Blawgletter®

Feds Fight Section 1 Blitz; Making a Hole for NFL to Run Through? (Update)

The Antitrust Division said in May that it thought the Supreme Court shouldn't take the case -- you know, the one that let the National Football League get away with conspiring to halt competition for fan headgear sales.  The Court grabbed it anyway. 

Today, the AD said vacate and remand.  Will the Justices see things the agency's way this time?

Blawgletter won't hold our breath.  The Roberts Court seems to get an endorphin rush each time it opens a new way for dominant firms to escape antitrust liability.  We called the Decision Below "silly" -- mainly because the Seventh Circuit declared the opposite outcome "silly".

Vermont Law School Professor Michael McCann's approach in "American Needle v. NFL:  An Opportunity to Reshape Sports Law" (forthcoming in Yale L.J.) (downloadable here) looks interesting:  "[T]he Supreme Court should reverse American Needle and encourage Congress to engage its ultimate authority over statutory antitrust law" by granting narrow exemptions for sports leagues like the NFL.

Update:  The American Antitrust Institute and the Consumer Federation of America filed a joint amicus brief.  They summarize their points thus:

1. Single-entity treatment under Copperweld requires that an entity be controlled by those with legal and economic incentives to act for the interests of the entity as a whole.  Sports leagues and join ventures that are controlled by independent economic actors, like the NFL, are not single entities. The Seventh Circuit’s holding that the NFL is a single entity because it produces a product for which cooperation is essential is inconsistent with NCAA and numerous other cases that treat the degree of integration of a joint venture as a rationale for applying the rule of reason, not exemption from § 1 of the Sherman Act. The Seventh Circuit’s extension of immunity beyond the production of football games to unnecessary and anticompetitive restraints on related activities is also inconsistent with the well settled framework for analyzing restraints related to an efficiency-enhancing integration. Even if the NFL were a single entity when collectively licensing the teams’ logos, the agreement not to license outside the venture would be subject to scrutiny under § 1.

2. Extending Copperweld to sports leagues and other highly integrated joint ventures would open a huge gap in the enforcement of the antitrust laws. It would permit the leagues to engage in anticompetitive conduct, and undermine enforcement against unnecessary and anticompetitive restraints by otherwise legitimate joint ventures in many industries. including those targeted by ongoing initiatives of the Justice Department and FTC.

3. There is no basis for immunizing sports leagues or other joint ventures because of the expense and supposed chilling effect of the rule of reason. Congress has repeatedly rejected the type of broad immunity respondents seek here. Rather, it has enacted narrow immunities for sports leagues and joint ventures in other industries that would be superfluous under respondents’ reading of Copperweld, and has otherwise rejected immunity even for extremely valuable joint ventures engaged in research and development and standard setting.

Authentic Nephrology Gibberish: Tenth Circuit Incants "No Antitrust Duty" of linkLine

Boy howdy, those judges in the Tenth Circuit sure do know their antitrust!  Yeeeeehiiiii!

That court mystified Blawgletter earlier this year in a like case.  See "Authentic Ski Resort Gibberish; Tenth Circuit Boots Antitrust Claim".

The new ruling surprises us less, for it draws on verbal hijinks the Supreme Court performed a mere seven days after the ski resort decision came out.  See "Squeeze This! -- Supremes Find No "Antitrust Duty" Not to Thwart Dependent Competitor".

In Four Corners Nephrology Assocs., P.C. v. Mercy Medical Center of Durango, No. 08-1231 (10th Cir. Sept. 29, 2009), a Unanimous Panel held that a nephrologist -- a kidney specialist -- couldn't prove two pieces of his antitrust claim against a hospital.  The doctor alleged that a Four Corners medical center -- which we infer faced zero competition in the area -- monopolized the local nephrology market by refusing to let him practice his medicine within its walls.  The claim failed, the court held, both because the dominant medical supplier had "no antitrust duty to share its facilities" and because the plaintiff suffered no "antitrust injury".

The second point would've done the case in by itself and strikes us as sound.  Dr. Bevan didn't want to compete so much as to get his piece of the Mercy nephrology monopoly.

But the first point -- about "no antitrust duty" -- looks troubling to us.  As we said when the Supremes decided linkLine on February 25:

Blawgletter suspects that the tag line for linkLine will come in a neat three-word package:  "no antitrust duty", a phrase that doesn't appear in Trinko or any other Court decision.  No duty to do this, no duty to do that.  And we imagine that The Current Majority will not decide a single case in which they conclude that a section 2 defendant violated any "antitrust duty" whatever.

The Tenth Circuit don't deserve blame for parroting the linkLine "no antitrust duty" formula -- just for doing it unnecessarily.

 5:3-10.

First Circuit Upholds Class-wide Damages in AWP Drug Case

 
Zoladex® suppresses sex hormones.

AstraZeneca told people it got an average wholesale price of $X for its Zoladex® drug when it in fact received a far lower AWP due to discounts and rebates.  The falsely high AWP let Zoladex® fetch more money per dose, enriching doctors who charged the AWP but got discounts and rebates that cut their actual cost by a large margin.

What to do?  If you paid more than you should have, you bring a class action.  You allege that AstraZeneca cheated Massachusetts payors and thus ran afoul of the Commonwealth's General Laws Chapter 93A.  And, by golly, you win at trial.

The First Circuit yesterday affirmed in all respects.  The court deemed AstraZeneca's conduct wrongful under Chapter 93A because it fooled payors into shelling out more than they would have if they'd known and expected a big spread between the public AWP and the AWP after the rebates and cuts.  Their Honors also rejected AZ's preemption and Daubert forays.  Blue Cross Blue Shield of Massachusetts v. AstraZeneca Pharmaceuticals LP, No. 08-1056 (1st Cir. Sept. 23, 2009).^*

But the part that got Blawgletter's blood pumping related to AstraZeneca's attack on the class aspects of the case.  The trial court, AZ argued, should've let the drug-maker show that some class members didn't care and would've paid the same price even if they knew the size of the spread -- which manner of trying the case would've put a big strain on class treatment.  AZ also said the trial court shouldn't have let the plaintiffs show "aggregate damages" of around $13 million.  The First Circuit nixed both points.

On the first one, the panel said that "it would quickly undermine the class-action mechanism were we to find that a district court presiding over a class action lawsuit errs every time it allows for proof in the aggregate."  Id.  As for the second point, the court noted that "[t]he use of aggregate damages calculations is well established in federal court and implied by the very existence of the class action mechanism itself."  Id.  "[T]he imprecision, if any, [in toting up class-wide damages] was negligible."  Id.

Hooray!

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*  Note that the First Circuit does two things that make its opinions hard to get to online:  It doesn't use pages (just a stream of html); and it doesn't give each opinion its own URL, making direct access by hyperlink impossible.

Second Circuit Revives CO2 Complaint; Global Warming = Public Nuisance?

Blawgletter's firm represents Kivalina, Alaska.

Blawgletter can make a fair guess why Connecticut v. Am. Elec. Power Co., Inc., No. 05-5104-cv (2d Cir. Sept. 21, 2009), came out after Associate Justice Sonia Sotomayor cleared the Senate last month.  Had it preceded the event -- and had Her Honor joined with her colleagues in the opinion -- it would have made a loud buzzing sound in the Senate chamber.  And the buzz would have come from the cutting of a wide swath for global warming cases through the U.S. judiciary primeval.

New York City, several states, and three land trusts sued six power companies for burning fossil fuels and thus flinging carbon dioxide in big amounts into the air.  They alleged that the extra CO₂ warmed the globe, setting in train climate change like you've never seen -- smaller snowpacks in the Sierra Nevadas plus all this:

[I]ncreased illnesses and deaths caused by intensified and prolonged heat waves; increased smog, with a concomitant increase in residents’ respiratory problems; significant beach erosion; accelerated sea level rise and the subsequent inundation of coastal land and damage to coastal infrastructure; salinization of marshes and water supplies; lowered Great Lakes water levels, and impaired shipping, recreational use, and hydropower generation; more droughts and floods, resulting in property damage; increased wildfires, particularly in California; and the widespread disruption of ecosystems, which would seriously harm hardwood forests and reduce biodiversity.

Am. Elec. Power, slip op. at 9.

The two-judge panel rebuffed every thunderbolt the power titans hurled at the complaint -- non-justiciable political question, standing, failure to state a claim for federal common law nuisance, and displacement of the claim by other federal law.

We can only guess why the opinion took over three years after oral argument (on June 7, 2006) to emerge.  Better late than never.

 The result doesn't shock our feed.

Do Fake Persons Hold Right to "Personal Privacy"?

The Federal Communications Commission denied an attempt by AT&T to block the agency from turning over papers that AT&T gave the FCC during a probe into the company's overcharging ways.  AT&T cited Exemption 7(C) in the Freedom of Information Act, which makes many federal records open to the public.  5 U.S.C. § 552(b)(7)(C).  The 7(C) proviso saved AT&T from "an unwarranted invasion of personal privacy" even though its personhood existed only in the realm of fiction.

The Third Circuit bought the argument.  The panel held that, because the FOIA defines "person" to include "corporation", the "personal" in "personal privacy" must mean of or pertaining to, among other things, a corporation.  AT&T Inc. v. Federal Communications Comm'n, No. 08-4024 (3d Cir. Sept. 22, 2009). 

Blawgletter admits that the statute could've done a better job of saying whose privacy it wanted to protect.  It might've said, for instance, "personal (including corporational) privacy".  Or "personal secrecy".

We prefer the secrecy solution.  Because all the world knows that corporations have no right to privacy.

Pricing Didn't Count as Trade Secret in Oklahoma, Tenth Circuit Rules

Your best salesmen quit and joined your toughest rival in the Tulsa "metals" niche.  And they, like, totally disrespected their covenants not to compete.  Plus they cut just enough off the secret price you quoted a good customer to steal the business!

Except you didn't tell the customer to keep the quote secret.  You lose, the Tenth Circuit held, on your trade secret claim.  Stainless Steel, L.P. v. Sappington , No. 08-5127 (10th Cir. Sept. 21, 2009) (applying Oklahoma law).

Antitrust Division Objects to Google Books Pact

Last week, the Antitrust Division of the U.S. Department of Justice filed a Statement of Interest of the United States of America Regarding Proposed Class Settlement in the Google Books case, The Authors Guild, Inc. v. Google, Inc., No. 05 Civ. 8136 (DC) (S.D.N.Y. Sept. 18, 2009).  The press release says:

WASHINGTON — The Department of Justice today advised the U.S. District Court for the Southern District of New York that while it should not accept the class action settlement in The Authors Guild Inc. et al. v. Google Inc. as proposed due to concerns of the United States regarding class action, copyright and antitrust law, the parties should be encouraged to continue their productive discussions to address those concerns. In its statement of interest filed with the court, the Department stated:

"Given the parties' express commitment to ongoing discussions to address concerns already raised and the possibility that such discussions could lead to a settlement agreement that could legally be approved by the Court, the public interest would best be served by direction from the Court encouraging the continuation of those discussions between the parties and, if the Court so chooses, by some direction as to those aspects of the Proposed Settlement that need to be improved. Because a properly structured settlement agreement in this case offers the potential for important societal benefits, the United States does not want the opportunity or momentum to be lost."

In its filing, the Department proposed that the parties consider a number of changes to the agreement that may help address the United States' concerns, including imposing limitations on the most open-ended provisions for future licensing, eliminating potential conflicts among class members, providing additional protections for unknown rights holders, addressing the concerns of foreign authors and publishers, eliminating the joint-pricing mechanisms among publishers and authors, and, whatever the settlement's ultimate scope, providing some mechanism by which Google's competitors can gain comparable access.

The settlement agreement between Google and the authors and publishers aims to resolve copyright infringement claims brought against Google by the Authors Guild and five major publishers in 2005 raised by Google's efforts to digitally scan books contained in several libraries and make them searchable on the Internet. The District Court's hearing on the proposed settlement is scheduled to take place on October 7, 2009.

ABA Journal Calls for Blawg 100 Advice, Retains Goofy Categories

The ABA Journal each year puts out a list of the 100 law blogs that won the most online votes.  In 2008, the top ballot-getter won 2,050; the last place blawg drew a mere 25.

The magazine has issued a call for "amici" comments:

Which blawgs should we include in our annual list of the 100 best legal blogs in December? We’d like your advice.

Tell us about a blawg you read regularly that you think other lawyers should know about. Keep it pithy—you have a 500-character limit. We’ll be including some of the best comments in our coverage.

Some additional tips:

• We’re not interested in “occasional” blawgs—blawgs you name should be updated at least weekly.
• We’ll ignore comments from authors suggesting their own blawgs. That’s just plain tacky.
• Campaigns to flood us with comments about a particular blog will turn us off. And you don’t want to do that, because the editors make the final decisions about what’s included in the Blawg 100.

Friend-of-the-blawg briefs are due no later than Friday, Oct. 2.

Blawgletter notes that the Blawg 100 seems desirous of keeping its classing system, which throws the bestest blawgs in 10 piles: 

• News
• Crime
• Professors
• Niche
• Technology
• Quirky
• Careers
• Students
• Podcasts
• Regional

 Our feed fills a quirky news niche.

The Black Hole of SLUSA; Sixth Circuit Okays Oblivion (Update)

You might've thought that, after the dot com bubble popped in 2000 and Enron melted down a year and a half later, Congress might've rued the free passes it gave to Bad Acters under the Private Securities Litigation Reform Act of 1995. 

But that August Body, a decade beyond the PSLRA, handed out more of the sweet sweet candy.  Witness the Class Action Fairness Act of 2005.  CAFA swept lots of state court class actions into federal court, where pro-CAFAites hoped they would die.  Many did.

And let's not forget the Securities Litigation Uniform Standards Act of 1998.  SLUSA bars just about any class action that asserts a state law claim having the merest whiff of securities fraud about it.

A black hole sucks all things close by -- including light! -- into itself.  A black hole converts stuff into non-stuff.  Nothing escapes a black hole.

A black hole, if it had sentience, might envy SLUSA.

For SLUSA reaches far beyond the usual range of federal courts.  It ties a tether to, and puts the stink of death on, all class state law claims so long as the complaint or (in Texas and elsewhere) the petition "covers the prohibited theories, no matter what words are used (or disclaimed) in explaining them."  Segal v. Fifth Third Bank, N.A., No. 08-3576, slip op. at 6 (6th Cir. Sept. 17, 2009) (emphasis supplied).   

Allege negligence, SLUSA gets you.  Try breach of fiduciary duty, as Daniel Segal did, and SLUSA attacks.  Go with tortious interference, defamation, trespass to chattels, trespass quare clausum fregit, battery, deceptive trade practices, theft of trade secrets, conversion, breach of contract, breach of warranty, monopolization, civil conspiracy, price fixing, allocation of customers, even nuisance -- and yet SLUSA awaits.

The claims in Segal bought the farm because they alleged that Fifth Third Bank betrayed trust account customers by using its control over funds in their accounts to buy products that enriched the bank but cost the customers.  The fact that the bank (allegedly) used deception to help its scheme proved fatal.

Nor did the court weep for the demise of class action treatment:

Segal claims that this approach allows SLUSA to "eliminate[] any remedy against an unfaithful fiduciary" short of removing the trustee.  Appellant's Letter Br. at 8.  "Congress," Segal adds, "could not have intended to prevent trust beneficiaries from pursuing damage claims for mismanagement against trust fiduciaries."  Id.  Yet Congress has done nothing of the sort.  "The Act does not deny any individual plaintiff, or indeed any group of fewer than 50 plaintiffs, the right to enforce any state-law cause of action that may exist."  [Merrill Lynch, Pierce, Fenner & Smith, Inc. v. ]Dabit , 547 U.S. [71,] 87 [(2006)].  SLUSA leaves open many avenues for claimants like Segal to vindicate their rights.

Segal, slip op. at 8.

Their Honors don't say what "avenues" the Segals of the world might now tread in their hopeful journey toward an award.  Nor do they concern themselves with the fact that SLUSA makes uneconomic -- on purpose -- the pursuit of state law claims by any but large individual claimants.  Or the fact that federal courts may kill even that way to go by consolidating 49 individuals' case with another one involving similar claims.

 It's really most sincerely dead.

Rape in Iraq Claim Falls Outside Arbitration Clause, Fifth Circuit Holds

Jamie Lee Jones took a job in 2005 with Overseas Administrative Services, a unit of Halliburton Company/ Kellog Brown & Root.  Within days of getting to her new home in the Green Zone, she alleges, co-workers drugged and raped her in her bedroom. 

When she sued, Halliburton/KBR moved to compel arbitration of all claims.  It cited language calling for such treatment of claims that "related to your employment" or involved personal injury "arising in the workplace" or "in or about a Company workplace."  The Fifth Circuit split 2-1 in holding that the agreement didn't cover causes of action that arose from the sexual assault.  Jones v. Halliburton Co., No. 20380 (5th Cir. Sept. 15, 2009).