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Second Circuit

Skyline Travel, Inc. v. Emirates, No. 11-1631-cv, 2012 WL 2016479 (2d Cir. June 6, 2012)

Background:  Plaintiffs, who sold travel services, products, and packages to retail customers, alleged state and federal antitrust claims against defendant Emirates, an owner and operator of a fleet of jets that provides air transportation to and from numerous international locations, including New York City.  Plaintiffs alleged that the defendant unlawfully blocked plaintiffs from purchasing airline tickets from the Defendant.  The district court dismissed plaintiffs’ antitrust claims. 

Outcome:  The Second Circuit affirmed the district court’s dismissal of Skyline’s antitrust claims, finding Skyline failed to identify the relevant market by limiting the product market to a single brand, franchise, institution, or comparable entity that competes with potential substitutes.

In re Publication Paper Antitrust Litig., 630 F.3d 51 (2d Cir. 2012)

Background:  Direct purchasers brought antitrust class action against manufacturer and seller of publication paper and its parent company alleging horizontal price-fixing conspiracy in violation of the Sherman Act.  The district court granted summary judgment to defendants.

Outcome:  The Second Circuit reversed summary judgment against all of the defendants but one (the parent company of one of the defendants).  The court found that not only did plaintiffs provide sufficient circumstantial evidence to support an inference of anticompetitive conduct  based on defendants’ parallel pricing and supply behavior, but it also found there to be strong direct evidence of a price-fixing scheme, including from testimony given in the related criminal trial from the president of one of the defendants.

In re Air Cargo Shipping Services Antitrust Litig., No. 11-5456-cv, 2012 WL 4820732 (2d Cir. Oct 11, 2012)

Background:  Indirect purchasers of airfreight shipping services alleged that numerous foreign airlines conspired to fix prices in violation of state antitrust laws.  The district court dismissed the plaintiffs’ state claims as expressly barred by a provision in the Federal Aviation Act (“FAA”) that preempts state-law claims “related to a price…of an air carrier” (“preemption provision”).  Plaintiffs appealed, arguing that Congress intended to preempt only state regulation of domestic air carriers.

Outcome:  The Second Circuit affirmed the judgment of the district court.  Reviewing the legislative history and purpose of the preemption provision, the FAA, and various statutes deregulating the airline industry, the Second Circuit concluded that “air carrier” means both domestic and foreign air carriers, and that Congress intended to preempt state regulation of foreign air carriers.

United States v. Morgan Stanley, No 11-Civ-6875, 2012 WL 3194969 (S.D.N.Y. Aug. 12, 2012); Simon v. KeySpan Corp., No. 11-2265-cv, 2012 WL 4125845 (2d Cir. Sept 20, 2012)

Background: The U.S. Department of Justice (“DOJ”) sued wholesale electricity producer KeySpan for allegedly colluding with its rival and manipulating New York City electricity prices in violation of Section 1 of the Sherman Act, and financial services firm Morgan Stanley for allegedly facilitating this anticompetitive conduct by engineering the underlying “swap” agreement that eliminated KeySpan’s incentive to compete.  Pursuant to a February 2011 consent decree, KeySpan paid the federal government $12 million in disgorged revenues (United States v. KeySpan Corp., 763 F. Supp. 2d 633 (S.D.N.Y. 2011)). 

Current Status:  In August 2012, the district court entered a consent decree between the DOJ and Morgan Stanley whereby the financial services firm disgorged to the U.S. Treasury $4.8 million of the $21.6 million earned in net revenues from the swap agreements (United States v. Morgan Stanley, No 11-Civ-6875, 2012 WL 3194969 (S.D.N.Y. Aug. 12, 2012)).  The district court found the disgorgement amount to be an adequate remedy in terms of percentage (the 22% Morgan Stanley paid being “slightly less” than the 25% paid by KeySpan) and deterrent effect.  Responding to public commentators’ concerns, the district court also observed that judicial approval of a consent decree does not require admission of wrongdoing and that disgorgement to the U.S. Treasury is appropriate and serves the public interest.

In September 2012, the Second Circuit affirmed that a retail customer of electricity in New York City lacked standing to bring federal antitrust claims against KeySpan and Morgan Stanley.  The district court found that Simon, as an indirect purchaser, lacked standing to bring his federal antitrust claims.  Simon suffered no antitrust injury because he is an indirect purchaser who did not have a pre-existing “cost-plus contract.” 

Southern District of New York

National Gear & Piston, Inc. v. Cummins Power Systems, LLC, No. 11-cv-4145, 2012 WL 1852409 (S.D.N.Y. May 17, 2012)

Background: Automotive parts supplier brought state action against distributor-dealer CPS and its parent company Cummins, which manufactured such automotive parts, alleging violation of New York’s Donnelly Act.  Plaintiff alleged that defendants, as both upstream suppliers and competitors to plaintiff, instructed plaintiff not to bid on municipal supply contracts and then terminated the parties’ distributor-dealer relationship, which together constituted a scheme to eliminate competition and/or restrain trade.  Defendants removed action to federal court and moved to dismiss.

Outcome:  The district court granted defendants’ motion to dismiss.  Although the district court found that plaintiff sufficiently alleged a conspiracy between itself and CPS, plaintiff ultimately failed to allege a relevant product market.  Specifically, the district court found that plaintiff provided conflicting statements about the relevant product market while failing to provide a plausible explanation as to why a market should be limited in a particular way, to identify which particular products were at issue, and to define the geographic boundary of the product market.

Eastern District of New York

DPWN Holdings (USA), Inc. v. United Air Lines, Inc., No. 11-cv-564, 2012 WL 1821409 (E.D.N.Y. May 18, 2012)

Background:  Shipper DHL brought action against United Air Lines, alleging that United was part of a conspiracy to fix the price of air cargo shipments in violation of the Sherman Act. Specifically, DHL alleged that United conspired to fix surcharges for fuel and security costs that were added to the base rates for shipments.

Outcome:  The district court denied United’s motion to dismiss, finding DHL sufficiently alleged United’s participation in the cartel by alleging United’s active role in developing, advocating, and following the fuel surcharge practices collectively developed by the airlines.  Despite the Department of Transportation’s grant of limited antitrust immunity to fuel surcharge coordination by United and other airlines, the district court found that the allegations are that such coordination began prior to the grant of immunity, and, subsequent to the grant of immunity, that United coordinated with airlines that were not covered by such immunity.

Drug Mart Pharmacy Corp. v. American Home Products Corp., 2012 WL 3544771 (E.D.N.Y. Aug. 16, 2012)

Background:  Individually-owned retail pharmacies sued manufacturers of brand name prescription drugs for allegedly offering discounts and rebates to plaintiffs’ competitors (“favored purchasers”) in violation of the Robinson-Patman Act’s prohibition on price discrimination.  Plaintiffs sought damages and injunctive relief.  Defendants moved for summary judgment.

Outcome:  The district court granted defendants’ motion for summary judgment.  The district court dismissed plaintiffs’ claim for damages on the ground that evidence showing only de minimus sales lost to favored purchasers did not demonstrate competitive injury, and that plaintiffs’ inability to “match up” a “significant” number of customers lost to the favored purchasers gained as a result of the alleged price advantages did not establish antitrust injury.  Finding neither competitive injury nor antitrust injury, the district court also dismissed plaintiffs’ claims for injunctive relief.

New York State Court

UMG Recs., Inc. v. Escape Media Group, Inc., 948 N.Y.S.2d 881 (N.Y. Sup. Ct. 2012)

Background: Defendant, owner and operator of music website www.grooveshark.com, filed counterclaim against plaintiff UMG Recordings, Inc. alleging violations of state antitrust laws under the Donnelly Act.  Defendant alleged that UMG controlled a substantial share of the market for the dissemination of recorded music within the State of New York, and that UMG used its leverage to coerce third-party businesses into refusing to deal with the defendant, causing defendant significant damage.

Outcome: The trial court dismissed defendant’s counterclaim, finding that the defendant alleged no more than a conclusory claim, devoid of any factual support, that the injury done to it constituted injury to competition. 

Williams v. Citigroup, Inc., 36 Misc. 3d 1201(A) (N.Y. Sup. Ct. 2012)

Background:  A finance lawyer who patented and marketed a structure that would reduce interest rates on airline special facility (“ASF”) municipal bonds accused Citigroup, JP Morgan, and Goldman Sachs of conspiring to boycott her product, in violation of state antitrust laws.  Specifically, plaintiff alleged that defendants conspired to block the use of her structure in ASF underwriting, thus restraining trade in the market for ASF bonds and resulting in higher costs for airlines, airline customers, and municipalities.  Defendants moved to dismiss for failure to state a cause of action.

Outcome:  The court granted defendant’s motion to dismiss.  The court determined that plaintiff sufficiently pleaded violations of the Donnelly Act, but failed to allege antitrust injury, as opposed to “market-wide injury.”  The court found that plaintiff lacked standing to assert the injuries allegedly suffered by the airlines and municipalities, and that her injuries (namely, loss of legal fees and potential licensing revenues) were too remote to confer antitrust standing because such losses are not the result of antitrust violations in the market for ASF bonds insofar as she is not a competitor therein.