Northwest Business Litigation

Attorneys not subject to sanctions under the Fair Debt Collection Practices Act

The Ninth Circuit Court of Appeals last week addressed the scope of sanctions for bad faith claims under the Fair Debt Collections Practices Act ("FDCPA").  A California plaintiff brought suit against two companies for violations of the FDCPA.  The plaintiff lost the suit, and the federal district court awarded attorney's fees and costs against the both plaintiff and his lawyers, finding that the lawsuit had been filed in bad faith and for the purpose of harassment as defined by the FDCPA.  The plaintiff's attorneys appealed.

On June 9, the Ninth Circuit issued its opinion in Hyde v. Midland Credit Management, Inc., holding that even if an FDCPA case is brought in bad faith and for the purpose of harassment, attorney's fees and costs cannot be awarded against the plaintiff's attorney under the FDCPA.

While the FDCPA does provide for an award of attorney's fees and costs against an unsuccessful abusive plaintiff, the Ninth Circuit looked at laws the FDCPA is modeled after and determined that Congress did not intend to allow fee awards against an attorney.  The Court reasoned that, had Congress intended to allow direct sanctions against an attorney, it would have explicitly said so.  The Court noted that there are other laws and rules by which courts can penalize attorneys directly.

Ninth Circuit puts Internet domain name registry in dispute

In an opinion issued earlier this month, Ninth Circuit Judge Mary M. Schroeder applied "antitrust statutes drafted in the late 19th century" to reinstate a lawsuit alleging wrongful acts in a very 21st century business:  the registry for ".com" and ".net" Internet domain names.

Plaintiff in Coalition for ICANN Transparency, Inc. v. VeriSign, Inc. alleges that VeriSign, the company that has the exclusive right to administer the registry of domain names, and ICANN, the non-profit oversight body that coordinates the Internet domain name system, prevented competition in the pricing of domain name registration.  While the trial court had dismissed the complaint for failure to state a claim, the Ninth Circuit held that, among other things, plaintiff adequately pleaded conspiracies to set artificially high prices for ".com" domain names and to prevent competitive bidding for the right to register domain names.

U.S. Supreme Court increases pleading burden for plaintiffs

Memo to plaintiffs in federal court:  You'll have to plead facts to support your claim in order to survive a motion to dismiss.  A complaint reciting the elements of a claim and amounting to a series of legal conclusions is no longer adequate.  Earlier this week, the U.S. Supreme Court held in Ashcroft v. Iqbal that Federal Rule of Civil Procedure 8, requiring a "short and plain statement of the claim," "does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Instead, legal conclusions must be supported by facts that are plausible - meaning facts that allow the court to draw the reasonable inference that defendant is liable.

While Iqbal garners media attention for addressing immunity from claims of unlawful detention of Muslims after the 9/11 attacks, its interpretation of federal pleading rules will have an impact on all civil litigants for years to come.

Iqbal follows the 2007 U.S. Supreme Court case of Bell Atlantic Corp. v. Twombly, which first stated the more stringent pleading rules.  Twombly was an antitrust case, and at the time it was unclear whether the heightened pleading requirements applied only to antitrust plaintiffs.  Justice Kennedy, writing for the majority in Iqbal, states that Twombly was not so limited, and applies to all civil complaints in federal court.

Falling book prices doom antitrust lawsuit against Amazon and Borders

A customer can't sue two retailers for illegal collusion unless he can show that he suffered actual damages, according an opinion issued this week by the Ninth Circuit.  In Gerlinger v. Amazon.com, Inc., plaintiff challenged an agreement under which the book retailer Borders Group, Inc.'s web site directed shoppers to a site hosted by Amazon.  The books purchased on that site were sold and shipped by Amazon, and Borders received a commission for each sale. 

Plaintiff, a customer of Amazon, claimed that Borders' commitment not to sell books directly on the internet during the term of the agreement amounted to a per se market allocation in violation of federal antitrust law.  The Ninth Circuit never addressed the legality of the agreement, instead affirming summary judgment in favor of defendants on the ground that plaintiff could not show that the prices he paid for books increased as a result of the agreement.  In fact, Amazon offered evidence that book prices declined after the agreement became effective.  Without proof of an "injury-in-fact," the customer could not challenge Borders' agreement to stay out of the on-line market.

Coincidentally, on the same day as the Ninth Circuit's ruling, Borders announced that it was ending its seven-year relationship with Amazon and launching its own e-commerce web site.

Another antitrust verdict hits forest-products firm

A year after the U.S. Supreme Court tossed out a $79 million antitrust verdict against it, Weyerhaeuser has this week been hit with another antitrust judgment by a jury in Portland - this time in the amount of $28 million, which will be trebeled to $84 million.  While the earlier case involved a claim by Weyerhaeuser's competitors in the alder mill business, this time the plaintiffs are a group of customers who purchased finished alder lumber.  Those plaintiffs contend that Weyerhaeuser monopolized the market for finished alder logs, illegally raising prices charged to plaintiffs.

See news coverage of this week's verdict here and here.  And see our coverage of last year's Supreme Court ruling here. 

Court dismisses antitrust complaint, then allows discovery

In 2007 the US Supreme Court raised the standards for pleading a federal antitrust claim, holding in Bell Atlantic v. Twombly that plaintiff must plead sufficient facts to suggest an illegal agreement in restraint of trade.  The Ninth Circuit last week agreed to dismiss an antitrust complaint for failing to meet that pleading standard.  What's interesting about the case, Kendall v. Visa USA, Inc., is what happened in the trial court:  the plaintiffs had been allowed to take depositions of defense witnesses after their complaint had been dismissed. 

According to the Ninth Circuit opinion, the district court judge dismissed the initial complaint for failure to plead adequate facts, but agreed that plaintiffs could conduct discovery before filing an amended complaint.  Because the amended complaint continued to be deficient, the court dismissed it without leave to amend.  This case turns the usual litigation process on its head:  a complaint must typically be in place before discovery can begin.  If discovery after dismissal becomes the norm in antitrust cases, expect many disputes over how much discovery defendants must make available to plaintiffs.

See our earlier coverage of the Supreme Court's Twombly opinion here.

Looking to Europe for antitrust enforcement

With the U.S. Supreme Court consistently ruling against antitrust plaintiffs, and with the Justice Department scaling back its antitrust enforcement efforts, it appears the European Union has taken the lead in regulating trade and competition.  Monday's ruling by the EU's Court of First Instance against Microsoft, including imposition of a $613 million fine, confirms that European law takes a hard line against dominant firms.  That tough stance will have repercussions outside of Europe.  The court's order that Microsoft must, for example, share communications code with its rivals will affect how the company conducts operations throughout the world. 

Antitrust law and an activist court

The August/September issue of the Oregon State Bar Bulletin has a commentary on the recent landmark antitrust case from the U.S. Supreme Court, Leegin Creative Leather Products v. PSKS.  It's by Lori Irish Bauman, a contributor to the Oregon Business Litigation Blog.  See our other coverage of the case here and here. 

Ninth Circuit reverses jury verdict in hospital antitrust case

The Ninth Circuit yesterday reversed a $16.2 million jury award in an antitrust dispute between two Eugene hospitals.  One of the key issues in Cascade Health Solutions v. PeaceHealth was whether PeaceHealth, the largest provider of hospital services in the market, engaged in illegal attempted monopolization when it offered bundled discounts to insurers -- meaning that it offered a bundle of services for a lower price than it charged for the services individually. 

Companies from across the country weighed in as amicus curiae, and the Ninth Circuit held that the district court's jury instructions on the bundled discount issue were erroneous.  According to the court,  offering a bundled discount that a competitor cannot match is not by itself an antitrust violation.  The Ninth Circuit adopted the test for illegal bundled discounts recommended earlier this year by the Antitrust Modernization Commission.  See further discussion of the case here and here.

Antitrust commentary in the Portland Business Journal

This week's Portland Business Journal has a commentary by blog contributor Lori Irish Bauman on the recent US Supreme Court opinion that overturned a 96-year-old antitrust precedent.  Here's a link to an on-line excerpt (subscription required for the complete article).

See our earlier coverage of the case, Leegin Creative Leather Products, Inc. v. PSKS, Inc., here.