Blawgletter®

Quote of the Day: Blawgletter

The wise thing for me to say . . . is that I don't have evidence to contradict it.

David Ingram, "Q&A: Plaintiffs' Lawyer Barry Barnett on the Comcast class action", Thomson Reuters News & Insight, May 13, 2013 (referring to "the academic study spotlighted in The New York Times that found that this Supreme Court is the most pro-business in modern history").

Bonus:    Lee Epstein, William M. Landes, and Richard A. Posner, "How Business Fares in the Supreme Court", 97 Minn. L. Rev. ___ (2013).

Second Bonus:    "It's not all skittles and beer."

Forget It, Jake. It's Kabletown.

At the end of the one of the Best Movies Ever, Evelyn Mulwray (Faye Dunaway) drives with her young daughter towards safety down a Los Angeles street. Will they escape? Yes, we think they just might!

A Los Angeles police lieutenant (Perry Lopez) steps onto the pavement. He aims his pistol and fires. Mulwray's car glides into a wall. The horn blares. It keeps blaring, as Mulwray's lifeless body presses against the steering wheel.

A look of crazy anguish pierces the face of Jake Gittes (Jack Nicholson), a private detective who has fallen in love with his client Mulwray. One of Jake's associates grabs him. He faces his boss and says:

"Forget it, Jake. It's Chinatown."

That pretty much sums up what Adam Liptak writes today in the Sunday NYT, on the front page of the Business section, about the rulings in business cases by the Roberts Court. Liptak titles his piece "Friend of the Corporation" (in the print version) and "Corporations Find a Friend in the Supreme Court" (online), and he opens it thus:

Not long after 10 a.m. on March 27, a restless audience waited for the Supreme Court to hear arguments in the second of two historic cases involving same-sex marriage. First, however, Justice Antonin Scalia attended to another matter. He announced that the court was throwing out an antitrust class action that subscribers brought against Comcast, the nation's largest cable company.

Almost no one in the courtroom paid attention, despite Justice Scalia's characteristically animated delivery, and the next day's news coverage was dominated by accounts of the arguments on same-sex marriage. That was no surprise: the Supreme Court's business decisions are almost always overshadowed by cases on controversial social issues.

But the business docket reflects something truly distinctive about the court led by Chief Justice John G. Roberts Jr. While the current court's decisions, over all, are only slightly more cnservative than those from the courts led by Chief Justices Warren E. Burger and William H. Rehnquist, according to political scientists who study the court, its business rulings are another matter. They have been, a new study finds, far friendlier to business than those of any court since at least World War II.

Liptak goes on to tell about the study, which appears in the Minnesota Law Review, by Wiliam M. Landes and Richard A. Posner, as well as "a despairing overview", in the New York University Law Review, by Arthur R. Miller.

Blawgletter says check it out.

You'll note that the case Liptak uses to kick off the article, Comcast Corp. v. Behrend, No. 11-864, holds a special place in our heart. We argued it to the Court last November, and in our giddiness afterwards dared to hope the Court would concede what became obvious during the argument -- that Their Honors had made a mistake in thinking, when they took the case, that it properly raised a question of admissibility of expert opinion evidence under the Daubert line of decisions.

The majority instead posed and answered a different question, one that it seems to have formulated after the briefing concluded. That explains the dissenters' view that the majority had engaged (per Liptak) in "unseemly judicial gamesmanship" by "refram[ing] the legal issue in the case so that they could rule for Comcast."

It's Kabletown.

Prof. Epstein Explains Why We Should Have Won Comcast Corp. v. Behrend

NYU Law School Professor Richard A. Epstein -- "an advocate of minimal legal regulation" and "one of the most influential legal thinkers of modern times" -- thinks the U.S. Supreme Court got its ruling wrong in Comcast Corp. v. Behrend, No. 11-864 (U.S. Mar. 27, 2013) (post here).

Leaving to one side the separate point that (according to a "stinging dissent by Justices Ginsburg and Breyer") "the writ of certiorari was improvidently granted because of a set of procedural wrangles on the question presented", Professor Epstein criticizes the majority's criticism of the regression analysis that estimated class-wide damages in Behrend:

No matter what regression is used, it is still the case that all the individual members of a given class will suffer somewhat different injuries that could never be picked up or measured if each person were to bring his own separate lawsuit. But in this instance, the class action offers a better vehicle for analysis because it attempts to measure aggregate social harm. That calculation in turn sets the stage for determining optimal deterrence against a defendant, by taking the total amount of antitrust injury that their actions caused and dividing it among the plaintiffs in a form that is certain not to reflect the exact injuries that each member of the class sustained. Yet at the same time, these errors do not systematically favor any identifiable class members and thus tend to cancel out. Allowing averaging across the plaintiffs, therefore, does improve the position of every member of the class, for each does far better off with a pro rata recovery than with nothing at all.

 

Supreme Court Reverses Cable Class

Today the Supreme Court, by 5-4, reversed a ruling that upheld certification of an antitrust case against Comcast as a class action. The majority disagreed with the district court and court of appeals on whether the plaintiffs' damages model showed class-wide losses from Comcast's efforts to thwart "overbuilder" competition in the Philadelphia area.

Justice Scalia wrote the majority opinion, in which Chief Justice Roberts and Justices Kennedy, Thomas, and Alito joined.

Blawgletter understands that Justices Ginsburg and Breyer took the unusual, if not extraordinary, steps of writing a joint dissent and reading it this morning from the bench. Justices Sotomayor and Kagan joined in the dissenting opinion.

The dissent urged that the Court should have dismissed the writ as improvidently granted and, failing that, should have affirmed the Third Circuit.

Class cousnel respectfully disagree with the majority's ruling. We look forward to satisfying the Court's narrow methodological concerns on remand to the trial court and to trying the case on the merits as soon as practicable.

I had the honor of arguing the case for the class in November. You hate to lose, but it was a terrific experience.

Lack of Motive Dooms Conspiracy Claim in Auction Rate Securities Market, Second Circuit Holds

We've known at least since Bell Atl. Co. v. Twombly, 550 U.S. 544 (2007), that competitors can engage in parallel conduct -- charging the same price, offering the same product features, setting identical contract terms -- without running afoul of the Sherman Act. A plaintiff claiming a violation of section 1, which bars conspiracies in restraint of trade, must allege, in addition to parallel behavior, "plus factors" that point to an agreement between competing firms not to compete.

The Second Circuit ruled on March 5 that a section 1 claim failed because the complaint's thrust -- that financial institutions agreed to stop propping up "auction rate securities" and all at once exit the ARS market -- didn't make sense:

Indeed, Defendants' alleged actions -- their en masse flight from a collapsing market in which they had significant downside exposure -- made perfect business sense. . . . In their brief on appeal, with its repeated mention of the February 13 auction failures, Plaintiffs seem to be suggesting that the ARS market had been healthy until that day and imploded in a sudden and unexpected collapse. But the allegations in their complaints reveal otherwise. Indeed, according to Plaintiffs themselves, ARS auctions started failing as early as the summer of 2007. Compl. 80. More auctions failed during the fall and winter, putting Defendants on notice that "the market for [ARS] was in danger of failing." Compl. 81. Thus by early 2008, each defendant was faced with the same dilemma. Continuing to prop up the auctions with support bids generated commissions for successful auctions; but if enough auctions failed, ARS would be seen as poor investments, the markets would dry up, and Defendants' support purchased would turn into major liabilities. As the complaints vividly demonstrate, each defendant was well aware of these dynamics -- the market as a whole was essentially holding its breath waiting for the inevitable death spiral of ARS auctions. In such an environment, it is unsurprising, and expected, that once failures reached a critical mass, defendants would exit the market very quickly. In fact, at that point abandoning bad investments was not just a rational business decision, but the only rational business decision.

Mayor and City Council of Baltimore v. Citigroup, Inc., No. 10-0722-cv (L), slip op. at 15-16 (2d Cir. Mar. 5, 2013) (emphasis in original).

Preview of Italian Colors Argument at UCL Practitioner

Kimberly Kralowec offers a preview of the oral argument this morning in Am. Express Co. v. Italian Colors Restaurant, No. 12-133 (U.S.). Check it out.

The case deals with whether a court may strike down an arbitration clause under federal law (the Arbitration Act) on the ground that it makes getting relief under substantive federal law (the Sherman Act) all but impossible. See "Class Arbitration Ban Fails in Second Circuit; Evidence Showing 'Frustration' of Rights Key".

Thanks, Kimberly!

Class Counsel Didn't Try Hard Enough to Get Settlement Money to Class Members, Third Circuit Rules

Blawgletter has noted concerns about awarding money from class action judgments and settlements to non-class members by way of "cy pres" awards. See "Does Cy Pres Have a Prayer?". These payments aim to do the next best thing to paying the funds to the members of the class.

Such efforts become necessary fairly often -- in consumer class actions especially -- due to the difficulties either of giving actual notice to class members (so that they can file a claim) or of getting proof of what class members paid or lost (so they can get their fair share of the available funds).

Cy pres distributions don't often raise big problems when they account for a small fraction of the money that the class receives as the result of judgment or settlement. But what if the cy pres piece dwarfs the payout to class members?

The Third Circuit ruled on Feb. 19 that district courts should require class counsel to work very hard to get settlement funds to class members. The court thus upset a $35 million settlement that promised to pay class members around $3 million while cy pres beneficiaries would get $18 million and the lawyers $14 million. Try again, the panel said. In re Baby Prods. Antitrust Litig., No. 12-1165 (3d Cir. Feb. 19, 2013).

The court gave class counsel a terrific reason to maximize awards to class members and to minimize cy pres distributions, saying:

Where a district court has reason to believe that counsel has not met its responsibility to seek an award that adequately prioritizes direct benefit to the class, we . . . think it appropriate for the court to decrease the fee award [to class counsel].

Id. at 27.

State-Action Doctrine Doesn't Bar Antitrust Claim Against Georgia Hospital Authority

A "substate" governmental entity that engages in conduct that would usually violate the Sherman Act may escape liablity under the state-action doctrine if the "state" directs "substate" to do the anticompetitive deeds. But the state must "'clearly articulate[] and affirmatively express[]' state policy to displace competition." Fed'l Trade Comm'n v. Phoebe Putney Health Sys., Inc., No. 11-1160, slip op. 8 (U.S. Feb. 19, 2013).

A scheme by a bi-county hospital "authority" in Georgia failed the clear-articulation and affirmative-expression test, the Supreme Court unanimously held today.

The authority had agreed to buy a hospital that accounted for 11 percent of the market for acute-care hospital services in a six-county area and to let an outfit that controlled 75 percent of the market lease its smaller cousin for $1 a year. The Federal Trade Commission sued under the FTC Act to enjoin the transaction. The district court dismissed the FTC's complaint under the state-action doctrine. The Eleventh Circuit affirmed, ruling that the doctrine applied so long as the conduct in question foreseeably resulted from the state law creating the hospital authority.

The Supreme Court reversed. It held (in an opinion by Justice Sotomayor) that the "foreseable result" standard flunked the clear-articulation and clear-expression test:

We have no doubt that Georgia’s hospital authorities differ materially from private corporations that offer hospital services. But nothing in the Law or any other provision of Georgia law clearly articulates a state policy to allow authorities to exercise their general corporate powers, including their acquisition power, without regard to negative effects on competition. The state legislature’s objective of improving access to affordable health care does not logically suggest that the State intended that hospital authorities pursue that end through mergers that create monopolies. Nor do the restrictions imposed on hospital authorities, including the requirement that they operate on a nonprofit basis, reveal such a policy. Particularly in light of our national policy favoring competition, these restrictions should be read to reflect more modest aims.

Id. at 16-17.

Ex-Bid-Rigger Can't Sue Fellow Schemers

The Second Circuit held on Valentine's Day that cheaters shouldn't prosper.

At least when they sue their old bid-rigging friends for rigging bids so as to punish them for mending their cheating ways. The panel ruled that Gatt Communications lacked standing to sue its erstwhile co-conspirators because, among other things, the harm to Gatt didn't result from injury to competition. Gatt Communications, Inc. v. PMC Assocs., LLC, No. 11-1111-cv (2d Cir. Feb. 14, 2013).

The third judge on the panel would have upheld the killing of the erstwhile bid-rigger's antitrust claim under the doctrine of in pari delicto (equally at fault). But the U.S. Supreme Court has never applied the IPD defense in an antitrust case. That means judge no. 3 wants to create a new way to defeat Sherman Act claims.

Should that view prevail? Nah. Antitrust law boasts more than enough ways to defeat claims. We don't need any more.

Posner Pans Per Se Plea

Seventh Circuit Judge Richard Posner today upheld (with help of course) a ruling against a plaintiff class that accused a pair of firms from the Great White North of scheming with U.S. outfits to raise the price of sulfuric acid, a by-product for the Canadians of smelting non-ferrous metals like nickel and copper.

The class claimed that a pact to replace domestic H2SO4 with H2SO4 from across the border hurt competition here and by that means raised prices in the land of the free and the brave.

Judge Posner seems to have thought the claim plausible but not so clear as to deserve per se treatment. The panel thus upheld dismissal of the case, which the plaintiffs refused to pursue under a rule of reason test.

That Judge Posner felt bafflement with the plaintiffs' choice may understate the case. Oh well. In re Sulfuric Acid Antitrust Litig., No. 12-1109 (7th Cir. Dec. 27, 2012).