Distribution, Competition, and Antitrust / IP Law

Archives for January 2016

An Unaccepted Offer of Judgment Won’t Moot a (Class) Claim

In Campbell-Ewald Co. v. Gomez, 577 U.S. ___ (2016), the Supreme Court held that an unaccepted offer of judgment under Federal Rule of Civil Procedure 68 does not moot a named plaintiff’s claim, and, therefore, the named plaintiff can still seek class certification.

The case involves text messages allegedly sent without consumers’ consent in violation of the Telephone Consumer Protection Act. Prior to class certification, the defendant offered judgment in the form of the named plaintiff’s full alleged damages and costs as well as an injunction against the defendant’s involvement in unsolicited text messaging. (The Act does not provide for attorney’s fees.) The plaintiff rejected the offer.

Applying “basic principles of contract law,” the Court (Ginsburg, J.) held that the defendant’s offer of judgment, once rejected, had no continuing efficacy. The parties therefore remained adverse.   Further, a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted. The Court did not decide whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to plaintiff and the court then enters judgment for the plaintiff in that amount.

Justice Thomas concurred in the judgment but would have rested on the common-law history of “tenders.” Chief Justice Roberts dissented, emphasizing that the federal courts must independently evaluate whether there is a live case or controversy. “[A] plaintiff is not the judge of whether federal litigation is necessary, and a mere desire that there be federal litigation – for whatever reason – does not make it necessary.” (Emphasis in original.) Under constitutional principles, “[t]he agreement of the plaintiff is not required to moot a case.” “If the defendant is willing to give the plaintiff everything he asks for, there is no case or controversy to adjudicate, and the lawsuit is moot.”  Chief Justice Roberts also noted that Gomez did not have standing to seek relief based solely on the alleged injuries of others, and Gomez’s interest in sharing attorney’s fees among class members or in obtaining a class incentive award does not create Article III standing.

Although the Supreme Court has in recent years been tightening up the standards for class certification, see, e.g., Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013), Gomez is evidence that the Court will not automatically approve arguments that limit the ability of plaintiffs to seek class certification.

Twombly’s Teeth

Occasionally a would-be plaintiff (or counter-claimant) asks whether one can file an antitrust claim and then get some discovery to back it up.

This is not a good game plan.

In Eastman v. Quest Diagnostics Inc., 2016 U.S. Dist. LEXIS 1282 (N.D. Cal. Jan. 6, 2016) (Orrick, J.), the plaintiffs sought pre-complaint discovery from the defendant, including its fee-for-service pricing for the years 2013 and 2015 for six geographic areas.  The court refused to allow such discovery.  Citing Twombly’s concerns about the expense of antitrust discovery, the court wrote that “[t]he Rule 8 screening function would be rendered toothless if [plaintiff] were entitled to pre-complaint discovery in order to fish for conduct that gives rise to an antitrust violation.” (cit. omit.).

The court noted that not all the information necessary to plead a plausible claim was in the hands of the defendant.  Nor was it clear how the pricing information would be sufficient, on its own, to enable plaintiffs to cure the deficiencies in their complaint, because plaintiffs would still lack pricing information for the defendant’s competitors, and “would lack a coherent and plausible explanation as to why it is appropriate to assume that Quest’s pricing is attributable to its alleged antitrust violations.”

In antitrust cases, perhaps more than in others, it is important to gather the facts first before filing the claim.

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