Northwest Business Litigation

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.

Supreme Court tosses out century-old antitrust rule, remaking the law of resale price maintenance

In an extraordinary repudiation of 96-year-old precedent, the Supreme Court today swept away the per se prohibition on resale price maintenance.  Since the 1911 case of Dr. Miles Medical Co. v. John D. Park & Sons Co.,  it has been illegal under the Sherman Act for manufacturers to dictate the prices at which distributors and retailers re-sell products.  In the decades since, that case has played a major role in how the retail segment of the economy has been organized.  The court's 5-4 opinion in Leegin Creative Leather Products, Inc. v. PSKS, Inc., now firmly rejects the rule of Dr. Miles, and allows manufacturers and distributors/retailers to agree on resale prices, subject only to the rule of reason that applies to all other vertical restraints of trade.

The case presents an interesting study in how courts employ economics in modern antitrust analysis.  According to the majority opinion written by Justice Anthony Kennedy, (1) Dr. Miles was based on flawed reasoning, including that resale price maintenance (RPM) violated the antiquated common-law rule against restraints on alienation, (2) many economists have criticized the prohibition against RPM as dampening pro-competitive activity, and (3) the Sherman Act is a "common law statute," which means that courts interpreting it are less constrained by the doctrine of stare decisis.

The dissent by Justice Stephen Breyer responds that (1) economists are not wholly in agreement that barring RPM is harmful to competition, and in any event the job of the court is not to count noses among economists, (2) Congress has had nearly 100 years to overturn Dr. Miles and has chosen not to do so, and (3) the prohibition against RPM is so firmly entrenched in our economy that, even if it the Sherman Act is a common law statute, stare decisis dictates that the court not undo the rule.

See our earlier coverage of the case here.

Securities regulation trumps antitrust law, the Supreme Court holds

On Monday the U.S. Supreme Court held that joint activity in the underwriting of an initial public stock offering is immune from scrutiny under the antitrust laws.  In Credit Suisse Securities v. Billing, plaintiffs claimed that the underwriters of hundreds of IPOs acted together to drive up the fees they earned, in violation of federal antitrust law.  Justice Stephen Breyer, writing for the court, held that extensive regulation by the Securities and Exchange Commission of the underwriters' activities precluded the application of antitrust law. 

Justice Clarence Thomas was the sole dissenter.  He wrote that the claims must proceed because, according to the Securities Act of 1933, securities law remedies do not preempt other existing remedies, including those under the antitrust law.

See our earlier coverage of the case here.

Supreme Court addresses antitrust pleading rules in Twombly

Monday's antitrust ruling from the U.S. Supreme Court makes it easier for courts to toss out cases at the pleading stage.  Litigators know that, under federal "notice pleading" standards, a complaint need not include an extensive recital of facts; a pleading that simply puts defendant on notice of the nature of the claims is sufficient.  Bell Atlantic Corp. v. Twombly appears to impose a different standard for pleading a Sherman Act Section 1 combination in restraint of trade.  It states that plaintiff must plead enough facts to plausibly suggest an actual unlawful agreement between the defendants.  Such a standard is necessary, according to Justice Souter, to avoid expensive discovery on a claim that lacks merit.

Like the Weyerhaeuser case decided earlier this term, Twombly makes the road that much rougher for antitrust plaintiffs.   

See other law blog coverage of the case here and here.

Update: Splenda lawsuit settlement

At the end of a month-long trial, the manufacturer of Splenda artificial sweetener settled the false advertising claim brought by the manufacturer of rival product Equal.  As earlier noted here in the Oregon Business Litigation blog, the trial in Philadelphia addressed whether the advertising slogan "made from sugar, so it tastes like sugar" is false, in violation of the Lanham Act and state law.

The terms of the settlement were undisclosed -- it's unknown whether the ad slogan will change, for example.  But defendant evidently saw the handwriting on the wall:  settlement talks started in earnest when the jury, during its deliberations, asked the judge for a calculator and copies of expert reports on damages.  The parties announced the settlement just before the verdict was to be read. 

See coverage of the settlement at How Appealing, Law.com, MSN, and the Wall Street Journal Law Blog.