You need to make it sound more like ditch-diggin'.
Anthony Bolognese, relating advice to an economist on his performance as a testifying expert.
You need to make it sound more like ditch-diggin'.
Anthony Bolognese, relating advice to an economist on his performance as a testifying expert.
A 9-0 Supreme Court today ordered a federal district court to remand a case seeking restitution for all Missippians who overpaid for liquid crystal displays (LCDs) back to state court.
The lawsuit, by the Attorney General of Mississippi, accused LCD makers of conspiring to fix prices, in violation of Mississippi antitrust and consumer protection statutes.
The manufacturers removed the case under "class action" or "mass action" under the Class Action Fairness Act. The district court ruled that the case didn't qualify as a "class action" but that it did meet the "mass action" test, which requires "monetary relief claims of 100 or more persons". A Fifth Circuit panel reversed under the "general public" exception to CAFA jurisdiction over a "mass action". But it agreed that the the "mass action" moniker applied.
Affirming, the Court (per Justice Sotomayor) held that "unnamed" parties such as the absent citizens of the Magnolia State do not qualify as "persons" for purposes of the "mass action" definition. That they may meet the test for "real parties in interest" didn't matter. The Court accordingly reversed the district court's ruling remanded the case for further proceedings (i.e., remand to state court). Mississippi ex rel. Hood v. AU Optronics Corp., No. 12-1036 (U.S. Jan. 14, 2014).
A sluggish Antitrust Division of the U.S. Department of Justice okays the deal but tacks on a proviso that the dairy dukes -- Dean Foods and Suiza -- must divest a few of the plants that process the raw milk.
The milk mavens do spin off the plants. Yet they agree to pay the buyer, Dairy Farmers of America, millions and millions of dollars to do a poor job of running the plants and selling the milk. The payola takes the form of contracts giving DFA the right to sell tons of its raw milk to the new combo.
Do you see a per se violation of the Sherman Act?
The Sixth Circuit didn't. It held that the pact between Dean/Suiza and DFA had too much of a "vertical" aspect to fit within one of the per se realms -- price-fixing, allocating customers or areas, limiting output. Food Lion, LLC v. Dean Foods Co., No. 12-5457 (6th Cir. Jan. 3, 2014).
The ruling means that the plaintiffs, Food Lion and Fidel Breto, will have to proceed under the "rule of reason", which (unlike the per se rule) demands proof that the restraint of trade restrained trade to an "unreasonable" extent. But that represents something of a win. The district court had thrown the case out on summary judgment.
Blawgletter agrees with the Sixth Circuit that the district court erred in granting summary judgment against the plaintiffs. The trial court shouldn't have ignored expert evidence that tended to show that the agreement not to compete pushed milk prices up within a discrete area, as the panel rightly ruled. But we disagree that the plaintiffs in the case don't have a proper per se case. We don't see how the fact that the payola went to DFA instead of straight to the DFA affiliate that carried out the agreement not to compete matters.
Nor did the court help clarify a legal area that many, including lots of lawyers, find daunting if not impenetrable. For example:
We don't mean to make light of the difficulties of judging antitrust cases. It isn't at all easy. But we do feel strongly that it's really important to get the details right. And, in this case, the panel didn't do that.
The Fourth Circuit reversed a judgment that awarded nothing -- zilch -- on a winning $50 million False Claims Act claim for civil penalties.
The panel first ruled that FSA relator Kurt Bunk had "standing" to sue under the statute despite his lack of personal injury. The harm to the federal government (from a scheme to fix prices and rig bids on charges for moving goods of U.S. military personnel) satisfied the injury-in-fact requirement for constitutional standing to sue, the panel held. The court thus joined "the two other circuits that have decided the issue." United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., No. 12-1369, slip op. 30 (4th Cir. Dec. 19, 2013) (citing United States ex rel. Stone v. Rockwell Int'l Corp., 282 F.3d 787, 804 (10th Cir. 2002), rev'd on other grounds, 549 U.S. 479 (2007), and Riley v. St. Luke's Episcopal Hosp., 252 F.3d 749, 752 n.3 (5th Cir. 2001) (en banc)).
The court also concluded that the award of zero in civil penalties could not stand. Sure, the panel noted, the statutory requirement of at least a $5,500 penalty for each of 9,136 false invoices -- totalling north of $50 million -- seemed harsh in light of a paltry $2 million or so in possible losses to the government. But Bunk agreed to take far less -- a mere $24 million -- as he had a right to do. "Under the circumstances before us, we are satisfied that the entry of judgment on behalf of Bunk for $24 million on the DPM claim would not constitute an excessive fine under the Eighth Amendment. That amount, we think, appropriately reflects the gravity of [price-fixer/bid-rigger] Gosselin's offenses and provides the necessary and appropriate deterrent effect going forward." Id. at 44.
The Tenth Circuit has ruled that Microsoft didn't kill WordPerfect. The market did.
Or at least that, if Microsoft did commit software-icide, it didn't lose money doing it and therefore Did Nothing Wrong. Novell, Inc. v. Microsoft Corp., No. 12-4143 (10th Cir. Sept. 23, 2013).
The Second Circuit has upheld rules that aim to ease the process for vendors of video content to complain to the Federal Communications Commission about bias by Comcast, Time Warner, and other cable giants in favor of their own video content. Time Warner Cable Inc. v. Federal Communications Comm'n, No. 11-4138(L) (2d Cir. Sept. 4, 2013).
The panel cited the fact that Comcast still holds big market shares (60 percent or more) in places like Philadelphia and Chicago and therefore could use its bottleneck status to force non-Comcast video sources to accept worse terms than Comcast provides to its affiliates.
The cable companies griped that the first amendment gave them the right to favor their own content as a matter of free speech. The court held that "intermediate scrutiny" applied to the complaint and that the 2011 FCC rules did a good enough job of trying to serve the congressional goal of preventing unfair use of market power by Comcast, et al. You don't have a free speech right to hurt competitors, the court seemed to say.
The rules the panel upheld, by the way, differ from the ones that govern the now-over fight between Time Warner and CBS over "retransmission consent", which applies only to broadcast programming.
The Seventh Circuit, per Judge Richard Posner, has put the kibosh on an effort to kill a pair of class actions over moldy Kenmore washing machines. Butler v. Sears, Roebuck & Co., No. 11-8029 (7th Cir. Aug. 22, 2013). In doing so, the court gave the back of its hand to those who claim that Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), wrought a Sea Change in class action Law.
The Supreme Court had vacated the Seventh Circuit's affirmance of class certification in the case against Sears and remanded to the court of appeals for Further Thought in light of Comcast. Sears, Roebuck & Co. v. Butler, 133 S. Ct. 2768 (2013).
Sears urged on remand that Comcast "rejects the dissenting view that 'economies of time and expense' override rigorous compliance with the predominance requirement". Sears' Circuit Rule 54 Statement, Butler v. Sears, Roebuck & Co., No. 11-8029, Doc. No. 30, at 5 (7th Cir. July 29, 2013). The panel responded thus:
Sears argues that Comcast rejects the notion that efficiency is a proper basis for class certification, and thus rejects our statement that "predominance" of issues comon to the entire class, a requirement of a damages class action under Rule 23(b)(3), "is a question of efficiency." 702 F.3d at 362. But in support of its argument Sears cites only the statement in the dissenting opinion in Comcast that "economies of time and expense" favor class certification, 133 S. Ct. at 1436 -- a statement that the majority opinion does not contradict. Sears is wrong to think that anything a dissenting opinion approves of the majority must disapprove of.
Butler, slip op. at 6-7. The enemy-of-my-enemy idea -- a "triadic interaction" rule that never did have much logic behind it -- did not sway their honors.
The court went on to reject two broad readings, common in defense circles, of Comcast. The first dealt with Sears's claim that "permutations" in what caused the washers to stink and in the amount of class members' stink-damages meant common issues couldn't predominate under Rule 23(b)(3). Sears' Circuit Rule 54 Statement at 6. The panel replied that "it was not the existence of multiple theories in [the Comcast] case that precluded class certification; it was the plaintiffs' failure to base all the damages they sought on the antitrust impact -- the injury -- of which the plaintiffs were complaining."* Butler at 7. Complexity in the theory of harm thus does not doom class treatment so long as the class ties the harm to class damages.
The panel also held that a total absence of class-wide damages doesn't prevent certification of a class under Rule 23(b)(3). The thinking went like this:
Sears thinks that predominance is determined simply by counting noses: that is, determining whether there are more common issues or more individual issues, regardless of relative importance. That’s incorrect. An issue “central to the validity of each one of the claims” in a class action, if it can be resolved “in one stroke,” can justify class treatment. Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. at 2551. That was said in the context of Rule 23(a)(2), the rule that provides that class actions are permissible only when there are issues common to the members of the class (as of course there are in this case). But predominance requires a qualitative assessment too; it is not bean counting. In Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 133 S. Ct. at 1196, the Court said that the requirement of predominance is not satisfied if “individual questions…overwhelm questions common to the class,” and in Amchem Products, Inc. v. Windsor, 521 U.S. 591, 623 (1997), it said that the “predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.” And in In re Inter-Op Hip Prosthesis Liability Litigation, 204 F.R.D. 330, 345 (N.D. Ohio 2001), we read that “common issues need only predominate, not outnumber individual issues.” Or as we put it in Messner v. Northshore University Health System, 669 F.3d 802, 819 (7th Cir. 2012), “Under the district court’s approach [which our decision in Messner rejected], Rule 23(b)(3) would require not only common evidence and methodology, but also common results for members of the class. That approach would come very close to requiring common proof of damages for class members, which is not required. To put it another way, the district court asked not for a showing of common questions, but for a showing of common answers to those questions. Rule 23(b)(3) does not impose such a heavy burden."
It would drive a stake through the heart of the class action device, in cases in which damages were sought rather than an injunction or a declaratory judgment, to require that every member of the class have identical damages. If the issues of liability are genuinely common issues, and the damages in individual hearings, in settlement negotiations, or by creation of subclasses, the fact that damages are not identical across all class members should not preclude class certification. Otherwise defendants would be able to escape liability for tortious harms of enormous aggregate magnitude but so widely distributed as not to be remediable in individual suits. As we noted in Carnegie v. Household Int'l, Inc., 376 F.3d 656, 661 (7th Cir. 2004), “the more claimants there are, the more likely a class action is to yield substantial economies in litigation. It would hardly be an improvement to have in lieu of this single class 17 million suits each seeking damages of $15 to $30…. The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30” (emphasis in original). The present case is less extreme: tens of thousands of class members, each seeking damages of a few hundred dollars. But few members of such a class, considering the costs and distraction of litigation, would think so meager a prospect made suing worthwhile.
There is a single, central, common issue of liability: whether the Sears washing machine was defective. Two separate defects are alleged, but remember that this class action is really two class actions. In one the defect alleged involves mold, in the other the control unit. Each defect is central to liability. Complications arise from the design changes and from separate state warranty laws, but can be handled by the creation of subclasses. See, e.g., Johnson v. Meriter Health Services Employee Retirement Plan, supra, 702 F.3d at 365 (10 sub-classes). These are matters for the district judge to consider in the first instance, and Sears will be able to present to her he evidence it’s obtained since the district judge ruled on certification almost two years ago.
Butler at 8-11.
To which we say -- amen!
*The evidence in Comcast in fact did tie the harm from Comcast's conduct to the class's damages. But the majority said it didn't. The Seventh Circuit implies that it agrees with Blawgletter on that point. See Butler at 8 (stating that "the class in Comcast was (in the view of the majority) seeking damages beyond those flowing from the theory of antitrust injury alleged by the plaintiffs") (emphasis added). Sadly, the ruling by the 5-4 majority in Comcast counts more than the views of Blawgletter, the district court, the majority on the Third Circuit, the four dissenting justices, and the Butler panel.
Let's start by saying we've found that the biz reporters have a not-very-good grasp of antitrust law. A terrible one in fact. They seem to think that whatever business wants, business ought to get. If it makes business sense, antitrust law should promote it, not try to stop it. Which fact we suppose shouldn't surprise anyone.
Just yesterday, the local paper here issued a paean in favor of the pending hook-up. The ink-stained wretch who wrote the item praised U.S. Air's CEO Doug Parker for making "the right call" by over and over again calling for . . . less competition -- or, in the item's telling, "industry consolidation".
The piece deems Parker "visionary" for wanting to cut the number of carriers and reduce airline capacity. It also credits Parker for wanting to gobble up Delta in 2007 -- in spite of the fact that the deal would have happened just in time for the Great Recession, whose onset swung Delta itself from a $1.6 billion profit to an $8.9 billion loss in the year after its 2008 merger with Northwest Airlines. Parker dodged a bullet, if you ask us.
The author even dismisses as merely "embarassing" and "bone-headed" an email that Parker sent the Delta CEO to complain about a "triple miles" offer that the rival carrier had made. He says "most other" moves that Parker tried, by contrast, "made business sense". See Complaint ¶ 45.
Illegally buying up the competition to gain market power also makes "business sense" -- ask John D. Rockefeller. Also inquire of AT&T, which tried to snag rival T-Mobile but failed after the DOJ moved to block the deal in court.
Thwarting competition almost always makes terrific business sense. That explains why it happens so often. As Adam Smith wrote:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
Antitrust laws exist to protect competition from conspiracy, to purge markets of unfair monopolies, and shield the public from bad service and high prices. Who cares about airline passengers? Reading the pro-merger, pro-CEO item we just went through, you'd think The Dallas Morning News does not.
On Aug. 12, the AAntitrust Division of the U.S. Department of Justice joined with the attorneys-general of six states and the District of Columbia to file a lawsuit to stop the merger of AMR, which owns American Airlines, into U.S. Airways. You can see the complaint here.
The filing took Blawgletter by surprise. Living in DFW, which AMR calls home, we've watched and read a lot of cheerleading in the local paper and TV stations about the awesome combo. It reached a crescendo in the last couple of weeks with the vote by stakeholders in the AMR bankruptcy for closing on the deal. We can't recall any warning bells about a possible blocking action by our friends at the Division.
But it looks serious. The Complaint doesn't carp about locking up a measly dozen or so "city-pairs" (a term that antitrust lawyers use for air routes from City A to City B and vice versa). No. Like Davy Crockett, a hero of the Alamo, it goes the whole hog. It says the impending marriage would cause great harm by taking the number of "legacy" air carriers in the U.S. to three from four, making collusion -- both the express and tacit kinds -- easier to practice and more profitable. It goes on to list an entire 14 pages of city-pairs. And, in a wrong-but-spooky touch, it implies that the merger must "be approved" by the district court before it can go through. Plus the Texas Attorney General, who loves to boast about suing the federal government, has joined the feds in the civil suit.
These people mean business.
Some will wonder, by the way, why the Antitrust Division wants to halt the U.S. Airways-AMR hookup but let Delta and Northwest and Continental and United join forces in 2008 and 2010, respectively, without much of a peep. Well, you have to start somewhere. Stopping the consolidation before the Final Four become the Thuggish Three or even the Terrible Two makes sense.
The D.C. Circuit today vacated class certification in an antitrust case on behalf of firms that paid fuel surcharges on top of basic charges to freight railroads. In re Rail Freight Fuel Surcharge Antitrust Litig., No. 12-7085 (D.C. Cir. Aug. 9, 2013). The court cited what it called the "propensity toward false positives" of the class's damages model. The panel also relied on Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), which likewise rejected an antitrust damages model.
Direct buyers of rail freight services may now wish to look at pursuing individual claims. Or they can wait to see what happens on remand. But for now the statute of limitations clock may have started ticking again.