author: McKEOWN, Circuit Judge:

text:
    AEROTEC INTERNATIONAL, INC., an Arizona corporation, Plaintiff-Appellant, v. HONEYWELL INTERNATIONAL, INC., a Delaware corporation, Defendant-Appellee.
    No. 14-15562
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted March 16, 2016, San Francisco, California
    Filed September 9, 2016

      Michael C. Blair (argued) and Craig M. LaChance, Baird, Williams & Greer, LLP, Phoenix, Arizona, for Plaintiff-Appellant.
    William J. Maledon (argued), Brett L. Dunkelman, Joseph N. Roth, and Eric M. Fraser, Osborn Maledon, P.A., Phoenix, Arizona; Richard G. Parker, O’Melveny & Myers LLP, Washington, D.C.; for Defendant-Appellee.
    Before: M. MARGARET McKEOWN, KIM McLANE WARDLAW, and RICHARD C. TALLMAN, Circuit Judges.
   OPINION

McKEOWN, Circuit Judge:

This case reads like an antitrust primer for aftermarket issues, with claims for exclusive dealing, tying, essential facilities, refusal to deal, price bundling, and price squeezing under Sections 1 and 2 of the Sherman Act and, differential pricing/price discrimination under the Robinson-Patman Act. „ Honeywell International Inc. (“Honeywell”) is one of the world’s two largest manufacturers of auxiliary power units (“APUs”), which power aircraft functions such as electricity and temperature. Aerotec International Inc. (“Aerotec”) is a small, independent company that provides maintenance, repair, and overhaul (“MRO”) services for Honeywell APUs. Aerotec argues that Honeywell leverages its monopoly power over the APU parts market to unfairly smother competition in the repair services market.

Aerotec’s antitrust claims fail for lack of evidence to link Aerotec’s misfortune to any cognizable basis for antitrust liability. This case serves as a reminder that anecdotal speculation and supposition are not a substitute for evidence, and that evidence decoupled from harm to competition — the bellwether of antitrust — is insufficient to defeat summary judgment. As the Supreme Court reminds us, “[t]he law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.” Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993); see also Cascade Health Sols. v. PeaceHealth, 515 F.3d 883, 901 (9th Cir. 2007) (reiterating that “antitrust laws protect the process of competition, and not the pursuits of any particular competitor”). We affirm the district court’s grant of summary judgment in favor of Honeywell.

BACKGROUND

This case concerns the repair and maintenance market for APUs, which are small engines that provide aircraft with the electrical power needed to keep air conditioning running, cabin lights shining, and electric-powered instrumentation functioning. Without APUs, air travel would be neither comfortable nor safe. A malfunctioning APU requires that a plane be grounded until the problem is fixed — a situation that can cost airlines hundreds of thousands of dollars a day. In short, APUs are an essential cog in a smoothly functioning aviation industry.

Very few companies manufacture APUs. Honeywell, a diversified manufacturer of aerospace products, dominates the APU industry, with a 76 percent share of the manufacturing market for commercial aircraft, 89 percent for business planes, and 79 percent for military aircraft. The other major manufacturer is Hamilton Sundst-rand.

Aerotec is a small APU shop that competes with Honeywell in the repair market. Aerotec’s share of the repair market is about 1 percent, and it is one of the few firms that repairs APUs from both Honeywell and Hamilton Sundstrand. Aerotec shares the stage with at least 49 other MRO servicers, plus Honeywell, which alone repairs as much as 54 percent of Honeywell-manufactured APUs.

The lifeblood of the repair and maintenance market is a steady source of replacement parts: Because of the proprietary nature of the design, manufacturers naturally control most of the replacement parts market for APUs. The industry denotes replacement parts branded by the manufacturer as “original equipment manufacturer” (“OEM”) parts, in contrast with substitute parts, which are referred to as “parts manufacturing approval” (“PMA”) parts because they require regulatory certification by the Federal Aviation Administration (“FAA”). Almost all parts available on the market are OEM parts. PMAs cover mostly non-essential parts and are rarely available for the more important, and expensive, components of an APU, such as turbine blades.

Repair procedures are also critical to the repair and maintenance market, given the technical complexity of APUs. Although Honeywell closely guards its proprietary repair methods involving QEM parts, the aviation industry as a whole has developed substitute repair methods for Honeywell’s APUs that both mimic and depart from Honeywell’s protocols. These repair processes must be approved by a “designated engineering representative” (“DER”) approved by the FAA, and are referred to within the industry as “DER repairs.”

Apart from Honeywell, APU repairs are undertaken directly by the airlines (“self-servicing airlines”), Honeywell affiliates, and independent operators. Participants in this market typically bundle parts and repairs in an effort to woo the airlines into long-term repair and maintenance agreements.

The majority of Honeywell MRO servi-cers, known as Honeywell affiliates, operate under long-term contracts with Honeywell for parts. Under these agreements, a servicer typically agrees to certain obligations and royalty fees in exchange for discounts on Honeywell OEM parts, priority in allocation of parts in shortages, and a license to use Honeywell’s intellectual property for APU repairs. At least five of the MRO servicers, including Aerotec, are independent companies without any manufacturer affiliation. These independent ser-vicers typically obtain the necessary parts for repairs by submitting purchase orders for parts on an as-needed basis through spot contracts with Honeywell. Under Honeywell’s tiered pricing structure, independent servicers pay more for OEM parts in spot orders than do self-servicing airlines, and typically pay more than Honeywell affiliates who negotiate prices as part of their long-term agreements. Facing these pricing differentials, independent servicers use cheaper PMA parts and DER repair methods when they are available, which is partly how they are able to compete in the volatile and competitive repair and maintenance market. Despite claimed barriers, Aerotec touts that its prices are 20 percent lower than its competitors on average.

Although Aerotec traditionally controlled less than one percent of the Honeywell APU repair and maintenance market, beginning around 2006, after emerging from a second bankruptcy, Aerotec made a push to increase its market share and profitability. The company branded itself as a “fierce low cost” competitor to Honeywell. Aerotec wrangled major MRO deals away from Honeywell, including one with Saudi Arabian Airlines (“Saudia”) in 2007 and another with Air India in 2009. The deal with Saudia was not easily won, and it was precarious from the get-go: Aerotec “openly discussed its financial limitations” with Saudia and contracted for a ‘“fixed monthly payment’ plan ... to ensure a steady cash flow,” despite the fact that Saudia’s prior deal with Honeywell had gone sour because of Saudia’s late payments. Aerotec’s sales director noted that carrying customer debt of $500,000 to $1,500,000 “would put [Aerotec] out of business.” But for a time Aerotec’s profits soared.

Aerotec’s upward trajectory did not last. Beginning in 2007, a well-documented worldwide parts shortage for the Honeywell Model 331-500 APU used in Saudia’s fleet of Boeing 777s hampered Honeywell’s ability to follow through on commitments to purchasers of parts, including Aerotec. Because Honeywell’s parts allocation system put independent MROs at the bottom of the priority list, Aerotec experienced delays in the delivery of parts. Aerotec’s lack of a preexisting inventory of parts exacerbated the problem. As a result of the unavailability of parts, Aerotec began having trouble fulfilling its contracts with Saudia and other clients. For its part, Sau-dia continued its pattern of late payments, leaving Aerotec stranded on a “continuous financial roller-coaster” with millions of dollars of customer debt. Honeywell continued to sell parts to Aerotec, and, even when Aerotec could not financially cover its demand, extended credit lines. But the credit came at the cost of further de-prioritization of shipments and additional layers of review for parts orders. As a result of these difficulties, Aerotec suffered a series of major bidding losses: Saudia left Aerotec in 2009, opting instead for a Honeywell affiliate; Air India left for Honeywell; and Air China chose Honeywell in a hotly contested bidding process.

In the face of its dwindling market share, Aerotec turned to federal court and filed a complaint alleging causes of action under §§ 1 & 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2, the Robinson-Pat-man Act, 15 U.S.C. § 13(a), and Arizona state law. Aerotec takes issue with Honeywell’s claims that its hands were tied by a parts shortage. Instead, Aerotec views the parts shortage as a pretext — part of what Aerotec alleges to be Honeywell’s thinly-veiled, multi-pronged plan to leverage its control over the parts market to pull business from independent servicers to itself and its affiliates.

In addition to the allegedly deliberate shipment delays, Aerotec alleges that Honeywell maintained an overly burdensome ordering process, held Aerotec to stringent payment terms at the same time that it failed to deliver parts, withheld needed technical information that previously had been provided as a matter of course, lured airline clients away from independent servicers by offering steeply discounted bundles of parts and repair services, and imposed a pricing penalty on independent servicers vis-a-vis airlines and Honeywell affiliates.

After the close of discovery, the parties filed cross-motions for summary judgment. The district court denied Aerotec’s motion and granted Honeywell’s motion, concluding that there was insufficient evidence to create triable factual disputes on Aerotec’s federal antitrust claims. The court also dismissed Aerotec’s Arizona state law claims because they either turned on the viability of Aerotec’s federal antitrust claims or were unsupported by evidence sufficient to create a material factual dispute. Reviewing summary judgment de novo and viewing the evidence in the light most favorable to Aerotec, the non-moving party, we affirm. See Rebel Oil Co., Inc. v. Atl. Richfield Co., 51 F.3d 1421, 1432 (9th Cir. 1995).

ANALYSIS

I. Section 1 of the Sherman Act

Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations....” 15 U.S.C. §1. Despite the breadth of the statutory language, the Supreme Court “has long recognized that Congress intended to outlaw only unreasonable restraints.” State Oil Co. v. Khan, 522 U.S. 3, 10, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997). To establish liability under § 1, a plaintiff must prove (1) the existence of an agreement, and (2) that the agreement was in unreasonable restraint of trade. Am. Needle, Inc. v. Nat’l Football League, 560 U.S. 183, 189-90, 130 S.Ct. 2201, 176 L.Ed.2d 947 (2010). Aerotec relies on two theories of liability under § 1: first, that Honeywell restrained trade by “tying” the purchase of Honeywell OEM parts to the purchase of Honeywell repair services; and second, that Honeywell restrained trade by forcing airlines into de facto exclusive dealing arrangements with Honeywell and its affiliates.

A. Section 1 of the Sherman Act— Tying

In a tying arrangement, a “seller conditions the sale of one product (the tying product) on the buyer’s purchase of a second product (the tied product).” Cascade Health, 515 F.3d at 912. By so doing, a seller with “market power in one market ... extend[s] its market power to an entirely distinct market.” Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145, 1159 (9th Cir. 2003). To establish a tying claim, Aerotec must prove:

(1) that [Honeywell] tied together the sale of two distinct products or services;
(2) that [Honeywell] possesses enough economic power in the tying product market to coerce its customers into purchasing the tied product; and (3) that the tying arrangement affects a not insubstantial volume of commerce in the tied product market.

Cascade Health, 515 F.3d at 913 (internal quotation marks omitted). Aerotec’s claim falters on the first, most fundamental requirement — the existence of a tie.

A tie only exists where “the defendant improperly imposes conditions that explicitly or practically require buyers to take the second product if they want the first one.” 10 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1752b (3d ed. 2011). Prohibited tying arrangements under § 1 include both positive and negative ties. See Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1178 (1st Cir. 1994) (drawing parallels between “positive” and “negative” ties), abrogated on other grounds by Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 130 S.Ct. 1237, 176 L.Ed.2d 18 (2010). Under the more traditional positive tie, sale of the desired (“tying”) product is conditioned on purchase of another (“tied”) product. See id. at 1156. A negative tie “occur[s] when the customer promises not to take the tied product from the defendant’s competitor, but courts ‘rarely encounter[ ]’ such a situation.” See Cascade Health, 515 F.3d at 912 n.23 (citing 10 Areeda & Herbert Hovenkamp, supra ¶ 1752c n.8 (2d ed. 2004)) (alteration in original). The common element in both situations is that a seller explicitly or implicitly imposes conditions linking the sale of a tying product with the sale of the tied product. See 10 Areeda & Hovenkamp, supra ¶ 1752c (3d ed. 2011) (noting that whether there is a tie turns on “whether the defendant gave buyers the reasonable impression that it would not sell product A to those who would not buy its B”). Aerotec’s claim does not fit either framework because there is no condition linked to a sale. We decline to stretch the tying construct to accommodate the claim that Honeywell’s conduct toward third party servicers — i.e., parts delays, pricing decisions, and removal of technical data— acts as an effective, or “de facto,” condition on sale to airlines.

Although Aerotec urges that its theory is directly supported by the Supreme Court’s decision in Kodak, Aerotec’s claim is critically different from the “negative” tying claim in that case. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992) (“Kodak”). In Kodak, the Supreme Court recognized a tie where Kodak conditioned the sale of printer replacement parts to copy machine owners on an agreement not to purchase repair services from an independent service provider: “[t]he record indicate[d] that Kodak would sell parts to third parties only if they agreed not to buy service from [independent service operators].” Id. at 463, 112 S.Ct. 2072. Unlike in this case, Kodak imposed its tying conditions on the purchasers of parts. Conditions of sale to competitor service providers were not at issue. Kodak simply does not map onto the facts here, where the only claimed conditions imposed were on independent servicers.

Nor can Aerotec transform Kodak by waving its hands and saying that the gravamen of its complaint is a “de facto” or “implied” tie. We readily acknowledge that tying conditions need not be spelled out in express contractual terms to fall within the Sherman Act’s prohibitions. See Collins Inkjet Corp. v. Eastman Kodak Co., 781 F.3d 264, 272 (6th Cir. 2015) (recognizing “non-explicit tying” when a seller “adopts a policy that makes it unreasonably difficult or costly to buy the tying product ... without buying the tied product”), cert. denied, — U.S. -, 136 S.Ct. 498, 193 L.Ed.2d 362 (2015); see also Foremost Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d 534, 542-43 (9th Cir. 1983) (rejecting a claim of a “technological tie” but acknowledging the possibility of such a claim), overruled on other grounds as recognized in Chroma Lighting v. GTE Prods. Corp., 111 F.3d 653, 657 (9th Cir. 1997). The problem with Aerotec’s claim is that there is no tie, ie., no evidence that Honeywell explicitly or implicitly ties or conditions the sale of APU parts to APU owners on a requirement that the owners “buy and repair Honeywell” and/or forego services from independent service providers. Aerotec does not dispute that Honeywell routinely sells APU parts to airlines without conditioning sales on service contracts. Honeywell allows airlines to purchase parts and services in separate transactions from whichever supplier they please. This undermines the analogy to Kodak, even under an implied tying theory. See Areeda & Hovenkamp, supra ¶ 1752a (Supp. 2016) (noting that the existence of a tie can only be established through a “nuanced inquiry into whether the defendant has so acted as to constrain buyer choices illegitimately”).

Perhaps cognizant that the arrangement in Kodak does not fit the facts here because there is no direct condition linked to the sale of parts to airlines, Aerotec argues in the alternative that “Honeywell creates an implied tie by making the purchase of Honeywell’s services an economic imperative.” Honeywell achieves the tie, Aerotec alleges, by constraining the flow of parts to independent servicers via delays on orders, preferential pricing policies, and withholding of technical information needed to complete repairs — in other words, by squeezing third party service providers. As a consequence, the independent servicers cannot deliver on airlines’ reasonable expectations for finding a “one-stop shop” for all of their parts and repair needs. Airlines “learn the game: if you want parts, you use Honeywell’s repair services.” But Aero-tec’s chain of logic and evidence is too attenuated to support liability for tying under § 1.

Aerotec contends that a refusal to deal with competitors may form the basis of a tying claim. Aerotec argues that Cascade Health supports its “refusal to deal” theory of tying. Importantly, however, that case did not dispense with the need for a tying condition embedded in a tying transaction. In Cascade Health, we said little about what constitutes a tie because it was obvious that there was a tying condition: the plaintiff alleged, and provided evidence, that the defendant health care network conditioned insurers’ purchase of tertiary care services on the purchase of primary and secondary services. 515 F.8d at 913. Only after briefly passing over the tying element did the court address the key issue, the coercion element. At issue was whether coercion was established by evidence that the defendant “forced insurers either as an implied condition of dealing or as a matter of economic imperative through its bundled discounting, to take its primary and secondary services if the insurers wanted tertiary services.” Id. at 914.

Nothing in Cascade Health suggests that arguably manipulative tactics imposed on a third-party competitor are sufficient by themselves to create a tie with respect to a separate buyer simply because they make it less desirable to purchase from the third party. None of our cases postdating Cascade Health come close to recognizing such a theory, which echoes a plea for relief on behalf of a competitor, not for the sake of competition itself. See e.g., Brantley v. NBC Universal, Inc., 675 F.3d 1192 (9th Cir. 2012) (involving conditions imposed on the buyer of the tying product); Blough v. Holland Realty, Inc., 574 F.3d 1084 (9th Cir. 2009) (same); Rick-Mik Enterprises, Inc. v. Equilon Enterprises, LLC, 532 F.3d 963 (9th Cir. 2008) (same).

Ultimately, Aerotec’s arguments fall off the rails for lack of any evidence that airlines were presented with an offer for the sale of parts that could have been reasonably perceived as conditioned on refraining from the purchase of parts or services from any other service provider besides Honeywell. The claim that Honeywell clogs and complicates the parts distribution pipeline to independent servicers cannot substitute for the necessary evidence of an implied condition embedded in the sale of the tying-product.

B. Section 1 of the Sherman Act— Exclusive Dealing

Aerotec brings a second claim under § 1 of the Sherman Act, alleging that Honeywell engaged in exclusive dealing, which is an “agreement between a vendor and a buyer that prevents the buyer from purchasing a given good from any other vendor,” and forecloses competition. Allied Orthopedic Appliances Inc. v. Tyco Health Care Grp. LP, 592 F.3d 991, 996 & n.1 (9th Cir. 2010). The agreements for purchase of repair services from Honeywell by the airlines are the starting point for our analysis. The record of these contracts, however, is characterized more by what is missing than what is there. Aero-tec cannot sustain its burden by offering broad allegations and complaints that are unhinged from any specific agreement. Nor is there evidence that Honeywell has a global agreement with all of its customers such that Aerotec’s failure to pinpoint or analyze specific agreements can be excused. The devil is in the details. We affirm the district court’s award of summary judgment on this claim because an exclusive dealing claim cannot succeed without evidence of exclusive dealing.

Aerotec has the burden to show that the agreements at issue foreclosed competition. See id. at 996 n.l (“[I]n a case under Section 1 of the Sherman Act, the plaintiff must prove that the exclusive dealing arrangement actually foreclosed competition”). In analyzing foreclosure, we

weigh the probable effect of the contract on the relevant area of effective competition, taking into account the relative strength of the parties, the proportionate volume of commerce involved in relation to the total volume of commerce in the relevant market area, and the probable immediate and future effects which pre-emption of that share of the market might have on effective competition therein.

Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 329, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961). This inquiry requires that we look at the actual terms of the agreements; indeed, “a prerequisite to any exclusive dealing claim is an agreement to deal exclusively.” ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 270 (3d Cir. 2012); see also Barr Labs., Inc. v. Abbott Labs., 978 F.2d 98, 110 n.24 (3d Cir. 1992) (acknowledging that the first question is whether there is an agreement to exclusivity). In doing so, we typically focus on whether there are requirements terms (ie., terms requiring a buyer to purchase all the product or service it needs from one seller), see Tampa Elec.- Co., 365 U.S. at 322, 81 S.Ct. 623, volume or market share targets, see ZF Meritor, 696 F.3d at 283, or long-term contracts that prevent meaningful competition by taking potential purchasers off the market, see Omega Envtl., 127 F.3d at 1163-64 (“[T]he short duration and easy terminability of these agreements negate substantially their potential to foreclose competition.”). See generally Areeda & Hovenkamp, supra ¶ 1800al-3.

Aerotec failed to provide any significant details about the repair agreements between Honeywell and the airlines. The only evidence of substance is a declaration from Aerotec that, pursuant to industry practice, purchasers of repair services contract for 3-7 years at a time, as well as testimony that Honeywell gives airline customers a 15 percent discount on parts. There is no evidence of which customers or how many of the contracts were for 3-7 years; likewise, there is no evidence that the discount is an “extreme quantity discount” that “give[s] a customer a lower price for buying in larger absolute quantities or a larger proportion of its needs,” amounting to “de facto” exclusive dealing. Areeda & Hovenkamp, supra ¶ 1807b2. Nor is there evidence of other terms that in effect transform these unspecified transactions into exclusive arrangements.

Aerotec does point to a market analysis that shows that as much as 47 percent of Honeywell APUs are under some form of contract for repair with Honeywell, but this figure conveys no relevant information about the substance of the contracts. What are the details? What is the term of the contract? Is it a spot market contract or a long-term contract? What restrictions or conditions are imposed on the customer? We don’t know because Aerotec didn’t tell us, either through copies of the contracts, analysis of the contract terms, or expert testimony. It is undisputed that some proportion of Honeywell’s repair contracts are non-exclusive and temporally circumscribed, as Honeywell provides single, on-demand repair services on a “time and materials” basis.

Contracts, simpliciter, are not illegal under the Sherman Act. Indeed, none of the indicia that we would ordinarily review in an exclusive dealing claim — e.g., requirements terms, steep market-share requirements, contract duration and other terms — are present in this record. The record simply does not indicate what proportion of the market is bound up in long-term contracts at any particular point in time or to what effect. At this stage of the litigation, after extensive discovery, Aero-tec needed to do something more than offer conclusory statements and stitch together disparate facts about the market for repairs; it needed concrete documentation that Honeywell’s agreements prevented customers from giving their repair business to other MRO servicers. The speculation and innuendo offered by Aero-tec cannot substitute for evidence.

Aerotec attempts to redirect attention from the absence of evidence of the exclusive substance of the agreéments by focusing on Honeywell’s power to force airlines to accept Honeywell services to the detriment of independent servicers. Evidence of Honeywell’s power to induce purchases of repairs by airlines is certainly relevant under a “de facto” exclusive dealing theory where we look “past the terms of the contract to ascertain the relationship between the parties and the effect of the agreement in the real world.” ZF Mentor, 696 F.3d at 270 (internal quotations omitted); see also LePage’s Inc. v. 3M, 324 F.3d 141,157 (3d Cir. 2003) (en banc) (same); United States v. Dentsply Int'l Inc., 399 F.3d 181, 193 (3d Cir. 2005) (same). In certain limited situations, discounts and rebates conditioned on a promise of exclusivity or on purchase of a specified quantity or market share of the seller’s goods or services may be understood as “de facto” exclusive dealing contracts because they coerce buyers into purchasing a substantial amount of their needs from the seller. Areeda & Hoven-kamp, supra ¶ 1807M-2.

Although we have not explicitly recognized a “de facto” exclusive dealing theory like that recognized in the Third Circuit and Eleventh Circuit, see ZF Meritor, 696 F.3d at 282 n.14 (reasoning that an “exclusive dealing claim does not require a contract that imposes an express exclusivity obligation”); McWane, Inc. v. FTC, 783 F.3d 814, 833-35 (11th Cir. 2015) (rejecting “formalistic distinctions” between exclusive dealing contracts and exclusive programs), we need not reach the issue here because, at bottom, a plaintiff must still show that contracts that were induced were exclusive rather than run-of-the-mill contracts, which inevitably “ !foreclose[ ]’ or ‘exclude[ ]’ alternative sellers from some portion of the market, namely the portion consisting of what was bought.” Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 236 (1st Cir. 1983). Simply put, a 15 percent discount on a single sale (or a series of independent sales) may be enticing enough to “coerce” a purchase in that instance, but in the absence of any exclusive requirements on which the discount is conditioned, the sale remains nonexclusive. The “de facto” exclusive dealing theory does not provide Aerotec an end run around the obligation to first show that express or implied contractual terms in fact substantially foreclosed dealing with a competitor for the same good or service.

A close review of the Third Circuit’s approach also underscores that the “de facto” exclusive dealing theory is of no use to Aerotec. In ZF Meritor, for instance, the question was whether long-term agreements that “did not expressly require the [purchasers] to meet ... market penetration targets ... were as effective as mandatory purchase requirements.” 696 F.3d at 282. The court concluded they were because no buyer could “afford to lose” the seller’s business, and thus the conditional discounts and unilateral cancellation provision effectively coerced buyers to enter into contracts with onerous terms, such as five-year commitments. Id. at 283. Just as in any exclusive dealing claim, however, the court first had to be satisfied that specific features of the agreement required exclusivity. Accordingly, the court examined the terms of the agreements in detail, focusing on their duration, the high market-share targets (at least 80 percent and up to 97.5 percent), and other specific terms granting preferential treatment to the seller in subsequent sales. Id. at 286-88. The same was true in LePage’s, where the Third Circuit recognized that extensive “all-or-nothing” discounts and rebates were not express exclusivity terms, but still looked to evidence that buyers understood offers as conditional on the buyer foregoing purchases from competitor manufacturers of tape, 324 F.3d at 158-59, and in Dentsply, where the court recognized that a condition of only carrying the seller’s product imposed in a “series of independent sales” was sufficient to make the exclusive condition as effective as if it was articulated in a written contract, 399 F.3d at 193. Unlike in those cases, the record here is missing evidence of contracts, the claimed extra-contractual conditions, or preferential treatment terms.

II. Section 2 of the Sherman Act

Section 2 of the Sherman Act makes it illegal to “monopolize ... any part of the trade or commerce among the several States.” 15 U.S.C. § 2. For liability to attach, a defendant must (1) possess monopoly power and (2) use that power “to foreclose competition, to gain a competitive advantage, or to destroy a competitor.” Kodak, 504 U.S. at 482-83, 112 S.Ct. 2072 (quoting United States v. Griffith, 334 U.S. 100, 107, 68 S.Ct. 941, 92 L.Ed. 1236 (1948)). In considering Aerotec’s claims, we assume without deciding that Honeywell possesses monopoly power in the market for APU parts.

Aerotec asserts what it describes as “a refusal-to-deaVessential-facilities theory,” claiming that refusal is proved via intent to foreclose competition or through Honeywell’s control of parts, an essential input. This novel framing of Aerotec’s § 2 claim is an effort to sidestep the reality that there was no actual refusal to deal. Instead, Aerotec attacks Honeywell’s business terms as a “de facto” refusal that is revealed by Honeywell’s intent to squash independent firms. Aerotec’s premise runs afoul of longstanding precedent that “as a general matter, the Sherman Act ‘does not restrict the long recognized right of [a] trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal.’ ” Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408, 124 S.Ct. 872, 157 L.Ed.2d 823 (2004) (“Trinko”) (quoting United States v. Colgate & Co., 250 U.S. 300, 307, 39 S.Ct. 465, 63 L.Ed. 992 (1919)). As we noted in MetroNet Services, the Supreme Court has exercised considerable caution in recognizing exceptions to this broad principle for three core reasons: 1) compelled sharing of the resources generating a competitive advantage undermines the- purpose of antitrust law by reducing incentives to invest in those resources; 2) compelled sharing puts federal courts in the role of central planners despite their being ill-equipped to assume this role; and 3) the compelled sharing may actually provide opportunities for collusion, which is the “ ‘supreme evil of antitrust.’” MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124, 1131 (9th Cir. 2004) (quoting Trinko, 540 U.S. at 407-08, 124 S.Ct. 872).

A. Section 2 of the Sherman Act— Refusal to Deal

In light of the Supreme Court’s reluctance to impose a duty to deal—Trinko declared the Sherman Act as “the Magna Carta of free enterprise,” 540 U.S. at 415, 124 S.Ct. 872 (internal quotations omitted) — Aerotec attempts to shoehorn Honeywell’s alleged conduct (i.e., “withholding of parts and technical data, onerous payment terms, and pricing penalties”) into the narrow exception recognized in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985). In Aspen Skiing, the defendant — who owned three of the four ski resorts in the market- — discontinued a joint lift-ticket package with a smaller rival, the only other competitor in the market, and then flatly refused to sell the rival any lift tickets so it could create- its own bundles. 472 U.S. at 592-94, 105 S.Ct. 2847. It is no wonder that the Supreme Court characterized this “limited exception” as “at or near the outer boundary of § 2 liability.” Trinko, 540 U.S. at 409, 124 S.Ct. 872.

Aspen Skiing offers no relief here. Aerotec simply did not like the business terms offered by Honeywell, especially after things began to change in 2007. But this “business pattern” can hardly be characterized as so onerous as to be tantamount to the conduct in Aspen Skiing. Aerotec’s vague requested remedy that we “order Honeywell to provide parts, data, and prices like it did before 2007,” reveals the problems with Aerotee’s refusal to deal claim: providing any meaningful guidance to Honeywell and ordering it to artificially create pre-2007 market conditions would require the courts to play precisely the kind of “central planning]” role that courts are “ill suited” to play. Id. at 408, 124 S.Ct. 872. As the Supreme Court has repeatedly emphasized, there is “no duty to deal under the terms and conditions preferred by [a competitor’s] rivals,” Pac. Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438, 457, 129 S.Ct. 1109, 172 L.Ed.2d 836 (2009); there is only a duty not to refrain from dealing where the only conceivable rationale or purpose is “to sacrifice short-term benefits in order to obtain higher profits in the long run from the exclusion of competition,” MetroNet Servs., 383 F.3d at 1132.

Sensing the deficiencies in its theory, Aerotec argues that intent to foreclose competition is sufficient to establish § 2 liability. While it is true that intent is a necessary element of attempted monopolization, it is not sufficient alone to establish liability. Competitors are not required to engage in a lovefest; indeed, “[e]ven an act of pure malice by one business competitor against another does not, without more, state a claim under the federal antitrust laws.” Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 225, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993). As the Tenth Circuit noted in rejecting a claim similar to the one here, “[w]ere intent to harm a competitor alone the marker of antitrust liability, the law would risk retarding consumer welfare by deterring vigorous competition.” Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1078 (10th Cir. 2013). By its very terms, § 2 of the Sherman Act regulates anti-competitive conduct, not merely anticompetitive aspirations or an independent decision on terms of dealing with a competitor.

B. Section 2 of the Sherman Act— Essential Facilities

The essential facilities doctrine is one of the circumstances in which plain English and antitrust lingo converge. This theory is a variation on a refusal to deal claim. It imposes liability where competitors are denied access to an input that is deemed essential, or critical, to competition. See Ferguson v. Greater Pocatello Chamber of Commerce, Inc., 848 F.2d 976, 983 (9th Cir. 1988). Although the Supreme Court has never recognized the doctrine, see Trinko, 540 U.S. at 411, 124 S.Ct. 872, we have continued to treat it as having a basis in § 2 of the Sherman Act. See MetroNet Servs., 383 F.3d at 1129; see also Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536, 546 (9th Cir. 1991).

To establish a violation of the essential facilities doctrine, Aerotec must show (1) that Honeywell is a monopolist in control of an essential facility, (2) that Aerotec, as Honeywell’s competitor, is unable reasonably or practically to duplicate the facility, (3) that Honeywell has refused to provide Aerotec access to the facility, and (4) that it is feasible for Honeywell to provide such access. MetroNet Servs., 383 F.3d at 1128-29. Because mandating access, as the essential facilities doctrine implies, shares the same concerns as mandating dealing with a competitor, a facility is essential “only if control of the facility carries with it the. power to eliminate competition in the downstream market.” Alaska Airlines, 948 F.2d at 544.

Aerotec reasons that APU parts are the “essential facility” because, absent parts, “repairs are impossible.” According to Aerotec, Honeywell uses a variety of tactics to put pressure on the parts supply chain. As a “smoking gun,” Aerotec emphasizes an internal Honeywell presentation outlining its efforts to manage a complex, crowded, competitive environment by controlling intellectual property, creating barriers to entry, and managing the supply chain by limiting parts availability.

Aerotec’s claims fail for an obvious reason' — a facility is only “essential” where it is otherwise unavailable. City of Anaheim v. S. Cal. Edison Co., 955 F.2d 1373, 1380 (9th Cir. 1992). In addition to substantial purchases of parts from Honeywell, Aero-tec has access to both PMA parts and OEM aftermarket parts acquired from other servicers. For example,. in 2007 alone, Aerotec purchased $1,074,072 of PMA parts and $9,347,661 of APU parts from vendors other than Honeywell (compared with about $9,420,240 in parts from Honeywell). Although Honeywell’s ordering process may very well be “Kafkaesque,” as Aerotec believes, and Honeywell may even provide priority access to certain customers, Honeywell does not deny Aero-tec access to APUs or their component parts. Trinko teaches that “where access exists, the [essential facilities] doctrine serves no purpose.” 540 U.S. at 411, 124 S.Ct. 872.

In sum, there is no evidence that Aero-tec is frozen out of — or even faces a chill in accessing — the parts supply chain. Thus, “[b]ecause reasonable access to the essential facility exists — even if not in a way that is conducive to [AerotecJ’s existing business model — [Aerotec] cannot establish an essential facilities claim.” MetroNet Servs., 383 F.3d at 1130.

C. Section 2 of the Sherman Act— Bundled Discounts

Both Honeywell and Aerotec offer bundled parts and repairs. As we explained in Cascade Health, “[b]undling is the practice of offering, for a single price, two or more goods or services that could be sold separately.” 515 F.3d at 894. Such bundling practices “generally benefit buyers because the discounts allow the buyer to get more for less,” and they also often “result in savings to the seller because it usually costs a firm less to sell multiple products to one customer at the same time than it does to sell the products individually.” Id. at 895 (citing United States v. Microsoft Corp., 253 F.3d 34, 87 (D.C. Cir. 2001) (per curiam)).

Because “[l]ow prices benefit consumers regardless of how those prices are set, and so long as they are above predatory levels,” Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 340, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990), the Supreme Court has cautioned against recognizing antitrust discounting claims except where the “prices complained of are below an appropriate measure of [a] rival’s costs” and where there is a “dangerous probability” that the pricing firm will be able to “recoup[ ] its investment” after it has successfully extinguished its competitors through artificially low prices. Brooke Grp., 509 U.S. at 222-24, 113 S.Ct. 2578. As the Court has observed,

[T]he costs of erroneous findings of predatory-pricing liability [are] quite high because the mechanism by which a firm engages in predatory pricing — lowering prices — -is the same mechanism by which a firm stimulates competition, and, therefore, mistaken findings of liability would chill the very conduct the antitrust laws are designed to protect.

Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., Inc., 549 U.S. 312, 320, 127 S.Ct. 1069, 166 L.Ed.2d 911 (2007) (internal citations omitted).

Like the negative tinge sometimes associated with bundled campaign contributions, Aerotec endeavors to cast Honeywell’s bundling behavior in a negative light. Despite the common practice of bundling parts and repairs — routine practice for both Honeywell and Aerotec — Aerotec claims that because Honeywell controls the pricing in the parts market, independent shops cannot compete with Honeywell’s steep discounts on the bundles. In truth, Honeywell’s discounts mirror the “lower cost structure” of Honeywell’s vertical integration, and therefore reflect “competition on the merits.” Brooke Grp., 509 U.S. at 223, 113 S.Ct. 2578.

Aerotec offers no credible evidence that Honeywell prices repair services below cost. The transaction that Aer-otec claims led to below cost pricing on repairs was a Honeywell repair bid to Avi-anca Airlines, which reflected a substantial discount. Notably, the record does not include Honeywell’s actual costs of labor and parts for this deal; Aerotec infers that the prices must be below cost, whatever the costs might be. Honeywell counters that the Avianca bid is not comparable to a below-cost bid because it is part of a “Not-to-Exceed” (“NTE”) agreement with the customer, wherein Honeywell agreed to provide repair services and parts for a price not to exceed a certain amount. Honeywell notes that, as long as it makes a profit over the course of repeated repair jobs with any one airline, it is pricing above cost. Honeywell provided substantial evidence of its “Airline Sales Approval Process,” through which it analyzes its NTE agreements and ensures that it sets its bids in the aggregate above cost. Honeywell also offered extensive evidence regarding its positive revenues on the specific contracts Aerotec challenges. In short, Aerotec’s single example, isolated and out of context, is insufficient to support a predatory pricing claim.

Aerotec suggests that it does not matter what Honeywell’s costs were because the discount on the Avianca bid was so extreme that, if Aerotec priced repairs at cost, it would have to offer repairs for less than $0 to compete with Honeywell’s bundled bid. Aerotec relies on the discount attribution test from Cascade Health, under which “the full amount of the discounts , given by the defendant on the bundle are allocated to the competitive product or products” and the “resulting price of the competitive product or products” is compared to the “defendant’s incremental cost to produce them.” 515 F.3d at 906. But the math doesn’t add up here because the discount attribution test does not apply in circumstances like this where the parties offer the same bundle of goods and services.

As Cascade Health made clear, the discount attribution test only applies where one of the competitors produces fewer goods or services than the other competitor. See id. at 909 (“[T]he primary anti-competitive danger posed by a multi-product bundled discount is that such a discount can exclude a rival who is equally efficient at producing the competitive product simply because the rival does not sell as many products as the bundled discounter.” (emphasis added)). It is the fact that the bundling competitor has exclusive capacity to “bundle” multiple products and absorb the cost of the total discount without experiencing a decline in profits that gives rise to the possibility that it could force out a “hypothetical equally efficient producer of the competitive product.” Id. at 906; see also Areeda & Hovenkamp, supra ¶ 749a.

Here, Aerotec provides airlines with the same bundle that Honeywell provides: parts and services. Honeywell’s ability to offer discounts on its parts when they are bundled with repair services is not categorically unavailable to Aerotec. Aerotec need not sell the parts in its bundled packages for cost if it is able to provide repair services more efficiently than Honeywell. Indeed, Aerotec provided evidence that it can and does outbid Honeywell, despite the fact that it must acquire parts first. Aerotec claims that it “provides high quality cost-effective repairs”: for instance, its “repairs last up to 24% longer than competitors’, and its prices are 20% lower.” Aerotec’s effort to invoke the discount attribution framework yields an absurd result, and one that risks applying our bundled discount jurisprudence to conduct far afield from conduct “resembling] the behavior that the Supreme Court in Brooke Group identified as predatory.” Cascade Health, 515 F.3d at 903.

Without any evidence of below-cost pricing or anticompetitive bundled discounting, Aerotec is left with only an argument that Honeywell engages in unlawful conduct by simultaneously charging a low (but above-cost) price for its repair bundles and raising the wholesale price of replacement parts to make it difficult or impossible for competitor servicers to offer similarly low-priced repair bundles. Although it disclaims making a “price squeeze claim,” this argument is foreclosed by the Supreme Court’s decision in Linkline. In Linkline, the. Supreme Court rejected a “price-squeeze” claim under which independent internet service providers who purchased inputs from AT&T but also competed against it in the retail outlet for certain digital services alleged that AT&T used its market power in the “upstream,” or wholesale, market to “squeeze its [retail] competitors by raising the wholesale price of inputs while cutting its own retail prices.” 555 U.S. at 449, 129 S.Ct. 1109. The Court held that “no such claim may be brought.” Id. at 442, 129 S.Ct. 1109. As we noted in applying Linkline, the case stands for the principle that “there is no independently cognizable harm to competition when the wholesale price and the retail price are independently lawful.” Doe 1 v. Abbott Labs., 571 F.3d 930, 934-35 (9th Cir. 2009). Such is the case here.

III. Robinson-Patman Act — Price Discrimination

Aerotec alleges that Honeywell engages in secondary-line price discrimination under the Robinson-Patman Act, 15 U.S.C. § 13(a), by giving Honeywell affiliates greater discounts off catalog price for parts than it provides to Aerotec and its fellow independent servicers. Secondary-line price discrimination, which means a seller gives one purchaser a more favorable price than another, requires (1) sales in interstate commerce; (2) products of the same grade and quality; (3) discrimination in price between two buyers; and (4) injury. See Volvo Trucks N.A., Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164, 176-77, 126 S.Ct. 860, 163 L.Ed.2d 663 (2006). Aerotec’s claims fail on the third element because the only pricing discrepancy between independent servicers and Honeywell’s affiliates documented in any way in the record is attributable to the benefits received by Honeywell (and its affiliates) through long-term agreements.

We start by noting considerable confusion in the briefing regarding the basis of the price discrimination claim. Aerotec claims that Honeywell charges independent servicers an across-the-board 15 percent premium which it does not impose on affiliates. Not so. All repair servicers, affiliates or not, are charged the 15 percent premium. In fact, the 15 percent premium is simply a lesser discount: airlines receive a 50 percent discount off list price, and all servicers — whether affiliated or not — receive a 42.5 percent discount. The difference between the two discounts is the source of the 15 percent figure. Honeywell’s tiered pricing structure therefore cannot serve as the basis of a price-discrimination claim, at least insofar as Aero-tec alleges that Honeywell affiliates are the favored party.

Aerotec presents another argument for price discrimination between Honeywell affiliates and independent ser-vicers — that the long-term contracts Honeywell negotiates with affiliates contain variable discounts off the price that independent servicers receive on the spot market. This argument fails because the contracts are not comparable. Unlawful secondary-line price discrimination exists only to the extent that the differentially priced product or commodity is sold in a “reasonably comparable” transaction. Tex. Gulf Sulphur Co. v. J.R. Simplot Co., 418 F.2d 793, 807 (9th Cir. 1969). Quite sensibly, courts have held that “a seller is not obligated to charge the same prices for a commodity if its sales contracts with different buyers contain materially different terms,” as they do when a seller and purchaser choose the relative stability of a long-term contract over individual transactions in a “spot market.” Coal. For a Level Playing Field, LLC v. AutoZone, Inc., 737 F.Supp.2d 194, 212 (S.D.N.Y. 2010) (citing Coastal Fuels of P.R., Inc. v. Caribbean Petrol. Corp., 990 F.2d 25, 27 (1st Cir. 1993)).

Aerotec is mistaken in its premise that any transactional differences are not reflective of materially different terms. For example, servicers under an affiliate contract are subject to substantial obligations that are not imposed on independent repair shops like Aerotec. These may include payment of license/royalty fees, maintenance of insurance, exclusive use of Honeywell parts, and compliance with policies, regulations, and procedures promulgated by Honeywell. Aerotec provided no examples of any spot sales between independent servicers and Honeywell that could be fairly compared to the terms and prices that were individually negotiated in agreements between Honeywell and its affiliates. As such, its claims for price discrimination fail.

IV. State Law Claims

Although Aerotec brought several claims under Arizona state law, it acknowledged at oral argument that success on the state antitrust claims rises and falls with the outcome of the federal claims. Likewise, Aerotec has been candid that its tortious interference claims live or die based on its federal antitrust claims. Because we affirm the district court’s award of summary judgment in favor of Honeywell on all of Aerotec’s federal antitrust claims, we likewise affirm the court’s award of summary judgment on the Arizona antitrust claims and dismissal of the tort claims.

Conclusion

There is no real dispute that Aerotec was a competitor to Honeywell, albeit a small one, in the APU repair market. But the antitrust laws require injury to competition, not merely injury to a competitor. Aerotec’s claims fail both as a matter of law and because it failed to marshal evidence of genuine issues of material fact on its tying, exclusive dealing, refusal to deal, bundled discount, and pricing discrimination claims.

AFFIRMED.

      . Aerotec’s theory of tying is quite similar to the approach advanced and rejected in Triad

        Sys. Corp. v. Se. Express Co., 1994 WL 446049 at *14-16 (N.D. Cal. Mar. 18, 1994), affirmed in part and reversed in part on other grounds by 64 F.3d 1330 (9th Cir. 1995).

      . Because exclusive dealing arrangements provide "well-recognized economic benefits ... including the enhancement of interbrand competition,” we apply the rule of reason rather than a per se analysis. Omega Envtl., Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1162 (9th Cir. 1997).

      . Although Honeywell claims that the "in commerce” requirement is not met because a number of the sales are to foreign airlines or service centers, it misapprehends the scope of this clause. For starters, a significant number of Honeywell’s APU sales are to customers for use or resale in the United States, although the parties have made no effort to fine tune the documentation or segregate the sales. Because this claim fails on other grounds, we need not parse the details of whether sales to international airlines could, in some cases, qualify as sales "for use, consumption, or resale” within the United States. 15 U.S.C. § 13(a). Compare Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 582 n.6, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ("The Sherman Act does reach conduct outside our borders, but only when the conduct has an effect on American commerce.”) with Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 878 (9th Cir. 1982) (holding that the "flow of commerce ends when goods reach their intended destination” (internal quotations omitted)).


source: Caselaw Access Project

author: M. SMITH, Circuit Judge:

license: Public Domain

text:
    UNITED STATES POSTAL SERVICE, Plaintiff-Appellee, v. Lorraine ESTER, Defendant, and Bellevue Post Office LLC, Defendant-Appellant.
    No. 14-35100
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted July 6, 2016, Seattle, Washington
    Filed September 9, 2016

      David R. West (argued) and Jeffrey Young, Garvey Schubert Barer, Seattle, Washington, for Defendant-Appellant.
    Teal Luthy Miller (argued) and Christina Fogg, Assistant United States Attorneys; United States Attorney’s Office, Seattle, Washington, for Plaintiff-Ap-pellee.
    Before: A. WALLACE TASHIMA, M. MARGARET McKEOWN, and MILAN D. SMITH, JR., Circuit Judges.
   OPINION

M. SMITH, Circuit Judge:

This case involves a dispute over a lease and purchase option between the Bellevue Post Office LLC (Bellevue) and the United States Postal Service (USPS). In 1963, USPS and Bellevue’s predecessor-in-interest entered into a twenty-year initial lease with five options to renew the lease and an option to purchase the property. When USPS attempted to exercise the purchase option, Bellevue refused to honor it, arguing that the lease had terminated as early as 1983 because USPS had failed to strictly comply with the option requirements for the lease renewals. The district court granted summary judgment for USPS and ordered specific performance of the sale of the property. We affirm.

FACTS AND PRIOR PROCEEDINGS

The lease in this dispute spans a fifty-year time period, during which the parties to the contract changed several times. The contractual relationship began in 1963, when Baugh Construction Company (Baugh) and USPS entered into a lease for a certain parcel of real property in Belle-vue, Washington. Since that time, USPS has continuously operated a branch Post Office location on the property. The 1963 lease featured an initial twenty-year term, to be followed by options for one ten-year and four five-year renewal periods respectively. All told, USPS could lease the property for a total of fifty years, and the lease would expire in May 2013 if USPS exercised all of its options to extend the term of the lease. In order to exercise a renewal option, USPS was required to give the Lessor (which was defined in the 1963 lease as “Baugh Construction Company, ... its successors, and assigns”) written notice of its intent to exercise the, next option at least 90 days before the end of the then lease term.

The lease also granted USPS an option to purchase the property at the end of the initial twenty-year lease term, at the end of each option term, and at the end of the full fifty-year term, assuming all the previous lease options had previously been exercised. At each potential purchase point, the purchase price was lower than the last one. At the end of the full fifty-year term, assuming all the options to extend the term of the lease had previously been exercised, USPS had the option to purchase the property for $300,000. Bellevue estimates the current value of the property to be in excess of $20,000,000.

The first change in the property’s ownership occurred in 1964. In January 1964, Baugh transferred the property to Edward Ester, Lorraine Ester, Josef Diamond, and Violett Diamond, who were each granted an undivided 25% interest in the property. In May of that year, despite Baugh’s previous transfer of the property to the Esters and the Diamonds, Baugh purported to assign to John Hancock Life Insurance Company all rights to receive rent resulting from the lease. John Hancock thereupon executed a “Power of Attorney to Receive Rent,” in which it purported to “appoint an attorney in fact to receive rents for [the] premises.” Specifically, it appointed Edward Ester and Josef Diamond as its “true and lawful attorneys” to “ask, demand, collect, and receive from the Postmaster of Bellevue, Washington, all rents due for the period beginning the first day of June, 1964.” Thus, as of June 1, 1964, USPS paid rent to Edward Ester and Josef Diamond as “attorneyfs] in fact” for John Hancock.

In 1968, the Esters and the Diamonds, as the owners of the property, amended the lease with USPS. The amended lease defined the “Lessor” as “Edward R.-Ester and Lorraine M. Ester, his wife; and Josef Diamond and Violett Diamond, his wife.” The amendment lowered the annual rental payments in exchange for a promise from USPS to assume the obligation to pay property taxes. The amended lease stated that “[i]n all other respects, the said lease shall remain the same and is hereby confirmed.”

In May 1978, Josef and Violett Diamond transferred their interests in the property to the trustees of four trusts they had established for the benefit of their grandchildren. After this transfer, the property was owned by Edward and Lorraine Ester, who each owned an undivided 25% interest in the property, and the four trusts for the Diamond grandchildren, each of which owned an undivided 12.5% interest in the property.

When the initial twenty-year lease term was to expire in May 1983, USPS had its first opportunity to extend the term of the lease. On February 4, 1982, USPS mailed a form renewal to “Edward R. Ester and Josef Diamond Attorneys-in-Fact under Lease.” According to the 1964 Power of Attorney document, these individuals were authorized to receive rents from USPS. In the “remarks” section of the option exercise form, USPS requested that the recipient “[pjlease notify this office of any change in your address or the ownership of your property.” The option notice was delivered (although it was physically received by someone with an illegible signature), and all parties proceeded for the next ten years as if the exercise of the option to extend the term of the lease had been effective. USPS paid rent; the appropriate owners apparently received that rent because no one complained that he, she, or it had failed to receiye it; and the owners made no attempt to evict USPS or contest the renewed lease. Moreover, none of the owners notified USPS of the change in ownership to the Diamond family trusts, or instructed USPS to direct correspondence to anyone other than Edward Ester and Josef Diamond.

The 1983 notice to exercise its option to extend the term of the lease was signed on behalf of USPS by Gary Duncan, identified as the “Contracting Officer!,] Seattle Field Office.” In the current litigation, Duncan submitted a declaration stating that he was the manager of that field office at the time he signed the notice. He could not recall the specific parameters of his contracting authority when he signed the option exercise notice, but testified that as part of his job he routinely confirmed that he was acting within his authority before signing contracts. He had no reason to believe that he did not follow that practice with regard to the 1983 option exercise notice, and could not recall having ever exceeded his delegated authority while at that post.

In 1989, the trustees of each of the four Diamond family trusts transferred the trust’s interest in the property to the grandchild who was the beneficiary of that trust, such that each grandchild became the owner of an undivided 12.5% interest in the property, free of trust. Effective upon these transfers, the property was owned by Edward and Lorraine Ester, each as to an undivided 25% interest, and the four Diamond grandchildren, each as to an undivided 12.5% interest. None of the owners (or Edward Ester and Josef Diamond as “attorneys-in-fact”) notified USPS about any of the transfers.

In October 1992, a few months before the expiration of the ten-year option term, USPS sent another notice evincing its intention to exercise its option to extend the term of the lease for another five-year term, as permitted by the 1963 lease. This option exercise notice was addressed to “Edward R & Lorraine M Ester,” and the four Diamond grandchildren — “Steven Foreman, Michelle Foreman, Cynthia L Diamond & Jonathan Diamond.” This correctly named all of the owners at the time of the option exercise notice. The record indicates that USPS sent a single copy of this option exercise notice to Edward Ester’s address, and that he signed the delivery receipt.

This time, the option exercise notice was signed by USPS employee John A. Logan, whose position was a “Principal Real Estate Specialist” in the Seattle Field Office. Logan submitted a declaration stating that during his tenure, he “held a Contracting Officer’s warrant with monetary authority” to execute contracts on behalf of the government, and that he “made it a point to be aware of’ the extent of that authority. He did not recall whether he independently confirmed his authority to sign this particular option exercise notice, but it was his practice to do so. USPS could not produce Logan’s contracting warrant under which he operated in 1992, but did provide his contracting warrant from 2002, when he worked in the Dallas office. USPS’s Rule 30(b)(6) witness testified that the 2002 warrant, which gave Logan Level 1 contracting authority, was a reduction from his authority in previous positions. This indicated (albeit circumstantially) that Logan had a higher level of authority in 1992, and would have had authority to sign the option exercise notice.

As with the previous option exercise, all parties involved proceeded as if the option exercise had been effective. USPS remained in the property and paid rent and property taxes on the property for the next five years; the owners received the rent, and took no action seeking to evict USPS or contest the validity of the lease option exercise.

In January 1993, the four Diamond grandchildren transferred their interests in the property to Edward and Lorraine Ester, whereupon the Esters each became the owner of an undivided 50% interest in the property. There is no evidence in the record that the Esters or any other person informed USPS of the transfers by the Diamond grandchildren.

In November 1993, Edward Ester died, leaving his undivided 50% interest to his estate. Lorraine Ester was appointed as the personal representative of that estate. At the end of 1993, therefore, Lorraine Ester owned an undivided 50% interest in the property in her individual capacity, and controlled the other undivided 50% interest in the property as the representative of Edward Ester’s estate.

The then five-year lease term was set to expire in May 1998. In June 1997, USPS sent a notice to exercise its option to extend the term of the lease for another five years. The notice was addressed to “Est of Edward R Ester and Lorraine M Ester, Steven Foreman, Michelle Foreman, Cynthia L Diamond, Jonathan Diamond.” It was therefore addressed to both the current owners of the property (Edward Ester’s estate and Lorraine Ester in her personal capacity), and also included the names of the Diamond grandchildren, who were no longer owners. Like it did with the previous option exercises, USPS sent a single copy of the renewal form to Lorraine Ester’s address, where she signed the delivery receipt. As before, all parties proceeded as if the relevant lease option had been validly exercised, thereby extending the term pf the lease for another five-year term.

In 1999, Lorraine Ester, as the personal representative of Edward Ester’s estate, transferred the estate’s undivided 50% interest in the property into a trust for the benefit of the Esters’ descendants. At this point, Lorraine Ester owned an undivided 50% interest in the property individually, and controlled the other undivided 50% interest in the property as the trustee of the Ester Trust.

In April 2001, USPS sent another notice to exercise its option to extend the term of the lease for another five years, beginning in 2003. The notice was addressed to “Lorraine Ester, Pers. Rep. Estate of Edward Ester, S. & M. Foreman / C. & J. Diamond.” It was once again mailed to Lorraine Ester’s address. Glenda Ester, Lorraine Ester’s daughter-in-law, signed the delivery receipt.

In September 2005, USPS sent a notice to exercise its option to extend the term of the lease for a final five-year term, beginning in May 2008. Just as with the previous notice in 2001, it was addressed to “Lorraine Ester, Pers. Rep. Estate of Edward Ester, S. & M. Foreman / C. & J. Diamond.” The delivery receipt signature is illegible.

Once the final lease term extension option was exercised, thereby extending the lease term to May 2013, the 1963 lease, as amended, contained no more options to extend the term of the lease. Under the terms of that contract, however, USPS was entitled to exercise an option to purchase the property. The 1963 lease stated that the purchase option could be exercised by giving the “Lessor” notice of its intention to purchase at least one year in advance of the end of the lease term. In September 2008, several years before the 2012 option notice cqt-off date, USPS sent a letter to “Lorraine Ester, Trustee,” which purported to “constitute the Postal Service’s written notice of exercising its option to purchase the fee simple title to the leased premises, including the underlying land for $300,000.” The letter was received by Glenda Ester, who wrote “L.E.” in the “printed name” field of the delivery receipt. Bellevue does not claim that the letter failed to reach Lorraine Ester.

In April 2012, just before the one-year notice deadline, USPS sent another letter, addressed to “Ms. Lorraine EsterTrus-tee,” reminding her that it intended to exercise the purchase option. Glenda Ester again signed the receipt. The next month, in May 2012, Lorraine Ester transferred both her individual undivided 50% interest in the property and the undivided 50% interest of the Ester Trust to Bellevue Post Office, LLC.

In October 2012, more than four years after USPS’s original notice to exercise its purchase option, counsel for Bellevue sent a letter to USPS stating that based on a review of the “lease history,” he did “not agree that the Postal Service has any right to purchase the Property.” Bellevue thus refused to honor the purchase option.

USPS sued for specific performance in the District Court for the Western District of Washington. Bellevue counterclaimed for holdover rent. After both sides undertook discovery, the parties filed cross-motions for summary judgment. Bellevue argued that the lease had terminated (and with it, all future options) as early as 1983, due to incomplete or inaccurate information in the name-and-address blocks of the notice forms and USPS’s failure to send separate notices to each Lessor. It also argued that USPS had not adequately proven whether Duncan in 1983 and Logan in 1993 had sufficient contracting authority to exercise options to extend the term of the lease.

The district court granted summary judgment for USPS and ordered specific performance of the sale of the property. It ruled that “there is no material dispute that the postal service complied with its rent and other lease obligations,” and that Bellevue’s attempts to declare the contract void were “legally and factually incorrect.” We affirm.

ANALYSIS

I. Applicable Law

“[0]bligations to and rights of the United States under its contracts are governed exclusively by federal law.” Boyle v. United Techs. Corp., 487 U.S. 500, 504, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988). In the absence of a governing federal statute, federal law is “of a content prescribed ... by the courts — so-called ‘federal common law.’ ” Id. This does not mean that we ignore Washington state contract law; to the contrary. “[T]he Supreme Court has encouraged the adoption of state law as the federal law applicable within [the relevant] state.” Dupnik v. United States, 848 F.2d 1476, 1481 (9th Cir. 1988). State law should be displaced only when “significant conflict exists between an identifiable federal policy or interest and the operation of state law, or the application of state law would frustrate specific objectives of federal legislation.” Boyle, 487 U.S. at 507, 108 S.Ct. 2510 (citations, quotation marks, and alterations omitted).

Bellevue asks us to apply Washington law, which “requires a higher showing to award the remedy of specific performance of a breached land contract, as opposed to the remedy of an award of money damages for the breach.” Keystone Land & Dev. Co. v. Xerox Corp., 353 F.3d 1070, 1076 n.6 (9th Cir. 2003). A plaintiff must provide “clear and unequivocal evidence that leaves no doubt as to the terms, character, and existence of the contract.” Kruse v. Hemp, 121 Wash.2d 715, 853 P.2d 1373, 1377 (1993) (en banc) (quotation marks omitted). We agree that Washington law should be used as the applicable federal common law in this case. Lease contracts for the postal service do not inherently implicate “clear and substantial interests of the National Government, which cannot be served consistently with respect for ... state interests.” Dupnik, 848 F.2d at 1481 (quoting United States v. Yazell, 382 U.S. 341, 352, 86 S.Ct. 500, 15 L.Ed.2d 404 (1966)). No specific federal interests (other than the generalized interest in USPS shouldering a lighter burden in this particular litigation) will “suffer major damage if the state law is applied.” See id. Thus, we apply Washington’s heightened evidentiary standard for specific performance. We hold, nevertheless, that USPS has shown clearly and unequivocally that it has a contractual right to purchase the property.

II. Options

‘Well-known principles of contract law guide us in the proper construction of federal contracts.” Wapato Heritage, LLC v. United States, 637 F.3d 1033, 1039 (9th Cir. 2011). “A written contract must be read as a whole and every part interpreted with reference to the whole, with preference given to reasonable interpretations.” Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d 1206, 1210 (9th Cir. 1999).

Under general principles of contract law, an optionee to an option contract can only exercise the option “strictly in accordance with its terms.” 15 Williston on Contracts § 46:12 (4th ed. 2010); see New Eng. Tank Indus, of N.H., Inc. v. United States, 861 F.2d 685, 687 (Fed. Cir. 1988) (“It is well settled that to properly exercise [an] option, the government’s acceptance of the offer had to be unconditional and in exact accord with the terms of the contract being renewed.”); Lockheed Martin IR Imaging Sys., Inc. v. West, 108 F.3d 319, 323 (Fed Cir; 1997) (similar) (citing Corbin on Contracts, § 284 (1963)).

Thus, Bellevue is correct about one thing: USPS must be held to the exact terms of the 1963 lease, as aménded. However, we note that this standard of exactitude is calibrated to what the contract actually requires, not an indefinite standard of scrupulous paperwork or best practices. See Lockheed, 108 F.3d at 323 (“[A]n option, like any contract, is circumscribed by its terms.”).

The terms of the 1963 lease require USPS’s notice to be “given in writing to the Lessor.” Bellevue contends that the 1983 lease renewal was ineffective because it was addressed to “Edward R. Ester and Josef Diamond Attorneys-in-Fact under Lease,” when the actual Lessors at the time were Edward Ester, Lorraine Ester, and the four Diamond trusts. It contends that because the delivery receipt is illegible, USPS is unable to “prove actual receipt ... by either of its two addressees, Edward Ester or Josef Diamond.” It further contends that the 1993 lease renewal was ineffective because although the notice named all of the Lessors, USPS only sent a single notice rather than separate copies to each owner, and the delivery receipt was signed only by Edward Ester. Similarly, the 1998 renewal notice included the names of the Diamond grandchildren, even though they had transferred their interests in the property a few years earlier. The 2001 renewal notice, addressed to “Lorraine Ester, Pers. Rep. Estate of Edward Ester” and the four Diamond grandchildren also does not specifically note that Lorraine Ester was a Lessor in her individual capacity. Finally, in 2005, USPS’s notice was addressed to “Lorraine Ester, Pers. Rep. Estate of Edward Ester” and the four Diamond grandchildren, instead of Lorraine Ester in her personal capacity and Lorraine Ester as the trustee of the Ester Trust.

According to Bellevue, each and every one of the “attempted” exercises of an option to extend the term of the lease was fatal to the continuing viability of the lease, because notice was not “given in writing to the Lessor.” We disagree. The option terms do not require that USPS prepare multiple copies of the written notice to be specifically delivered to each and every Lessor. The lease does not specify whether the notice of exercise must be delivered by hand service or certified mail; whether it can be delivered to an agent, attorney, or employee; whether a Lessor must personally sign the' delivery receipt; or that the name-and-address box on the form notice must accurately state the names and legal role of each and every Lessor. It only says that written notice must be “given in writing to the Lessor.” A reasonable interpretation of the word “given” does not imply the degree of punctiliousness Bellevue insists is required. See Give, WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY (1961) (third definition, “to put into the possession of another for his use”); give, The American Heritage Dictionary (4th ed. 2000) (fourth definition, “to convey by a physical action”). For each lease renewal, USPS “gave” written notice via certified mail of its intention to exercise its option to at least one person who was a Lessor at the time of the renewal, and Bellevue has provided no evidence indicating that the notice was not delivered to, or put into the possession of, all Lessors accordingly.

Furthermore, the parties’ actions over the decades unambiguously demonstrate that the notice was given to the Lessors, because everyone involved continued to perform the lease as agreed upon for thirty years after the first alleged defect. USPS continued to pay rent, which Belle-vue and its predecessors continued to accept. USPS continued to pay property taxes on Bellevue’s behalf (which is consistent with the lease as amended in 1968, and not a tenancy at sufferance). In 1987, the owners refused USPS’s request that they paint the building on the property, and an attorney acting on behalf of Edward Ester and Josef Diamond represented that USPS’s remedies in the matter were “limited to terminating the lease.” The owners further affirmed the existence of the lease when they twice offered USPS $1,000,000 to strike the purchase option from the lease. Lorraine Ester’s son John described the purchase offer in a press interview with the King County Journal. All of this is strong circumstantial evidence that at each juncture, USPS’s written notice was effectively “given” to the “Lessors.” See Dynamics Corp. of Am. v. United States, 389 F.2d 424, 430 (Ct. Cl. 1968) (“[T]he practical interpretation of a contract, as shown by the conduct of the parties, is of great weight in interpreting the contract.”).

Thus, there is no material dispute that all Lessors were “given” written notice, as evidenced by their continued recognition of the lease for nearly thirty years after the first alleged termination. Even under Washington law’s high standard for awarding specific performance, USPS successfully provided “clear and unequivocal evidence” that it exercised its options to extend the term of the lease in strict compliance with the terms of the lease, and that the lease therefore continued to exist through the time it also properly exercised its purchase option. See Kruse, 853 P.2d at 1377.

III. Contracting Authority

The federal government cannot enter into valid and binding contracts except through the actions of “a government representative having actual authority to bind the United States in contract.” Keehn v. United States, 110 Fed.Cl. 306, 326-27 (2013) (quoting Anderson v. United States, 344 F.3d 1343, 1353 (Fed. Cir. 2003)). Bellevue argues that the 1963 lease terminated in 1983 or 1993, because USPS did not provide “clear and convincing evidence” that Duncan and Logan had adequate contracting authority to validly exercise the various options in the lease.

USPS could not produce a contracting warrant for either Duncan or Logan during the' relevant time periods, which is unsurprising for documents of that age. However, none of the law cited by Bellevue indicates that the government must produce the actual warrant to show that an officer had sufficient authority to contract. USPS produced ample evidence that both Duncan and Logan were authorized to renew the lease. Each submitted a declaration stating that he had contracting authority, that he was in the habit of confirming the limits of his authority before signing contracts, and that he had no reason to believe he would have acted in excess of his authority. Arthur Strange provided further testimony that, based on Logan’s contracting warrant from 2002, Logan would have had even higher authority while he worked in the Seattle Field office in the early nineties. USPS bore its initial burden on summary judgment to identify record evidence that “demón-stratela] the absence of a genuine issue of material fact” on this issue. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed R. Civ. P. 56(e)). Once USPS made this showing, Bellevue was required to “set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). This required Belle-vue to “do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Bellevue has not met that burden. It simply speculates that Duncan or Logan might not have had the requisite authority, and notes that unauthorized transactions by federal employees do occur. That is not enough to defeat summary judgment where USPS has provided persuasive (albeit not conclusive) evidence that each had appropriate contracting authority.

We agree with the district court that the 1963 lease remained valid. The owners continuously treated the lease, the various lease options, and the purchase option as valid and enforceable for fifty years, and reaped the benefit of their bargain. Now that the term of the lease has ended, and they are faced with losing a valuable piece of property at a price well below its current value, they wish to avoid its burdens.' This they cannot do.

CONCLUSION

The district court’s order granting summary judgment to USPS and compelling specific performance for the sale of the property is AFFIRMED.

      . The 1997 notice was signed by Arthur Strange. Bellevue does not dispute that Strange had sufficient contracting authority to execute the option exercise notice on behalf of the government.

      . The 2001 notice was signed by Marcus Nielsen. USPS has produced the contracting warrant that establishes he had the contracting authority to exercise the option to extend the term of the lease.

      . The 2005 notice was signed by Garry Mat-tox, who undisputedly had contracting authority to sign the renewal.

      . USPS suggests that the strict compliance requirement only applies to the option to purchase the property, and is irrelevant to the "earlier duties under the contract, including its lease-renewal notices.” This is not the case; the requirement applies to contractual options generally, including options to renew a lease. See New Eng. Tanlcs, 861 F.2d at 687; Wapato Heritage, 637 F.3d at 1033.

      . "Lessor” is defined as "Baugh Construction Company, ... its successors, and assigns.” Bellevue argued to the district court below, and implies in its appellate briefing that perhaps the proper meaning of the "Lessor”, for option purposes is as it was defined in the 1968 amendment: "Edward R. Ester and Lorraine Ester, his wife; and Josef Diamond and Violett Diamond, his wife.” According to this ' interpretation, USPS would have had to give notice to these four individuals and not their successors and assigns, apparently even after they transferred their interests in the property or passed away. This is not a reasonable interpretation of the contract language. As an initial matter, it conflicts with the clear language of the 1968 amendment, in which the parties made one specific change with regard to the payment of rent and property taxes and agreed that "in all other respects, the [1963] lease shall remain the same and is hereby confirmed.” Moreover, such a result would bé, as the district court noted, an "absurdity.”

      .Our opinion in Wapato Heritage does not create such a requirement. In Wapato, the Department of the Interior held land in trust on behalf of an Indian tribe, and executed a lease on behalf of the trust beneficiaries. 637 F.3d at 1035. The lease stated that the lessee had an option to renew the lease "provided that notice of the exercise of such option shall be given by the Lessee to the Lessor and the Secretary in writing.” Id. (emphasis added). The lessee only provided notice to the Secretary, and not the Lessor. We held that the contract unambiguously required the lessee to give written notice to both the Lessor and the Secretary (and that the Secretary was, by implication, not the Lessor). Id. at 1040.-It failed to do so, and the option was therefore invalid. Id. The contract here, unlike in Wapa-to, did not by its terms require separate notice to be given to more than one party.

      . Bellevue principally relies on U.S. Postal Service v. Sunshine Development Inc., 674 F.Supp.2d 619 (M.D. Pa. 2009). In that case ■ (which, of course, is not binding on this court), a postal service employee who undis-putedly lacked authority signed a lease renewal. Id. at 623. After the time for exercising the lease option had lapsed, an officer with proper authority attempted to retroactively ratify the unauthorized transaction. Id. at 627. The court ruled that the lease was not validly renewed. Id. at 628. Sunshine does not stand for the proposition that a government agency must produce an actual contract warrant in order to prove that an employee had the requisite authority to enter into a contract.