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  • Northern District Of California Shuts Down App Developers’ Antitrust Suit
     

    05/11/2021
    On April 26, 2021, Judge Beth Labson Freeman of the United States District Court for the Northern District of California dismissed a complaint alleging that Facebook violated Section 2 of the Sherman Act by removing certain application interfaces that plaintiffs relied on for their mobile applications.  Reveal Chat Holdco LLC, et al. v. Facebook, 5:20-cv-00363 (N.D. Cal. Apr. 26, 2021).  Plaintiffs alleged that the application programming interfaces (“APIs”) were central to their ability to function and that the removal of these APIs by Facebook in 2015 was part of a scheme to harm applications that were competitive or potentially competitive with Facebook.  In dismissing the complaint for a second time and with prejudice, the Court concluded that plaintiffs’ “entire theory of liability is based on completed acts by Facebook beyond the limitations period” and that their claims were therefore time-barred.

    According to the complaint, in April 2014, Facebook announced its intention to remove access to several “rarely used” APIs.  A year later, however, plaintiffs allege Facebook entered into agreements with certain third-party developers that allowed continued access to the removed APIs, while acknowledging that the APIs were not available to the general public.  Plaintiffs allege that Facebook’s motivation for removing the APIs was to stunt applications that were in direct competition with Facebook.  As support, plaintiffs pointed to media reports on internal Facebook documents seized by the United Kingdom Parliament that allegedly showed that Facebook did not have any business justification for removing the APIs and simply wanted to protect themselves from competition.  Plaintiffs contended that they had contacted Facebook to secure exemptions from the API removal but received no response and could not have discovered Facebook’s anticompetitive motivations until the media reports were released in 2019.

    The Court previously granted a motion to dismiss filed by Facebook on July 8, 2020, finding that plaintiffs’ claims were time-barred by the four-year statute of limitations for antitrust claims.  Specifically, the Court determined that plaintiffs had not adequately pleaded fraudulent concealment and that plaintiffs had constructive knowledge of the facts giving rise to their claims as early as September 2015 via an article published in the Wall Street Journal.  The Court further found that plaintiffs had not demonstrated diligence in trying to uncover facts leading to their claims given that Facebook’s allegedly anticompetitive actions were publicly disclosed.  The Court granted plaintiffs leave to amend, however, on the issue of whether the statute of limitations should be tolled due to fraudulent concealment.

    In its motion to dismiss the amended complaint, Facebook argued again that plaintiffs’ claims were time-barred and that plaintiffs’ amendments did not cure the deficiencies in the pleading.  In response, plaintiffs argued that there was an intra-circuit split as to whether a “discovery rule” or an “injury rule” applied to antitrust claims and that plaintiffs’ claims had not accrued under the discovery rule.  The Court disagreed and found that both the Supreme Court and Ninth Circuit had applied the injury rule to antitrust cases.  The Court further determined that there was no continuing violation because plaintiffs had not pleaded facts sufficient to demonstrate harm beyond their injuries in April 2015.

    The Court also found that plaintiffs’ fraudulent concealment arguments failed.  Plaintiffs relied on precedent in price-fixing cases to support their arguments that the limitations period should be tolled based on fraudulent concealment.  The Court distinguished that precedent by noting that, in those cases, both the price and the injury were concealed, whereas here, plaintiffs were aware that they had lost access to the relevant APIs.  The Court also determined that plaintiffs failed to plead affirmative conduct by Facebook because they had not pleaded specific facts regarding the documents and people involved with the particularity required by Rule 9(b).  As a result, Judge Freeman granted Facebook’s motion to dismiss with prejudice.

    The decision reaffirms the application of the “injury rule” for determining the statute of limitations in antitrust cases and serves as a cautionary tale to plaintiffs to act with diligence in pursuing possible antitrust violations.

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