On March 27, 2013, in Comcast Corp., et al. v. Behrend, et al., No. 11-864, the U.S. Supreme Court ruled 5-4 that a district court may not certify a class action under Federal Rule of Civil Procedure 23(b)(3) without first determining that damages may properly be awarded on a classwide basis. The decision can be found here.
Respondents initially filed suit against Comcast Corporation and its subsidiaries, alleging that Comcast had conspired with other cable providers to segment the Philadelphia cable market so that providers would be able to maintain exclusivity over the segments, in violation of Section 1 and Section 2 of the Sherman Act. Respondents claimed that Comcast “clustered” their cable television operations within a particular region by swapping their systems outside the region for competitor systems inside the region, thereby eliminating competition and holding prices for cable services above competitive levels. Respondents sought to certify a class under FRCP 23(b)(3), which requires that “the questions of law or fact common to class members predominate over any questions affecting only individual members.” Read More
On March 19, 2013, the U.S. Supreme Court unanimously held in Standard Fire Ins. Co. v. Knowles, No. 11-1450, that class representatives cannot circumvent the Class Action Fairness Act (CAFA) by stipulating to limit their damages claim to less than $5 million to keep their case out of federal court. The decision is available here.
CAFA, which Congress enacted in 2005, provides that federal district courts (subject to certain exceptions) have jurisdiction over class actions if the proposed class has 100 or more members, the parties are minimally diverse, and the amount in controversy exceeds the aggregate sum or value of $5 million. Since CAFA was enacted, lawyers for class action plaintiffs have tried to avoid federal court jurisdiction under CAFA by stipulating that they will not seek more than $5 million for the putative class. In Knowles, the plaintiff sought to employ this very tactic. When the defendant removed the plaintiff’s case from Arkansas state court to federal court, the district court held the plaintiff’s stipulation that the class would not seek to recover total aggregate damages more than $5 million was sufficient for the case to fall outside the reach of CAFA, and remanded the case to state court. Read More
On Feb. 19, 2013, the U.S. Supreme Court issued a unanimous opinion in FTC v. Phoebe Putney Health System, Inc., 568 U.S. __ (2013), holding that a Georgia law creating and empowering local health authorities to acquire and lease hospitals did not “clearly articulate and affirmatively express” an intent to allow acquisitions substantially lessening competition, and therefore did not trigger so-called state action immunity. The decision is available here.
In Phoebe Putney, the Hospital Authority of Albany-Dougherty County owned one of two hospitals in the county, Phoebe Putney Memorial Hospital, which was in turn managed by Phoebe Putney Health System, Inc. (PPHS). The Hospital Authority decided to purchase the other hospital in the county and lease it to PPHS. The Federal Trade Commission sued to enjoin the transaction under Section 5 of the FTC Act and Section 7 of the Clayton Act. The District Court denied the FTC’s request on the basis that the transaction was immune under the state action doctrine. The 11th Circuit affirmed, holding that the state legislature would have foreseen that conduct such as the acquisition would occur and could lessen competition, given the broad powers state law granted to the local authorities to purchase and lease hospitals. Read More
On March 4, 2013, the 11th U.S. Circuit Court of Appeals issued an opinion in Sunbeam Television Corp. v. Nielsen Media Research, Inc., affirming a lower court ruling that Sunbeam lacked antitrust standing to pursue Section 2 claims alleging exclusionary conduct by Nielsen, which held an undisputed monopoly in the market for “television audience measurement services,” or television ratings. The decision is available here.
Sunbeam, a Miami-area broadcaster, purchased ratings from Nielsen. Sunbeam alleged that, among other things, Nielsen violated antitrust laws by excluding competition from three potential competitors: Arbitron, ADcom, and erinMedia. Sunbeam claimed that as a customer, its burden to show causation between Nielsen’s exclusionary conduct and Sunbeam’s injury was less than that required of a competitor. Specifically, Sunbeam claimed that it need not establish the same degree of preparedness to enter the market by competitors Arbitron, ADcom, and erinMedia that would be required if one of the competitors brought the claim. Read More
On Feb. 19, 2013, the 3rd U.S. Circuit Court of Appeals in In re Baby Products Antitrust Litigation, vacated the district court’s approval of a class action settlement that included a cy pres provision because there was not sufficient information to determine whether the settlement provided an adequate direct benefit to the class members. The decision is available here.
A cy pres provision in a settlement typically allows any settlement funds leftover after distribution to the class members to be distributed to a third party (typically, a charity) if the third party’s activities relate to the injury suffered by the class. The settlement in In re Baby Products was for $21.5 million, but only $3 million was ultimately distributed to the class, leaving cy pres recipients with $18.5 million. Although the 3rd Circuit joined the 1st and 9th Circuits in generally approving the permissibility of cy pres provisions in class action settlements, the Court ultimately vacated the district court’s approval of the settlement—as well as the attorneys fees awarded based on it—because the parties never advised the district court that such a minimal amount would go directly to the class members.
For attorneys contemplating a cy pres provision in a settlement agreement, the 3rd Circuit’s opinion provides important guidance. For example, cy pres provisions are more likely to survive scrutiny where individual distributions are impractical or too difficult. A cy pres distribution should be a small percentage of the total settlement funds, with direct distributions to the class being the primary focus of the settlement. Further, if the district court does not receive sufficient information from the parties to make this determination, the court might withhold approval of the settlement until information is provided.
On Feb. 14, 2013, the 9th U.S. Circuit Court of Appeals revived AT&T’s California Cartwright Act claims against various manufacturers of thin film transistor liquid crystal display screens in AT&T Mobility LLC v. AU Optronics Corp., No. 11-16188. The decision is available here.
AT&T’s claims, which accused Samsung Electronics Co., LG Display Co., Sharp Corp., and other manufacturers of conspiring to fix the prices of TFT-LCDs used in AT&T’s products, had been dismissed in November 2010. See AT&T Mobility LLC v. AU Optronics Corp., et al., No. 09-4997 (N.D. Cal. Nov. 12, 2010). The district court had held that AT&T failed to establish a sufficient nexus between California and its claims, because AT&T did not allege that it purchased TFT-LCDs screens in California.
In the 9th Circuit, AT&T argued that its allegations regarding defendants’ price-fixing activities in California established a sufficient link to the state to allow their Cartwright claims to proceed beyond the motion to dismiss stage. The 9th Circuit agreed, ruling that “in-state conduct that causes out-of-state injuries can be relevant to a due-process analysis” under the Cartwright Act. Furthermore, the 9th Circuit noted that the application of California law would not undermine the policies of other states.
On March 14, 2013, the jury in In re Vitamin C Antitrust Litigation, 06-MD-1738 (E.D.N.Y.) returned a $54.1 million verdict ($162.3 million post-trebling) for the direct purchaser class plaintiffs after a trial that lasted nearly three weeks. The plaintiffs, in what is the first antitrust case ever filed against Chinese companies in a U.S. court, alleged that the four major Chinese producers of vitamin C conspired to fix prices and production levels of vitamin C exported from China to the United States. The defendants, with support from the Ministry of Commerce of the People’s Republic of China, mounted a defense based on the foreign sovereign compulsion doctrine and argued that although the Chinese vitamin C producers coordinated on pricing and production, the Chinese government required them to do so.
Of the four manufacturer-defendants, one was not sued for monetary damages because its sales contracts contained arbitration clauses that required any claims for such damages to be resolved by arbitration. Another manufacturer settled the case before trial for $9 million. A third manufacturer settled the case during the trial for $22.5 million. The jury found the overcharges amounted to $54.3 million dollars. After trebling and a reduction for amounts paid in settlement, the defendant against which the court entered judgment will be liable for $131.7 million plus attorney’s fees.
On March 26, 2013, the Department of Justice issued a business review letter in which it declined to state its enforcement intentions regarding a proposed exchange for the trading of unit license rights (ULRs) to sets of patents. The request for the business review letter was made by Intellectual Property Exchange International, Inc. (IPXI) with respect to its creation of a proprietary market for patent licenses by which the company would obtain exclusive patent licenses and then sublicense them through a tradable instrument called a ULR. A ULR would consist of standardized licenses for a defined set of patents and uses under terms and conditions set jointly with patent holders. The DOJ’s letter acknowledges that the business model could result in efficiencies in licensing patents, including facilitating or advancing F/RAND (Fair, Reasonable, and Non-Discriminatory) licensing, and therefore could benefit consumers. At the same time, the DOJ explains that because IPXI could not predict which patents and markets might be at issue, it was unable to conduct the fact-intensive analysis needed to determine possible anticompetitive effects associated with, among other things, pooling of patents. Accordingly, the DOJ declined to announce its enforcement intentions. The business review letter is available here.
On Jan. 31, 2013, the Department of Justice filed an antitrust lawsuit challenging Anheuser-Busch InBev’s proposed acquisition of total ownership and control of Grupo Modelo, a Mexican company that owns the Corona brand. The parties have informed the D.C. District Court judge handling the case that they are close to settlement. Meanwhile, a private action on behalf of nine individual beer drinkers was filed in the Northern District of California on March 22, 2013, seeking to block the merger.
Anheuser-Busch and Modelo are the largest and third largest beer firms, respectively, in the U.S. beer market and collectively control about 46 percent of that market. According to DOJ, the $20.1 billion transaction would substantially lessen competition in the U.S. beer market as a whole, as well as in 26 metropolitan areas across the U.S., and result in higher beer prices for consumers, with fewer new products to choose from. DOJ argued that because of the U.S. beer market’s size and existing high concentration, even a small increase in the price of beer could result in billions of dollars to harm to American consumers. The lawsuit, filed in Washington, D.C., paints Modelo as an important competitor that puts pressure on Anheuser-Busch to maintain or lower prices, particularly in states like California, New York, Texas and other markets.
On March 20, U.S. District Court Judge Richard Roberts granted an extended stay of the government’s suit until April 9, after the parties informed the court that they were close to a settlement. The court advised the parties that if an agreement is reached pursuant to the Antitrust Procedures and Penalties Act, the parties should submit a statement to the court illustrating how the settlement would eliminate the anticompetitive effects of the merger.
On Jan. 10, 2013, the U.S. Department of Justice sued Bazaarvoice Inc., alleging that its acquisition of PowerReviews Inc. in June 2012 substantially lessened competition in the market for online platforms for product ratings, and therefore violated Section 7 of the Clayton Act. The DOJ seeks divestiture of enough Bazaarvoice assets to create a separate competing business that can replace PowerReviews in the marketplace. See U.S. v. Bazaarvoice, Inc., 13-CV-0133 (N.D. Cal.). The complaint is available here.
Bazaarvoice and PowerReviews each provide online platforms for product ratings and reviews. Online retailers and manufacturers use the platforms to collect consumers’ product reviews and display them on their Web sites. According to the DOJ, Bazaarvoice is the primary commercial supplier of these ratings platforms, and prior to the acquisition, PowerReviews was its main competitor. The DOJ alleges that price competition between the two suppliers resulted in substantial discounts for many retailers and manufacturers, as PowerReviews had positioned itself as a low-price alternative to Bazaarvoice. The DOJ further argues that the acquisition of PowerReviews has given Bazaarvoice the ability to raise the price of its platform to anticompetitive levels. In answering the DOJ’s allegations, Bazaarvoice maintains that there remains intense competition in the market for online ratings platforms, and that the DOJ failed to consider other major competitors and had too narrowly defined the market. For example, Bazaarvoice points to software that integrates Facebook features such as “posts” and “likes,” as well as providers of ratings and reviews technology used for travel, restaurants, and local businesses. The case is scheduled for trial in September 2013.