Full opinion text
TABLE OF CONTENTS I. INTRODUCTION II. EVIDENCE III. THE DEFENDANT’S CLAIMED BASES OF RELIEF IV. DISCUSSION A. PLAINTIFFS’ STANDING TO RECOVER FOR ANTITRUST VIOLATIONS B. THE UNCONSTITUTIONAL APPLICATION OF THE SHERMAN ACT ■ C. THE SHERMAN ACT CLAIMS 1. Section 1 (a) Sufficiency of the Evidence to Establish a Suppression of the TENS Industry (b) Concerted Action (c) Sherman Act § 1 Per Se Charge to the Jury 2. Section 2 (a) Specific Intent (b) Dangerous Probability of Success D. THE CLAIM OF INCONSISTENT VERDICTS E. THE CONTRACT CLAIM F. THE FRAUD CLAIM G. EVIDENTIARY RULINGS H. DAMAGES 1. TENS Sales for Acute Pain in U. S. and Canada 2. TENS Sales for Acute Pain in U. K. and Europe 3. TENS Sales for Chronic pain 4. TENS Sales for Japan 5. TENS Sales for Post-Operative Pain 6. Sales of Chronic Pain Electrodes 7. Sales of Acute Pain Electrodes 8. Sales of Post-Operative Electrodes V. CONCLUSION APPENDIX MEMORANDUM OPINION AND ORDER MILES W. LORD, Chief Judge. I INTRODUCTION On May 2, 1979, Norman R. Hagfors, Clayton Jensen, and Stanley McDonald, hereinafter plaintiffs, filed this suit against Johnson & Johnson, a health care corporation headquartered in New Brunswick, New Jersey, alleging breach of contract, fraud, and conduct designed to foreclose competition in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, and Section 7 of the Clayton Act, 15 U.S.C. § 18. This Court’s jurisdiction is based on §§ 1332 and 1337 of 28 U.S.C. Following a five and one-half month trial in which the jury awarded the plaintiffs $56,800,000.00 (before trebling) on the Sherman Act claims, $6,275,000.00 as actual and compensatory damages and $25,000,000.00 as punitive and exemplary damages on the fraud claim, and $5,700,000.00 on the contract claim, the defendant Johnson & Johnson moves this Court, pursuant to Rule 50(b), F.R.Civ.P. for judgment notwithstanding the verdict or, in the alternative, for a new trial. For the reasons stated below, the motion is denied. The essential elements of the plaintiffs’ contentions are as follows: 1) Johnson & Johnson induced the plaintiffs to enter into stock purchase and employment agreements on September 20, 1974, on the basis of numerous promises and representations of Johnson & Johnson’s intention to foster the rapid and successful development of StimTech, a corporation owned by the plaintiffs which manufactured and sold heart pacemakers and electronic nerve stimulators for the control of pain; 2) From the time of StimTech’s acquisition by Johnson & Johnson until the present, Johnson & Johnson intentionally caused StimTech to languish close to the point of extinction; 3) During the same period of time, Johnson & Johnson placed tremendous resources and support at the disposal of its pain control drug business, which enjoyed phenomenal growth and profitability in the sale of drugs used to treat the same pain conditions that the transcutaneous electronic nerve stimulators (TENS), manufactured by StimTech, could have effectively treated; and 4) All of the aforementioned activity, designed to foreclose competition between TENS devices and pain control drugs, occurred with the full knowledge and participation of the top executives of Johnson & Johnson. II THE EVIDENCE This Court considered the evidence in the light most favorable to the non-moving parties, the plaintiffs, and because of the magnitude of the 13,000 page transcript generated in the course of the five and one-half month trial, summarized only that evidence which is relevant to the plaintiffs’ claims, together with the inferences which may properly be drawn therefrom. Even so, this summary by no means purports to be complete and exhaustive. The transcript itself should be referred to as the ultimate source of the evidence; therefore, where helpful, cites to the record (Tr. ...) are included in parentheses. In 1970, plaintiff Norman Hagfors set up an office and workshop in the basement of his home and began making plans to start a new business. Mr. Hagfors, until the time of his new venture, had been employed for 13 years at Medtronic Inc., most recently as head of New Product Research. While at Medtronic, Mr. Hagfors did extensive work in the area of nerve stimulation for the treatment of pain, in addition to his earlier work in the heart pacemaker field. In August of 1970, Mr. Hagfors incorporated Stimulation Technology, Inc. (StimTech) and began looking for a foreign heart pacemaker company willing to enter into a licensing arrangement with him for the manufacture and distribution of pacemakers in the United States. During that same time period, Dr. Donlin Long, a neurosurgeon at the University of Minnesota, discussed with Mr. Hagfors the possibility of designing a transcutaneous (non-implantable) electronic nerve stimulator (TENS). Dr. Long and Mr. Hagfors, along with several other experts in the pain control field, had, in the late 1960’s, developed a surgically implantable device known as a dorsal column nerve stimulator for use in the treatment of certain types of pain. The interest in these devices had grown out of a theory proposed in a paper published by two medical doctors in 1965. The paper, entitled “The Gate Theory of Pain,” described a mechanism by which nerve fibers transmit pain signals to the brain. The success of the surgically implanted devices, developed as a result of clinical applications of the gate theory, led Dr. Long to consider the development of an external stimulator which would achieve the same results as the implantable stimulator. After joining Dr. Long in work at the University, Mr. Hagfors designed the first modern solid state TENS device. The device, consisting of an electronic package in a metal box, provided electrical stimulation to nerve fibers on the skin, thereby blocking the transmission of pain sensations along the nerve fibers deeper in the body and reducing pain in the patient. This use of stimulation, with the resultant effect of controlling pain in the patient, represented the most sophisticated application of the gate theory of pain. The electrical impulses were transmitted along wires to pads (electrodes) which were attached to the patient’s skin at the pain site. The first StimTech TENS device was constructed by Mr. Hagfors in his basement from parts purchased from electronics supply stores. In September of 1971, a short time before StimTech built its first TENS unit, Mr. Hagfors was joined in his new corporation by Mr. Stanley McDonald. From 1967 until 1971, Mr. McDonald had been with Medtronic in a marketing position, and prior to that he had worked in sales for the E. R. Squibb Company, where he won a number of sales awards. Together the two men continued the search for a foreign heart pacemaker manufacturer interested in a licensing arrangement with StimTech. It was Mr. Hagfors’ plan to use the sale of heart pacemakers as a financial base to support the development and marketing of TENS devices, which had not attained the same level of acceptance among the medical profession as that of the pacemaker. This lack of acceptance of TENS among doctors was due in large part to the doctors’ lack of awareness of the device and to the fact that studies showed doctors were more drug-oriented than device-oriented. Mr. Hagfors believed, however, that once the medical profession could be sold the concept of stimulation, the potential market for the TENS device far exceeded the potential for the already substantial pacemaker market. The evidence revealed that in introducing a new drug or medical device, the patient’s confidence in the device is much greater if it is prescribed for him by a physician. As a consequence, many drugs and devices are marketed through the prescription method. This is not necessarily a result of the need to use them under the supervision of a physician but rather because the physician’s prescription constitutes an endorsement of the product, and it is simpler and less expensive to educate the physicians than the population generally. It appears from the evidence that after the drug or device is established and used, it is frequently taken off the prescription list, or the so-called “ethical” prescription list, and sold over the counter (OTC). Since a great deal of the physician’s education depends on the advice given him by the drug company “detail” men in whom he has confidence, the best available way to put a new drug or medical device into the market is to have the detail men contact the doctor, endorse the product, and convince the doctor that the medicine or the device should be purchased. In the course of educating the doctor, it is most helpful to have available for presentation to the physician research articles, experiments, and surveys made by other reputable physicians who endorse the new drug or device. Thus, the usual way in which to proceed is to have the promoter of the drug “fund” the research by prominent practitioners or researchers, and also to have these researchers present learned treatises to the various segments of the medical professions and publish the work in the medical journals. These requirements for obtaining “respectability and acceptability” are expensive, time-consuming, and create genuine problems for a new company with a new product entering into the medical field. In achieving proper introduction and marketing, a TENS device would face many of the above obstacles, whereas much of the ground work had already been laid for the pacemaker’s endorsement. It was for this reason that these plaintiffs made a decision to sell pacemakers. If they could obtain a pacemaker and sell it, they would not face the barriers to market entry that tffey faced in marketing the TENS device. The pacemaker was already accepted both by the physicians and the public; therefore, the extensive research and development both in the product and the market were unnecessary. Since Mr. Hagfors and Mr. McDonald were thoroughly familiar with the manufacture and sale of pacemakers, it was their plan to manufacture and sell pacemakers and to use the profits therefrom to “carry them” financially while they developed the TENS device and promoted the marketing of it. During the summer of 1971, Mr. Hagfors invited Mr. P. J. Reynolds, head of marketing for Devices, Ltd., an English heart pacemaker company, to visit him on one of Mr. Reynolds’ trips to the United States. In August of 1971, Mr. Reynolds came to the United States and met in Minneapolis to discuss a licensing agreement. As a followup to the August meeting, Mr. Hagfors and Mr. McDonald went to England in October of 1971 for further discussions with Devices. During the October meeting, a verbal understanding between the two companies was reached in which it was agreed that StimTech would distribute and manufacture heart pacemakers for Devices, Ltd. in the United States. Pursuant to a later written agreement, StimTech began importing and selling Devices’ pacemakers in the United States. Following the agreement with Devices, all three plaintiffs pledged their financial and professional support to the development of StimTech, and in the summer of 1972, Mr. Clayton Jensen assumed a full-time position as Vice President in charge of manufacturing. Mr. Jensen graduated in 1960 from the University of Minnesota with a degree in mechanical engineering and, before coming to StimTech, worked in various electrical and mechanical engineering positions with the McQuay Corporation. With Mr. Jensen’s arrival at StimTech, the executive staff consisted of Mr. Hagfors, President; Mr. McDonald, Vice President for Marketing; and Mr. Jensen, Vice President for Manufacturing. During 1972, StimTech sold heart pacemakers and TENS devices in Minnesota and California. At the same time, the company was engaged in product research and market evaluation with the idea of improving its product lines and expanding its sales territory. Dr. Long, the pain expert, signed an exclusive consulting agreement with StimTech. Clinical studies during this period indicated the growing possibilities for the successful use of TENS devices in new areas such as sports medicine. Already TENS had proved successful in treating conditions such as headaches, back pain, post-surgical pain, and phantom limb pain without any risks to the patient. As a result of TENS’ proven effectiveness in these áreas, TENS devices were promoted as alternatives to drugs. A strong selling point for TENS was the fact that TENS have virtually no side effects, while painkilling drugs, as indicated in the evidence, have proven dangerous side effects, especially when - used for extended periods of time. The pacemaker StimTech was importing from Devices was the Model 3821 mercury-powered device, which contained the first hybrid integrated circuits in pacemaking as well as the first hermetically sealed container for pacemaker electronics. By 1973, StimTech had improved upon Devices’ 3821 by designing its own 3821T with a tangential entry for the pacemaker electrode. In addition to designing the 3821T pacemaker, StimTech did extensive planning in 1973. In August of that year, before Johnson & Johnson became a factor in the operation of the company, Mr. McDonald presented his 1973-74 sales and marketing plan for StimTech which included the following emphases: 1) research and new product development: in heart pacemakers, development and manufacture of a programmable pacemaker which would permit the alteration of pacemaker rate and other parameters without the necessity for additional surgery; the development of a lithium powered pacemaker; in TENS, the development of a smaller TENS device with a separate battery pack, rechargeable batteries, recessed knobs, and rounded corners; the development of new stimulating electrodes; 2) expansion of marketing: sales in the Far East and other international markets; marketing of TENS for sports injuries; development of a TENS rental program; formation of a nationwide staff of nurses to work with doctors and salesmen; 3) market analysis: potential for TENS — existence of 18 million arthritics, 7.5 million back patients, 1.2 million amputees. Underlying Mr. McDonald’s sales and marketing plan was the emphasis on the company’s urgent need for additional funds to support its projected research and development.' Without additional, capital, StimTech believed it would not be able to exploit fully its potential. From mid-1972 through mid-1973, StimTech contacted a number of potential lenders and investors. The plaintiffs estimated that they would need approximately $7 million to provide “up front” financing for research and development for new pacemaker and TENS products. They planned to raise $5 million of this amount through an initial stock offering of $750,000.00, followed by a placement of $2 million, and then a public offering of $3 million. Because of the fact that Devices, too, was in serious need of additional working capital, the plaintiffs also considered purchasing Devices or having a public offering for a combined StimTech/Devices company. Plaintiffs informed Devices of their interest in “combining forces.” In late May of 1973, StimTech entered into an agreement with Piper, Jaffray & Hopwood, Minneapolis’s leading investment bankers, giving that firm the exclusive right for 120 days to find investors for StimTech. Piper, Jaffray was also given the first choice to handle any public offerings or private placements for StimTech over the next five years. During the same period of time in which StimTech was seeking additional funding, Mr. Hagfors was sought out by Dr. Jack McConnell who had heard of StimTech and had begun to make overtures. Dr. McConnell was the Director of Corporate Development for Johnson & Johnson. Corporate development is a major activity for Johnson & Johnson, which actually consists of a “family” of approximately 150 companies, separately incorporated, which operate in an autonomous fashion. Testimony from Johnson & Johnson officials indicated that Johnson & Johnson has a highly decentralized posture, and each Johnson & Johnson company is run as a separate profit center with its own budget, President, and Board of Directors. Although Johnson & Johnson is in the health care field generally, the greatest percentage of Johnson & Johnson’s overall sales is in the pharmaceutical area. Within that pharmaceutical segment of the corporation, McNeil is the Johnson & Johnson owned company engaged in the sale of the pain control drugs Zomax and Tylenol. This last statement is significant because, as the plaintiffs contend and it appears from the record, the agents and officers of the Johnson & Johnson companies, specifically McNeil, working in the drug pain control area, moved in and took over StimTech and its affairs; this is more fully developed infra. In the fall of 1972, before visiting Mr. Hagfors, Dr. McConnell, who had previously been the chief of new product development for McNeil, took the precaution of visiting the English company Devices, on which StimTech was dependent for its “bread and butter.” Approximately six months later, Dr. McConnell approached and spoke with Mr. Hagfors at a StimTech booth at a medical convention. StimTech and its cashflow problems were discussed at this visit. Later in the spring of 1973, Dr. McConnell again met with the plaintiffs at the StimTech office in Minneapolis. While in Minneapolis, Dr. McConnell explained that he was seeking corporate opportunities for Johnson & Johnson and that the purpose of his visit was to consider Johnson & Johnson’s buying an interest in StimTech. Following his meeting at StimTech, Dr. McConnell reported to his superior, Foster Whitlock, Johnson & Johnson Executive Committee Vice Chairman, that StimTech represented a genuine opportunity for Johnson & Johnson. The nature of this “opportunity” was not made clear in the letter. As the evidence adduced at trial demonstrated, the jury was entitled to conclude that what Dr. McConnell had referred to was the “opportunity” to take over the company, to stifle it, and to continue to promote and to protect the sale of pain killing drugs, Johnson & Johnson’s most lucrative products. Dr. McConnell also informed Mr. Whitlock of StimTech’s need for additional funding and of his plans to show Mr. Hagfors a Johnson & Johnson subsidiary in Texas as a part of the Johnson & Johnson program to impress the plaintiffs with the wisdom of being a part of the Johnson & Johnson family. The Johnson & Johnson Executive Committee, of which Mr. Whitlock was a member, is the top management group for the entire Johnson & Johnson organization. Each of the Johnson & Johnson companies reports directly to an Executive Committee member, or to a Johnson & Johnson executive who, in turn, reports directly to an Executive Committee member. As such, every Johnson & Johnson company has an Executive Committee member ultimately responsible for it. The Executive Committee is in charge of the development of business, development of products, examination of acquisition candidates, and the general orchestration of the Johnson & Johnson corporation as well as having considerable management responsibilities for the “family” corporation. More specifically, the Executive Committee annually reviews each Johnson & Johnson company, annually reviews and approves a budget and forecast for each Johnson & Johnson company, annually reviews the performance of every Johnson & Johnson executive at every Johnson & Johnson company, reviews and approves expenditures above certain levels, and reviews and approves all executive compensation at Johnson & Johnson companies above certain levels. Mr. Whitlock, as Vice Chairman of the Johnson & Johnson Executive Committee, was the committee member to whom Dr. McConnell brought news of the StimTech opportunity because, in Dr. McConnell’s estimation, Mr. Whitlock was “likely to be most closely related to that particular business being looked at”. Therefore, Mr. Whitlock, the President of the Pharmaceutical Manufacturers Association and the Committee member with the ultimate responsibility for the Johnson & Johnson pharmaceutical companies, including McNeil, added StimTech to his list of charges. The plaintiffs contend that the singling out of Mr. Whitlock by Dr. McConnell as the Committee member most closely related to StimTech is evidence of the fact that Johnson & Johnson itself was fully aware of the relationship of TENS devices and pain control drugs and the potential for competition. In keeping with his report to Mr. Whit-lock, Dr. McConnell induced the plaintiffs to travel to Arbrook, a Johnson & Johnson subsidiary near Dallas, in the summer of 1973. During that visit, the plaintiffs saw a Johnson & Johnson company in action and discussed with Dr. McConnell the nature and extent of Johnson & Johnson’s support of StimTech should the proposed acquisition take place. Dr. McConnell showed the plaintiffs the research and technology at Arbrook. At trial, Dr. McConnell admitted wanting to impress the plaintiffs with what Johnson & Johnson could do,, and he told them that “Johnson & Johnson encourages them to market their products as widely as possible.” Dr. McConnell also described international sales, “how that’s encouraged,” and the use of other Johnson & Johnson companies to assist acquired companies. (Tr. 5,012-24.) Both Mr. Whitlock and Dr. McConnell testified to the fact that Johnson & Johnson had numerous salesmen, and it would be to StimTech’s benefit to become part of the family for a number of reasons, including marketing assistance. (Tr. 5,490-91; 3,798-99.) The plaintiffs were indeed impressed by the trip and satisfied by Dr. McConnell’s responses to their questions. As Dr. McConnell proceeded to negotiate for the acquisition of StimTech, he also indicated an interest in acquiring Devices. Mr. Hagfors, who at the time of the Ar-brook visit could see no harm in Johnson & Johnson’s simultaneous acquisition of StimTech and Devices, wrote a letter to the Chairman of Devices when he returned from Texas and stated that “Johnson & Johnson has one goal with all of their companies, and that is to make them number one in their field. Their goal would be to make Devices number one in pacemakers and to spend the required monies to make it happen”. (Tr. 2,590-95.) Dr. McConnell told the plaintiffs at the conclusion of the trip to Arbrook that Johnson & Johnson was interested in buying 40-60% of StimTech, with an option for the remainder. At the same time, Dr. McConnell reported to Mr. Whitlock that the visit was worthwhile, that the opportunity was attractive, and that he had responded to the plaintiffs’ many questions regarding the possible acquisition. Dr. McConnell emphasized the fact that the three persons who were the principals of StimTech, and are the plaintiffs here, worked very well together and certainly constituted the most valuable asset of the company. He began his memo to Mr. Whitlock with the following observations: July 5, 1973 Mr. F. B. Whitlock Last Thursday and Friday I visited in Dallas with the three principals from Stimulation Technology of Minneapolis. I wanted to show them an example of a company that grew from a single product and also give them a chance to visit with other personnel in the company. Their Sales Manager, Mr. Stan. McDonald, had previously been with Medtronic. He is a bright, accomplished salesman and probably a very good manager from the sales record. He is extremely talkative and in a group discussion one often ends up with a monologue. Mr. Norman Hagfors, the President, is the quiet, controlled, competent type and tends to use Stan, as a tracking horse. Sooner or later, Stan, will ask the questions that Norm, wants asked. I may under-rate Stan. He may even speak for the corporation as a whole at times. Under any circumstances, there is a very good relationship among the three principals. The third is Clayton Jennsen who is Vice President in charge of operations. He speaks very little in a group. That is probably because he is the least experienced of the three — a hard worker and knowledgeable in operations, but would not make a good manager. The visit was very worthwhile. I continue to be impressed with this group. There is a real substance in the company. They have competed with one of the giants in the field (Medtronic which does $50,000,000 and over per year) and have come out extremely well in the contest. In the area of pacemakers, where they compete with Medtronic, they get their share of the market and more. They need capital to expand their marketing effort. In the area of research (dorsal column stimulators) they are ahead of Medtronic. This one has an enormous amount of potential. The main characters have a proven track record which is enviable; they have basic technology in an area which is considered to be one of the truly emerging areas and the marketing and manufacturing know-how to accompany it. It is the most attractive opportunity I have seen in quite some time. When one couples it with the potential that Devices brings to this discussion, it suggests that this will be a major business for us in a few years. Jack B. McConnell After receiving Dr. McConnell’s account of the trip, Mr. Whitlock instructed Dr. McConnell to continue with negotiations with StimTech. The plaintiffs contend that this memorandum was ambiguous and was subject to several interpretations. The “attractive opportunity” could have meant the chance to get involved and really make a profit in. a new industry, or it could have meant the chance for Johnson & Johnson to destroy a potential competitor of drugs at an early stage before the business had a chance to fully develop. The plaintiffs’ contention, apparently adopted by the jury, is that the evidence supported the latter interpretation. Before serious and formal negotiations were begun, Messrs. Whitlock, McConnell, and Anderson, at various meetings, had made promises and representations to plaintiffs that after acquisition by Johnson & Johnson, StimTech Company and its TENS therapy would be actively promoted by the Johnson & Johnson sales force of 4,000 people, who were capable of contacting every physician in America on very short notice; that adequate financing would be given to promotion, development, experimentation, research, and marketing of TENS devices; that StimTech would be given management and sales assistance; and that StimTech would have available to help it in its marketing the already established worldwide sales organization of Johnson & Johnson. Insofar as athletic medicine was concerned, Johnson & Johnson had a salesman “in every locker room” throughout America, and the assertion was that those persons would be available to promote TENS devices for sports medicine. The representation was that the projected sales would easily make millions of dollars for the plaintiffs. Based upon these representations and many others, the negotiations with StimTech continued. In August of 1973, the plaintiffs and their attorney, Michael P. Sullivan, Esq., met in Minneapolis with Dr. McConnell and other representatives of Johnson & Johnson. At that meeting, Johnson & Johnson orally agreed to buy 37.1% of StimTech’s outstanding stock for approximately $750,-000.00, with the plaintiffs agreeing that they would sell the rest of StimTech to Johnson & Johnson under certain conditions, which are hereinafter explained. It was also understood at this meeting that Johnson & Johnson’s continued interest "in StimTech was contingent on StimTech’s not seeking additional funding from any source other than Johnson & Johnson. Dr. McConnell’s contemporaneous reports of the meeting, written to Mr. Whitlock, outlined the terms of the agreement and elaborated on StimTech’s concern over the possibility of being isolated from Devices. Dr. McConnell explained that if a company hostile to StimTech purchased Devices, the plaintiffs would face “a very awkward situation.” Such an “arrangement would interrupt the smooth flow of technical information important to their research and manufacturing operations,” wrote Dr. McConnell. (Tr. 3710-16.) The plaintiffs contend that this “awkward situation” is precisely what Johnson & Johnson created and confronted StimTech with later in the preacquisition negotiations. Later in August of 1973, Mr. Hagfors met with Dr. McConnell and Mr. Whitlock in Mr. Whitlock’s New Brunswick office. Mr. Whitlock gave Mr. Hagfors a placard entitled “Our Track Record in Acquisitions” which stated in essence that Johnson & Johnson always underestimated the capital required for new companies. Thus, plaintiffs contend, it could reasonably be assumed that if Johnson & Johnson were consistent in following its track record, Johnson & Johnson would, in reality, invest a great deal more in StimTech when the acquisition became final than it originally promised. On September 5, 1973, StimTech, the plaintiffs, and Johnson & Johnson executed a Securities Purchase and Option Agreement (“1973 Agreement”) providing that Johnson & Johnson would pay $700,000.00, plus commissions, to Pijjer, Jaffray in return for a 37.1% interest in StimTech’s stock. This initial investment was to be known as Phase I. The 1973 Agreement also contemplated a Phase II, which was to be the complete conveyance of all remaining shares of StimTech stock to Johnson & Johnson. The effectuation of Phase II was to be attempted by the parties within 180 days of the signing of the 1973 Agreement. The agreement also provided that “the shareholders hope to negotiate a pay-out over 5 to 10 years for said shares purchased in Phase II of an amount approximating 10 million dollars conditioned upon the performance of the Company in the manner which they contemplate.” The fact that Johnson & Johnson had not acquiesced in the purchase price but had agreed to negotiate with the knowledge of the plaintiffs’ range was also included in the agreement. After Dr. McConnell’s original contact with StimTech, but before the purchase of 37.1% of StimTech’s stock, Johnson & Johnson formed a new subsidiary, Johnson & Johnson Development Company, whose sole purpose was to acquire or invest in new or developing companies. Charles M. Anderson was made President, and StimTech was his first investment. Following the formation of the Development Company, Johnson & Johnson placed a “tombstone” ad in the Wall Street Journal to announce Johnson & Johnson Development to the financial community. However, when the plaintiffs attempted to run a similar announcement of their 37% sale to Johnson & Johnson in a local newspaper, Dr. McConnell asked them to cancel the ad. It is the plaintiffs’ contention that the refusal to permit StimTech to advertise its association with Johnson & Johnson was one of the first manifestations of Johnson & Johnson’s disguised intent to suppress StimTech. Pursuant to the 1973 Agreement, Mri Whitlock, the Executive Committee’s pharmaceutical man, was appointed to the StimTech Board of Directors. Mr. Whitlock came to Minneapolis for the October 21, 1973, meeting of the Board and talked with plaintiffs about the purchase negotiations for the remainder of the StimTech stock. The possibility of opening a Japanese market for StimTech was discussed at the meeting and followed up by Mr. Whitlock with the suggestion that the plaintiffs contact a Johnson & Johnson Japanese subsidiary to obtain additional information about the potential Japanese distributor. It should be noted that this apparent willingness to have StimTech sell in Japan was manifested before the purchase of the remaining shares of StimTech stock. The evidence is that once the acquisition was complete, such sales were prohibited by Johnson & Johnson, and no effective inter-company cooperation or communication was allowed. Following the October 21 meeting, Mr. Whitlock also informed plaintiffs that he did not want Mr. Sullivan, -plaintiffs’ attorney, at any future meeting between himself and plaintiffs. Mr. Sullivan, after being told by the plaintiffs of Mr. Whitlock’s request, resigned from the StimTech Board of Directors. A short time after the signing of the 1973 partial acquisition agreement, several unexpected changes occurred in the relationship between StimTech and Johnson & Johnson, some of which served to disrupt the progress of the negotiations and caused delays in much needed research and development for StimTech. Mr. Charles Anderson took over the responsibility of face-to-face negotiations from Mr. Whitlock. Hagfors requested, but was not shown, an evaluation of Devices, Ltd. prepared for Johnson & Johnson by a prominent cardiologist. This report pointed out Devices’ need for substantial funds if the company were to remain viable. Plaintiffs contend that Johnson & Johnson knew of the need for the infusion of funds into Devices, Ltd. but did not provide sufficient funds because better heart pacemakers from Devices, Ltd. would generate profits for StimTech, which, in turn, could be used to promote TENS in competition to pain drugs. During this same period of time, Dr. McConnell, in person and later by letter, suggested that the originally agreed upon 180 day negotiating period be extended. The plaintiffs became concerned about the extension of the, negotiation period requested by Johnson & Johnson but reluctantly agreed to it. They had little alternative because of increasing financial difficulties caused by the delay and by Johnson & Johnson’s insistence that they not deal with others for finances. Both StimTech and Devices had been forced to delay the development of new programs because of the time demands for the negotiations on their personnel and the uncertainties created by the extension. On March 13,1974, with the future of the acquisition still unclear, the plaintiffs requested and were given a $100,-000.00 loan from Johnson & Johnson. StimTech subsequently borrowed from Johnson & Johnson a total of $300,000.00, which was set by Johnson & Johnson as the limit of its line of credit. StimTech was aware that if the acquisition did not proceed to completion it would have to seek outside financing to enable it to repay the $300,000.00 to Johnson & Johnson. The plaintiffs also testified that they wondered what would become of StimTech’s agreement with Devices should the Johnson & Johnson-StimTech negotiations fail, a fear expressed earlier to Dr. McConnell. During the period between September 5, 1973, and the eventual acquisition of StimTech by Johnson & Johnson, the plaintiff continued to meet with Mr. Anderson to work out the details of the potential purchase. At Mr. Anderson’s request, the plaintiffs provided Johnson & Johnson with continually updated projections of StimTech sales and profits for the next five year period. Mr. Anderson, at that time, stated that his reason for seeking revised projections was that the figures then being used by StimTech were too conservative. At a later time, after a dispute developed, however, the plaintiffs were told that Johnson & Johnson believed the projections were very optimistic and therefore unrealistic. On April 9, 1974, Mr. Anderson met with the plaintiffs in Minneapolis to present a proposal for the completed acquisition of StimTech stock. Mr. Anderson’s proposal consisted of a handwritten document containing the following provisions: 1) cap on maximum earn-out payment to the plaintiffs of $12 million, based upon a multiple of StimTech’s profits over the next five years; 2) contribution of additional financial support by Johnson & Johnson as required in good business judgment; and 3) intercompany loans as required. At this same meeting, Mr. Anderson asked for and received a summary of projected financial requirements for StimTech which would follow the acquisition. In that projection, Mr. Hagfors’ estimation totalled $7 million, including $1.5 million in working capital before the end of 1975, total financial commitments of $1.3 million for the remaining eight months of 1974, and $1.3 million for 1975. The potential for international sales was also discussed at the April 9 meeting, and Mr. Anderson told the plaintiffs that if it made sense after the acquisition, Johnson & Johnson would support it. At the conclusion of the April 9 meeting, Mr. Anderson told plaintiffs that he would present the $12 million earn-out proposal to the Johnson & Johnson Executive Committee for approval. On May 9, 1974, the plaintiffs were informed by Mr. Anderson’s superior at Johnson & Johnson, Mr. Whitlock, that he would be presenting an acquisition proposal for StimTech to the Executive Committee the following week and that Johnson & Johnson was completing its acquisition of Devices on May 10, the next day. Prior to Mr. Whit-lock’s telephone call, the plaintiffs were not aware that Johnson & Johnson’s purchase of Devices was so near to completion. The plaintiffs contend that when they received the news that Johnson & Johnson was on the verge of owning and controlling their source of pacemakers on which they relied to fund their development of the TENS business, they became very concerned about the loss of their bargaining position with Johnson & Johnson. The plaintiffs later learned that in order to acquire Devices, Johnson & Johnson had paid nearly the full asking price, despite strong warnings from its own experts regarding Devices’ financial condition and net worth. This excessive expenditure for Devices is cited by the plaintiffs as an indication of Johnson & Johnson’s urgent desire to gain control over StimTech for its own purpose, which was to suppress it as a competitor in the pain control field. This acquisition of Devices effectively gave Johnson & Johnson the power to cut off all heart pacemaker components, which, as the evidence demonstrated, was the lifeblood of StimTech and its main hope for the profits needed to fund research and development for TENS. On May 13, 1974, rather than asking the Johnson & Johnson Executive Committee to approve the $12 million proposal outlined to the plaintiffs, Mr. Whitlock presented an $8 million earn-out proposal to the Executive Committee and received authority from them to spend up to his requested amount in acquiring the remainder of StimTech stock. Furthermore, Mr. Whitlock testified that neither he nor Mr. Anderson ever intended to request approval for the $12 million proposal, and any mention of that amount to plaintiffs was “pure negotiation.” Johnson & Johnson never told the plaintiffs that the request to the Executive Committee had been $8 million, not $12 million. On May 20, 1974, having secured Johnson & Johnson Executive Committee approval for the $8 million package, Mr. Anderson met with the plaintiffs and presented a proposal on a “take it or leave it” basis. According to Mr. Anderson, the cap was $6.5 million, and the time and method of payment were not negotiable. Mr. Anderson also told the plaintiffs that Johnson & Johnson’s acquisition of Devices had been completed. In light of StimTech’s indebtedness to Johnson & Johnson, Johnson & Johnson's ownership of Devices, and Johnson & Johnson’s intransigent offer, the plaintiffs became aware of the fact that they were in a very poor bargaining position. A subsequent meeting between the plaintiffs and Johnson & Johnson was held on May 23. This time, Mr., Whitlock came to Minneapolis to answer the plaintiffs’ questions relating to their concern over the change in Johnson & Johnson’s proposal. Mr. Whitlock encouraged the plaintiffs to take the new, lower cap because StimTech’s association with Johnson & Johnson would make the plaintiffs eligible for Johnson & Johnson executive benefits. Mr. Whitlock discussed salaries and informed the plaintiffs that his own package amounted to $500,000.00.. He also discussed cash bonuses, stock options, stock grants, and retirement programs and convinced the plaintiffs that the executive benefits would more than make up for the reduction in the cap from $12 million to $6.5 million. Mr. Whit-lock, according to Mr. Hagfors’ contemporaneous notes of the meeting, told the plaintiffs to take a look at McNeil Laboratories’ Henry McNeil who believed Johnson & Johnson and made $100,000,000.00. In addition, Mr. Whitlock assured the plaintiffs that Johnson & Johnson had the resources and would put them to work for StimTech so that the relationship would be profitable for Johnson & Johnson as well as for the three principals. Several weeks after the May 23, 1974, meeting with Mr. Whitlock, the plaintiffs reached agreement on an acquisition with a maximum earn-out jof $7 million. Once the verbal agreement on the acquisition had been reached, Johnson & Johnson, represented by Mr. Anderson and the Johnson & Johnson in-house corporate attorney Peter Galloway, met with the plaintiffs and Mr. Sullivan, who was allowed to re-enter negotiation, in Minneapolis to negotiate the terms of a written agreement. Although Mr. Whitlock’s visit had succeeded in allaying the plaintiffs’ fears to the extent that they were willing to agree to the acquisition, the plaintiffs testified that the residual effect of the long, uncertain negotiating period on their part was a basic distrust of Johnson & Johnson. As a result of that distrust, which was obvious to Johnson & Johnson witnesses, who testified to that effect, the plaintiffs attempted to include contractual provisions in the written agreement which were not acceptable to Johnson & Johnson. Specifically, one of the plaintiffs’ requests was for provisions relating to the details of calculating the earn-out, which was to be based on a formula applied to the performance of StimTech over the following five years. These provisions reflected both plaintiffs’ understanding of those elements agreed to in earlier stages of the negotiations and their concerns that changes might occur which would adversely affect their potential to achieve the maximum earn-out. One provision the plaintiffs sought and obtained called for measuring the earn-out based on 5% of total sales over the earn-out period, which would have yielded the $7 million cap on $140 million of sales. Two other of plaintiffs’ requests, one, that Johnson & Johnson provide that it would not compete with StimTech in TENS devices or pacemakers during the earn-out period and two, that Johnson & Johnson agree that it would not sell or dispose of StimTech’s business during the earn-out period, were refused by Mr. Galloway. At a later date, however, Mr. Anderson assured the plaintiffs that Johnson & Johnson had no intention of competing with StimTech or disposing of the business but that these understandings could not be part of the agreement. Rather, they had to be left to mutual trust and good will, according to Johnson & Johnson through Mr. Anderson. The concept of mutual trust became an important element of the stock purchase agreement executed on September 20,1974, by the plaintiffs and Johnson & Johnson. Over the negotiating period, a number of representations had been made by Johnson & Johnson to the plaintiffs, which influenced their willingness to sell the remaining shares of StimTech stock. Among these representations were the following: 1) StimTech would get financial and managerial backing from Johnson & Johnson; 2) StimTech could avail itself of the Johnson & Johnson sales force which consisted of more than 4,000 persons; 3) StimTech could make use of the Johnson & Johnson worldwide sales organization, which had distribution to all but a few countries in the world; 4) StimTech would be able to realize the maximum earn-out based solely on sales of $140 million; and 5) StimTech could expect the cooperation of the Johnson & Johnson athletic division in introducing TENS for sports medicine. StimTech sought to include many of these representations in the contract, but Mr. Anderson again informed the plaintiffs that everything could not be put in writing. Mr. Anderson told the plaintiffs they had to trust that Johnson & Johnson would do the things they had said they would do. At Mr. Sullivan’s suggestion, paragraph 10(a) was included in the stock purchase agreement to assure the plaintiffs those items not in writing would be dealt with in good faith. Mr. Hagfors was further advised by Mr. Sullivan that the “umbrella” of paragraph 10(a) would incorporate any representations made during the negotiating period. In its final draft, paragraph 10(a) of the September 20, 1974, stock purchase agreement read as follows: Stockholders [plaintiffs] and Johnson & Johnson recognize and acknowledge that the relationship which will exist between Johnson & Johnson, the Company [StimTech] and the Stockholders upon consummation of the transactions contemplated herein, must be based upon a high degree of mutual trust and confidence by the Company, Stockholders and Johnson & Johnson. Stockholders and Johnson & Johnson agree that each will at all times act in respect to its dealings with the Company and its operations, and subject to the exercise of reasonable business judgment, act [sic] in such a way as to promote to the extent reasonably possible the successful operation and growth of the Company. (Emphasis added) In testimony adduced at trial, Mr. Galloway, attorney for Johnson & Johnson, stated that if Johnson & Johnson intentionally withheld adequate financial backing, marketing assistance, administrative assistance, overseas marketing assistance, and help in research and development, in his mind there would be no question of its being in violation of paragraph 10(a). This, according to Mr. Galloway, would be true even though none of the aforementioned were provided for, sjxicifically, in the contract. Thus, the chief counsel of Johnson & Johnson, the man involved in the drafting of the contract, admitted on the witness stand that many of the previous promises and representations were effectively incorporated into paragraph 10(a). The plaintiffs’ testimony as to each of these promises and representations were largely admitted by one or more of the defendant’s witnesses or the Johnson & Johnson documents introduced at trial. In his testimony the chief counsel for Johnson & Johnson admitted the need for parol evidence to explain the promises to be incorporated into the contract, and there is, thereafter, very little genuine dispute as to what the promises were and no dispute that they were to be read into the contract. (Tr. 8197-98; 8210-11.) The stock purchase agreement also provided that the compensation for the stock would be roughly $2.00 for every $1.00 of profit earned by StimTech during the five year earn-out period, with a guaranteed minimum of $1.3 million and a cap of $7 million. In addition to the stock purchase contract, on September 20, 1974, the plaintiffs entered into three year employment and five year non-compete agreements, which prevented their competing in the pacemaker or the pain control industry for the next five years, except as employees of StimTech. With the signing of the agreements, StimTech became a wholly-owned subsidiary of Johnson & Johnson. Once the acquisition was completed, Johnson & Johnson instituted a number of new policy changes at StimTech, which adversely affected growth and development. Initially, Charles Anderson became the Chairman of the Board for both StimTech and Devices, Ltd.; as such, he had the major responsibility for both companies. Although Mr. Hagfors remained in the position of President of StimTech for a period of time following acquisition, it was conceded in the evidence that Mr. Anderson could overrule Mr. Hagfors, and the plaintiffs had no power to outvote Mr. Anderson. Mr. Anderson made all the basic management decisions at StimTech and relieved the plaintiffs of any effective role in the operations of the company. Plaintiffs introduced evidence showing that at a very early time after the total acquisition, Mr. Anderson, acting for Johnson & Johnson, took many steps which were very damaging to StimTech as a corporation and thus to the plaintiffs as individuals. The plaintiffs were now divested of their stock and relegated to the role of employees of Johnson & Johnson under the control of Mr. Anderson. They were later able to protest Johnson & Johnson decisions successfully on only two occasions, both of which involved steps which would have had serious legal implications if enacted. These instances will be discussed in connection with the electrodes and the pricing policies attempted to be imposed upon them by Johnson & Johnson in certain patent matters. Exactly three months after Johnson & Johnson acquired StimTech, Mr. Anderson imposed a hiring freeze in the marketing area. Later, in February of 1975, a total freeze was imposed on hiring and extended to include Devices as well as StimTech. All hiring decisions had to be made with Mr. Anderson’s approval; one janitor was added to the staff but even the hiring of secretaries was not permitted. In addition, even though StimTech had become a subsidiary of Johnson & Johnson, on December 31, 1974, Mr. Anderson announced that StimTech would not be permitted to use the Johnson & Johnson name in connection with marketing or labeling its products or. in dealing with its customers. Several months later, StimTech was also informed that Johnson & Johnson would not permit the StimTech products to be displayed at the Johnson & Johnson annual meeting to be held at the end of March in 1975. One of Mr. Anderson’s earliest orders which was alleged to be detrimental to StimTech established a transfer pricing policy at StimTech which applied to any sale of StimTech products to other Johnson & Johnson companies. The original transfer price was manufacturing cost plus 10%. This price, which created a loss for StimTech, was protested by Mr. Hagfors and was later increased to manufacturing cost plus 25%, but the normal StimTech markup, absent transfer pricing, was at least two times the manufacturing cost. This newly instituted pricing created dissension between StimTech and Devices, Ltd. and deprived StimTech of badly needed profits. Another of Mr. Anderson’s earlier directives adversely affected StimTech’s future sales and expansion plans. On December 12, 1974, Mr. Anderson announced that Devices, Ltd. would have exclusive distribution rights for StimTech’s products for the United Kingdom and Europe. If StimTech wanted to sell TENS in that part of the world, it could do so at transfer prices and only through Devices, Ltd., even though Devices, Ltd. had only one salesman for TENS in all of the United Kingdom and Europe. At a later date, Mr. Anderson extended Devices, Ltd.’s territory to the Par East, which foreclosed StimTech from making any effective sales efforts in the Far East. From the inception of StimTech, the plaintiffs had planned to expand the marketing of TENS to include international sales. This intention was reflected in Mr. McDonald’s 1973-74 marketing plan and discussed with Johnson & Johnson during the negotiation period. Letters of inquiry to StimTech from all over the world, prior to acquisition, indicated the existence of a market potential for companies interested in purchasing or distributing TENS devices. However, the Johnson & Johnson imposed distribution arrangement with Devices served to lessen that potential because of the sheer inability of Devices, Ltd.’s one salesman to cover any extensive territory. In addition, Mr. Anderson initially refused to permit StimTech to hire an international salesman, indicating that StimTech, instead, should concentrate its efforts on the domestic market. In the spring of 1976, however, StimTech did hire an international salesman, Shimon Gibori. Mr. Gibori, who was subsequently fired by Mr. Anderson, was somewhat erratic and irresponsible. However, evidence adduced at trial indicated that Mr. Gibori, before his termination, made a sales trip to South America and returned with what appeared to be orders of approximately $100,000.00. These orders were not filled. Although the parties stipulated that no evidence existed to show that StimTech stifled the orders, the most it was possible to glean from the activities of Mr. Gibori was reflected in a stipulation which stated that he “indicated in several instances possible availability of StimTech distributorships in foreign countries and that StimTech didn’t follow through”. Gibori’s testimony and his other activities were “not to be considered” by the jury. Another international sales incident, peripherally related to Shimon Gibori, was Mr. Anderson’s termination of StimTech’s relationship with Cilag-Chemie, a Johnson & Johnson subsidiary in Sweden. Mr. Gibori, while an employee of StimTech, arranged for Cilag-Chemie to distribute TENS devices for StimTech in Sweden. Devices, in the meantime, however, had established a distributorship for TENS with Ethicon in Sweden, another Johnson & Johnson subsidiary. Ethicon, upon learning that it would be competing with Cilag-Chemie in the sale of TENS, expressed its displeasure over the arrangement to Brian Cornish of Devices and Charles Anderson of StimTech. Specifically, the company stated that “It is perhaps needless to say that we are chagrined to find ourselves in this situation and so are our friends at Cilag-Chemie who also have spent time and money on this project.” Ethicon made it perfectly clear that it was that company’s understanding that Devices, Ltd. was to “have full responsibility for their own products as well as StimTech’s products on the European market”. (Tr. 8432.) Mr. Anderson, upon learning of Ethicon’s annoyance, immediately terminated the arrangement with Cilag-Chemie and prevented StimTech from setting up its own direct relationships. Thus, not only did Johnson & Johnson fail in its contractual obligation to promote StimTech products, but actually refused to allow the Johnson & Johnson subsidiary Cilag-Chemie to compete, in the sale of stimulators after its assistance had been solicited by StimTech and had agreed to the distribution arrangement. Aside from the question of the international suppression of StimTech, we have here an instance where the two independent companies and StimTech were not allowed to compete with Devices and Ethicon which, in and of itself, gives indication of Johnson & Johnson’s reluctance to foster an atmosphere in which competition can thrive. During that same period, late 1974 to early 1975, Mr. Anderson told StimTech that there would be no planning and construction of foreign “mini-plants.” These factories, already in use by Medtronic, were designed to serve as final assembly plants for StimTech products in foreign countries as a means of avoiding tariff barriers, receiving favorable government treatment and lowering the prices of the goods. As such, these proposed mini-plants had been an integral part of StimTech’s original international marketing plan, the essence of which was well known by Johnson & Johnson before the purchase of StimTech. Despite these restrictions on international sales, many inquiries came from Europe, the British Isles, Central and South America, the Middle East, the Far East, Australia, and even the Iron Curtain countries. The plaintiffs, during the case, argued that this evidence showed a deliberate intent by Johnson & Johnson to suppress their sales and prevent their competition. Johnson & Johnson never gave any explicit explanation for prohibiting these sales, and no plausible explanation for these acts, other than plaintiffs’ theory, came into the evidence in this case. Another futile attempt to expand StimTech’s sales internationally was made by Mr. McDonald during a European trip in 1975. Mr. McDonald called on several European dealers and physicians in an attempt to enhance the sales of both electronic pain control devices and heart pacemakers. Brian Cornish, the Devices’ managing director, who, like many of the men who controlled StimTech’s destiny, had come to the company from McNeil (the Tylenol Company), later wrote to Mr. Hagfors complaining about Mr. McDonald’s activities and insisting that the previous ground rules relating to “assigned markets” be observed. This was true in spite of Mr. McDonald’s invitation to Devices to come to the United States to sell its products to customers. When Mr. McDonald returned from his trip, he encouraged the securing of government approvals of payment for TENS under national health insurance programs as quickly as possible. He theorized that TENS would be cheaper and more effective than drugs to treat pain over a long period of time and concluded that the European market was potentially larger than the domestic market because of the European system of socialized medicine. No action was taken in response to Mr. McDonald’s report, and StimTech received no assistance from other Johnson & Johnson companies to sell its products internationally. As stated earlier, shortly after the acquisition, Mr. Anderson required StimTech to concentrate on its domestic rather than its international market. However, Mr. Anderson would not even allow StimTech to expand its U.S. market. Specifically, in January of 1975, Mr. Anderson told StimTech that its sales efforts must be concentrated in three of four geographic areas in which the company was already successfully selling its product and that the domestic territories would not be permitted to expand. In keeping with his directive, Mr. Anderson vetoed any significant expansion of the very effective nurse liaison program under which StimTech employed registered nurses to assist in sales, patient instruction, and research of TENS devices. No rational explanation for these moves was ever given by Johnson & Johnson except that it was their business judgment. The jury could well have concluded, however, that the steps were taken with a deliberate intent to injure StimTech and to prevent its competition. Another StimTech-owned innovation, designed to assist in sales, education, and research in regard to TENS, was Midwest Pain. This center was the prototype of pain control clinics to which doctors could refer patients for instruction in the use of TENS devices and a place where prescriptions for TENS could be filled. A memo from Mr. Galloway to Mr. Anderson sent six months after acquisition evidenced Johnson & Johnson’s prior intention to dispose of Midwest Pain “at an early date”. This was done despite the plaintiffs’ long-held plan to expand the Midwest Pain concept by opening such centers in other parts of the country. As a result, no additional pain control centers were opened by Johnson & Johnson, and Midwest Pain was eventually sold to Mr. McDonald when he left StimTech in 1977. The plaintiffs contend that the curtailment of this marketing technique was very effective in keeping the sales of TENS devices down and even more significant in keeping the medical profession and the public oblivious to the benefits available through TENS therapy. As a further example of what plaintiffs allege was intentional suppression, evidence was introduced to show that in November of 1977, StimTech received a request from Pain Control Centers International, a chain of pain clinics, to buy at least $200,000.00 of TENS devices for its 25 centers. Mr. DeAngeli, the Johnson & Johnson man in charge of StimTech, sought and obtained legal advice from Mr. Galloway to the effect that StimTech did not have to sell to PCI, and he subsequently refused their business. The defendant contends the sale was not made because the prospective purchaser PCI’s credit was poor. The plaintiffs responded at trial, however, that a “cash on delivery sale” would have provided adequate protection for StimTech. Johnson & Johnson had no satisfactory explanation for refusing to allow StimTech to sell its products, and one could conclude on the record that Johnson & Johnson never asked for the products to be sent C.O.D. Th