On October 3, 2011, the Ninth Circuit held that parens patriae actions commenced by state attorneys general are not “class actions” under the Class Action Fairness Act (“CAFA”) and, therefore, could not be removed from federal to state court under the CAFA removal provisions. Washington v. Chimei Innolux Corp., No. 11–16862, 2011 WL 4543086 (9th Cir. Oct. 3, 2011). The California and Washington attorneys general commenced actions under state law in their respective state courts to recover damages for their citizens as a result of price fixing among LCD manufacturers. These actions are based on the same allegations in MDL No. 1827. Defendants removed them asserting jurisdiction under CAFA. CAFA creates subject matter jurisdiction and authorizes removal in a class action where there is minimal diversity of citizenship between a defendant and one named or unnamed putative class member and the amount sought by the class exceeds $5,000,000. Defendants argued that a parens patriae action is just like a class action and the CAFA removal provision should thus apply. Joining the Fourth Circuit, West Virginia ex rel. McGraw v. CVS Pharm., Inc., 646 F.3d 169 (4th Cir.2011), the Ninth Circuit held that the language of CAFA does not permit treating parens patriae actions as class actions. It then affirmed the district court’s remand orders.
Oct
06
Posted by : | On : October 6, 2011
Sep
15
Posted by : | On : September 15, 2011
In antitrust litigation, defendants routinely resist discovery pending a motion to dismiss. They rely on Bell Atlantic Corp. v. Twombly, arguing that they should not be put through the expense of discovery until the Court decides whether the claims are plausible. On September 8, 2011, the United States District for the District of Colorado rejected such tactics. SOLIDFX, LLC v. Jeppesen Sanderson, Inc., 11-CV-01468-WJM-BNB, 2011 WL 4018207 (D. Colo. Sept. 8, 2011). The Court held that Twombly “does not erect an automatic, blanket prohibition on any and all discovery before an antitrust plaintiff’s complaint survives a motion to dismiss.” (citation omitted). It explained that “[w]hen the discovery would not be so burdensome, a closer question is presented, a question calling for the exercise of discretion and the balancing of competing factors.” (citation omitted). The Court noted that “[a] party seeking a protective order under Rule 26(c) has the burden of demonstrating good cause and cannot sustain that burden simply by offering conclusory statements. Accordingly, the party moving for a protective order must make a particular and specific demonstration of fact in support of its request.” The Court denied the stay because the defendant did not make a factual showing of burden.
Plaintiffs would be well advised to press for at least targeted discovery, such as documents produced in government investigations. To extent that no genuine burden exists, such discovery should be obtainable pending a motion to dismiss regardless of its strength.
Sep
13
Posted by : | On : September 13, 2011
On September 6, 2011, the United States District Court for the Eastern District of New York denied summary judgment for vitamin C manufacturers in In re Vitamin C Antitrust Litig., MDL No. 1738 (Decision (Vit C)). The Court rejected defendants’ act of state defense under which defendants claimed immunity contending that Chinese law required them to fix prices.
The Chinese government provided support for defendants, by providing a statement that the scheme was required by the Chinese legal system (the Chamber also filed an amicus brief). The Court disagreed – what at first glance appears surprising is explained by the fact that the Chinese government did not explain many aspects of the law and was vague on other aspects.
The Court acknowledged that trying to apply some foreign legal systems to U.S. law is akin to fitting a round peg in a square hole. For example, experts explained to the Court that “law” in China is not based so much on the written law, but rather a mix of law (as we understand it) and voluntary behavior.
After analyzing these cultural differences, the Court found that the Chinese legal and regulatory system was not sufficiently concrete to justify a finding that the otherwise illegal (within the U.S. Court’s jurisdiction) behavior was required by the Chinese law. Thus, while the behavior was legal under the Chinese system, it was not required. The lack of a requirement to comply with a law was, inter alia, fatal to the defendants. The Court was unconvinced of compulsion because the statement of Chinese law read like a litigation position and the Chinese government had made contrary representations to the WTO.
There are a number of other noteworthy issues. The Court refused to defer to the Chinese government’s evidence on the Chinese law. The Court did not need to set a standard of deference; so it did not so. The jurisprudence is still uncertain on the level of deference to be afforded a foreign government’s statements of foreign law. The Court took notice of a WTO Panel decision (July 5, 2011, not yet (and, may not be) appealed to the Appellate Body), which neither of the parties had made reference. The Court also did not examine the level of deference to a WTO Member’s statements that the WTO affords – both during accession negotiations and at a Panel hearing. The Court appeared to take the findings of the WTO Panel at face value, and not subject it to a factual analysis. This is particularly interesting because at the WTO the U.S.’s position is that Panel and Appellate Body decisions are not “law.”
As an aside, the U.S. recognized China’s market economy status in 2010.
This post was co-authored by Adrian Render.
Jan
14
Posted by : | On : January 14, 2011
The Seventh Circuit accepted an interlocutory appeal on a certified question arising from the district court’s denial of a motion to dismiss the second amended complaint in In re Text Messaging Antitrust Litig., No.10-8037, 2010 WL 5367383 (7th Cir. Dec. 29, 2010). Judge Posner held that the sufficiency of a complaint’s allegations to state a claim was a controlling question of law within the meaning of 28 U.S.C. section 1292(b). Judge Posner then affirmed the denial of the motion to dismiss because:
“The second amended complaint alleges a mixture of parallel behaviors, details of industry structure, and industry practices, that facilitate collusion. There is nothing incongruous about such a mixture. If parties agree to fix prices, one expects that as a result they will not compete in price-that’s the purpose of price fixing. Parallel behavior of a sort anomalous in a competitive market is thus a symptom of price fixing, though standing alone it is not proof of it; and an industry structure that facilitates collusion constitutes supporting evidence of collusion. An accusation that the thousands of children who set up makeshift lemonade stands all over the country on hot summer days were fixing prices would be laughed out of court because the retail sale of lemonade from lemonade stands constitutes so dispersed and heterogeneous and uncommercial a market as to make a nationwide conspiracy of the sellers utterly implausible. But the complaint in this case alleges that the four defendants sell 90 percent of U.S. text messaging services, and it would not be difficult for such a small group to agree on prices and to be able to detect “cheating” (underselling the agreed price by a member of the group) without having to create elaborate mechanisms, such as an exclusive sales agency, that could not escape discovery by the antitrust authorities.
Of note is the allegation in the complaint that the defendants belonged to a trade association and exchanged price information directly at association meetings. This allegation identifies a practice, not illegal in itself, that facilitates price fixing that would be difficult for the authorities to detect. The complaint further alleges that the defendants, along with two other large sellers of text messaging services, constituted and met with each other in an elite “leadership council” within the association-and the leadership council’s stated mission was to urge its members to substitute “co-opetition” for competition.
The complaint also alleges that in the face of steeply falling costs, the defendants increased their prices. This is anomalous behavior because falling costs increase a seller’s profit margin at the existing price, motivating him, in the absence of agreement, to reduce his price slightly in order to take business from his competitors, and certainly not to increase his price. And there is more: there is an allegation that all at once the defendants changed their pricing structures, which were heterogeneous and complex, to a uniform pricing structure, and then simultaneously jacked up their prices by a third. The change in the industry’s pricing structure was so rapid, the complaint suggests, that it could not have been accomplished without agreement on the details of the new structure, the timing of its adoption, and the specific uniform price increase that would ensue on its adoption.”
As this case indicates, Twombly should not be overly difficult to satisfy even in the absence of a governmental investigation to support the conspiracy allegations. It is also noteworthy that the although the court entertained an interlocutory appeal by permission, such an approach is the exception, not the rule. Indeed, even in this case, the court expedited the appeal by not accepting additional briefing and not hearing oral argument.
Dec
10
Posted by : | On : December 10, 2009
On November 19, 2009, the New York Attorney General’s motion to dismiss the charges arising from alleged bid rigging of insurance policies against Thomas T. Green, Jr. and William L. Burnie (former Marsh executives) and Geri Mandel (a former Zurich executive) was granted by Justice James Yates. New York Attorney General Andrew Cuomo sought dismissal in light of the acquittals of Joseph Peiser, Greg Doherty and Kathleen Drake, former Marsh executives, after an 11-month bench trial before Justice Yates, who was to preside at the upcoming trial. These acquittals were reported in the October 26, 2009 Post. As you may recall (and discussed in the February 22, 2008 Post), two Marsh executives were convicted of Donnelly Act violations after a 10-month bench trial. These cases were brought by then New York Attorney General Elliot Spitzer. Marsh paid $850 million to settle and another Marsh executive pleaded guilty.
Dec
09
Posted by : | On : December 9, 2009
On November 25, 2009, the court in In re Static Random Access Memory Antitrust Litig., No. C 07-01819 CW, 2009 WL 4263524 (N.D. Cal. Nov. 25, 2009), certified 28 indirect purchaser classes – one nationwide class for injunctive relief under section 16 of the Clayton Act and 27 separate indirect purchaser damages classes under the laws of Arizona, Arkansas, California, Florida, Hawaii, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Mexico, New York, North Carolina, North Dakota, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Washington, West Virginia, Wisconsin, Puerto Rico and the District of Columbia.
Injunction: the court certified the class under Rule 23(b)(2). It rejected the standing challenge holding “Plaintiffs have alleged sufficient facts to establish Article III standing for their nation-wide injunctive relief class. IP Plaintiffs allege that Defendants and their co-conspirators entered into a continuing conspiracy in restraint of trade artificially to raise prices for SRAM in the United States. They further allege that these market-wide overcharges were then passed through the chains of distribution, and that they were injured by paying supra-competitive prices when they indirectly purchased Defendants’ products.” The court also rejected defendants’ argument “because IP Plaintiffs seek to certify a nation-wide injunctive class from November 1, 1996 through December 31, 2006, they have impliedly alleged that the conspiracy ended in 2006. However, a finite proposed class period does not defeat certification of a class under Rule 23(b)(2). See, e.g., Jaffe v. Morgan Stanley & Co., 2008 WL 346417, at *3 (N.D.Cal.) (certifying injunctive-relief class for settlement affecting persons employed by the defendants “at any time between October 12, 2002 and December 3, 2007). Further, IP Plaintiffs allege that the same market conditions that facilitated the conspiracy from 1996 to 2006 continue today. They allege that Defendants’ price-fixing resulted from a systematic, repeated pattern of sharing sensitive competitive information which was greatly facilitated by the cross-competitor business relationships that still exist. Thus, there is alleged a significant risk that the conspiracy will persist or reform in the future.”
Individual state damages classes: the court certified 27 different classes based on individual state law. The court rejected “Defendants[’] … concern[] that [it] will be unable to manage state-law claims from twenty-seven state classes” holding “there is no qualitative difference between a federal district court considering class certification of state claims under that state law and a federal court serving as a multi-district litigation forum performing the same task for many federal courts. Moreover, courts frequently certify classes under the laws of multiple jurisdictions. See, e.g., Norvir Anti-Trust Litig., 2007 WL 1689899, at *8 (N.D.Cal.) (certifying class under the common law of forty-eight states); In re Pharm. Indus. Average Wholesale Price Litig., 233 F.R.D. 229, 230-31 (D.Mass.2006) (certifying multi-state defendant subclasses under the consumer protection laws of forty-one states).” In holding that the individual issues predominated over the individual issues, the court held that “there [wa]s a reasonable method for determining on a class-wide basis whether and to what extent that overcharge was passed on to each of the IP Plaintiffs at all levels of the distribution chain.”
Experts: the court rejected each parties’ challenge to the other parties’ expert holding that the appropriate standard is “whether the expert evidence is sufficiently probative to be useful in evaluating whether class certification requirements have been met.” The court made short shrift of the challenges holding “Although each side presents myriad valid challenges to the other’s expert, the Court concludes that these challenges are of the type that go to the weight of the evidence, not the admissibility. … The parties’ motions to exclude reflect disagreement with the opposing parties’ position; however, this disagreement does not warrant exclusion.”
Oct
29
Posted by : | On : October 29, 2009
In letters dated October 27, 2009 (State AG Letter re HR 3190; State AG Letter re S 148), 41 state attorneys general wrote to Congress asking them to overrule Leegin Creative Leather Product, Inc. v. PSKS, Inc., 551 U.S. 877 (2007). In Leegin, the Supreme Court held that resale price maintenance — the practice in which a manufacturer requires a retailer to sell its products at a certain price — was subject to the rule of reason. In doing so, the Court overruled Dr. Miles Medical Co. v. John D. Park & Sons, Co., 220 U.S. 373 (1911), which held that resale maintenance is a per se violation of section 1 of the Sherman Act. The state attorneys general urge passage of H.R. 3190, which provides that “[a]ny contract, combination, conspiracy or agreement setting a minimum price below which a product or service cannot be sold by a retailer, wholesaler or distributor shall violate section 1 of the Sherman Act.” As reported in the May 23, 2008 Post, 35 state attorneys general wrote to Congress on May 8, 2008 asking that it enact nearly identical legislation (S. 2261).
Practitioners should know that resale price maintenance can still be a per se violation of state antitrust laws. As reported in the May 4, 2009 Post, Maryland enacted such a law. And as reported in the March 31, 2008 Post, the New York, Michigan and Illinois attorneys general brought an action against Herman Miller in which they alleged that Herman Miller’s resale price maintenance program was a per se violation of their state antitrust laws. Herman Miller entered into a consent decree.
Oct
26
Posted by : | On : October 26, 2009
Joseph Peiser, Greg Doherty and Kathleen Drake, former Marsh executives, were acquitted after an 11-month bench trial before Justice James Yates of violating New York’s antitrust law — the Donnelly Act. They were acquitted of bid-rigging in connection with the sale of insurance policies. As you may recall (and discussed in the February 22, 2008 Post), two Marsh executives were convicted of Donnelly Act violations after a 10-month bench trial. These cases were brought by then New York Attorney General Elliot Spitzer. Marsh paid $850 million to settle and another Marsh executive pleaded guilty.