February 5, 2013 – 6:25 pm
In In re: TFT-LCD (Flat Panel) Antitrust Litigation, Northern District of California Judge Susan Illston has decided to allow some liquid crystal display manufacturers charged with price fixing to assert a pass-on defense. The defense contends that the plaintiffs cannot recover damages because they passed on alleged overcharges to their customers. Although the pass-on defense is not recognized under the federal antitrust laws, the court held that it was available with respect to certain state law price-fixing claims in California, Illinois, Michigan, Minnesota and New York. The precedent in these states with respect to the pass-on defense was not always clear. So, the court’s decision was significant.
Judge Illston refused to find, however, that the defendants had already submitted sufficient undisputable evidence that each plaintiff had in fact passed on the overcharges.
February 5, 2013 – 11:37 am
In Apple Inc. v. Amazon.com Inc., Northern District of California Judge Phyllis Hamilton dismissed a false advertising claim in which Apple accused Amazon of infringing its “App Store” mark. Amazon used that name to describe a section of its website selling applications for Android devices. Apple alleged that the use of use of the mark would divert sales and improperly associate Apple with Amazon’s inferior products.
The court held that Apple failed to produce sufficient evidence of a likelihood of confusion. “Apple has failed to establish,” Judge Hamilton wrote, “that Amazon made any false statement (express or implied) of fact that actually deceived or had the tendency to deceive a substantial segment of its audience.” Using a term in a descriptively correct way, the court reasoned, does not of itself constitute “a representation that the nature, characteristics or quality of the Amazon Appstore is the same as that of the Apple App Store.” This is particularly true given that Amazon sold apps only for Android and Kindle products.
The court has yet to resolve Apple’s trademark claim.
January 29, 2013 – 11:22 am
In MM Steel LP v. Reliance Steel & Aluminum Co. et al., Southern District of Texas Judge Kenneth M. Hoyt, denied a motion to dismiss a suit filed by MM Steel LP, a steel distributor, accusing a group of steel distributors and producers of conspiring to boycott MM Steel and drive it from the market. In its suit, MM Steel claims that steel distributors American Alloy and Reliance Steel & Aluminum Co. agreed with Nucor Corp. and other steel producers to refuse to sell steel to MM Steel or its partner companies.
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. 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, 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.
January 28, 2013 – 5:06 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 drug makers 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.” 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.
January 28, 2013 – 5:05 pm
In European Commission v. Stichting Administratiekantoor Protielje and Cosselin Group NV, Advocate General Julianne Kokott, the chief legal adviser to the Europe’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.
January 28, 2013 – 2:26 pm
Senators Patrick Leahy and Chuck Grassley reintroduced previously stalled Criminal Antitrust Anti-Retaliation Act, which would extend whistleblower protections to employees who give federal prosecutors information in criminal antitrust investigations. The act would amend the Antitrust Criminal Penalties Enforcement and Reform Act (“ACPERA”), which provides leniency to guilty parties who report criminal cartels and cooperate with civil claimants. According to Leahy and Grassley, the whistleblower protections that would be created by this new bill are modeled on and are a natural extension of the Serbanes-Oxley financial accounting and corporate governance reform law. This latest bill stems from the Government Accountability Office’s July 2011 recommendation to extend ACPERA to protect not only the guilty parties, but the innocent third party informants by providing a civil remedy for those whistleblowers who experience retaliation for tipping off the DOJ to an antitrust violation.
January 28, 2013 – 12:10 pm
In JTS Choice Enterprises Inc. v. E.I. Du Pont De Nemours and Co. et al., Colorado District Court Judge William J. Martinez denied motions to dismiss filed by DuPont Co. and Metro Paint Supplies Inc. in an antitrust suit filed by JTS Choice Enterprises Inc., accusing DuPont of using its market power to wrongfully divert business from JTS to Metro. In its suit, JTS claims that DuPont forced a Denver-area DuPont paint dealer to allow Metro to purchase it and then turned a blind eye when Metro began soliciting JTS customers in breach of an agreement DuPont has with its “jobbers” – who sell DuPont paints to auto body repair shops or retailers – prohibiting them from stealing each other’s customers.
DuPont moved to dismiss JTS’ suit, claiming that since JTS sold its entire business to National Coating & Supplies Inc. a year and a half before JTS filed its suit, it must also have transferred any causes of action it had held before the sale. The court rejected DuPont’s argument, holding that although the contracts documenting JTS’ sale to National did not explicitly mention the claims in the DuPont suit, JTS’ intention not to transfer the claims was made clear in court filings indicating a JTS co-owner had notified National’s president before the sale of his plans to sue.
Defendant Metro also moved to dismiss the suit, arguing that the Colorado court did not have jurisdiction to hear the case against it because the actions alleged were undertaken by its co-defendant and subsidiary, Automotive Coatings & Equipment LLC (“ACS”). The court disagreed and held that due to Metro and ACS’ common ownership, shared marketing materials, websites, and employees, there is enough evidence to prove that Metro held over ACS the “degree of control” necessary for the court to exercise jurisdiction over Metro. According to the court, it is undisputed that ACS is a subsidiary of Metro that was created for the purpose of segregating Metro’s business in the Midwest from ACS’ Colorado dealings, so under either an agency or alter ego theory, the court has personal jurisdiction over Metro.
January 28, 2013 – 11:42 am
In Rockwell Automation Inc v. AU Optronics Corporation et al., Northern District of California Judge Susan Illston rejected LG Display Co. Ltd.’s argument that Rockwell Automation Inc.’s state price-fixing claims would lead to duplicative recovery in the multidistrict litigation over liquid crystal display panels. LG brought counterclaims and affirmative defenses against Rockwell’s Wisconsin state law claims arguing that the Wisconsin statute barred double recovery since LG had already paid to settle and continued to face claims from buyers both “above and below Rockwell on the distribution chain.” Judge Illston rejected LG’s argument and held that based on her earlier decisions in this MDL, duplicative recovery is often a “necessary consequence” from state indirect purchaser damages claims in cases alleging a nationwide price-fixing plot when federal claims from direct buyers are also involved.
January 24, 2013 – 5:06 pm
In Freedom Watch Inc. v. Organization of the Petroleum Exporting Countries, District of Columbia Judge Reggie B. Walton dismissed the latest antitrust lawsuit against the Organization of the Petroleum Exporting Countries, holding that plaintiff Freedom Watch, Inc. did not properly serve OPEC. In its suit, Freedom Watch accused OPEC of violating U.S. law by fixing oil export prices. In dismissing the suit, the court held that based on a previous Eleventh Circuit decision, there is essentially no way to legally serve OPEC unless it consented to being sued. The court stated that plaintiff’s service of OPEC by serving its U.S. attorneys was improper because OPEC never authorized the firm to accept service of process on its behalf and specifically opted not to authorize its attorneys to do so in the current case. Freedom Watch previously attempted to sue OPEC in 2008, but a Florida District Court also dismissed its suit for lack of proper service. In that case, Freedom Watch tried to serve OPEC by handing the summons and complaint to an Austrian police officer who did not work for OPEC, at a reception desk at OPEC’s headquarters; then mailing the same documents to OPEC’s headquarters through the Austrian postal system from a Vienna hotel without any option for return receipt.
January 24, 2013 – 2:33 pm
In Wholesale Grocery Products Antitrust Litigation, Minnesota District Court Judge Ann D. Montgomery granted defendants’ motion for summary judgment, and dismissed the claims of the last two plaintiffs in a suit alleging wholesale grocery suppliers SuperValu Inc. and C&S Wholesale Grocers Inc. conspired to inflate prices by entering into a non-compete agreement. The consolidated antitrust action, filed on behalf of grocery stores in 13 states, alleged that their grocery suppliers, C&S and SuperValu, violated the Sherman and the Clayton Acts by colluding to consolidate regional market power. According to the plaintiffs, C&S and SuperValu exchanged their distribution centers, located in each others’ territories, and then entered into an agreement not to solicit customers of each others’ transferred facilities for five years after the exchange.
In its portion of the suit, plaintiff D&G Inc., claimed that C&S’ absence from the Midwest market allowed SuperValu to inflate prices. The court rejected this argument, holding that although the asset exchange agreement consolidated SuperValu’s market share, D&G’s ability to switch to an alternative supplier after it grew tired of dealing with SuperValu is proof that the agreement did not create the sort of market power that would allow SuperValu to charge higher prices without losing customers.
The other plaintiff, DeLuca’s Market Corp., claimed that C&S had used its newfound market power to decrease the quality of its service and to charge DeLuca’s a higher freight rate than the one DeLuca’s had previously negotiated with SuperValu. The court rejected DeLuca’s argument as well, holding that not only were its claims contract disputes, but DeLuca’s failed to show that C&S’ prices were supra-competitive.