Restraint Of Trade

Twombly Extends Its Reach

Until today, there could be some debate about the applicability of Twombly to non-antitrust cases.  No longer.  Not after today's Supreme Court decision in Ashcroft v Iqbal, No. 07-1015 (U.S. May 18, 2009).

The decision is here: Download 07-1015

The case involved a Bivens action against former Attorney General Ashcroft, and others, by a Pakistani national alleging that he was detained and held under restrictive conditions on the basis of his race, religion, or national origin. 

As discussed at SCOTUS blog, here , the Supreme Court held that high officials like Ashcroft cannot be held liable for misconduct of actors down the ranks, but only for their only misconduct.  The decision thus obviously taps into the ongoing debate about culpability for the torture of terrorism suspects.

But, more significantly, for antitrust practitioners, the decision was made on pleading grounds, applying Twombly.  Here, the decision breaks new ground in a couple of ways:

First, the Supreme Court expressly lays out the role for "judicial experience and common sense" in conducting the plausibility analysis:

    "Determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense."

It is ironic that this expansion of judicial discretion is being championed by the conservative wing of the Court.

Second, the Court identified some statements it found "conclusory," including that:

• petitioners "knew of, condoned, and willfully and maliciously agreed to subject [him]" to harsh conditions of confinement "as a matter ofpolicy, solely on account of [his] religion, race, and/or national origin and for no legitimate penological interest."
• Ashcroft was the "principal architect" of this invidious policy,  and

• Mueller was "instrumental" in adopting and executing the policy.  (See Slip Op at 16-17)

   

As the dissent argues, it is not at all clear that these allegations should be disregarded as "conclusory."  They do plead conclusions, but to a degree, all factual allegations do. 

The lasting legacy of the decision, from a pleading perspective, will undoubtedly be an ever increasing debate over what distinguishes a cognizable factual allegation from a "conclusory" one.  That line has not yet been satisfactorily drawn.

Class Arbitration Remains Vital

The Second Circuit ruled on election day that the plaintiffs in the long-running Parcel Tanker antitrust litigation could seek to proceed on a class-wide basis before the arbitration panel overseeing the case.  This sends a strong indication that the trend toward courts and arbitrators permitting class arbitration is likely to continue.

The decision is here: Download parcel_tanker_2d_cir.pdf

The case was brought in federal district court by direct purchasers of parcel tanker transportation services globally against parcel tanker companies, alleging a global conspiracy to restrain competition in the world market for parcel tanker shipping services.  Parcel tankers are special ships designed to transport certain speciality liquids, such as chemicals, edible oils, and acids. 

After the suit was filed, the defendants convinced the Second Circuit (on appeal from an earlier ruling) that the parties' shipping transactions were governed by contracts with enforceable agreements to arbitrate and that the antitrust claims were arbitrable.  The arbitration clauses in question were silent, however, on whether arbitration may proceed on a class-wide basis.

Plaintiffs filed a demand for class arbitration, and the panel determined that the arbitration clauses permitted class arbitration.  The defendants petitioned the district court to vacate the ruling, arguing that it showed a "manifest disregard" for the law.  The district court agreed and vacated the ruling.  However, on appeal, the Second Circuit has now upheld the panel's ruling.  The case (which my firm but not me) works on, will now go back to the panel, which will decide whether, in fact, the case should be arbitrated on a class-wide basis.

In a context where companies are seeking to slip arbitration clauses ever more widely into contracts with purchasers, the Second Circuit's ruling importantly affirms that the arbitration proceeding can accomodate class-wide relief.

Report on today's DDAVP argument in Second Circuit

The Second Circuit finally heard argument today in the long-running In re DDAVP Antitrust Litigation, 5-cv-2237 (SDNY).

The case was brought by purchasers of the pharmaceutical drug desmopressin acetate ("DDAVP") back in early 2005, alleging that Defendants Ferring and Aventis took certain steps, including wielding a patent obtained by fraud on the Patent Office, to keep generic competition to DDAVP off of the market, thereby causing purchasers of DDAVP to pay higher prices than they should have. 

In November 2006, Judge Charles Brieant -- who sadly passed away earlier this year -- dismissed Plaintiffs' claims  holding, among other things, that purchasers of a patented product do not have standing to bring a claim under the antitrust laws to recover damages in the form of overcharges, even if the patent covering the product was procured through outright, intentional fraud on the Patent Office and even if it clearly led to purchasers being economically harmed.  The decision is here:

Download ddavp_mtd_order.pdf

It's a long story why the case took so long to be heard - suffice it to say that hopefully today's argument will spell the issue's impending resolution, in the Second Circuit at least.

I don't profess to have any knowledge about the merits of the case itself under its facts, but I am not alone in believing the standing issue to be quite significant:   it goes to the heart of the antitrust law's ability to deter corporate misconduct and to provide a remedy for those directly harmed by anticompetitive conduct. 

[full disclosure - I worked on the case for a short time awhile ago, but do not work on it anymore.]

If antitrust law cannot do these things, what can it do?

As Judge Livingston (who presided today, despite being the Court' s most recent appointee) suggested while quizzing Ferring's counsel, if harmed purchasers simply can't recover as a matter of law, the deterrent effect of the Clayton Act will be substantially undercut.  It was nice to hear a jurist specifically focusing on the issue of deterrence - which is often woefully neglected.

Nor is this issue just a concern to the private bar.  In the DDAVP case, the DOJ and FTC took the unusual step of submitting a powerful joint amicus brief  favoring the plaintiffs on the standing issue.

James Fredericks argued today for the DOJ and did a nice job, as did David Sorensen for the plaintiffs. 

LCD price-fixing case can proceed

Judge Susan Illston (ND Cal) ruled Monday that  purchasers alleging a price-fixing conspiracy by a number of American and foreign companies that manufactured and sold Thin Film Transistor Liquid Crystal Display ("TFT-LCD") panels and products could proceed past the pleading stage.  The order is here: Download lcd_mtd.pdf

TFT-LCDs are used in a number of products, including computer monitors, laptop computers, televisions, and cellular phones.  Plaintiffs allege that defendants fixed prices of TFT-LCD products over about a 10-year period beginning in January, 1996.

Judge Illston rejected defendants' argument that the complaints failed to allege enough facts to demonstrate a plausible basis for a claim to relief under the Supreme Court's 2007 decision in Twombly. 

Judge Illston noted, for example, that the complaints allege complex and unusual pricing practices by defendants, which cannot be explained by the forces of supply and demand, and that defendants had offered pretextual reasons for price increases. 

The complaints also allege specific instances of invitations to agree and subsequent agreements.  "Courts have held that a conspiracy to fix prices can be inferred from an invitation, followed by responsive assurances and conduct." 

Lead Counsel appointed in Municipal Derivatives Antitrust Litigation

SDNY Judge Victor Marrero has appointed Cohen Milstein Hausfeld & Toll, Boies Schiller & Flexner, and Susman Godfrey as interim co-lead counsel on behalf of the proposed class in the Municipal Derivatives Antitrust Litigation, in which plaintiffs allege bid rigging and price fixing in the municipal derivatives market.

The Order is available here:  Download muni_derivatives_order.pdf

Previously, the Judicial Panel on Multidistrict Litigation had centralized the related actions filed around the country in the SDNY. 

Classes Certified - Albany Nurses & Polyether Polyols

Two significant class certification decisions were reached this week.

In a case alleging a conspiracy to suppress wages paid to Registered Nurses, the Northern District of New York certified a class of:  "All persons employed by any defendant or co-conspirator to work in a hospital in the Albany MSA as an RN at any time from June 20, 2002 until the present."

In the decision - Download 72808_nurse_wages.pdf - the Court found that certification is appropriate with respect to whether there was a violation of antitrust law and whether there has been injury to the class that the Sherman Act was designed to prevent.

In a case alleging a conspiracy to fix prices of polyether polyol products, the District of Kansas certified a class of direct purchasers of polyether polyol products (with certain exclusions) from January 1, 1999 through December 31, 2004 in the United States and its territories.  That decision is available here:  Download 72908_polyether_polyol.pdf