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Third Circuit Remands Class Certification Ruling in Blood Reagents Price-Fixing Case

by | Apr 15, 2015 | ,

On Wednesday, April 8, 2015, the Third Circuit Court of Appeals vacated a district court’s order certifying a class of direct purchasers of blood reagents in a price-fixing suit against Ortho-Clinical Diagnostics Inc.  In re Blood Reagents, case number 12-4067.  Plaintiffs allege that Ortho-Clinical Diagnostic Inc. (Ortho) and a producer of blood reagents, violated Section 1 of the Sherman Act by conspiring with the only other U.S. producer of reagents, Immucor Inc., to raise prices of blood reagents on numerous occasions throughout the 2000s.  Immucor settled with plaintiffs in 2012.  In September 2011, the plaintiffs moved to certify a class of direct purchasers, and the district court held a hearing in July 2012.  To support their arguments for class certification, the plaintiffs relied on expert testimony to create their damages model and antitrust impact analysis.  Although Ortho challenged the reliability of the expert testimony, the district court certified the class and held that the testimony “could evolve to become admissible” at trial.  In re Blood Agents, 283 F.R.D. 222, 243-245 (E.D. Pa. 2012).  Ortho’s arguments went to the merits and were not persuasive at the class certification stage.  Id. at 240-41.  In making this ruling, the court relied on the Third Circuit decision of Behrand v. Comcast Corp., 655 F.3d 182 (3d. Cir. 2011).  Ortho appealed.

The Third Circuit vacated this class certification decision and remanded the case back to the lower court.  Since the district court’s ruling, the Supreme Court overturned Behrand and the “could evolve” standard relied on by the lower court in this case.  Comcast v. Behrand, 133 S.Ct. 1426 (2013).  Instead, the Supreme Court emphasized that the class certification analysis must be rigorous.  Id. at 1432.  Therefore, the Third Circuit determined that this “rigorous analysis” applied to expert testimony critical to proving class certification.  It held that if challenged expert testimony is critical to class certification, then plaintiffs cannot rely on this challenged testimony to show conformity with the class certification requirements unless they also establish, and the trial court finds, that the testimony satisfies the standard for expert testimony set forth in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).  According to the Third Circuit’s order, on remand, the district court must first determine which, if any, of Ortho’s attacks on the expert’s reliability challenge the aspects of the expert testimony offered by the plaintiffs to satisfy class certification requirements.  Then, if necessary, the lower court must perform a Daubert analysis on this testimony before deciding whether to certify the class.



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Supreme Court Asked to Clarify the Reach of U.S. Antitrust Laws to Foreign Conduct

by and | Mar 24, 2015 | , ,

On March 16, 2015, AU Optronics Corporation America Inc. (AU Optronics) and Motorola Mobility LLC separately asked the U.S. Supreme Court to clarify the Foreign Trade Antitrust Improvements Act (FTAIA) and the extent to which its language allows foreign conduct to be brought within the scope of the Sherman Act.  The requests for review follow from potentially conflicting holdings from the Seventh and Ninth Circuits in cases that stem from distinct interpretations of the same provisions in the FTAIA and involve the very same conduct – AU Optronics’ and its co-conspirators’ agreement overseas to fix the prices of liquid crystal display (LCD) panels.  The cases have different procedural foundations in that the Ninth Circuit case is a criminal suit brought by the Department of Justice (DOJ), while the Seventh Circuit case is a civil matter in which private parties are seeking damages.

In Hsiung,[i] AU Optronics appeals the Ninth Circuit’s holding that the Sherman Act via the FTAIA can support criminal charges against foreign cartel conduct.  In that case, the court had affirmed AU Optronics’ conviction in July 2014 and rendered an amended opinion on January 30, 2015.  Meanwhile, Motorola Mobility appeals the Seventh Circuit’s finding in Motorola Mobility[ii] that a civil price-fixing claim against the same cartel could not be supported under the same provisions of the FTAIA.  The Seventh Circuit decided the case on November 26, 2014 (after vacating a previous opinion from March 2014) and later amended its opinion on January 12, 2015.  The companies believe that these interpretations of the FTAIA are conflicting and, therefore, ripe for Supreme Court review.

The FTAIA was adopted to clarify the enforcement scope of U.S. federal antitrust laws as applied to anticompetitive conduct that occurs abroad.  Since its enactment, however, lower courts have interpreted the FTAIA differently, which has led to conflicting decisions and legal uncertainty.  Under the FTAIA, all foreign conduct is placed outside the scope of the Sherman Act, unless (1) the alleged conduct involves import commerce (import commerce exemption)  or (2) it has a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce and the criminal charge or civil claim “arises from” that effect (domestic effects exception).

The circuit courts interpreted certain language in these provisions differently, specifically “import commerce” and “direct effect,” and when such effect “gives rise to a Sherman Act claim.”  In Hsiung, the Ninth Circuit considered import commerce to be any conduct affecting an import market, which means that it need not be shown that a foreign defendant directly imported goods himself into the U.S.  As to the domestic effects exception, the Ninth Circuit further explained that foreign conduct has a direct effect on U.S. commerce where the conduct “follows as an immediate consequence of the defendant[s’] activity.”  According to the court, AU Optronics’ conduct had a direct effect on U.S. commerce that gave rise to a Sherman Act claim because the price-fixed goods manufactured abroad were a significant component of [...]

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Seventh Circuit Denies Rehearing in LCD Price-Fixing Suit by Motorola

by | Jan 20, 2015 | ,

On January 12, the Seventh Circuit Court of Appeals refused Motorola Mobility LLC’s petition for a rehearing en banc of its price-fixing claims against foreign manufacturers of liquid crystal display (LCD) panels. Motorola Mobility LLC v. AU Optronics Corp., et al., case number 14-8003. Motorola alleged that these foreign manufacturers violated Section 1 of the Sherman Act by conspiring with each other to set the price for LCD panels. Only approximately 1 percent of the panels sold to Motorola by defendants were purchased by and delivered to Motorola in the United States to be used in the assembly of Motorola cellphones. Motorola’s foreign subsidiaries purchased the rest – with 57 percent of all panels bought by a Motorola entity incorporated into cellphones sold abroad, and the remaining 42 percent assembled by the Motorola foreign subsidiary into cellphones and then sold to and delivered to Motorola for resale in the United States. The Northern District of Illinois granted partial summary judgment to the defendants, ruling that Motorola’s claim as to the 99 percent of panels purchased by foreign subsidiaries was barred by the Foreign Trade Antitrust Improvement Act (FTAIA), 15 U.S.C. §§ 6a, which has been interpreted to limit the extraterritorial reach of U.S. antitrust law. The district judge certified an order for immediate appeal.

In November, the Seventh Circuit affirmed the district court’s partial grant of summary judgment. In his amended opinion filed January 12, Judge Posner determined that the effect of the alleged foreign cartel did not give rise to a federal antitrust claim because the plaintiff could only be injured indirectly. Under federal antitrust jurisprudence, claimants that purchase indirectly and/or suffer derivative harm lack antitrust standing to bring suit in the United States. Posner explained that plaintiff’s foreign subsidiaries were the direct purchasers injured by the alleged LCD panel conspiracy. In response to Motorola’s argument that it and its foreign subsidiaries should be treated as a single entity, Posner asserted that the corporate formalities of the U.S. parent and its foreign subsidiaries should be respected. Motorola decided to have its subsidiaries incorporated in and pay taxes to these foreign jurisdictions, and therefore, the subsidiaries must seek relief in the countries in which they or the alleged conspirators are incorporated. A parent does not have a right to sue for damages on behalf of its foreign subsidiaries in the United States. Importantly, although Posner’s opinion could protect an alleged foreign conspirator from facing treble damages in U.S. civil court, his opinion also made clear that if the alleged price-fixing has a direct, substantial and reasonably foreseeable effect on U.S. commerce, then the FTAIA does not block the U.S. Department of Justice from seeking injunctive or criminal relief.

In December, Motorola petitioned the Seventh Circuit for a rehearing en banc. It argued that defendants purposefully negotiated directly with Motorola in the United States and that Motorola determined the prices and quantities of panels purchased from defendants by its U.S. subsidiaries. The defendants purposefully engaged in business with the plaintiff, and [...]

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The EU Directive on Antitrust Damages Actions

by , and | Jan 19, 2015 | , ,

The EU Directive on Antitrust Damages Actions requires the 28 EU Member States to adapt their laws and procedures to comply with the Directive by 27 December 2016 at the latest. It establishes a basic right to claim damages for loss caused by antitrust infringements, and establishes a minimum framework of rules concerning proof of the infringement, the measure of damages, the right to obtain document disclosure in support of a claim, the so-called passing-on defence, limitation periods, joint and several liability, and contributions among joint infringers. Read the full Special Report here.


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Foreign Airlines Move to Dismiss Rate-Fixing Litigation

by | Jan 16, 2015 | ,

Last Friday, foreign cargo carriers filed motions to dismiss an air freight price-fixing suit brought by Schenker AG, the logistics division of Germany’s national railway company, Deutsche Bahn, in the Eastern District of New York.  Schenker AG v. Societe Air France, et al., case number 1:14-cv-04711.  In its complaint filed last August, Schenker alleged that seven foreign airlines conspired to fix surcharge rates for various air cargo routes to, from and within the United States.  This suit is just the latest in a series of investigations and claims concerning anticompetitive behavior in the air cargo industry, which began in 2006 when the U.S. Department of Justice (DOJ), in conjunction with the European Commission and South Korea’s Fair Trade Commission, organized raids of the offices of numerous air carriers around the world.  Airlines have paid billions of dollars in fines to competition agencies throughout the world and nearly a billion more dollars in settlements to direct purchaser plaintiffs in a multi-district litigation in U.S. federal court.

Defendants All Nippon Airways Co., Ltd. and Cargolux Airlines International S.A. moved the district court to dismiss the action on the grounds of forum non conveniens under the Second Circuit’s precedent in Capital Currency Exch., N.V. v. Nat’l Westminster Bank PLC, 155 F.3d 603, 609 (2d Cir. 1998).  According to these defendants, Schenker’s choice of forum should be afforded little deference because Schenker is a foreign corporation that was forum shopping, choosing the United States for its treble damages.  Instead, defendants argued that Germany was an adequate alternative forum, especially given that Schenker is owned by the German government and that many of the witnesses and documents are located in Europe.  In addition, defendant Qantas filed a separate motion to dismiss on the basis that Schenker filed its claims after the Clayton Act’s four year statute of limitations had run.  Qantas argued that if Schenker had performed the requisite due diligence, then it would have been aware of its claims on February 15, 2006, the day after which it was reported that the DOJ organized the raids of the airlines.  Even considering that the statute of limitations was tolled until May 2011 when Schenker opted out of the middle-district class action against the airlines, Qantas contended that Schenker had to file its complaint before June 1, 2014, which the plaintiff failed to do.



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Summary Judgment Affirmed by Sixth Circuit in Broker Commission Price-Fixing Litigation

by | Nov 21, 2014 |

On November 13, 2014, the Sixth Circuit Court of Appeals upheld the dismissal of price-fixing claims against two home brokerage service firms in Kentucky, McMahon Co. and HomeService of America, Inc.  Hyland, et al. v. HomeServices of America Inc., et al., case number 12-5947.  The plaintiffs, a class of Kentucky brokers, alleged that the defendants conspired to raise the price of broker commission fees in violation of Section 1 of the Sherman Act.  The plaintiffs supported their claims by alleging that public comments made by McMahon Co. regarding not cutting fees in the face of competition from internet brokers showed a unity of purpose amongst the defendants.  They also pointed to the fact that defendant companies typically set their listing commission fee at six percent.  The defendants, on the other hand, argued that the fee was not set through agreement between brokers and that commission fees could be negotiated for specific transactions.  The Western District of Kentucky granted summary judgment for the defendants, and the plaintiffs appealed.

The appellate court affirmed, determining that there was no direct evidence of an agreement and insufficient circumstantial evidence for the plaintiffs’ claims to defeat summary judgment.  Citing the Supreme Court’s precedent in Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) and the Sixth Circuit decision in Re/Max, Int’l, Inc. v. Realty One, Inc., 173 F.3d 995 (6th Cir. 1999), the Sixth Circuit explained that circumstantial evidence cannot support an inference of a conspiracy when the evidence is equally consistent with independent conduct as conspiratorial behavior.  To survive summary judgment, circumstantial evidence must tend to exclude the possibility of independent conduct.  Upon review of the record, the panel agreed with the district court that evidence, such as the fact that the defendants would deviate from the six percent commission rates through negotiations and the fact that there appeared to be no impact on the defendants’ pricing as a result of comments made at public hearings, did not exclude the possibility of independent conduct.  Because the plaintiffs’ circumstantial evidence of conspiracy was equally consistent with permissible behavior on the part of the defendants, the plaintiffs failed to support an inference of conspiracy.



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NCAA Appeals Ruling on Compensation for Student-Athletes

by | Nov 19, 2014 |

On November 14, 2014, the National Collegiate Athletic Association (NCAA) submitted its initial brief to the Ninth Circuit Court of Appeals challenging the Northern District of California’s August decision that the NCAA’s rules banning student-athletes for being compensated for the use of their names, images and likenesses violated antitrust laws.  O’Bannon v. National Collegiate Athletic Association, et al., case number 14-16601.  The NCAA argued that these rules do not violate the Sherman Act because of the Supreme Court’s decision in NCAA v. Board of Regents of the University of Oklahoma, 468 U.S. 85 (1984).  In that case, the Supreme Court determined that rules aimed at protecting the amateurism of college athletes, such as bans on paying students to play, were not prohibited by the antitrust laws.  The NCAA contended that rules banning compensation for student-athletes’ likenesses are the same as the prohibitions on being paid to play, and therefore, should be allowed under the Supreme Court’s amateurism precedent.  In addition, the NCAA argued that plaintiffs lack antitrust standing because publicity rights in television broadcasts of games are not recognized by states.  Further, the association claimed that its rules do not involve a commercial activity, so the Sherman Act should not apply.

This case originated in 2009 when two former NCAA student-athletes filed class action suits against the NCAA, Electronic Arts, Inc. and Collegiate Licensing Co., alleging that these organizations profited from student-athlete likenesses on television, in video games and on merchandise while prohibiting the athletes from receiving payment.  After a three-week bench trial in the summer, District Judge Wilken entered an injunction against the NCAA after determining that without the NCAA rules, Division I basketball and Football Bowl Subdivision schools would compete for recruits’ athletic talents and licensing rights as well as compete to offer athletic and educational opportunities for students.  The NCAA previously settled with plaintiffs for $20 million over the use of students’ likenesses in video games, and Electronic Arts and Collegiate Licensing also reached a settlement with both plaintiff groups for $40 million.



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Mushroom Growers Denied Capper-Volstead Antitrust Immunity

by | Oct 22, 2014 | ,

On October 14, 2014, the Eastern District of Pennsylvania denied a motion for reconsideration brought by members and affiliates of the former Eastern Mushroom Marketing Cooperative (EMMC).  In re Mushroom Direct Purchaser Antitrust Litig., No. 06-0620 (E.D. Pa. Oct. 14, 2014).  In 2009, the court denied defendants’ motion for partial summary judgment, which argued that defendants were immune from antitrust liability as members of an agricultural cooperative under the Capper-Volstead Act, 7 U.S.C. § 291.  The court gave two reasons for denying the motion: (1) the EMMC allegedly conspired with entities that were not engaged in agricultural production and (2) non-grower M. Cutone’s membership in the cooperative destroyed Capper-Volstead immunity.  Defendants moved for reconsideration in light of intervening authority from the Supreme Court in American Needle Inc. v. Nat’l Football League, 560 U.S. 783 (2010), and the Third Circuit in Deutscher Tennis Bund v. APT Tour, Inc., 610 F.3d 820 (3d Cir. 2010).

Defendants argued that, under American Needle, an unlawful conspiracy could not exist between an EMMC grower member and its affiliated distributor.  The court analyzed American Needle and emphasized that “substance, not form, should determine whether a[n] . . . entity is capable of conspiring under § 1 [of the Sherman Act].”  Mushroom, No. 06-0620 at 6 (quoting American Needle, 560 U.S. at 195).  The court held that its prior conclusion that member Kaolin/South Mill and its distribution centers were not a single entity was undisturbed by American Needle.  That the entities were “separate decision makers pursuing separate economic interests” was strongly evidenced, in the court’s eyes, by litigation that had occurred between the entities.  Mushroom, No. 06-0620 at 9.

Defendants also argued that participation in the cooperative by M. Cutone, a non-grower affiliate of grower-member M&V Enterprises, was protected under Capper-Volstead under the same rationale behind the intra-enterprise conspiracy doctrine discussed in American Needle.  The court held that this argument “misconstrue[d] the nature of the single entity defense. . . . Merely because two parties are considered to be a single entity for the purpose of a conspiracy claim under American Needle does not require that they be similarly considered in order to determine whether the cooperative’s membership included non-growers.”  Mushroom, No. 06-0620 at 12.  Therefore, M. Cutone’s “power to participate in the control and policy making of the association through voting . . . destroyed the availability of Capper-Volstead immunity for the cooperative.”  Id. at 11-12 (internal quotation marks omitted).

The court certified both issues for interlocutory review under 28 U.S.C. § 1292(b), as well as the question of whether a cooperative member’s good faith reliance on the advice of counsel can shield it from antitrust liability.  It remains to be seen whether the Third Circuit will take up the appeal.



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S.D.N.Y. Dismisses Cotton Traders’ § 1 Claims Under Copperweld

by | Oct 17, 2014 | , ,

On September 30, 2014, the Southern District of New York reconsidered the Commodities Exchange Act (CEA) and Sherman Act claims brought against Louis Dreyfus Commodities B.V. and its affiliates in In re Term Commodities Cotton Futures Litigation, 12 Civ. 5126 (ALC)(KNF) (S.D.N.Y. Sept. 30, 2014).  The plaintiffs, cotton futures traders, alleged that the defendants manipulated the price of cotton futures by “unreasonably and uneconomically demanding delivery of certificated cotton in fulfillment of futures contracts,” among other allegations of manipulative behavior.  In December 2013, the court denied defendants’ motion to dismiss, and defendants subsequently moved for reconsideration.  On reconsideration, the court dismissed plaintiffs’ § 1 claim under the intra-enterprise conspiracy doctrine set forth in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), but declined to dismiss the CEA or § 2 claims.

The court began its analysis by emphasizing the narrow holding of Copperweld.  It noted that Copperweld’s holding was limited to the relationship between “a parent and its wholly owned subsidiary”; where the relationship between two conspirators is anything less than complete ownership, lower courts “must draw from the analysis in Copperweld without the benefit of a bright line rule.”  Cotton, 12 Civ. 5126 at 6-7.  While the court rejected an interpretation of the intra-enterprise conspiracy doctrine that “Section One claims are not viable where the only named coconspirators are a parent corporation and its subsidiaries” as an overstatement of the law, it did not go so far as to hold that the doctrine only applies to parents and their wholly owned subsidiaries.

The five defendants in Cotton were all related through a web of parent-subsidiary relationships.  The plaintiffs did not specify whether each subsidiary was wholly owned, or clearly plead the nature of the defendants’ relationships.  The court held that, viewing the allegations in the light most favorable to the plaintiffs, it could not conclude that the allegations supported “a reasonable inference that Defendants ha[d] ‘separate corporate consciousnesses.’”  Cotton, 12 Civ. 5126 at 10.  For the defendants that were not wholly owned by other defendants, “the allegations portray[ed] the other Defendants as having ‘ownership’ and ‘control over’ them and giving ‘directions to’ them.  Nothing in the [complaint] demonstrate[d] a rational possibility that Defendants were ‘previously separate and competing entities [that combined] to act as one for their common benefit.’”  Id.

Regarding the § 2 claim, defendants argued that the court should apply the pleading standards for predatory pricing claims established by the Supreme Court in Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., Inc., 549 U.S. 312 (2007).  The court disagreed and concluded that Weyerhaeuser was inapplicable to these facts because the case did not present a classic predatory bidding scheme.  Due to the procedural posture of the case, the court did not discuss any additional issues related to defendants’ alleged monopolization.  Though it did not dismiss the § 2 claim, the court noted “the delicate factual balance in which Plaintiffs’ remaining claims hang” and granted defendants leave to move for summary judgment before the plaintiffs could [...]

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Local Wholesaler-Retailer Dispute Has Federal Implications

by | Oct 16, 2014 | , ,

On August 14, the U.S. District Court for the Southern District of Mississippi issued an opinion finding that state regulations bolstered one antitrust claim and hindered another in an ongoing dispute between a northern Mississippi convenience store chain, Major Mart, and an Anheuser-Busch InBev (ABI, a/k/a “Red Network”) distributor, Mitchell Distributing Company.

In Mississippi, by statute, like those of many other states, beer manufacturers must designate exclusive sales territories for each brand.  Mitchell holds the exclusive right to sell ABI brands to retailers in the counties in which Major Mart operates its 11 convenience stores.

The relationship between Mitchell and Major Mart started to break down in 2010, when Major Mart claimed that it was receiving inaccurate and confusing price information from Mitchell.  Major Mart asked Mitchell for compensation of lost profits due to the incorrect pricing information.  Mitchell denied the request, and Major Mart decided later to remove ABI displays and signs, lower the prices of competitors’ products, and reduce the cooler space allocated to ABI in some of its stores.  According to Major Mart’s complaint, Mitchell retaliated by (1) demanding shelving allocation that represented ABI’s market share of approximately 70 percent, (2) demanding price parity with competing products of ABI, (3) changing its deliveries to Major Mart stores to once a week so as to fill up Major Mart’s coolers and storerooms, leaving no room for competitor products and (4) delivering on Fridays so that Major Mart stores would not have cold beer on the “best selling day of the week.”

After litigation was first initiated, the parties reached a settlement in 2011, agreeing that Mitchell would increase its deliveries to at least twice per week and Major Mart would reconsider shelf space allocation and increase prices on competing brands of beers to the same price as ABI products.  This temporary resolution, however, failed when Major Mart did not reallocate its shelf space.  In response, Mitchell once again cut deliveries to one day per week and thereafter began to provide sales coupons and promotional giveaways exclusively to Major Mart’s competitors.  Major Mart also claimed that Mitchell delivered beer that was close to the end of its shelf-life, replaced fresher beer Major Mart had with older beer and missed deliveries during key dates, including July 4 and just as students were returning to college.  Eventually, Major Mart sued.

Major Mart alleged that Mitchell engaged in monopolization and attempted monopolization in violation of the Sherman Act and price discrimination in violation of the Robinson-Patman Act.  In response, Mitchell filed a motion for summary judgment asserting that the Sherman Act did not apply, as (1) Mitchell’s actions were immunized by the State Action Doctrine—the principle that the Sherman Act does not apply to states acting in their capacities as sovereigns—and (2) Mitchell’s actions, which occurred solely in Mississippi, did not affect interstate commerce—as required for Sherman Act jurisdiction.

Quickly discarding the State Action Doctrine assertion, the court noted that to qualify as a state’s action, conduct must be “undertaken pursuant to [...]

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