Private antitrust litigation continues to be robust. Over the past year, there have been a number of important developments, as discussed below.
Plenty of action in class actions
Antitrust class actions remain active. Courts continue to look at factors like the ascertainability of the class, the quality of proposed damage calculation models and the viability of defined relevant time periods in making certification decisions.
One pending case concerns an alleged no-hire agreement between the Duke University and University of North Carolina schools of medicine. Seaman v Duke University, et al, Case No. 1:15-cv-00462 (MDNC). In February 2018, North Carolina district judge Catherine C Eagles certified a class of 5,400 faculty members from the two medical schools. The faculty claimed that an alleged no-hire agreement between the two schools negatively impacted their compensation and prevented them from accessing certain job opportunities. Judge Eagles considered the faculty’s common legal theory and the fact their case would require the court to look at common evidence regarding violation, impact and damages in finding class treatment appropriate. But she declined to extend the class to include non-faculty, because doing so would have introduced too much complexity and confusion for the jury in an otherwise complicated case. North Carolina has settled, but Duke remains in the case.
In July 2017, in a rare move, the Second Circuit de-certified two classes of investors who claimed that Brazilian oil company Petrobras’s long-term acceptance of kickbacks and bribes, and the resulting criminal investigation, damaged the company’s market value and drove down share prices. In re: Petrobras Securities Litigation, Case No. 1:14-cv-09662 (2d Cir 2017). While not an antitrust case, the decision has implications for antitrust class actions, as it concerned the disputed ascertainability requirement for identifying the members of a proposed class. Defendants argued that there was no administratively feasible manner for putative class members to prove that they purchased the notes in question in ‘domestic transactions,’ which is required for US securities laws to apply. The Second Circuit rejected defendants’ arguments that there is an implied requirement that membership in a class be ascertainable in an ‘administratively feasible’ manner. It held that a class is ascertainable if defined by ‘objective criteria that establish a membership with definite boundaries’. In declining to impose the heightened standard, the Second Circuit sided with the Sixth, Seventh, Eighth and Ninth Circuits, and disagreed with the Third Circuit. While it rejected the ascertainability requirement, the Second Circuit found that the requirement that individual class members prove that they purchased the notes in ‘domestic transactions’ was still relevant to the predominance requirement under Rule 23(b)(3) and vacated the lower court decision on the basis that the decision failed to address how class members would satisfy that element of their claim on a class-wide basis. This decision is an important reminder that Circuit courts can de-certify a class if they determine that the lower court failed to consider all relevant factors.
In a case that has important implications on tolling in class actions, the Supreme Court ruled in June that its American Pipe decision, which provides for tolling of the statute of limitations during the pendency of a class action, does not allow a putative class member, after a denial of class certification, to start a new, successive class action after the original statute of limitations would have expired. China Agritech, Inc v Resh et al, Case No. 17-432 (2018). If class certification is denied, unnamed class members must join an existing suit or file an individual action. The decision reversed the Ninth Circuit, but validated the First, Second, Fifth and Eleventh.
A victory for rideshare companies
In May 2018, the Ninth Circuit held that a Seattle ordinance that allows for-hire drivers to bargain collectively is not covered by state action immunity and therefore is subject to antitrust challenge. United States Chamber of Commerce, et al v City of Seattle, et al, DC No. 2:17-cv-00370-RSL (9th Cir 2018). The decision hinged on whether the ordinance was foreseeable when the state initially enacted its transportation regulations. Judge Milan Smith found no plain evidence that the state legislature had imagined allowing that sort of anti-competitive agreement among drivers and that the ordinance was not made pursuant to a clearly articulated state policy. The City of Seattle has asked for a rehearing en banc (a rehearing in front of the full Ninth Circuit), arguing that the three-judge panel did not properly interpret Supreme Court precedent regarding state action immunity.
Animal Science: foreign governments’ interpretations of law not binding
The Supreme Court recently ruled that foreign governments’ interpretations of their own laws are entitled to substantial, but not conclusive, weight in US courts. Animal Science Products, Inc et al v Hebei Welcome Pharmaceutical Co Ltd, et al, Case No. 16-1220 (2018). US purchasers of Vitamin C originally secured a $147 million price-fixing judgment against two Chinese pharmaceutical companies, which had argued that Chinese law compelled them to fix prices and exempted them from certain aspects of US antitrust law. After the Second Circuit vacated that judgment, the Supreme Court granted certiorari. In unusual practice, the court heard amici curiae argument from the Chinese Ministry of Commerce, a privilege typically only granted to the US government. The court then reversed and remanded, finding that the appellate court had deferred too heavily to the Chinese government’s interpretation of its own laws.
Jeld-Wen: third parties may be awarded damages, even after mergers clear
In 2012, home hardware company Jeld-Wen acquired Craftmaster Manufacturing, Inc, in a merger that reduced the number of door skin manufacturers from three to two. The Department of Justice (DOJ) opened a preliminary investigation into the acquisition, but took no action to prevent it, and at the time, no customers complained about the merger. But six years later, Jeld-Wen customer Steves and Sons, which originally indicated to the DOJ that it did not oppose the merger, filed suit, alleging that it had begun to receive less favorable price terms, lower product quality and worse service as a result of the deal, and that the merger violated antitrust laws. It recently won $58.6 million in damages and awaits an upcoming ruling in the federal district court as to whether Jeld-Wen must divest some of its assets to restore industry competition. Steves and Sons, Inc v Jeld-Wen, Inc, Case No. 3:16-cv-545 (ED Va). This case serves as an important reminder that private antitrust litigation is a source of continued merger enforcement, even after a deal is consummated.
Reverse payment cases continue
In the wake of Actavis in 2013, reverse payments remain an important area. In August 2017, the Third Circuit issued decisions on two separate reverse payment suits; reversing one and affirming another. In In re: Lipitor Antitrust Litigation, Case No. 14-4202 (3d Cir 2017), the court reversed the lower court’s dismissal, holding that plaintiffs had plausibly alleged schemes to artificially inflate the price of the drugs Lipitor and Effexor XR and that the lower court had imposed too stringent a pleading standard in dismissing them. Drugmakers Pfizer and Teva Pharmaceuticals appealed the Lipitor decision to the Supreme court, arguing that under Actavis, antitrust scrutiny should only apply to large and unjustified reverse payments. But in February 2018, the Court declined their petitions. Pfizer Inc, et al v Rite Aid Corp, et al, Case No. 17-752 (2018); Wyeth LLC, et al v Rite Aid Corp, et al, Case No. 17-771 (2018).
Separately, in In re: Wellbutrin XL Antitrust Litigation, et el, Case No. 13-3559 (3d Cir 2017), the court found that plaintiff purchasers of a drug had failed to show actual injury resulting from alleged reverse payment settlements between drug companies and affirmed the lower court’s holding.
Additionally, while not private antitrust litigation, the Federal Trade Commission (FTC)’s Administrative Law Judge recently issued a ruling in the agency’s first complete reverse payment trial since Actavis. In re: Impax Labs, Inc, Docket No. 9373 (2018). The administrative law judge’s decision is one of the first to apply a full rule-of-reason analysis after Actavis, finding that the benefits of the companies’ agreement outweighed any potential anti-competitive harms. FTC commissioners have granted an appeal. It will be interesting to see how the Commission treats the ALJ’s decision and how that affects private litigation in the future.
Illinois Brick: modern applications
The Supreme Court recently granted a petition for certiorari filed by Apple following its loss at the 9th Circuit. A class of consumer plaintiffs sued Apple, alleging its closed-system App Store allowed it to monopolise a purported market for iPhone app distribution, resulting in high prices for consumers. The District Court dismissed the suit under Illinois Brick, which prohibits indirect purchasers from recovering monetary damages. On appeal, the Ninth Circuit reversed, holding that consumers had a direct relationship with Apple because they purchased apps through the App Store. Apple appealed to the Supreme Court, which asked the US Solicitor General to weigh in. The Solicitor General submitted a brief in support of Apple’s position, arguing that Illinois Brick turns on the plaintiffs’ theory of harm. If plaintiffs’ alleged a pass-on theory of harm, as the plaintiffs in Apple, Illinois Brick bars recovery. The Supreme Court just recently granted certiorari and will hear this case. Apple Inc v Pepper, No. 14-15000, 846 F 3d 313 (9th Cir 2017), cert granted, No. 17-204 (18 June 2018).
Illinois Brick is under fire at the DOJ’s Antitrust Division as well. Makan Delrahim, Assistant Attorney General for Antitrust, recently stated his desire to repeal both Illinois Brick and Hanover Shoe, two long-standing Supreme Court decisions that often keep indirect purchasers from recovering antitrust damages. Private litigants should be mindful of this moving forward, as it would be a marked change from decades of established precedent.
Cases to watch
There are currently several large price-fixing civil class actions to watch as they continue to develop:
- Automotive Parts Artitrust Litigation, Case No. 2:12-md-02311 (ED Mich), Judge Marianne O Battani.
- In re: Generic Pharmaceuticals Pricing Antitrust Litigation, Case No. 2:16-md-02724 (ED Pa), Judge Cynthia M Rufe.
- In re: German Automotive Manufacturers Antitrust Litigation, Case No. 3:17-md-02796 (JPML), Judge Charles R Breyer.
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