Liability: Easier to Prove Than Amount of RPA Damages

Liability: Easier to Prove Than Amount of RPA Damages

In many or most civil lawsuits, it is more difficult to prove liability than the amount of the plaintiff's damages. The interesting thing about Robinson-Patman Act litigation is that the reverse is usually true: it's easier to prove liability than damages .

The reason for this is simple. Everyone knows what's happening. The major manufacturers are giving huge price breaks to the superstores in many industries, which price breaks are not given to the competing small retailers.

The small retailers know this is true because they can buy products in the superstores for less than they are paying the manufacturers.

The superstores are often advertising prices for products which are less than the price being paid by the small retailer.

Small retailers know because they are losing customers and are being forced out of business.

Customers know, instinctively, because they are making their purchases, more and more, in the superstores, and not in the small competing retailers.

Small wholesalers know this is true, because they are losing their small retailer customers and going out of business themselves.

There is a demand for more and more superstores by consumers who understand that superstores mean lower prices, but usually are unaware that lower prices mean less competition, less opportunity, less political freedom, greater concentration of capital and more unemployment (or more employment and low-wage jobs).

Thus, as to RPA cases, the liability is easily proveable, if not known to most persons.

Discovery is generally needed to confirm the obvious about liability, and to disprove the two main defenses, if even asserted at all.

Defendants will usually assert the meeting competition defense, in order to have some argument of a defense, but will generally avoid alleging a cost justification defense, because the amount of the combined discounts, fees and allowances is generally far higher than any conceivable cost justified discount, and there is generally no litigation credit for partial cost justification.

Thus, RPA litigation usually boils down to the amount of the plaintiff's damages, which becomes the heart of the lawsuit and the basis for any settlement.

The plaintiff and its lawyer must work on the damages issues from the very outset, starting off with preservation of all of the plaintiff's financial (including data processing) records, and putting the information into proper order to be able to prove th e amount of the plaintiff's damages.

An expert on damages will have to be retained, which should be done as soon as possible, to be able to put the most important part of the case in order quickly, and to be able to make use of the relatively short discovery period to obtain whatever informa tion may be needed to strengthen the plaintiff's case for damages.

Several important areas for damages development come to mind: (i) proving the amount of damages lost by lack of growth in sales; (ii) proving how a superstore 10 blocks or 10 miles away has had a proven effect upon the plaintiff's sales; and (iii) proving the amount of the plaintiff's direct costs which are to be deducted from the plaintiff's lost gross (pre-tax) profits.

Obviously, the decline of sales from from actual sales figures for the plaintiff's best year (from a gross sales standpoint) is a starting point for the proof of damages. The plaintiff and his expert generally will claim that the plaintiff has lost in ea ch of the 4 years the difference between sales of the best year (the base year) and each of the 4 years prior to the filing of the action, the 1-2 years of the action itself up to the day of trial, and perhaps for 2-4 years after the first day of trial.

But this does not provide any damages for the lost growth in the plaintiff's business. If the plaintiff's business was steadily growing every year prior to the 4 year period before filing of the action, then the 5th year prior (the base year) would proba bly have been exceeded in sales during the 4-year period and after, which amount can be estimated and proven by projecting the actual sales growth into the 4-year period and beyond, to increase the plaintiff's damages.

Proving how a superstore, or many superstores, located a distance away from the plaintiff's store is often required, and there may have to be some digging in the discovery area against the defendant to find some evidence on buying patterns to prove from t he defendant's own data the area in which it draws customers and from whom, and thought should be given to commissioning a survey to determine where plaintiff's present customers also buy, and for what reasons, and how often and how much; and the customer s of the competing superstores should also be surveyed to determine where they previously purchased.

Through discovery and surveys the plaintiff should be able to prove the disastrous effect which the superstores are having on the plaintiff's business, as well as the greater adverse effect which will occur when the superstores are built in closer proximi ty to the plaintiff's place of business.

Finally, there is the issue of proving the amount of the plaintiff's direct costs which should be deducted from the gross profits on sales, including any commissions payable to sales personnel, any cost of returns, and any reserve for bad debt, just to na me a few items which might properly be deducted as direct costs. Items such as electricity, heat and janitorial services although allocable by the plaintiff to each dollar of sales by the plaintiff and its accountant, are generally overhead items which c ontinue when the plaintiff's sales decrease and probably are not to be considered as direct costs.

Anyway, the point is that there should be more time and thought given to the proving of damages in RPA cases, because the proof of liability is relatively easy in most cases.

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Copyright © 1997, 1999 by Carl E. Person