December 27, 2012 – 3:27 pm
In MM Steel LP v. Reliance Steel & Aluminum Co. et al., Southern District of Texas Judge Kenneth M. Hoyt, denied a motion to dismiss suit filed by MM Steel LP, a steel distributor, accusing a group of steel distributors and producers of conspiring to boycott MM Steel to edge it our as a potential rival. In its suit, MM Steel claims that steel distributors American Alloy and Reliance Steel & Aluminum Co. made agreements to push MM Steel out from contention and conspired with Nucor Corp. and other steel producers to implement a boycott refusing to sell steel to MM Steel or companies that it tried to team up with. Defendants Reliance and Chapel Steel Group filed a motion to dismiss, claiming that Mike Hume and Matt Schultz, founders of MM Steel, who had worked at Chapel for 12 years, abruptly left the company and secretly worked to set up MM Steel as a rival. Defendants further argued that Chapel previously sued MM Steel for wrongfully taking advantage of its resources and won a temporary restraining order, limiting MM Steel’s ability to conduct business. According to the defendants, a month after certain restrictions in the restraining order had expired; MM Steel brought the present suit against Chapel and other defendants, claiming that its business difficulties were a result of a conspiracy and not its flawed business model or the TRO.
The court denied defendants’ motion to dismiss, holding that MM Steel had provided enough details about the alleged conspiracy and made specific enough allegations about the conduct of the defendants to move the suit forward. The fact that the plaintiff’s pleadings and proffers do not involve the same claims of conduct and particulars as to all the defendants does not defeat the claim. According to the court’s order, the plaintiff’s pleadings set forth sufficient details and allegations to apprise the defendants of whom the plaintiff claims engaged in the alleged conduct, when the conduct occurred, and what conduct constitutes the common law or statutory violation.
December 27, 2012 – 2:56 pm
In Clayworth v. Pfizer, the California Supreme Court denied a petition to rehear a consolidated antitrust suit, filed by a group of pharmacies, accusing Pfizer Inc., GlaxoSmithKline PLC and other drugmakers of conspiring to inflate drug prices in the U.S. and keeping lower-priced Canadian drugs off the market. The defendants originally won at the trial court level when the court held that plaintiffs were not entitled to damages because they passed the higher prices on to consumers. On appeal, the First District Court of Appeals affirmed the “pass-on defense.” However, the California Supreme Court reversed, holding that under the Cartwright Act, the “pass-on defense” was not available.
On remand, the trial judge granted defendants’ motion for summary judgment, holding that the plaintiffs had failed to meet their burden of providing evidence that showed a conspiracy was more likely than not. The appeals court affirmed and shot down the plaintiffs’ argument that their allegation relied on direct evidence of a conspiracy, holding that this direct evidence sought to demonstrate the defendants had conspired to tie increases in their prices to the Consumer Price Index, not that they had priced their drugs lower in Canada. And, according to the appeals court, allowing plaintiffs to amend their suit to drop the Canadian floor conspiracy this late in the suit would be unduly prejudicial. Plaintiffs petitioned the California Supreme Court to rehear the case. CA Supreme Court denied the plaintiffs’ petition.
December 26, 2012 – 3:14 pm
In European Commission v. Stichting Administratiekantoor Protielje and Cosselin Group NV, Advocate General Julianne Kokott, the chief legal adviser to theEurope’s highest appeals court, issued an opinion that a parent company can be held liable for the cartel activity of its subsidiaries regardless of whether the parent actually conducts business itself. This recommendation came in a case where Europe’s high court is considering a lower court’s ruling that held that the European Commission could not fine Stichting Asministratiekantoor Portielje, a parent company that controls Gosselin Group NV, for its role in a long-running cartel for moving services in Belgium, on the ground that the parent company cannot be penalized by a decision implementing Article 81, if it was not involved in the undertaking itself.
Advocate General Kokott disagreed with the General Court, stating that the proper measure of whether a parent company should face joint and several liability is whether the infringing subsidiary lacks sufficient autonomy, making the two companies a single entity, regardless of the economic status of the individual units. According to the opinion, the only decisive factor in the analysis of liability is whether — viewed as a whole — one undertaking has committed the infringement. If an infringement occurred, a penalty can be imposed on all natural or legal persons who are principals of that joint undertaking. Although this opinion is used to provide objective legal analysis to Europe’s Court of Justice, it is not binding on the court.
December 21, 2012 – 3:13 pm
In Ritz Camera & Image LLC v. SanDisk Corp., the Federal Circuit held that the purchasers of a patented produce may file a monopolization suit based on the claim that the defendant obtained the patent by defrauding the U.S. Patent & Trademark Office. The decision allows a class action challenging a SanDisk Corp. flash memory patent to proceed.
In the Walker Process case, the U.S. Supreme Court held that a licensee can prove an antitrust claim by showing that a patent was obtained by fraud along with the other elements of an antitrust violation. SanDisk argued that purchasers should not be permitted to bring such a claim because they did not face a threat of an infringement challenge and thus could not file a declaratory judgment action attacking the validity of the patents.
The Federal Circuit rejected the defendant’s arguments, explaining that “[n]othing in Walker Process supports SanDisk’s argument that the rules governing standing to bring patent validity challenges should be imported into an antitrust case simply because one element of the antitrust cause of action requires proof of improper procurement of a patent.” Although antitrust claims are often filed by competitors, the consumers of a firm’s products are the intended beneficiaries of the antitrust laws. Here, for example, Ritz Camera argues that SanDisk’s patent enforcement activities against its competitors caused Ritz to pay higher prices. The court thus held that it would make no sense to deny purchasers the right to pursue an otherwise legitimate antitrust theory.
SanDisk also argued that permitting this sort of claim would “open the floodgates” to litigation against patent holders. But the Federal Circuit responded that Walker Process claims require “demanding proof” of intentional fraud. Few plaintiffs would be likely to meet that standard absent serious concern about the appropriateness of a patent.
The court did not reach the merits of the claim, remanding to the district court.
December 21, 2012 – 3:11 pm
In In re: Vitamin C Antitrust Litigation, Eastern District of New York Judge Brian M. Cogan refused to dismiss multidistrict litigation alleging that Chinese manufacturers fixed the price of vitamin C, holding that the sales fell within the import and domestic effects exceptions to the Foreign Trade Antitrust Improvements Act. As a result, that law does not block the foreign purchasers from pursuing an antitrust claim.
The court held that because the Chinese defendants knew that their conduct would impact U.S. customers, their sales to foreign companies will remain part of the direct-purchaser damages class. Judge Cogan explained that “[t]he sales contracts . . . show [that] the defendants specifically contracted for the delivery of vitamin C to locations within the U.S.,” and while many transactions occurred abroad, “the intent and result of those transactions was the direct importation of vitamin C into the U.S.”
The judge, who is handling the MDL over the allegedly Chinese state-mandated price-fixing plot, stated the transactions fell under the FTAIA’s.
December 21, 2012 – 3:10 pm
The Department of Justice has closed its two-year antitrust investigation of Monsanto’s planned activities with respect to Roundup Ready 1 modified soybeans after the 2014 expiration of its patent. The DOJ may have been concerned that Monsanto would demand that farmers destroy or return seed when existing licenses expire because the company now prevents farmers from saving seeds from year-to-year. The company’s assurances that it would not force growers to use a new patented variant or sue those who save seeds after the current patent expires apparently satisfied the antitrust enforcers.
December 21, 2012 – 3:09 pm
The U.S. Supreme Court has granted certiorari to decide “whether the Federal Arbitration Act [FAA] permits courts, invoking the ‘federal substantive law of arbitrability,’ to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim.” The case involves a credit card company’s adoption of an arbitration requirement compelling merchants that want to accept the card to waive their right to pursue antitrust claims on a class-wide basis.
The Second Circuit held that the defendant could not preclude class litigation through its arbitration clause because it would be financially infeasible for the merchants to pursue their claims on an individual basis.
The Supreme Court has previously held that (1) the FAA preempts state laws prohibiting class action waivers decision and (2) FAA prohibits imposing class arbitration on parties that have not agreed to it. A decision should be reached within the next six months.
December 10, 2012 – 9:22 am
In Comcast Corp. et al. v. Caroline Behrend et al., the U.S. Supreme Court will decide the standard that plaintiffs must satisfy to meet the Court’s requirement that, prior to certifying a class, the district court must find that admissible evidence supports the view that damages can be calculated on a class-wide basis.
The plaintiffs allege that Comcast has monopolized the cable television market. They contend that a district judge need only conclude that it is “more likely than not” that expert testimony will show that damages to class members can be calculated class-wide. The defendant Comcast contends that the district court did not do enough to ensure that the plaintiffs’ expert testimony was sufficient.
At oral argument, the Justices questioned the defendant had preserved the admissibility issue for appeal and whether the parties actually disagreed on the legal standard. A decision should be forthcoming in the next six months.
December 9, 2012 – 11:44 am
The Federal Trade Commission is coming under fire by pharmaceutical groups for proposing to expand its review of exclusive pharmaceutical patent rights licenses. Under the proposed change, a drug patent holder would need to report a license to the FTC under the Hart-Scott-Rodino (HSR) Act if the patent owner transfers the exclusive marketing and sales rights to another company even if it retains the exclusive right to make the drug.
Although the sale of a patent has long been considered a reportable HSR transaction if it otherwise met the general filing thresholds in the act, the licensing of patent rights, particularly exclusive licenses, have proven more difficult to categorize. Until recently, the FTC asked whether the license transferred the exclusive right to make, use, and sell a patented produce. Licenses in which the patent holder retains the right to make the product have generally been viewed as un-reportable distribution agreements rather than as the reportable transfer of an asset.
The FTC argues that the right to commercialize a drug, rather than the right to manufacture, is critical to competition concerns. It thus wants to review drug licenses that retain the distribution agreement form. Drug lobbying group PhRMA opposed the change, arguing in filed comments that “[t]he proposed rules constitute an unprecedented attempt by the agency to increase the HSR Act requirements for a single industry.” According to the group, the statute does not permit the FTC to expand pre-transaction notification requirements in this way.
December 9, 2012 – 11:42 am
In In re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, Eastern District of New York Judge John Gleeson preliminarily approved a $7.25 billion settlement in multi-district litigation alleging that the credit card companies collusively set the fees that they charge merchants to accept cards.
Judge John Gleeson explained that class action settlements must be approved at the preliminary stage if they meet a relatively modest threshold. He thus rejected the objections from more than 1000 merchants and trade associations, including some of the largest class members, describing their concerns as “overstated.” They claimed that although the cash value of the settlement appears high (a $6.05 billion payment to merchants and an eight-month fee discount valued at approximately $1.2 billion), relative to the card associations revenues it is not and, more importantly it does not do enough to permit competition on merchant fees going forward. The court identified as a significant point of disagreement the value of the provision in the settlement permitting merchants to surcharge customers who use cards. “You can’t all be right,” Judge Gleeson stated, “about the value of that proposed rule change.” And he suggested that he may appoint an expert to examine the issue before deciding whether to issue final approval.
In addition, the plaintiffs in a class action in the District of Columbia have urged the court to clarify that the proposed settlement applies only to merchant fees and not to fees charged to ATM operators. Although both types of fees are commonly referred to as interchange fees, the ATM plaintiffs argue that the fees serve different purposes and that the issues are entirely distinct. The District of Columbia cases are National ATM Council Inc. et al. v. Visa Inc. et al.; Barton et al. v. Visa Inc. et al.; and Stoumbos v. Visa Inc. et al.