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Second Circuit

Anderson News, LLC v. American Media, Inc., No. 10–4591–cv, 2012 WL 1085948 (2d Cir. April 3, 2012)

Background:  Plaintiff Anderson News was a wholesaler in the magazine industry responsible for purchasing magazines from publishers and distributing them to retailers.  Prior to February 2009, Anderson was the second largest magazine wholesaler in the United States, with a 27 percent market share.  The defendants are national magazine publishers and their distribution representatives.  Approximately 80 percent of the magazines distributed by Anderson were published by one of the defendants.  In order to cover the cost of collection and destruction of unsold magazines, Anderson proposed a $.07 surcharge to be paid by the publishers.  Shortly after the announcement of the surcharge, Anderson alleged that the defendants conspired to eliminate Anderson as a wholesaler through a concerted refusal to deal in violation of Section 1 of the Sherman Act and New York law.  Anderson alleged that the publisher defendants cut off Anderson’s supply of magazines by giving their business to two of Anderson’s competitors. 

The district court granted defendants’ motion to dismiss for failure to state a claim and denied plaintiffs’ motion for leave to file an amended complaint, finding that the defects in the complaint were incurable and that the proposed new complaint added only allegations that were conclusory.  Plaintiffs appealed to the Second Circuit.   

Outcome:  Reviewing Anderson’s proposed amended complaint in light of Twombly, the Second Circuit found that the amended complaint, which contained additional factual allegations, should have been allowed.  The Second Circuit vacated the district court’s decision and remanded for further proceedings.

Southern District of New York

United States v. Apple, Inc. et al., No. 12-cv-2826 (S.D.N.Y. Apr. 11, 2012)

Background:  The Department of Justice (“DOJ”) alleges that Apple Inc. (Apple) and five book publishers conspired to raise the price of e-books in violation of Section 1 of the Sherman Act.  The DOJ alleges that the five publishers communicated and met with each other to strategize about countering Amazon.com, Inc.’s (“Amazon”) growing power and low e-book prices.  At the end of 2009, the complaint asserts that the publishers began discussions with Apple.  The DOJ claims that Apple coordinated with the publishers to implement an agency model for selling e-books, whereby the publishers would control the prices to consumers and retailers would function as the publishers’ agents for a commission.  Each agreement also contained a most favored nation clause labeled as “unusual” by the DOJ that stated that the publishers would not charge a higher price on e-books sold on Apple’s store than the price charged by any other e-book seller, effectively removing pricing authority from other retailers.  Apple signed e-book distribution agreements with each publisher in January 2010.  Subsequently, Amazon agreed to use the agency model.  The complaint alleges that e-book prices for newly released and best-selling e-books rose to $12.99 or $14.99 from $9.99.

Current Status:  Three of the publishers have settled, while the remaining defendants do not seem inclined to do so.  A putative class action alleging similar claims was filed several months before the DOJ’s action:  In Re: Electronic Books Antitrust Litigation, No. 11-md-02293 (S.D.N.Y).  The district court has denied Apple’s and the publishers’ motions to dismiss. 

KSW Mech. Serv., Inc. v. Mech. Contractors Ass’n of NY, Inc., No. 11 Civ. 5100, 2012 WL 1027354 (S.D.N.Y. Mar. 27, 2012)

Background: KSW Mechanical Services, Inc. alleged that the Mechanical Contractors Association of New York, Inc. (the “Association”) conspired, in violation of Section 1 of the Sherman Act, with a local union for a favorable work rule for Association members. The Association negotiated labor contracts on behalf of its members, which the union then used to negotiate terms with third-parties, such as KSW (the “Independents”).  The union’s contract with the Association required a shop steward to oversee projects when eight workers were employed on a given job, whereas the resulting contract with the Independents (including KSW) required a shop steward when only four employees were on a job. The Association justified this by claiming that its members had a better history of “contract compliance and timely benefit payments.”  Both parties moved for summary judgment.

Outcome:  The district court denied the Association’s motion for summary judgment.  The district court first rejected the Association’s argument that its negotiations with the union were lawful under the theory of “pattern bargaining” because the Association negotiated a different contract with the union than the Independents did, thus there was no uniform pattern.  The district court further found that the Association was not protected by the “non-statutory exemption” to the antitrust laws because the Association is a non-labor group, bringing it outside the protection of the exemption.  Finally,  the district court found that KSW’s antitrust standing should be decided by a jury. Whether the increased shop steward requirement impacted competition was in genuine dispute, and, therefore “the impact of the shop steward provision on labor costs and the Independents’ ability to bid competitively must be addressed at trial.”

In re Currency Conversion Fee Antitrust Litig., MDL No. 1409, 2012 WL 401113 (S.D.N.Y. Feb. 8, 2012)

Background:  Plaintiffs brought antitrust action alleging that certain credit card issuers conspired to include mandatory arbitration clauses in cardholder agreements in violation of Section 1 of the Sherman Act.  Plaintiffs also allege that defendants participated in a group boycott by refusing to issue cards to individuals who did not agree to arbitration.  The defendants moved for summary judgment.

Outcome:  The district court denied the defendants’ motion for summary judgment.  Finding parallel conduct, the district court evaluated the various “plus factors” and found factual disputes that must be resolved at trial. 

Grand River Enters. Six Nations v. King, No 02 Civ. 5068, 2012 WL 263100 (S.D.N.Y. Jan. 30, 2012

Background:  In 1998, the nation’s four largest tobacco companies entered into an agreement with 46 states to settle pending and future claims in exchange for annual payments to compensate the states for health care costs associated with tobacco-related illnesses.  Plaintiff filed a complaint against the Attorneys General of 30 states, alleging that the settlement violated, among other laws, the Sherman Act.  The district court, on March 22, 2011, granted summary judgment in favor of the states and dismissed the Sherman Act claim because the plaintiff could not show it suffered an antitrust injury flowing from the settlement agreement.  The district court also found that the Parker v. Brown, 317 U.S. 341 (1943), state action immunity protected the states from any Sherman Act liability. Plaintiff moved to amend the district court’s March 22, 2011, judgment dismissing its Sherman Act claims, arguing that newly discovered documents would have materially influenced the court’s findings had they been part of the summary judgment record.

Outcome:  The district court denied plaintiff’s motion. The district court held that the plaintiff did not establish that it was justifiably ignorant of the new evidence at the time when the evidence could have impacted the summary judgment motions and that, in any event, the new evidence did not raise any factual issues that would change any Sherman Act findings. 

Eastern District of New York

In re Vitamin C Antitrust Litig., 279 F.R.D. 90 (E.D.N.Y. 2012)

Background:  Domestic Vitamin C manufacturers filed an antitrust suit against Chinese Vitamin C manufacturers, alleging that they fixed prices and limited exports to the United States.  Following the district court’s denial of the defendants’ motion for summary judgment based on the foreign sovereign compulsion defense, act of state doctrine, and doctrine of international comity, a group of direct purchasers moved for certification of a damages class.  Another plaintiff moved separately for certification of a class of direct and indirect purchasers seeking injunctive relief against all defendants.

Outcome:  The district court certified the damages class, but held that one of the plaintiffs was an indirect purchaser and therefore lacked standing to sue for damages under federal law.  The district court also certified the injunctive class of direct and indirect purchasers. 

New York State

Global Reinsurance Corp. – U.S. Branch v. Equitas Ltd., 2012 WL 995268 (N.Y. Mar. 27, 2012)

Background:  Global Reinsurance Corp. brought an action against retrocessional reinsurers, collectively referred to as Equitas Ltd., alleging violations of New York’s Donnelly Act.  Global Reinsurance alleged that the Equitas was the hub of a conspiracy in the market for the purchase, sale, and servicing of retrocessional reinsurance coverage.  Global Reinsurance argued that, after the formation of Equitas, which was created by an agreement of the governing body of Lloyd’s of London, Equitas made all the decisions on how claims made under pre-1993 policies were handled, thereby eliminating competition for claims services in the worldwide market.

Outcome:  The Court of Appeals reversed the lower court’s reinstatement of the Donnelly Act claim and dismissed the case, holding that the plaintiff did not allege that Lloyd’s had market power in the worldwide retrocessional insurance market.  As a result, there was “no allegation of any anticompetitive effect attributable to the posited conspiracy beyond the Lloyd’s marketplace.”  While Lloyd’s may “be the single most significant vendor of retrocessional non-life coverage,” this allegation does not prove that there was any “broader anti-competitive effect.”           

Further, even if this defect in pleading was curable upon an amended complaint, the Court of Appeals further held that the Donnelly Act would not create liability in New York for “the foreign conspiracy plaintiff purports to describe.”  A German company had purchased reinsurance through its New York branch in a London marketplace – which wholly lacks a New York locus for the claims, and “only incidently [sp] affected commerce in this country.”  The court stated that there would need “to be a very close nexus between the conspiracy and injury to competition in” New York in order for the Donnelly Act to regulate the behavior.  As such, the judgment of the Supreme Court was reinstated and the claim dismissed.