While 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.
First, an aside. Justice Antonin Scalia wrote the opinion for the unanimous Supreme Court. Regardless of what you might think about his jurisprudence, he is one heck of a writer. What I like about his writing is that when I read it, I feel like I am engaging with an actual real-life person.
His wit comes through, but it is more than that. He has the rare skill of taking complex subject matter and reducing it into language and imagery that actual people (and not just computer-like lawyers) understand.
Justice Elena Kagan shows the same ability. She, by the way, was my administrative law professor at Harvard Law School, and what we experienced in class comes through in her writing. She was also a great professor: she asked tough, demanding questions, but was personable, fair, and funny.
Anyway, back to Lexmark and standing.
It is obvious that the parties and amici bombarded the Court with various tests, expecting the Court to sort through them and pick the best one. That doesn’t seem unreasonable since the circuits split on competing tests. And a federal common law of sorts had developed on prudential standing.
But Justice Scalia and the Court would have none of that. In fact, the Court obliterated the idea of “prudential standing,” which it put in quotes so as to stress that the label is wrong.
What the Court said and did is eliminate any standing requirement that is not attached to the statute in dispute. Standing determinations henceforth are merely an exercise in statutory interpretation. I wonder if Justice Scalia had statutory interpretation on his mind after writing a landmark book on the subject with Bryan Garner?
That doesn’t mean that traditional requirements like “zone of interests” and “proximate cause” disappear altogether. Those elements apply for most statutes because Congress is presumed to legislate against the background of those traditional common-law requirements. So they would apply, unless Congress suggested otherwise.
This ruling will also make it more difficult for courts to generalize standing requirements from one statute to another. For example, here, the Court declined to apply the Clayton Antitrust Act standing rules from Associated General Contractors of California v. California State Council of Carpenters because that case analyzed standing for federal antitrust claims, not the Lanham Act statutes. The Court did note, however, that in Associated General Contractors, it decided the standing requirements on a statutory interpretation of the Clayton Act.
In Lexmark, the Court concluded that a non-competitor properly alleged standing under the Lanham Act because it satisfied standing requirements deduced from the Act itself: “To invoke the Lanham Act’s cause of action for false advertising, a plaintiff must plead (and ultimately prove) an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.”
But what about antitrust?
The Court endorsed Associated General Contractors as resting on statutory not prudential considerations. And if you read that case, the Court uses that language. But if you look at the actual factors for antitrust standing, some of them seem more in the “prudential” camp than the statutory-interpretation camp.
Let’s look at a couple of points that the Court made in Lexmark (the new law). In response to Lexmark’s argument that the Court should decline to adjudicate plaintiff’s claim on grounds that are “prudential” rather than constitutional, the Court reiterated the principle that “a federal court’s ‘obligation’ to hear and decide cases within its jurisdiction is ‘virtually unflagging.’”
Lexmark, in fact, based its “prudential standing” arguments on Associated General Contractors, but Justice Scalia says “we did not describe our analysis in that case in those terms.” The Court then explains how some of those “prudential” factors are really better thought of as factors derived from statutory-interpretation—like the zone of interests test and proximate causation.
A court, says Justice Scalia, cannot “limit a cause of action that Congress has created merely because ‘prudence’ dictates.” And later, the Court criticizes two factors of a proposed test as problematic for that reason: “The speculativeness of the damages claim,” and “the risk of duplicative damages or complexity in apportioning damages.”
So where I am going here? Did you guess? What does this sound like?
It sounds to me a lot like Illinois Brick Co. v. Illinois, and the “brick” wall that case law places between indirect purchasers and federal antitrust standing. The Illinois Brick doctrine prohibits indirect purchasers from suing under the federal antitrust laws because courts have “prudentially” (my characterization) determined that allowing them to do so would create too much complexity in apportioning damages. That is why major antitrust class actions usually involve a class of direct purchasers suing under the federal antitrust laws and indirect purchasers suing under the state antitrust laws.
The courts concluded in the 1960’s and 70’s that it would just be easier for everyone involved if indirect purchasers couldn’t sue under the federal antitrust laws and defendants couldn’t argue that direct purchasers weren’t damaged to the extent they “passed-on” their damages to the indirect purchasers.
And in Associated General Contractors, decided in 1983, the Court again endorsed these limitations in its standing discussion: (“keeping the scope of complex antitrust trials within judicially manageable limits” and “avoiding either the risk of duplicative recoveries” and “complex apportionment of damages”).
What does this mean? Let’s say you purchased a television from Best Buy, and later find out that the television manufacturers conspired to fix prices. You are the indirect purchaser and Best Buy is the direct purchaser. Best Buy could sue the manufacturers in federal court, and the defendants could not argue that Best Buy passed-on any damages from the higher prices to you, the customer. You, on the other hand, could not sue in federal court because you are an indirect purchaser. Lucky for you, however, you can sue under often identical state laws in the same case.
So in the end, the Illinois Brick doctrine really doesn’t do what it was intended, and it sure seems, regardless of how its origin is couched, to come from “prudential” concerns. In fact, these are the same prudential concerns that the Court ripped out of the toolbox of judges in Lexmark. And, remember, “a federal court’s ‘obligation’ to hear and decide cases within its jurisdiction is ‘virtually unflagging.” So it can’t opt out just because it would be complicated. In fact, recent decisions like FTC v. Actavis, Inc. explain that courts can minimize unnecessary complexity with flexibility in how they manage antitrust cases.
Does this mean Illinois Brick is dead? Probably not, yet. But I think it is worth making the argument to see where it goes.