In Oncology Tech Inc. v. Elekta Inc. et al., Western District of Texas Judge Harry Lee Hudspeth dismissed antitrust claims asserted by medical device maker, Oncology Tech Inc., against Impac Medical Systems Inc., holding that the lawsuit did not sufficiently establish that Impac monopolized the market for a radiation therapy component used to treat cancer. Oncology Tech originally filed this suit after Impac shut down a lucrative, five-year arrangement with Oncology Tech, where Impac agreed to make Oncology Tech’s brass compensators available to its clients in exchange for Oncology Tech’s agreement to produce the devices.
In dismissing Oncology Tech’s antitrust claims, the court rejected Oncology Tech’s argument that Impac eliminated competition in the market for brass compensators. According to the court, where a plaintiff fails to define the relevant market with reference to the rule of reasonable interchangeability and cross-elasticity of demand, or alleges a proposed market that clearly does not encompass all interchangeable substitute products even when all factual inferences are granted in plaintiff’s favor, the relevant market is legally insufficient. The court held that plaintiff’s market definition was legally insufficient because there are unrestricted alternatives being produced by other companies that apparently fall within the same market.
In a separate order, the court refused to dismiss Oncology Tech’s claim against Impac under the Texas Deceptive Trade Practices Act. Although the act does not apply to transactions exceeding $500,000, the court ruled that Impac failed to show Oncology Tech paid more than that amount in a business deal that is the subject of the suit.
In Southern New England Telephone v. Palermino et al., the Second Circuit ruled that former telecommunications monopolists including an AT&T Inc. subsidiary, Southern New England Telephone Co., must offer lower, regulated rates for network interconnection services to smaller carriers and new entrants into the field. In November 2009, Southern New England Telephone filed the present suit to dispute a decision by the Connecticut Department of Public Utilities Commission in favor of the lower regulated rates. In May 2011, U.S. District Judge Warren Eginton ruled to preserve the department’s decision, after which Southern New England Telephone appealed to the Second Circuit.
The Second Circuit affirmed the lower court’s ruling, holding that Telecommunications Act of 1996 (“TCA”) requires former monopolists, including Southern New England Telephone, to offer the service at regulated rates lower than its negotiated rates to ensure that small carriers can compete fairly with the giants. According to the court, smaller competitors would be left at a disadvantage because of the monopolists’ ongoing control over much of the network infrastructure if they did not receive lower rates for interconnection services. The court further stated that it would be inconsistent with the stated purpose of the TCA to allow AT&T to charge higher negotiated rates for the interconnection service because this would impose additional costs and competitive disadvantages upon the new entrants and would allow AT&T to further exploit its status as a former monopolist.
In Federal Trade Commission v. Phoebe Putney Health Systems inc. et al., the Eleventh Circuit granted Federal Trade Commission’s motion to remand its challenge of Phoebe Putney Health System Inc.’s $195 million acquisition of a nearby rival, back to the district court, to decide whether to stop the hospitals from further integrating their operations.
In this case, FTC sought to block Phoebe Putney from acquiring Palmyra Park Hospital Inc. because the transaction would harm competition. The district court dismissed FTC’s original complaint on the ground that the state action doctrine renders the deal immune from antitrust challenge. The doctrine states that state entities are immune from antitrust challenge so long as normal competition rules are replaced by a clearly articulated state policy that provides for regulation and supervision of the challenge behavior. After the Eleventh Circuit affirmed this decision, FTC lodged a U.S. Supreme Court petition. In a unanimous decision, the U.S. Supreme Court reversed the lower court’s decision and held that the state action doctrine did not shield the hospital acquisition from federal antitrust law.
In light of the Supreme Court’s decision, FTC filed an amended complaint in district court, along with bids for a temporary restraining order and preliminary injunction to prevent Phoebe Putney and Palmyra Park from continuing to integrate until the end of an FTC administrative proceeding. But the district court informed the two sides that it did not have jurisdiction because the matter was pending at the Eleventh Circuit. This prompted FTC to file a motion requesting a swift remand of the case to the district court. The Eleventh Circuit granted FTC’s motion, holding that due to the ongoing consumer harm at issue, and the pending time-sensitive motions, it will issue its remand order swiftly, thereby facilitating needed proceedings in the district court.
In Expedite Inc. v. Plus Bags Cars & Serv LLC et al., Oregon District Judge John V. Acosta declined to dismiss a bid-rigging lawsuit brought by lost baggage delivery service, Expedite Inc., against its rival Plus Bags Cars & Serv LLC. Expedite accuses Plus of taking over a bidding service called DSI and using confidential bid information to undercut Expedite’s bids and direct business to its own subsidiary, Home Serv. Plus’ current motion to dismiss was its third attempt to dismiss the case. After the last dismissal, the judge told Expedite it needed to fix its lack of particularity regarding a vendor information form, lack of reliance, and lack of causative nexus to the alleged injury.
In Plus’ latest motion to dismiss, it agreed that Expedite had met the first condition but not the last two. Plus argued Expedite’s allegations that it would have gone directly to the airlines had it known about the rigged bidding process lacks plausibility. The court disagreed, holding that even though there was a well-established bidding process between the baggage delivery companies and the airlines, that process changed in 2009 when Plus’ subsidiary Home Serv took over the bidding process from DSI. According to the court, this was when Expedite started losing business to Plus, so it is plausible that Expedite would have directly contacted the airlines if it had learned that Plus had rigged the bidding process to ensure that its own subsidiary won the bid
The court also held that Expedite successfully pled its proximate injury element of its claim, which the judge defined as “damage to the plaintiff, resulting from the plaintiff’s reliance on defendant’s representation.” Judge Acosta held that Expedite relied on Home Serv to fairly administer the bidding process because Home Serv held out in its communications that the bidding process would be fair and based on cost, service levels, track record, and regional presence. The judge said that it is reasonably forseeable that Expedite, had it known of the rigged bidding process, would have notified the airlines of the irregularities it alleges, and attempted to negotiate directly with the airlines.
In Jim Evans Academy of Professional Umpiring Inc. v. The National Association of Professional Baseball Leagues Inc. et al., a Florida state court refused to rely on the baseball antitrust exemption to dismiss the plaintiff umpiring school’s complaint alleging that Minor League Baseball violated the state’s antitrust laws by revoking the school’s accreditation to train umpires. The court held that the exemption, which has been recognized by the federal courts for Major League Baseball, did not apply to this case. The exemption, the court held, is limited to challenges to the reserve system that allowed baseball to restrict the movement of players among teams.
April 23, 2013 – 12:32 pm
In MiniFrame Ltd. v Microsoft Corp, Southern District of New York judge Richard J. Sullivan dismissed the plaintiff’s case, concluding that Microsoft’s Windows licensing rules and entry into the multi-user market did not constitute anti-competitive conduct and predatory pricing.
MiniFrame provides a service that enables multiple users to access a single PC. It argued that by changing the terms of its Windows licensing agreements to require payment on a per-user basis instead of on a per-computer basis, Microsoft forced all customers who utilized MiniFrame’s system to license Windows. As a result, MiniFrame’s value decreased because it would save its customers less money. When Microsoft introduced its own cheaper multiuser system, it effectively monopolized the market by combining higher licensing fees with a predatorily priced multi-user service.
The court rejected the plaintiff’s allegations. Microsoft was entitled, Judge Sullivan held, to set licensing terms for its Windows operating system, and it had no obligation to work with rivals or tailor terms to their benefit. Patent holders, he believed, are permitted to “curb the development of a derivative market by refusing to license their technology or doing so only in a limited manner.” Microsoft thus was within its rights in limiting the plaintiff’s ability to reproduce and distribute its software to many users.
With respect to the predatory pricing allegations, the court held that MiniFrame failed to show, as it was required to do, that Microsoft was setting prices below cost or below industry-standard charges.
April 23, 2013 – 12:31 pm
In The Morning Star Packing Co. LP et al. v. U.S. District Court, Eastern District of California, the United States Court of Appeals for the Ninth Circuit held that the lower court had improperly denied a request for restitution by Morning Star under the Mandatory Victim Restitution Act (MVRA). The plaintiff claimed that it was a victim of former SK Foods LP CEO’s criminal price-fixing and racketeering scheme.
The MVRA provides restitution to a victim of “any offense committed by fraud or deceit” regardless of the defendant’s financial condition. An exception exists if the process of determining damages would be so complex that it would unreasonably delay sentencing. In this case, the lower court had rejected the restitution claim on the ground that the defendant could not pay and that Morning Star could file civil law suits. The Ninth Circuit held that these were illegitimate grounds on which to block the restitution request.
April 22, 2013 – 10:21 am
Several of Google’s competitors have lodged complaints with the Internet Corporation for Assigned Names and Numbers urging it to reject Google’s applications for domain names such as “.search.”; .fly”; and “.map,” Similar complaints were previously lodged when Amazon.com Inc. sought the domain name “.book.” FairSearch.org — a group that includes Microsoft Corp., Expedia Inc. and Oracle Corp. — contend that approving these application would effectively grant Google “an unfair competitive advantage . . . through the improper grant of a perpetual monopoly of generic industry terms to a single company.”
April 22, 2013 – 10:18 am
In The Standard Fire Insurance Co. v. Greg Knowles, the United States Supreme Court held unanimously that named plaintiffs in a purported class action cannot bar federal jurisdiction by seeking less than $5 million in damages.
Under the Class Action Fairness Act (CAFA), an action seeking more than $5 million in damages triggers federal court jurisdiction. The problem for the plaintiff Knowles, according to the Court, is that he lacked the authority to bind the class to the $5 million limit. Although “the precertification stipulation can tie Knowles’ hands,” the Court explained, “it does not speak for those Knowles purports to represent, for a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.”
The Court also expressed concern that plaintiffs could artificially divide class actions on a state-by-state basis, keeping each just below the $5 million threshold and thereby defeating federal jurisdiction, even though the class overall sought damages well above the threshold. Permitting such a tactic would conflict with CAFA’s objective of ensuring that important interstate cases are adjudicated in federal court.
April 19, 2013 – 12:44 pm
In Comcast Corp. et al. v. Caroline Behrend et al, the United States Supreme Court held that the Third Circuit improperly failed to consider the class’s proposed damages model before certifying the class. In a split decision, the majority held that lower courts must consider the merits before certifying a class, when necessary, to ensure that Rule 23’s requirements are satisfied.
The majority stressed that a plausible means to measure class-wide damages was not enough to move forward with class certification. The lower court must determine that the proposed method is a reasonable one. In this case, the model might well have been unreasonable because it relied on all four of the plaintiffs original liability theories when only one had been upheld by the court. “[A] model purporting to serve as evidence of damages in this class action,” Justice Scalia explained for the majority “must measure only those damages attributable to that theory.”
The dissenting justices emphasized that the case did not hold that class-wide damage calculability was an essential element of certification. Neither party addressed that issue, and the dissent emphasized that damages were simply one issue going into the calculus of whether “’questions of law or fact common to class members predominate over any questions affecting only individual members.’” The dissenters emphasized that it is well established the inability to calculate damages on a class basis does not bar class certification. “In particular, when adjudication of questions of liability common to the class will achieve economies of time and expense,” the dissenting justices observed, “the predominance standard is generally satisfied even if damages are not provable in the aggregate.”