Two recent US antitrust class action settlements drew additional scrutiny from federal judges, showing that the allocation of settlement funds between a proposed class and their attorneys will be carefully reviewed for fairness to class members.
On Friday, August 8, 2014, the Southern District of New York denied motions for summary judgment filed by the National Hockey League, Major League Baseball, Comcast Corp. and DirecTV LLC in suits alleging that these organizations and television providers conspired to hinder competition in television and internet sports broadcasting. In two class action suits brought by consumers of broadcast sports, plaintiffs claimed that the leagues and television providers agreed to “black out” games so that regional sports networks faced limited competition to broadcast live events. This purportedly anti-competitive agreement forced plaintiffs to buy “out of market” packages offered by defendants, such as MLB Extra Innings, to watch live games on television or the internet if they did not live within the regional provider’s viewing territory. Laumann, et al. v. National Hockey League, et al., case number 1:12-cv-01817; Lerner v. Office of the Commissioner of Baseball, et al., case number 1:12-cv-03704. District Judge Shira Scheindlin determined that the questions of whether plaintiffs have provided evidence of collusion among the leagues and providers and evidence of a tacit agreement between the providers should be decided at trial by a fact finder. In addition, Judge Scheindlin refused to apply the rule established in Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, 259 U.S. 200, 208 (1922), that exempted Major League Baseball from the antitrust laws. She explained that Major League Baseball’s exemption did not extend to the league’s contracts for television broadcast services. A trial date has not been set.
On March 28, 2014, Judge Daniels of the Southern District of New York dismissed antitrust and unjust enrichment claims against over 20 banks accused of manipulating prices in the Euroyen interbank lending market by submitting false rate quotes to Yen-LIBOR and Euroyen TIBOR rate-setting organizations. Laydon v. Mizuho Bank, Ltd., No. 12-cv-3419 (S.D.N.Y. Mar. 28, 2014). The plaintiff, a short purchaser of Euroyen TIBOR futures contracts, also brought claims under the Commodities Exchange Act, which the court allowed to go forward.
The court based its dismissal of the price-fixing claim on lack of antitrust standing and failure to allege a restraint of trade. The plaintiff lacked antitrust standing for two reasons: (1) failure to plead antitrust injury and (2) the indirect, remote and speculative nature of his alleged injury—while the alleged misconduct involved manipulating present-day interbank lending rates, the alleged injury was suffered in the futures market. Although the plaintiff alleged that prices were distorted, he failed to allege that the distortion resulted from a reduction in competition. The ruling was partially based on the unique nature of the rate-setting process, which is neither supposed to be competitive nor collaborative. Instead, “each bank was supposed to independently contribute its submission to be evaluated collectively with other bank submissions.”
In holding that the plaintiff failed to allege a restraint of trade, the court noted, “Plaintiff merely alleges that prices may have been different. Plaintiff does not, however, allege that trades in Euroyen TIBOR futures contracts were in any way restrained by the alleged misconduct.” The court analyzed the alleged misconduct under the rule of reason and found that the plaintiff had failed to plead any anticompetitive effects. “There are no allegations that banks competed less, or were forced out of any of these markets. Nor is there any allegation that output of Euroyen futures contracts was eliminated or diminished. Absent any such allegations, Plaintiffs’ claim does not sufficiently plead a violation of the Sherman Act.”
On March 11, 2014, Judge Ann Montgomery of the District of Minnesota dismissed a putative antitrust class action against Graco Inc. and its distributors that accused Graco of buying two of its closest competitors in the spray foam equipment market for the purposes of raising prices and reducing product options. Insulate SB Inc. v. Abrasive Products & Equipment et al., case number 0:13-cv-02664. The plaintiff alleged that after Graco purchased its rivals, it conspired with its distributors to boycott competitors. The lawsuit followed Graco’s FTC settlement which bars it from pressuring distributors into not carrying its competitors’ equipment products. The court held that the plaintiff’s allegations, which occurred four years prior to filing the suit, were barred by the statute of limitations, and that even if the claims were not time-barred, the plaintiff’s allegations were speculative and conclusory. The court also dismissed the plaintiff’s request for injunctive relief, finding the remedy drastic for the situation and stating that “Graco’s acquisition occurred over five years ago, and divestiture would impose obvious hardship on Graco employees and distributors.”
On 3 March 2014, the Milan Court of Appeal overturned a previous decision issued by the Milan Tribunal, declaring a class action brought by an Italian consumers association, Altroconsumo, against local railway operator Trenord as non-admissible.
On 8 November 2013, the Milan Tribunal had dismissed the class action started by Altroconsumo on the grounds inter alia, that passengers had not suffered homogeneous damages.
Following the appeal against the order of the Milan Tribunal, in its judgment of 3 March 2014, the Milan Court of Appeal found that, while assessing the admissibility of a class action, the judge cannot pretend that the damages suffered by consumers shall be exactly the same, otherwise, the chances of filing a class action would be reduced to zero.
Therefore, according to the Milan Court of Appeal, it would be sufficient that the rights of customers are homogeneous, while different damages suffered by consumers are at the basis of the quantification of the compensation.
If confirmed, such wider interpretation of the admissibility requirements might make it easier for consumer associations to file class actions against companies active in Italy.
For more information, please contact your regular McDermott Will & Emery lawyer or an author.
France is one of the last western European countries to introduce a class action system. After decades of debates, two failed attempts by both left wing and right wing Parliament majorities, nine months of legislative procedure and thousands of amendments, it should soon, finally, be possible to launch a group action in France.
On February 12, 2014, Cathay Pacific Airlines Ltd. settled a freight shipping price-fixing multidistrict class action litigation in the Eastern District of New York. In re Air Cargo Shipping Services Air Cargo Antitrust Litigation, case number 1:06-md-01775. The Hong Kong-based airline agreed to pay consumers of air-freight shipping services $65 million in the settlement. After the U.S. Department of Justice and European Commission initiated investigations of the air freight industry, purchasers of shipping services brought price-fixing actions against air cargo companies from two dozen countries in 2006. The Department of Justice claimed that these air cargo companies conspired to set the rate at which they charged for certain routes. These airlines then held subsequent meetings to ensure that these rates were enforced. To date, 20 defendant groups have paid $758 million in settlements with eight defendant groups still remaining in the class action. Cathay Pacific previously paid $1.44 million to the Canadian Competition Bureau and $60 million to the Department of Justice for pleading guilty to violations of Canadian and United States competition and antitrust laws, respectively.
On December 10, 2013, Judge Edmond Chang of the Northern District of Illinois certified a class of plaintiffs who filed a proposed class action against NorthShore University Health System (formerly Evanston Northwestern Healthcare) on behalf of all end-payors who purchased inpatient and outpatient healthcare services directly from NorthShore.
In 2000, Evanston Northwestern acquired rival Highland Park Hospital. The FTC successfully challenged the consummated merger in 2004, but did not order divestiture because the hospitals had already been merged and was functioning as a single entity for several years. After the FTC’s decision, the plaintiffs brought their class action, alleging that NorthShore illegally monopolized the market and caused the plaintiffs and the putative class to pay artificially inflated prices for healthcare services.
A previously assigned judge denied the plaintiffs’ motion for class certification, holding that the plaintiffs had failed to satisfy the Rule 23(b)(3) “predominance” prerequisite to class certification – i.e., that there are questions of law or fact common to class members that predominate. Fed. R. Civ. P. 23(b). On interlocutory appeal, the Seventh Circuit held that the plaintiffs did satisfy predominance, then vacated the district court’s order and remanded.
On remand, Judge Chang held that the only remaining issue as to class certification was whether the plaintiffs had satisfied the Rule 23(b)(3) “superiority” prerequisite to class certification, i.e., that a class action must be “superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). NorthShore argued that the plaintiffs failed to satisfy the superiority prerequisite because: 1) arbitration is superior to class action litigation (with respect to the payors who NorthShore alleged are bound by arbitration provisions in the payor contracts); 2) managed care organizations have an interest in individually controlling any claim against NorthShore; and 3) class certification would be unmanageable because a trial would require “hundreds of mini-trials analyzing many individual [NorthShore contracts with payors]”. Judge Chang disagreed, finding, among other things, that the parties disagreed as to whether all of NorthShore’s contracts with payors even contained arbitration provisions. Moreover, Judge Chang noted that the payors had not yet taken a position as to whether they wanted to exercise their individual right to control the litigation, despite ample opportunity to do so. Finally, Judge Chang commented that the “Seventh Circuit credited the ability of the plaintiffs’ expert . . . to use common evidence to show that all of the class members suffered some antitrust impact,” which would eliminate the need for hundreds of mini-trials on liability. Accordingly, Judge Chang found that the plaintiffs had satisfied the superiority prerequisite and certified the class.
This is a unique case because most hospital mergers are challenged pre-consummation, where an injunction is the only remedy available to plaintiffs. In fact, this is the first private antitrust class action related to a hospital merger.
The main developments in antitrust are:
1. Merger Control (Art. 5-bis)
From January 1, 2013:
- The Italian merger control thresholds will be cumulative and no longer alternative (i.e. the combined turnover in Italy of all undertakings concerned exceeds € 468 million AND the Italian turnover of the target exceeds € 47 million);
- The current mandatory merger control filing fee (i.e. 1.2 percent of the value of the transaction in a range of € 3,000 and € 60,000) will be replaced by a mandatory fee of 0.08 per thousand of the turnover applicable (regardless of a transaction being filed) to all companies having a turnover exceeding € 50 million (such contribution shall be paid by October 30, 2012 for the first year, and July 31, 2013 for the following years).
2. New Bodies
- Business Courts (Art. 2) – by September 24, 2012, the IP specialized sections of Italy’s Tribunals and Appeal Courts (renamed “business specialized sections”) will have jurisdiction also over all claims for damages caused by national and EU antitrust infringements, as well as corporate and public procurement matters involving limited companies.
- Transport Authority (Art. 36) – it will be created within May 31, 2012 and will have supervising powers on the transport sector and the access to relevant infrastructures (it will be fully operative following the adoption of its implementing decrees).
3. Main New Powers of the Authority
- Unfair clauses (Art. 5) – since March 24, 2012, the Authority is responsible to ensure protection against unfair contractual clauses in business to consumer agreements and it may impose fines up to € 50,000.
- Unfair commercial practices (Art. 7) – since March 24, 2012, extension of the Authority’s powers in the enforcement of the unfair commercial practices rules to protect, not only consumers, but also small enterprises (with less than 10 employees and a turnover of less than € 2 million).
- Food sector (Art. 62) – from October 25, 2012, the Authority will have the power to supervise and may apply fines up to € 500,000, in case of breach of the new rules concerning agreements in the food sector (i.e. written form and other specific requirements; obligation to pay within 30 days for perishable goods and within 60 days for all other goods).
- Public Utilities (Art. 25) – since March 24, 2012, the Authority shall now be consulted in various fields, including the public utilities local award procedures (where the population is above 10,000 inhabitants).
4. Banks and Insurance
- Banks (Art. 28) – from July 1,2012, banks shall propose to their customers the offers of at least two different insurance groups, if they require a life insurance as a condition to issue a mortgage.
- Insurance (Art. 34) – no later than July 24, 2012, car insurance intermediaries will be required to inform their customers about the contractual conditions proposed by at least three different insurance groups.
5. Class Action (Art. 6)
Amendments to the current rules (entered [...]
France may join the growing number of jurisdictions for class action style private antitrust damage claims in the EU.
A judge from the French Cour de cassation, the highest civil jurisdiction, speaking at a conference yesterday, stated that class action style "assigned damages claims" under French law could be accepted by French courts without a change in legislation. Under this model, a company may buy damage claims from cartel victims and bring them as a bundled claim to court.
This is the same mechanism that has recently been used in German courts by CDC. Should this position materialise in French jurisprudence, it would mean that class action style damage claims could prosper in France.