In Mayor and City Council of Baltimore et al. v. Citigroup Inc. et al., Second Circuit Court of Appeals ruled against a class of auction-rate securities investors and in favor of UBS AG and other top banks, finding that the banks’ simultaneous abandonment of the $330 billion ARS market before the financial crisis was a legitimate business decision. Plaintiffs sued USB AG, Bank of America Corp, Goldman Sachs Group Inc., and other banks, claiming that in 2008, shortly before the financial crisis, the banks stopped placing cover bids at ARS auctions, thereby allowing the market to collapse. In January 2011, a New York federal judge dismissed the plaintiffs’ claims. Second Circuit affirmed this decision, holding that the banks’ decision to leave the ARS market made perfect business sense because most market participants were waiting for the inevitable death spiral of ARS auctions. According to the court, in such an environment it is expected that once the auction failures reached a critical mass, the banks would exit the market very quickly. In its decision, the court also relied on Bell Atlantic Corp. v. Twombly, which found that plaintiffs alleging violations of the Sherman Act must show evidence that the defendants reached an anti-competitive agreement rather than merely engaged in “parallel conduct.” According to the Second Circuit, there was no evidence of an actual conspiracy among the banks in this case.
Antitrust Enforcement Agencies Oppose Use of Arbitration Clause to Block Class Actions
March 19, 2013 – 1:21 pm
In American Express Co. et al. v. Italian Colors Restaurant et al., the U.S. Supreme Court will decide whether an arbitration agreement can legitimately include a waiver of the right to class adjudication. The Department of Justice, Antitrust Division, and the Federal Trade Commission have filed a brief arguing that the provision improperly prevents parties from obtaining relief under federal antitrust laws.
Although arbitration provisions have substantial value, the agencies argue that they should not be used to effectively limit substantive rights. By prohibiting class adjudication, they contend, the provisions before the court “extract what are in substance prospective waivers of substantive federal rights, . . . subverting the purposes of the relevant rights-conferring statutes, without furthering the [Federal Arbitration Act’s] purpose of encouraging actual arbitration.”
The Supreme Court is reviewing a decision by the Second Circuit Court of Appeals holding that an arbitration agreement compelling merchant customers of a credit card company to forego class claims effectively blocked antitrust challenges because no single customer could justify the expense.
AAI Supports Notice of Patent Transfers
March 19, 2013 – 1:19 pm
The American Antitrust Institute has joined those urging the U.S. Patent and Trademark Office to require companies transferring patents to make a public filing providing notice of the transaction. In November, the USPTO concluded that “[a]n incomplete ownership record . . . presents a significant barrier to competition and market efficiency.” The AAI concurred in that assessment, arguing that now non-practicing entities and companies with standard essential patents can avoid disclosing transactions and thereby restrain competition. Moreover, shell companies that own patents and assert them anticompetitively may shield the real parties in interest from the reputational impact that would limit the well-known parent company from using the patent in a similarly questionable way.
“A complete patent ownership record,” the AAI argued, “can help operating companies, both incumbents and potential new entrants, manage their legal risk and reduce their search cost.” For example, a public record of the real party in interest can help standard setting bodies avoid patent hold-up by enabling it to ensure that essential patents are disclosed. And this disclosure becomes increasingly vital, the AAI contended, as patents grow in importance to the international economy. In short, disclosure enables innovating companies to do their work free from the distraction of groundless and unanticipated legal challenges.
The AAI, like the USPTO, ultimately concluded that disclosure will help insure that the rewards to patents actually support innovation rather than patent trolls that hold patents solely to profit from licensing revenue.
Jury Awards $400 Million In Price Fixing Urethane Foam MDL
February 26, 2013 – 4:30 pm
In In re: Urethane Antitrust Litigation,Kansas federal jury awarded $400 million to a class of purchasers in multidistrict litigation against the Dow Chemical Co. and other chemical manufacturers, finding the companies conspired to fix the price of urethane foam, used in many types of cushions. The litigation, which was consolidated in 2008, accused chemical companies Dow, Bayer AG, BASF SE, Huntsman International LLC and Lyondell Chemical Co. of orchestrating a scheme to fix prices of polyether polyol products that are used to manufacture urethane foam.
The day before the trial in this case was to begin, in a memorandum filed under seal, Dow asked the court to decertify the class. Dow contended the plaintiffs’ common evidence wouldn’t prove that each class member was impacted by the alleged collusion, and that the plaintiffs’ expert had assumed such impact rather than actually analyzing it. The company also said the case had inadequate class representatives. Furthermore, after the trial had commenced, but prior to the jury’s verdict, Dow filed a motion asking for a judgment in its favor. Dow claimed that the plaintiffs had failed to prove the existence of a conspiracy or that they had been affected by the alleged conspiracy; failed to prove an “essential element” of their fraudulent concealment claim; and hadn’t presented evidence concerning their urethane chemical purchases.
Despite these motions, after the conclusion of a five-week trial, the jury found that Dow had conspired to fix, raise or stabilize the prices of urethane chemicals, which caused the class of foam-product manufacturers to spend more on the chemicals than they otherwise would have, and awarded plaintiffs $400 million in damages.
Court Dismisses Steel Sheet Antitrust Suit
February 26, 2013 – 3:07 pm
In Stanislaus Food Products Co. v. USS-Posco Industries et al., Eastern District of California Judge Lawrence J. O’Neill granted U.S. Steel Corp., USS-Posco Industries and other steelmakers’ motion for summary judgment in a suit filed against them by tomato cannery Stanislaus Food Products Co. Stanislaus’ suit alleged that the defendants struck a deal in 2006 to allocate the market for steel sheets in the western U.S., forcing it to buy cans at inflated prices starting in 2009. Stanislaus claimed that until 2006, U.S. Steel made its own steel sheets and directly competed with USS-Posco in the western U.S. But in 2006, U.S. Steel, Pohang Iron & Steel Co. Ltd., and their various subsidiaries allegedly agreed to allocate market share to USS-Posco. As a result, Stanislaus claimed, the price for steel and tin went up substantially despite a decrease in raw material prices, forcing it to pay inflated prices for tin cans. In their second bid for summary judgment, defendants pointed out that Stanislaus had finally conceded that U.S. Steel hadn’t stopped selling tin-mill products in the western U.S., “a fact this court described as the ‘linchpin’ of plaintiff’s alleged market allocation agreement.” Stanislaus subsequently requested an order allowing it to file its opposition to the defendants’ motion under seal. The court granted the request, saying there were “compelling reasons” for keeping the information in the opposition under wraps. The court’s order granting defendants summary judgment was sealed and did not provide any information about the order other than stating that “the issues have been tried or heard and a decision has been rendered.”
DOJ Expands Its Investigation Into Auto Industry’s Price Fixing and Bid Rigging
February 26, 2013 – 2:23 pm
A criminal investigation into price-fixing and bid rigging in the auto parts industry between 2000 and 2010, conducted by the U.S. Department of Justice, Japan Fair Trade Commission, and antitrust officials in Europe, has expanded, according to DOJ’s deputy assistant attorney, Scott Hammond. The probe, which previously involved a number of products including automatic wire harnesses, instrument panel clusters and fuel senders, has expanded to new products and could expand to additional companies. So far, nine companies have pled guilty in the ongoing investigation, including Autoliv, Denso Corp., Fujikura Ltd., Furukawa Electric Co. Ltd., G.S. Electech, Nippon Seiki Co. Ltd., Tokai Rika, TRW Deutschland Holding GmbH and Yazaki Corp., according to the DOJ. The DOJ has imposed $809 million in fines to date, including $470 million against Yazaki. In October, Tokai Rika agreed to plead guilty and pay a $17.7 million fine for its role in the conspiracy to fix prices of heater control panels installed in cars sold in theU.S.and elsewhere. Tokai Rika also agreed to plead guilty to a charge of obstruction of justice related to the investigation of the Antitrust Division, according to the DOJ. Twelve executives have also pled guilty in the probe, including ten Japanese executives, who surrendered toU.S.jurisdiction and are serving sentences of one to two years, the DOJ confirmed.
Court Denies Interlocutory Appeal Request in Cathode Ray Tubing Antitrust MDL
February 25, 2013 – 12:45 pm
In In re: Cathode Ray Tube (CRT) Antitrust Litigation, Northern District of California Judge Samuel Conti rejected Samsung Electronics Co. Ltd. and other electronic makers’ request for an interlocutory appeal of a ruling that indirect purchasers of allegedly price-fixed cathode ray tubes could pursue antitrust claims under an exception to the U.S. Supreme Court’s Illinois Brick ruling. This case is part of the much larger multidistrict litigation over the alleged collusive behavior that includes both direct and indirect purchasers of cathode ray tubes. In November, Judge Conti ruled that the nine retailers who purchased finished products from Samsung and other defendants that contained the tubes had standing to litigate price-fixing claims under the so-called ownership or control exception to the Illinois Brick ruling. According to the Illinois Brick ruling, only the first party in a distribution chain to purchase price-fixed products has standing to sue under the Clayton Act. In 1980, the Ninth Circuit carved out an exception to the Illinois Brick rule in Royal Printing Co. v. Kimberly-Clark Co., permitting a printer to sue paper manufacturers for antitrust damages even though they purchased the allegedly price-fixed paper through a distributor. The court in the present case used this exception to hold that retailers had standing to bring the current claims.
Defendants moved for an interlocutory appeal, arguing that the appeal should be granted because the plaintiffs would lack federal antitrust standing if they were ineligible for the ownership or control exception. The court denied defendants’ request, holding that resolution of the specific issue — whether the exception applies to the retailers — would not be controlling or material to the overall outcome of the case and would not speed up completion of the litigation. Additionally, the Ninth Circuit’s rule that was applied in the November decision is not disputed by other circuits, so there is no substantial ground for difference of opinion on this point, according to the court.
Eighth Circuit Denies Grocery Wholesalers’ Bid for Arbitration of Antitrust Claims
February 25, 2013 – 12:11 pm
In In re: Wholesale Grocery Products Antitrust Litigation, Eighth Circuit Court of Appeals allowed certain retailers to pursue their claims against SuperValu Inc. and C&S Wholesale Grocers Inc., instead of forcing them to go to arbitration. Several retailers are each trying to bring class action antitrust claims against either SuperValu or C&S over an agreement the two wholesalers allegedly reached to exchange certain customer supply contracts and not to compete with one another for those customers for a set period of time. However, each retailer not only had a supply agreement with one of the wholesalers but also an arbitration agreement, forcing the retailers to each only sue the wholesaler with whom they did not sign an arbitration contract.
The wholesalers moved to compel arbitration, maintaining that they could still force all of the antitrust claims into arbitration either through the equitable estoppel theory or the notion that the wholesalers had essentially inherited the arbitration agreements from the wholesalers that originally signed them as part of the contract exchange. In a split decision, the Eighth Circuit disagreed with the defendants, holding that the retailers’ claims against the nonsignatory wholesalers are not “so intertwined with the agreement containing the arbitration clause that it would be unfair to allow the signatory to rely on the agreement in formulating its claims but to disavow availability of the arbitration clause of that same agreement.” The court further held that the claims at stake do not stem directly from the contract that included the arbitration clause, so plaintiffs would have had a statutory right to bring antitrust suit against defendants they did not contract with, regardless of the supply and arbitration deals.
Pennsylvania Governor Sues NCAA Over Sanctions Against Penn State
February 25, 2013 – 9:05 am
In Commonwealth of Pennsylvania, Thomas W. Corbett Jr., Governor v. National Collegiate Athletic Association, Pennsylvania’s governor, Thomas W. Corbett filed suit against NCAA, claiming the NCAA’s sanctions against Pennsylvania State University (“Penn State”) in response to the sexual abuse scandal surrounding former assistant football coach Jerry Sandusky, violated antitrust laws and would cause dire economic harm to both the school and the state’s citizens.
Sanctions against Penn State included a $60 million fine, a four-year ban on football post-season play and a four-year reduction in athletic scholarships for football. According to the governor’s complaint, Penn State did not engage in any conduct expressly prohibited by the NCAA, but was only suspected of violating vague principles of “institutional control” and “individual integrity.” The suit further alleges that because a finding that Penn State violated any NCAA rules would not be a certainty, NCAA forced Penn State to voluntarily accept the sanctions through a “consent decree” to save Penn State’s football program from being shut down by NCAA for four years. As such, the complaint contends that the NCAA’s ad-hoc efforts to punish the university would violate the antitrust laws by interfering with markets for post-secondary education, Division I football players, and the sale of athletic apparel and memorabilia.
Refusal to Deal on Patent Licensing Case Dismissed
February 25, 2013 – 9:03 am
In Cascades Computer Innovation LLC v. RPX Corp, Northern District of California Judge Yvonne Gonzalez Rogers dismissed with leave to amend an antitrust case by Cascades Computer Innovation alleging that several Android device makers had conspired to refuse to deal with it.
Cascades alleged that the companies agreed that none of them would engage in negotiations to license its patents even though those patents are infringed by the defendants’ Android devices. The plaintiff claims that the defendants entered this agreement because Cascades is a nonpracticing entity, a company that holds patents without manufacture products or conducting research and development.
The court held that the complaint alleged insufficient specifics about how the defendants conspired and failed to show how the defendants’ conduct harmed competition or resulted in antitrust injury to the plaintiff. “Due to Cascades’ vague allegations of a group boycott,” Judge Rogers wrote, the plaintiff “has not alleged sufficient facts to show that the injury Cascades has suffered flows from the defendants’ unlawful conduct.”