Distribution, Competition, and Antitrust / Intellectual Property (IP) Law

On the Difficulty of Dauberting Antitrust Economists

It’s difficult.  Despite a valiant effort, the defendants in In re: High-Tech Employee Antitrust Litigation, 2014 U.S. Dist. Lexis 47181 (N.D. Cal. Apr. 4, 2014) (Koh, J.), failed to exclude the expert testimony of plaintiffs’ economist, who has opined on the purported wage impact of the defendants’ alleged bilateral agreements not to cold call each other’s employees.

I won’t cover the complex statistics and econometrics here, but if you’re interested, I’m attaching a copy of the decision (click the link).

In re High-Tech Employee Antitrust Litigation

Injunctive Relief, but not Damages Class, Certified in NCAA Student-Athlete Litigation

English: National Collegiate Athletic Associat...

(Photo credit: Wikipedia)

In In re NCAA Student-Athlete Name & Likeness Licensing Litigation, 2013 U.S. Dist. LEXIS 160739 (N.D. Cal. Nov. 8, 2013) (Wilken, J.)., the Court certified a class of current and former student-athletes seeking injunctive relief, but declined to certify a damages class. The case illustrates the importance for plaintiffs of tying a theory of harm to damages to all purported class members – or for defendants, the importance of finding a disconnect between the two.

The plaintiffs were or are NCAA Division I football and basketball student-athletes. They allege that the NCAA misappropriated their names, images, and likenesses in violation of their statutory and common law rights of publicity. Some of the named plaintiffs also allege that the NCAA violated federal antitrust law by conspiring with Electronic Arts and the marketing firm Collegiate Licensing Company to restraint competition in the market for the commercial use of their names, images, and likenesses.

Plaintiffs allege a market for the acquisition of group licensing rights for the use of names, images and likenesses in the broadcasts or rebroadcasts of Division I basketball and football games and in videogames featuring Division I basketball and football. Plaintiffs challenge the NCAA’s rules, which allegedly prohibit student-athletes from receiving compensation for the commercial use of their names, images, and likenesses. Plaintiffs also seek monetary damages as a result of the NCAA’s alleged plan to fix at zero the price of student-athletes’ group licensing rights.

The Northern District of California had little difficulty in certifying a class of plaintiffs seeking injunctive relief against the NCAA. However, the Court declined to certify a Rule 23(b)(3) damages subclass, for several reasons.

First, in the Court’s view, the Plaintiffs had failed to satisfy the manageability requirement because they did not identify a feasible way to determine which members of the damages subclass were actually harmed by the NCAA’s allegedly anticompetitive conduct. In the Court’s view, the Plaintiffs did not address or overcome the “substitution effect” – i.e., the fact that if athletes had stayed in college because the NCAA’s rules were different, they would have displaced other student-athletes on their respective teams. Those displaced student-athletes would have either been forced to play for other Division I teams or simply lost the opportunity to play in Division I altogether. In either case, they would not have suffered injuries as members of the teams for which they actually played.

Second, the Court concluded that Plaintiffs had not adequately proposed a method to determine which student-athletes were actually depicted in videogames during the relevant class period, or which student-athletes appeared in game footage during the relevant time period.

These sorts of substitution effects occur with some frequency, and require careful attention.

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A Supreme Court Antitrust Twofer: What You Need to Know

Washington DC: United States Supreme Court

Washington DC: United States Supreme Court (Photo credit: wallyg)

Within the past two weeks, the U.S. Supreme Court has decided two important cases relevant to antitrust.

First, on March 27, in Comcast Corp. v. Behrend, No. 11-864, the U.S. Supreme Court ruled that a U.S. district court may not certify a class action under Federal Rule of Civil Procedure 23(b)(3) without first determining that damages may properly be awarded on a classwide basis. The Court held that if a damages model fails to attribute supra-competitive prices specifically to the theory of impact, Rule 23(b)(3) cannot authorize class treatment.

Justice Scalia, writing for the majority, cited the Court’s reasoning in Wal-Mart Stores, Inc. v. Dukes as requiring “a determination that Rule 23 is satisfied, even when that requires inquiry into the merits of the claim.” At the class certification stage, “any model supporting a plaintiff’s damages case must be consistent with its liability case.”

In the past, lower courts saw no need for class plaintiffs to tie each theory of antitrust im­pact to a calculation of damages. That, they said, would involve consideration of the merits having no place in the class certification inquiry.  This approach is no longer the law after Comcast.

Time will tell whether Comcast reduces the overall number of class claims presented, or merely leads to more robust expert reports and expert discovery.

Second, on March 19, the Supreme Court held in Standard Fire Ins. Co. v. Knowles, No. 11-1450, that class representatives cannot circumvent the Class Action Fairness Act (CAFA) by stipulating to limit their class damages claim to less than $5 million to keep their case out of federal court. The decision should make it more difficult for plaintiffs to keep their antitrust and other class claims out of federal court by, e.g., so stipulating, and bringing multiple cases/claims, each purportedly under $5 million.

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Supreme Court Agrees to Hear Two Antitrust Cases Next Term

U.S. Supreme Court building.

U.S. Supreme Court building. (Photo credit: Wikipedia)

Today, although it did not issue its much-anticipated ruling on the Obama Administration’s health care plan, the Supreme Court did agree to hear two antitrust cases during its next term (which starts in October).

In the first case, styled in the court of appeals as Behrend v. Comcast Corp., 655 F.3d 182 (3d Cir. 2011), Comcast challenged a decision certifying a class of cable TV subscribers.  The Supreme Court has limited the question presented on appeal to: “Whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.”

This is an important question.  In the U.S., in most antitrust class actions, plaintiffs must show that common questions predominate over individual questions.  Behrend involves application of that basic rule to the issue of damages.  A “no” answer could have a significant negative impact (from plaintiffs’ perspective) on antitrust class action litigation in the U.S.  (In the Supreme Court, the case is numbered 11-864.)

In the second case, styled in the court of appeals as FTC v. Phoebe Putney Health System, Inc., 663 F.3d 1369 (11th Cir. 2011), the Court will take up the question of whether a hospital acquisition is immunized from antitrust scrutiny by virtue of the state action doctrine.  (The Eleventh Circuit determined that the immunity attached, because the acquisition was authorized pursuant to a clearly articulated state policy to displace competition.)  The FTC is pressing ahead with the appeal against the background of its challenges to three hospital mergers since 2011.  (In the Supreme Court, the case is numbered 11-1160.)

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N.D. Cal. Certifies Antitrust / Arbitration Estoppel Question to Ninth Circuit

In re Apple & AT&TM Antitrust Litigation, No. C 07-05152 JW (Feb. 1, 2012) (Ware, J.)

Judge Ware certified for interlocutory appeal the question of whether a non-signatory may assert equitable arbitration estoppel against a signatory plaintiff.

The case involves a Sherman Act Section 2 / aftermarket claim against Apple. The case arose from the plaintiff’s service contract with defendant ATTM. As part of that service contract, the plaintiff signed an arbitration agreement with defendant ATTM which precluded class arbitrations and class actions.

The district court initially followed Mundi v. Union Security Life Ins. Co., 555 F.3d 1042 (9th Cir. 2009), in finding that equitable estoppel required plaintiff to arbitrate with non-signatory Apple as well. The Mundi court had found a dearth of prior Ninth Circuit precedent, and had looked to other circuits for guidance — in particular, the Second Circuit in Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354 (2d Cir. 2008). The Ninth Circuit allowed the assertion of equitable estoppel where the dispute is “intertwined” with the contract and there is a sufficient “relationship” between the parties.

Plaintiff filed a motion for reconsideration. Because the Apple Court’s prior order “was premised on an interpretation of Mundi which required the Court to undertake an extensive analysis of both that opinion itself and the Second Circuit caselaw to which the Mundi court looked for guidance, and given the language in Mundi which indicates that the Ninth Circuit did not mean to extend the ‘concept of equitable estoppel of third parties’ beyond the ‘very narrow confines’ delineated in previous cases,” the Apple Court found reason to certify the issue of arbitration by equitable estoppel for interlocutory review.

 

American Express Can’t Enforce Arbitration Agreement Antitrust Class Action Waiver

The Supreme Court’s recent arbitration decisions have not yet killed the antitrust class action.

Yesterday, in a purported class action brought by merchants against American Express, the Second Circuit ruled that American Express could not enforce an arbitration agreement containing a class action waiver provision.  The Second Circuit distinguished the Supreme Court’s recent decisions in Concepcion and Stolt-Nielsen.  (Concepcion, in particular, had bolstered the enforceability of  arbitration provisions, ruling that the Federal Arbitration Act preempts certain state laws.)  The Second Circuit found that those cases did not address the issue of whether a class-action arbitration waiver clause is enforceable even if the plaintiffs are able to demonstrate that the practical effect of enforcement would be to preclude their ability to vindicate their federal statutory rights.

In so ruling, the Second Circuit relied upon evidence that showed that the cost of individually arbitrating the merchants’ claims would be prohibitive.  (The merchants had alleged that when American Express entered the commodity credit card business, American Express forced merchants to pay “excessive” rates equal to American Express’ more attractive business and personal charge cards by tying the credit and charge cards together.)

The decision is In re American Express Merchants’ Litigation, 2d Circuit Feb. 1, 2012.  A petition for certiorari is likely.

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