fixing, group boycott, and advertising limitations – even though the RCC franchises do not themselves allege that any of Coke’s conduct was a per se violation.”[49]  To the contrary, the bottlers did allege exclusive advertising, group boycott, and price fixing as predatory conduct in support of their monopoly claims.[50] The Court’s opinion completely disregards this evidence.

    As the Dissent explained, per se violations “are not separate causes of action; they are analytical categories used to decide whether conduct may be presumed to be anticompetitive, or must be shown to be so.”[51]  As such, per se violations are conclusively presumed to be an unreasonable restraint of trade.[52]  The jury was allowed to judge the reasonableness of this per se conduct and also found it to be unreasonable.  The fact that the jury was permitted to consider this conduct under a rule of reason analysis does not somehow cleanse that conduct of its unreasonably predatory character and its adverse effect on competition. 

     In addition, the Court dismissively states that Plaintiffs were free to negotiate their own CMAs in order to counter the effect of Coke’s CMAs.  This statement draws an inference against the verdict.  However, the evidence supports an inference in favor of the verdict.  Coke imposes “all or nothing” bundled restrictions lasting virtually the entire year.[53]  Despite not wanting these “all or nothing” bundled restrictions,[54] virtually every retailer in this market except Wal-Mart accepts them, but retailers do not accept these restrictions in other markets where Coke lacks monopoly power.[55]  Viewing the evidence in the light most favorable to the verdict, a jury could reasonably infer that while in theory Coke’s competitors had the ability to negotiate CMAs, they had little or no opportunity in reality to do so; therefore, any such attempt would be futile.  Yet this Court chooses to infer otherwise.

     A reasonable jury could infer from the Delta Beverage study that Coke’s exclusive advertising requirements increased prices and decreased output.  The Court, in reaching its result, chose to infer otherwise.

     The jury could have reasonably inferred from the evidence of Coke’s misallocating the sales-to-space ratio that Coke literally pushed its rivals off the shelves, leaving them unreasonably inadequate shelf space to stock their products, promote their products, or introduce new products.  Considering this with other evidence, a reasonable jury could have concluded that Coke had so much CSD space that it was able to promote products with little or no market share, prevent the Bottlers from successfully promoting their own products or introducing new products and raising its rivals’ costs by leaving so little space, rivals had to make additional trips to restock their shelves.  Yet, the Court chooses to infer otherwise.

Safeguards are Needed for No Evidence Review

      In a no evidence challenge, the complaining party must show that there is no more than a mere scintilla of evidence to support the jury’s finding.[56]  A scintilla of evidence is evidence that “‘is so weak as to do no more than create a mere surmise or suspicion of its existence.’”[57]   

     The final test for legal sufficiency must always be whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review. Whether a reviewing court begins by considering all the evidence or only the evidence supporting the verdict, legal-sufficiency review in the proper light must credit favorable evidence if reasonable jurors could, and disregard contrary evidence unless reasonable jurors could not.[58] 

     Upon sustaining a no evidence challenge, the proper remedy is reversal and rendition of judgment contrary to the jury’s verdict.[59] 

      When an appellate court reverses a case on a no evidence point and takes away a jury’s verdict, the parties and the lower courts are entitled to an explanation.  This Court has implemented significant measures to ensure that the courts of appeal do not invade the province of the jury by substituting their own verdicts in place of the jury’s when reviewing for factual sufficiency.  However, the same safeguards are not in place in a no evidence review. 

      This Court has recognized the danger of an appellate court substituting its own judgment for that of the jury when conducting a factual sufficiency review.[60]  As a safeguard for the sanctity of the jury system, this Court imposed a check on the appellate review process.[61]  When reversing on factual insufficiency grounds, an appellate court must “detail the evidence relevant to the issue in consideration and clearly state why the jury’s finding is factually insufficient or is so against the great weight and preponderance as to be manifestly unjust; why it shocks the conscience; or clearly demonstrates bias.”[62]

     Additionally, the court’s opinion “should state in what regard the contrary evidence greatly outweighs the evidence in support of the verdict.”[63]  Compliance with these requirements demonstrates that the court considered the evidence favoring the jury verdict and fully analyzed why the evidence was insufficient. 

Conclusion

     United States District Judge Sam Sparks has been both an eloquent champion of trial by jury and a vigilant watchdog against encroachments upon it.  He attributes the decline of jury trials, in part, to a proclivity for taking away jury verdicts by appellate courts, including both the 5^th Circuit and the Texas Supreme Court.  Judge Sparks sounds this caution to us all:

Perhaps, after thorough consideration and upon open discussion and debate, our citizens will choose to amend our constitutions and give up their right of trial by a jury of their peers.  However, until that happens it is unconstitutional for courts to disregard jury decisions that are supported by sufficient and competent evidence.  We, as lawyers, are sworn to uphold the Constitution of our country and our states.  As lawyers, we should identify those instances where proper jury verdicts are discarded. We must tell the guilty judges that it must stop because it upsets the balance between the rights of the people and the power of the judiciary.[64]

     When appellate courts “commandeer[] the jury’s role as fact-finder,”[65] the right to trial by jury is shaken.  One member of this Court laments that the civil jury trial is losing its market and that, “if the public is paying attention, it does not appear to be convinced.”[66]  Jury trials are declining.[67]  That decline “cannot easily be reversed and will likely be irreversible at some point.”[68]   

     Every time a court takes away a jury verdict, the foundation shakes and trembles.

     If appellate courts so freely reverse jury verdicts, then there is little chance that trial by jury can long endure upon so unstable a foundation.  Each tremor is an alarm to us all – it is a siren warning of the widening chasm ahead.  

                                                                                    Respectfully submitted,

                                                                                    Gerald R. Powell

State Bar # 16196300

CERTIFICATE OF SERVICE

I certify that a copy of this letter brief was served on counsel of record on the 5^th day of January 2007, addressed as follows:

Mr. David R. McAtee                                                  Mr. Jerry L. Beane      

Mr. Orrin L. Harrison, III                                             Ms. Kay Lynn Brumbaugh

1700 Pacific Avenue, Suite 4100                                  1717 Main Street, Suite 3700

Dallas, Texas 75201                                                     Dallas, Texas 75201

Mr. Jonathan M. Jacobson                                           Mr. P. Michael Jung

590 Madison Avenue                                                   901 Main Street, Suite 4300

New York, New York 10022                                      Dallas, Texas 75202

Attorneys for Petitioner The Coca-Cola                    Attorneys for Petitioners Coca-Company      Cola Enterprises Inc., et al.

Mr. Warren Harris

711 Louisiana Street

Houston, Texas 77002-2781