Articles Posted in US Supreme Court

LIBOR Antitrust MDLThe US Supreme Court just issued its decision in an antitrust case called Ellen Gelboim v. Bank of America Corporation. This case arises out of major multi-district litigation (an MDL) centered on allegations that major banks conspired to manipulate the London InterBank Offered Rate (which you probably know as LIBOR) to lower their interest costs on financial instruments sold to investors.

For purposes of Gelboim, the intricate details of the alleged conspiracy are not relevant, but you should know that it led to over 60 actions filed in federal court against the banks.

That sounds like a lot of cases and you might infer from the large number that the defendants must have done something wrong if so many people are suing them. But that isn’t necessarily true.

What happens is that a government agency announces an investigation (or it leaks) or someone has the idea that there is price-fixing, market-allocation, bid-rigging or some related horizontal per se antitrust violation going on.

There are plaintiff law firms all over the country that specialize in bringing these types of lawsuits and when one appears, you see many more very quickly. They follow each other and an antitrust blizzard ensues. It is, in fact, an extremely competitive market among plaintiff firms. And when a big set of cases develop, the plaintiff lawyers are often fighting each other for bigger pieces of the pie more than they battle defendants’ attorneys.

Fortunately, there is a set of procedures that deal with such a situation—Section 1407. This statute created the Judicial Panel on Multidistrict Litigation (JPML), which may transfer the many related actions “involving one or more common questions of fact” to one district court for coordinated or consolidated pretrial proceedings.

Importantly, as the Supreme Court points out, this does not mean that all of the cases are transferred forever into the one district court. They are just there for pre-trial proceedings. Of course, practically speaking, they rarely leave that court as most of these cases are either dismissed or settled. If not, the statute requires that each individual action “shall be remanded by the panel at or before the conclusion” of the pretrial proceedings to the original district court.

Continue reading →

White TeethThe trade association necessitates a delicate balancing act between anticompetitive conduct condemned by the antitrust laws and pro-competitive information-sharing and best practices that ultimately help consumers.

Trade associations should have antitrust policies and should consistently consult with an antitrust attorney. Antitrust law reserves its greatest scorn to the horizontal agreements—the deals between and among competitors. And a trade association is, by definition, an entity created to bring these competitors together.

Competition Policy International (CPI) published an Antitrust Chronicle this week about trade associations and industry information sharing and I was fortunate that they invited me to publish an article in this issue. My article is called “’But the Bridge Will Fall’ is Not a Valid Defense to an Antitrust Lawsuit.” I discuss one of my favorite Supreme Court cases of all time: National Society of Professional Engineers v. United States.

There are a couple of ways that trade associations—and, really, any group of industry competitors—harm competition and risk antitrust liability. The first and most obvious concern is that the competitors will conspire against their customers or suppliers (don’t forget that buying conspiracies may be illegal too).

For example, a group of competitors may reach agreements on price, output, geographic or product and service markets, contractual terms, etc. These are per se antitrust violations, condemned with little analysis other than whether there was, indeed, an agreement.

The other conspiratorial harm that trade associations or groups of industry competitors can inflict is on competitors from another industry or profession. In my view, this harm is underrated and under-considered. I discussed this concern in a law review article a couple years ago.

Continue reading →

NC Dental PictureThe US Supreme Court does not review many antitrust cases. So when they do, it is kind of a big deal for antitrust attorneys around the world.

On Tuesday, the Supreme Court heard oral arguments in North Carolina Board of Dental Examiners v. FTC, which addressed the scope of state-action immunity from antitrust liability. More specifically, the Court is reviewing whether a state licensing board must satisfy both prongs of what is known as the Midcal test to avoid antitrust scrutiny.

The first element, which everyone agrees applies, requires the defendant entity to show that the State “clearly articulated and affirmatively expressed” the challenged anticompetitive act as state policy. The Supreme Court is deciding whether state licensing boards are subject to the second element as well: whether the policy is “actively supervised by the State itself.” Municipalities and other local governments have a free pass from this second element, but private people and entities must satisfy the active supervision requirement.

So what is the big deal? If an entity—state or private—can show that state-action immunity doesn’t apply, it can violate the antitrust laws at will. It can grab consumer surplus for itself; it can exclude competition; it can behave under different rules than everyone else. And monopoly is quite profitable.

In NC Board of Dental Examiners v. FTC, a state-sanctioned dental board—composed of six licensed dentists, one licensed dental hygienist, and one public member—engaged in actions to exclude non-dentist teeth-whitening services. As you might recall, Bona Law filed an amicus brief in this case. You can learn about the case and our amicus brief here. Among other points, we argued that the Supreme Court should analyze the case as the Court outlined in American Needle, by reference to whether the units of competition—the independent decision-makers—are private. They are. We also advocated that the Supreme Court apply an active state supervision requirement with some teeth.

Continue reading →

By Jarod Bona and Aaron Gott

We filed an amicus curiae brief with the U.S. Supreme Court on behalf of We All Help Patients, Inc. in North Carolina State Board of Dental Examiners v. FTC, a federal antitrust case challenging anticompetitive conduct by professional-licensing boards.

Let us tell you a little bit about this interesting case.

The Antitrust Case

The North Carolina Board of Dental Examiners is composed of six licensed dentists, one licensed dental hygienist, and one “public member.” Dentists make a lot of money by offering teeth-whitening services. So when non-dentists started providing teeth-whitening services at a far lower cost, dentists started complaining to the Board about the lower-priced competitors.

Naturally, a Board made up of self-interested private parties had an incentive to do something about it. They began sending cease-and-desist letters to non-dentist teeth whiteners and even went so far as to ask shopping malls to not lease kiosks to teeth whiteners. It wasn’t clear, of course, that North Carolina law limited teeth-whitening services to dentists.

The Board’s actions were, in fact, a conspiracy to restrain trade. The members were competitors that acted in agreement to exclude other competitors. The conspiracy question was not at issue with the US Supreme Court.

The Federal Trade Commission, which has long advocated for “free and unfettered competition as the rule of trade” to protect consumers and economic liberty, issued an administrative complaint against the State Board and ultimately held that the Board engaged in anticompetitive conduct and the state-action immunity doctrine did not apply. The case made its way up through the Fourth Circuit—which agreed with the FTC—and finally to the U.S. Supreme Court.

Continue reading →

Rotten WoodThe defendants in Halliburton Co. v. Erica P. John Fund, Inc. failed to show the US Supreme Court the “special justification” necessary to overturn settled precedent.

As we explained in a previous post, the Supreme Court in this case agreed to reconsider its 1988 decision in Basic v. Levinson, which allowed a shareholder class in a securities fraud lawsuit to satisfy statutory “reliance” requirements by invoking a presumption that stock prices traded in “efficient” markets incorporate all material information, including alleged misrepresentations.

But between then and now, academics, economists, and commentators chipped away at the economic theory underlying this presumption, which is based upon “the efficient capital markets hypothesis.”

So if a legal precedent depends upon an economic theory that now appears less valid than it did before, do you overrule it or keep it in place because it has ingrained itself into a larger legal structure?

Here is a similar question from real estate: If part of the wood in a load-bearing wall has started to rot, do you replace it? The Supreme Court held that you do, if you can show a “special justification.”

Continue reading →

PomegranateMany of my cases will pit one competitor against another in litigation. An antitrust claim is often at the center of the dispute, but a number of other claims can find their way into the case; sometimes even in a starring role.

Litigation between competitors can include, for example, trade secret or intellectual property disputes, tortious interference claims, and Lanham Act claims, to name just a few. Our focus today is on the Lanham Act because the U.S. Supreme Court last week issued an interesting opinion on its scope in POM Wonderful LLC v. Coca Cola Company.

The question was whether The Federal, Food, Drug and Cosmetic Act (FDCA) precluded a plaintiff from filing a Lanham Act claim related to food labeling. Justice Kennedy explained for a unanimous court (which did not include Justice Breyer) that plaintiffs can pursue their claim about pomegranate-blueberry juice labeling: The statutes don’t conflict—they complement each other.

First, some background. The Lanham Act is a federal private right of action to enforce trademark rights, as well as (and relevant here) “unfair competition through misleading advertising or labeling.” What is particularly interesting about the Act is that it is specifically designed for competitors. That is, consumers that discover false advertising or labeling can’t bring a Lanham Act case. Only competitors that can “allege an injury to a commercial interest in reputation or sales,” have standing. You might recall that the Court addressed Lanham Act standing earlier this term in Lexmark International, Inc. v. Static Control Components, Inc., discussed here.

Continue reading →

Illinois BrickWhile waiting for my flight to leave San Diego on my way to Washington, DC for the ABA Antitrust Spring Meeting, I saw on Twitter—the best source for immediate Supreme Court news—that the Supreme Court had decided Lexmark International, Inc. v. Static Control Components, Inc. 

The Supreme Court in that case clarified standing requirements for Lanham Act claims, which create liability for false association and false advertising. The Lanham Act often comes up in legal battles between competitors, as competition often devolves into allegedly false statements about each other’s products or services.

The case is significant for standing in general, but I wonder if it may have some antitrust implications down the road as the lower courts grapple with its broader implications.

Continue reading →

Supreme Court BuildingOn March 5, the Supreme Court will hear arguments on whether the fraud-on-the-market presumption in securities class actions should survive. The case is Halliburton v. Erica P. John Fund and it could be groundbreaking. If the Supreme Court jettisons the presumption, it will close a major avenue for securities class-action lawsuits.

Update: The US Supreme Court issued its decision on June 23, 2014.

But what does this mean for antitrust lawsuits? We’ll get to that in a moment.

First, some background: In 1988, the Supreme Court held in Basic v. Levinson that when a shareholder class sues a company under Rule 10b-5 (for misrepresentation, etc.), it need not show that the individual class members relied on the misrepresentations because the stock market is “efficient” and such statements are quickly incorporated into the stock price.

So if you purchased a share of stock after a management official said that the company increased revenue twenty-percent year-over-year even though the manager knew that the revenue numbers were not accurate, you purchased stock that was already inflated from the statements because the market incorporated those statements immediately into the stock price.

Remember the classic book, A Random Walk Down Wall Street? It is all about efficient-market theory. Great book, by the way.

Continue reading →

Contact Information