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California Court Finds Lack of Antitrust Standing for Price-Fixed Component Parts

by Lisa A. Peterson | Sep 29, 2014 | Private Litigation

On Sept. 22, 2014, the U.S. District Court for the Northern District of California issued an important opinion regarding antitrust standing in Los Gatos Mercantile, Inc. v. E.I. DuPont de Nemours & Co. (DuPont), No. 13-cv-01180-BLF (N.D. Cal. Sept. 22, 2014). The DuPont opinion is one of several recent opinions handed down on the topic by the Northern District of California in cases involving price-fixed component products. In DuPont, the U.S. District Court for the Northern District of California granted in part and denied in part the defendants’ motion to dismiss for lack of constitutional and antitrust standing.

Much of the court’s analysis focused on whether the plaintiffs pleaded sufficient facts in their complaint to allege to demonstrate antitrust standing for certain claims. The court held that the plaintiffs failed to establish antitrust standing. The court analyzed antitrust standing using a well-known five-factor test promulgated by the Supreme Court in Assoc. Gen. Contractors v. Cal. State Council of Carpenters (AGC), 459 U.S. 519 (1983).

To assess standing under AGC, courts consider: (1) the nature of the alleged injuries and whether the plaintiffs were participants in the relevant market; (2) the directness of the alleged injury; (3) the speculative nature of the harm alleged; (4) the risk of duplicative recovery and (5) the complexity in apportioning damages. Id. at 536-39.

Because the plaintiffs alleged a Sherman Act Section One claim for which damages are not available, two of the factors—risk of duplicative recovery and complexity in apportioning damages—did not apply. DuPont, No. 13-cv-01180-BLF, at *8. Thus, the court considered whether the facts pleaded by the plaintiffs demonstrated: (1) that they were participants in the relevant market; (2) that they suffered a sufficiently direct injury and (3) that the harm alleged was not speculative. Id. at *11-14.

First, the court found that the plaintiffs did not plead they were participants in the relevant market. The plaintiffs’ complaint listed a broad array of products containing the price-fixed component. Id. at *11-13. Although courts have applied different tests—such as whether the market for the price-fixed component and the finished product were inextricably linked or whether the plaintiffs alleged they were participants in the same market as the price-fixed component—to analyze this factor in different price-fixing litigations, the DuPont plaintiffs failed to meet any of these tests because they listed such a broad array of products. Id.

The court also emphasized that two recent price-fixing cases analyzing antitrust standing focused on the fact that the price-fixed component could be physically traced through the supply chain because they were “identifiable, discrete components that did not become indistinguishable parts” of the finished product. Id. In contrast, the price-fixed component in DuPont was a chemical ingredient. The chemical became an indistinguishable part of the finished product. Id. The plaintiffs alleged that they were able to physically trace the price-fixed component through the distribution chain. Id. In contrast, in past decisions, courts have found the mere allegation of traceability to be sufficient. Id. However, the DuPont court stated this allegation [...]

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Automotive Bearings Price-Fixing Allegations Survive FTAIA Defense

by McDermott Will & Emery | Aug 28, 2014 | Private Litigation

On August 26, 2014, the Eastern District of Michigan denied a motion by a Japanese manufacturer and its U.S.-based subsidiary (NTN Corporation and NTN USA Corporation) to dismiss the direct and indirect purchaser complaints in In re Bearings, 2:12-cv-00500-MOB-MKM (E.D. Mich. Aug. 26, 2014), one of the cases in the In re Automotive Parts Antitrust Litigation MDL, No. 12-md-02311. Following an investigation by the Japan Fair Trade Commission in 2013, NTN admitted to participating in a conspiracy to fix prices for bearings, which the complaints describe as “friction-reducing devices that allow one moving part to glide past another moving part.”

According to NTN, the plaintiffs were trying to use NTN’s participation in a price-fixing conspiracy in Japan to “link NTN to a different conspiracy in the United States” simply because NTN had “knowledge that some of its bearings sold in foreign markets would enter the United States market.” This “theory of global United States antitrust jurisdiction,” NTN contended, is prohibited by the Foreign Trade Antitrust Improvements Act (FTAIA).

The court was unpersuaded. The plaintiffs’ allegations depicting foreign investigations were not merely attempts to recover for conduct that occurred in other countries; rather, the existence of foreign investigations and guilty pleas was what “render[ed] Plaintiffs’ claims of a conspiracy directed at the United States plausible.” According to the court, the FTAIA arguments did not apply to NTN USA, which was alleged to have manufactured and sold bearings in the United States. And “[w]ith respect to NTN, Plaintiffs allege[d] that NTN USA manufactured and sold price-fixed bearings directly into the United States market at the direction of NTN.” The court concluded that “[t]he conduct at issue in this case is not the type of conduct Congress sought to exclude from the Sherman Act’s reach.”

Judge Upholds Poaching Claims in Pharmaceutical Data Antitrust Case

by Emily Townsend | Aug 22, 2014 | Healthcare Antitrust, IP Antitrust, Private Litigation

On Friday, August 15, 2014, Judge Gerald McHugh of the Eastern District of Pennsylvania let stand several counterclaims that IMS Health Inc. (IMS) made against Symphony Health Solutions Corp. (Symphony) in connection with related to allegations that Symphony had poached IMS employees to steal trade secrets.

In July 2013, Symphony brought a complaint against IMS, the largest pharmaceutical data and analytics company in the world, alleging that IMS unlawfully abused its monopoly power in pharmaceutical data markets and violated the antitrust laws through various types of horizontal and vertical exclusionary conduct, including entering into exclusive long-term agreements with data suppliers, requiring data suppliers to sign most-favored-nation clauses, acquiring rivals to eliminate competition, and bundling its products. In response to the complaint, IMS filed multiple counterclaims alleging that Symphony poached IMS employees to steal IMS’s trade secrets. Symphony then filed a motion to dismiss IMS’s counterclaims.

After reviewing Symphony’s motion to dismiss, Judge McHugh dismissed IMS’s trade secret misappropriation claims as to two former IMS employees as barred by res judicata. Specifically, a prior consent order already addressed concerns that Symphony gained access to IMS’s trade secrets through the two former IMS employees. Judge McHugh also dismissed IMS’s claim of tortious interference regarding a vendor because IMS’s “prediction” of future harm could not sustain its claim.

However, Judge McHugh let IMS’s poaching claims go forward and refused to dismiss IMS’s claims of improper procurement of confidential information and unfair competition. As to improper procurement, Judge McHugh highlighted IMS’s allegation that its former employee hired by Symphony made a public presentation with IMS materials. With respect to unfair competition, Judge McHugh ruled that IMS had stated facts sufficient to support its claim when it alleged that “Symphony targeted for hire groups of employees who worked in parts of IMS’s business that Symphony wished to duplicate, with the purpose of appropriating IMS’s trade secrets.”

District Court Denies Summary Judgment in Broadcast Rights Class Action

by Emily Townsend | Aug 15, 2014 | Private Litigation

On Friday, August 8, 2014, the Southern District of New York denied motions for summary judgment filed by the National Hockey League, Major League Baseball, Comcast Corp. and DirecTV LLC in suits alleging that these organizations and television providers conspired to hinder competition in television and internet sports broadcasting. In two class action suits brought by consumers of broadcast sports, plaintiffs claimed that the leagues and television providers agreed to “black out” games so that regional sports networks faced limited competition to broadcast live events. This purportedly anti-competitive agreement forced plaintiffs to buy “out of market” packages offered by defendants, such as MLB Extra Innings, to watch live games on television or the internet if they did not live within the regional provider’s viewing territory. Laumann, et al. v. National Hockey League, et al., case number 1:12-cv-01817; Lerner v. Office of the Commissioner of Baseball, et al., case number 1:12-cv-03704. District Judge Shira Scheindlin determined that the questions of whether plaintiffs have provided evidence of collusion among the leagues and providers and evidence of a tacit agreement between the providers should be decided at trial by a fact finder. In addition, Judge Scheindlin refused to apply the rule established in Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, 259 U.S. 200, 208 (1922), that exempted Major League Baseball from the antitrust laws. She explained that Major League Baseball’s exemption did not extend to the league’s contracts for television broadcast services. A trial date has not been set.

Judge Rules NCAA Ban on Student-Athlete Compensation Violates Antitrust Law

by Emily Townsend | Aug 14, 2014 | Private Litigation

On Friday, August 8, 2014, the Northern District of California determined that the National Collegiate Athletic Association’s (NCAA’s) rules banning student-athletes for being compensated for the use of their names, images and likenesses violated antitrust laws. In re Student-Athlete Name & Likeness Licensing Litigation, case number 4:90-cv-01967. During the three week-long bench trial in June 2014, the student athletes argued that the NCAA and its member schools and conferences conspired to fix compensation for the use of athletes’ likenesses at zero. The NCAA countered by contending that not paying athletes stopped some schools from being able to compensate students more than others, that athletes received benefits, such as an education and room and board, for playing college sports, that the rule protected these students’ amateur status, that paying athletes would cause tension with non-athlete classmates, and that fans would not watch college sports if athletes were paid. District Judge Wilken was unpersuaded by the NCAA’s arguments. In her ruling, Judge Wilken stated that the NCAA did not provide credible evidence that fans would abandon supporting their teams if athletes were paid. Moreover, because schools compete for recruits with impressive facilities and highly-paid coaches, the NCAA undercut its argument that not compensating student-athletes leveled the competitive playing field between colleges. Instead, Judge Wilken determined that without these 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.

In entering an injunction against the NCAA, Judge Wilken suggested that NCAA member schools should increase the stipends paid to students to cover the full cost of attending college, and she also recommended that schools hold money collected from the use of students’ likenesses in a trust for the students until they graduate. At the same time, however, she refused to allow student athletes to receive money from product endorsements. On Monday, August 11, 2014, the NCAA asked Judge Wilken to clarify the application of her order, which stated that the injunction prohibiting the NCAA’s ban on compensating players would begin with athletes who enroll after July 1, 2016. The NCAA requested that Judge Wilken explain whether the injunction applied to current student athletes beginning in July 2016 or whether it only applied to recruits who start college after that date.

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. 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. Both settlements received preliminary approval from Judge Wilken in July 2014.

Chinese Magnesite Producers Antitrust Class Action Complaint Dismissed

by Michelle Lowery | Jul 30, 2014 | Chinese Developments, Energy/Commodities, Private Litigation

On July 24, 2014, the district court in Animal Sci. Prod., Inc. et al. v. China Nat’l Metals & Minerals Imp. and Exp. Corp. et al., Case No. 2:05-cv-04376 (D.N.J.), dismissed direct purchaser plaintiff’s Amended Complaint without prejudice in favor of magnesite producers accused of engaging in a price fixing scheme for magnesite and magnesite products sold in the United States. The court found that the direct purchaser plaintiff, Resco, did not plausibly plead facts to establish antitrust standing as a direct purchaser. The analysis was complicated by the fact that Resco inherited its claim from an assignor, Possehl (US), and the Amended Complaint contained no facts supporting the allegation that Possehl made direct purchases from the defendants. The court recommended amending the complaint to identify specific transactions and the governing agreements for those purchases.

The dismissal is another setback for the plaintiffs, who filed suit in 2005 against 17 foreign companies, 16 of which are located in China. None of the Chinese defendants responded to the complaint and in 2007, and plaintiffs filed a motion for a default judgment. Seven of the companies responded in 2008 with a motion to compel arbitration. However, before any of the motions were resolved, the case was administratively closed while the Third Circuit determined the appropriate standard for analyzing whether the district court had jurisdiction to hear the case under the Foreign Trade Antitrust Improvements Act. The case was reopened in April 2012 and the district court asked for briefing on antitrust standing issues, which resulted in the dismissal of the Amended Complaint.

District Court Pares Down Price Discrimination Suit Against Chrysler

by McDermott Will & Emery | Jul 18, 2014 | Distribution/Franchising, Private Litigation

On July 11, 2014, the Northern District of California dismissed one of two federal antitrust claims brought against Chrysler Group LLC under the Robinson-Patman Act, 15 U.S. C. § 13, as well as several state statutory and common law claims. Matthew Enterprise, Inc. v. Chrysler Group LLC, No. 13-cv-04236-BLF (N.D. Cal. July 11, 2014). The plaintiff, a franchise car dealer and direct customer of the defendant, alleged that Chrysler committed anticompetitive price discrimination by offering volume discounts to new dealers on more favorable terms than those offered to established dealers like the plaintiff and by selectively offering the plaintiff’s competitors disguised price discounts in the form of below-market rent. The court allowed the former claim to go forward but dismissed the latter for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

The court began by recounting the purposes behind the Robinson-Patman Act, as described by the Supreme Court in FTC v. Sun Oil Co., 371 U.S. 505, 520 (1963): “to curb the use by financially powerful corporations of localized price-cutting tactics which had gravely impaired the competitive position of other sellers . . . and to ensure that businessmen at the same functional level . . . start out on equal competitive footing so far as price is concerned.” Matthew Enterprise, slip op. at 6 (internal quotation marks omitted). It explained that in order to state a “secondary-line case” involving competition among customers of a common seller, a plaintiff must plead facts showing that “(1) the relevant sales were made in interstate commerce; (2) the products were of like grade and quality; (3) the seller discriminated in price between the Plaintiff and another purchaser of the same products; and (4) that the effect of that price discrimination was to injure, destroy, or prevent competition to the advantage of a favored purchaser.” Id., slip op. at 7.

The plaintiff in Matthew Enterprise alleged that Chrysler offered volume discounts to established car dealers based on a formula that took into account the dealer’s prior year sales. Because new dealers, by definition, did not have prior year sales, Chrysler used different criteria to determine the volume at which new dealers would receive a discount, which the plaintiff alleged was substantially lower than the volume the plaintiff needed to sell in order to qualify for the discount. For example, the plaintiff alleged that “this inequality of treatment led to [one new competitor] receiving vehicle subsidies during July 2012, despite selling only sixty vehicles, while Plaintiff failed to receive incentives, despite selling 130 vehicles.” Id., slip op. at 8. These allegations, taken as true for purposes of the motion to dismiss, allowed the court ultimately to conclude “that Chrysler ha[d] set up its newly opened dealers as a class of ‘favored purchasers’” in violation of the Robinson-Patman Act. Id., slip op. at 9.

Regarding the second price discrimination claim, the court noted that it was not aware of any Ninth Circuit case law holding that the Robinson-Patman Act applies to real [...]

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Court Won’t Reconsider Prior Ruling in NCAA Class Action

by Emily Townsend | May 15, 2014 | Private Litigation

On May 12, 2014, the National Collegiate Athletics Association (NCAA) lost its motion for leave to file a motion for reconsideration of a prior ruling, which barred the NCAA from arguing at trial that not paying student-athletes for their likenesses increased competition by raising financial support for women’s and less prominent men’s athletics. A former NCAA basketball player originally filed a class action suit against the NCAA in 2009 in the Northern District of California, alleging that the NCAA profited from student-athlete likenesses on television and in video games while prohibiting the athletes from receiving payment. In re Student-Athlete Name & Likeness Licensing Litigation, case number 4:90-cv-01967. In April 2014, upon consideration of the parties’ opposing motions for summary judgment, District Judge Claudia Wilken ruled that plaintiffs were entitled to summary judgment as to the NCAA’s fourth justification for the challenged restraint – greater support for women’s and less prominent men’s sports – because this argument was not legitimately pro-competitive. Judge Wilken first determined that the NCAA could not restrain competition in the relevant market, football and men’s basketball, to allegedly promote competition in the markets for women’s sports and less prominent men’s sports. Second, the NCAA could financially support women’s sports and less prominent men’s sports through less restrictive means by forcing member conferences to redistribute a greater portion of profits made from football and men’s basketball to these other sports. In moving for leave to file a motion for reconsideration, the NCAA submitted a declaration and report from an economic expert, who argued that the relevant market should be broadened to include athletes who play sports other than football and men’s basketball. In response to the NCAA’s arguments, Wilken concluded that plaintiffs’ allegations challenged conduct with respect to football and men’s basketball, and the possibility that the challenged behavior affected student-athletes in other sports did not redefine the relevant market. Judge Wilken thus denied the motion, reiterating that the purported pro-competitive justification did not address competition in the relevant market of football and men’s basketball. Trial is set to begin on June 9, 2014.

MOFCOM Asks Second Circuit to Reverse Judgment Against Chinese Vitamin Manufacturers

by McDermott Will & Emery | Apr 18, 2014 | Chinese Developments, Private Litigation

On April 14, 2014, China’s Ministry of Commerce (MOFCOM) filed an amicus brief asking the Second Circuit to overturn a ruling by the Eastern District of New York against Chinese vitamin manufacturers. See Brief for Amicus Curiae Ministry of Commerce of the People’s Republic of China in Support of Defendants-Appellants, In re Vitamin C Antitrust Litigation, No. 13-4781 (2d Cir. filed Apr. 14, 2014). The lower court rejected the defendants’ argument that the challenged conduct was required by Chinese law and refused to dismiss the case. The case was later tried by a jury and ultimately resulted in a $157 million judgment against the defendants.

As MOFCOM recounted in its brief, the Chinese agency has been involved in the litigation since 2006, when it filed its first amicus brief in support of defendants’ motion to dismiss. MOFCOM explained that beginning in 1997, it required the defendants to participate in a Vitamin C Subcommittee in order to obtain export licenses, which “could be revised or revoked if a licensee failed to comply with mandatory export price and quantity constraints.” Brief at 5. The lower court characterized MOFCOM’s involvement in the case as “a post-hoc attempt to shield defendants’ conduct from antitrust scrutiny.” Id. at 2. In its April 14 filing, MOFCOM fired back, calling the court’s statement “profoundly disrespectful, and wholly unfounded.” Id.

MOFCOM’s central legal argument is that under United States v. Pink, 315 U.S. 203, 220 (1942), American courts must accept a foreign government’s official interpretation of its own law as conclusive. The district court, however, “ignored these fundamental precepts” and “instead invented its own mode of analysis that yielded a strikingly incorrect conclusion of Chinese law.” Brief at 14. The case has raised thorny international relations issues, and the appeal will no doubt be closely watched by the Chinese government. In MOFCOM’s words, “[t]he district court’s approach and result have deeply troubled the Chinese government, which has sent a diplomatic note concerning this case to the U.S. State Department.” Id. at 13. A reversal by the Second Circuit would “reaffirm that principles of international comity require district courts to treat official statements of a foreign government with a high degree of deference and respect, and with due caution about the court’s ability to determine accurately the law of an unfamiliar legal system.” Id.

Judge Ends Indirect Purchaser Plaintiffs’ Case in Refrigerant Compressors

by Lisa A. Peterson | Apr 16, 2014 | Private Litigation

Last week, on April 8, 2014, the District Court for the Eastern District of Michigan dismissed the remaining claims of indirect purchaser plaintiffs (IPPs) in the ongoing Refrigerant Compressors litigation. In re: Refrigerant Compressors, Case No. 2:09-md-02042 (E.D. Mich. April 8, 2014). Almost exactly one year ago, the court dismissed most of the IPPs’ claims, mainly on the basis that the IPPs lacked antitrust standing to bring them. In re: Refrigerant Compressors, Case No. 2:09-md-02042, Doc. 343 (E.D. Mich. April 9, 2013). As a result of that decision, the IPPs’ case was limited to claims based on only two state statutes seeking damages against manufacturers of fractional compressors used in refrigeration devices, based on sales that occurred in only those two states. The court’s decision dismissing the last two state claims was brief and resulted from a stipulation among the IPPs and those particular manufacturers to dismiss the claims. The parties have not filed their agreement with the court, and it is not publicly available.

Significantly, the court dismissed the IPPs’ claims with prejudice, eliminating these IPPs’ ability to refile their claims. This order now ends the indirect purchaser litigation with respect to these IPPs in the refrigerant compressors litigation five years after the IPPs filed their initial complaint, but before the parties reached discovery. It is unclear whether this agreement will bar any future claims by other potential indirect purchasers. Typically, when a class plaintiff settles a litigation prior to the actual certification of a class, the parties seek to certify a settlement class. By certifying a settlement class, the settlement becomes binding on all of the absent class members who do not opt out. Accordingly, a settlement with a class of plaintiffs will bar any future litigation by members of that same class. Here, there is no certification of a settlement class. Therefore, it is possible that other indirect purchasers may be able to bring claims against these defendants in the future.

The court also ordered each party to bear its own costs and legal fees. The court explicitly noted no one should consider its order and stipulation as an admission of liability against any defendant. Such an order and stipulation likely means that the parties agreed to a settlement. It is unclear whether the settlement involves some small payment to the IPPs or whether there was no payment, which is possible if the parties felt that the costs to all parties of litigating the case vastly exceeded the plaintiffs’ potential damages.

This settlement shows that if a defendant can eliminate a significant number of indirect purchasers’ state claims, the indirect purchaser plaintiffs may be more likely to settle prior to engaging in expensive discovery. However, defendants should still consider moving the court to certify a settlement class in order to bar any future claims from all indirect purchasers.

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