Case Brief ACC 7220 Law of Corporate Management and Finance Case Name: Republic Tobacco v.

North Atlantic Trading Court Delivering Opinion: United States Court of Appeals, Seventh Circuit Citation: 381 F.3d 717 (2004) Facts: Republic and North Atlantic are competitors in the market for premium rollyour-own (RYO) cigarette papers, tobacco, and other tobacco-related products. Republic and North Atlantic sell their RYO products to distributors and wholesalers, who in turn resell the products to outlets such as convenience stores. Republic's products are marketed under several brand names, including Job, Top, and Drum. North Atlantic's products are marketed under the brand name Zig-Zag. North Atlantic sent current and potential customers two letters that were critical of Republic. The first letter went after the way in which Republic conducted business and also the display box it used for its products. It stated that the boxes violated a trademark and patent held by North Atlantic and that they had sued over it. Even though the statements within this letter were untrue, a company doing business with Republic dropped them after receiving the letter. North Atlantic sent another letter stating that it was suing Republic for anti-trust violations, which was true. This letter said that Republic engaged in unfair competition and deceptive trade practices among their anti-trust violations. This appeal involves the claims that the two competing tobacco companies brought against one anotherone company suing for violation of antitrust laws, the other for defamation. North Atlantic, was upset when its efforts to engage new markets for its cigarette papers proved unsuccessful. It blamed its difficulties in cultivating new customers on the business practices of its competitor, Republic and decided to sue. Then Republic became upset with North Atlantic after North Atlantic criticized Republic's business practices in two letters sent to customers. Claiming that it had been defamed (among other things), Republic also decided to sue. The parties' two lawsuits were eventually combined into one case before the United States District Court for the Northern District of Illinois. At summary judgment, the district court considered both parties' multiple claims and counterclaims. The only one to survive was Republic's defamation claim. Not only did it advance but it was successful at summary judgment. After this judgment, a jury trial was held on the issue of presumed and punitive damages, for the defamation claim. The jury returned a verdict for $8.4 million in presumed damages and $10.2 million in punitive damages. The trial court granted North Atlantic's subsequent motion for remittitur, reducing the awards to $3.36 million and $4.08 million.

Plaintiff/Appellants Contention: On appeal, North Atlantic sought review of: (1) the district court's decision to grant summary judgment to Republic on its defamation claim; (2) the remitted damage awards; and (3) the district court's decision to grant summary judgment to Republic on North Atlantic's antitrust claims. Defendant/Appellees Contention: Republic cross-appeals the district court's refusal to entertain a procedure that might have enabled Republic to appeal the remittitur. Issue: Whether the district courts ruling of defamation claim of Republics actions met the criteria of Illinois courts and North Atlantics actions met for the antitrust claims. Also, North Atlantic was trying to stop remitted damages being sought by Republic. Superior (trial) Court Ruling: The United States Court of Appeals affirms the district court's grant of summary judgment to Republic on its defamation claim and North Atlantic's antitrust claims. They also affirm the district court's decision with respect to Republic's cross-appeal. Finally they vacate the district court's remitted damages award and order entry of judgment for $1 million in presumed damages and $2 million in punitive damages. Rule of Law: The tort of defamation is an intentional false communication that injures a persons reputation or good name. A defamatory statement is one that "tends to cause such harm to the reputation of another that it lowers that person in the eyes of the community or deters third persons from associating with him." Also, to make out a defamation claim under Illinois law, the plaintiff must show "that the defendant made a false statement concerning him, that there was an unprivileged publication to a third party with fault by the defendant, which caused damage to the plaintiff." Holdings: The Court of Appeals, Flaum held that: 1. The court had discretion to award costs of securing judgment on appeal. Conclusion: The United States Court of Appeals affirmed the district court's decisions with respect to Republic's defamation claim, North Atlantic's antitrust claims, and Republic's cross-appeal. On the issue of damages, they vacated the district court's award of presumed and punitive damages, and awarded Republic $1 million in presumed damages and $2 million in punitive damages. Comments: When North Atlantic Trading Company sent out the letter out to current and potential customers it damaged Republics reputation. Subsequently, it was proven that business was lost because of their actions. While the Clark

Company was the one used for evidence in the case it is very possible that there was other loss of business due to these letters. It is difficult to regain consumer confidence once it is lost. Customers care about the integrity of the companies in which they conduct their business. When their actions are righteous customers feel good about spending their money with them. When the opposite occurs their confidence can be lost forever. Many may never find out that the allegations were untrue. Court judgments like in this case are important to compensated for losses due to defamation.

The complaint alleges that Republic Tobacco's exclusivity agreements, rebates, incentive programs, buybacks and other activities violate federal and state antitrust and unfair competition laws. The complaint charges that Republic Tobacco entered into contracts, combinations, and conspiracies in illegal restraint of trade and has attempted to illegally monopolize, and has illegally monopolized, the roll-your-own ("RYO") cigarette paper market in the southeast United States Republic asserts that the Czerewko Letter was designed to persuade Clark to abandon its exclusive deal with Republic, in favor of a less profitable deal from North Atlantic. Republic contends that to accomplish this task North Atlantic utilized a strategy of attacking Republic's lower prices, rebates and travel incentives with slander and threats. On cross-appeal, Republic challenges "the longstanding rule that a plaintiff in a federal court ... may not appeal from a remittitur order he has accepted." An order that offers a choice between a remitted award and a new trial is not a final decision, and if a plaintiff agrees to accept the reduced judgment in the trial court, that plaintiff may not later argue that the jury's verdict should be reinstated on appeal. Id. However, if the plaintiff declines to accept the reduced award, no appeal may be taken until after a new trial. Because Republic accepted the remittitur here, instead of facing a second trial, it cannot challenge the remittitur.