Western District Of Kentucky Upholds Complaint Challenging Franchise No-Poach Agreements As Horizontal Restraints Of Trade
On October 21, 2019, Judge Joseph H. McKinley Jr. of the United State District Court for the Western District of Kentucky issued a mixed order and opinion that denied Defendants Papa John’s International, Inc. and Papa John’s USA’s (“Papa John’s” or “Defendants”) motion to dismiss Plaintiffs’ class claims, but granted Defendants’ motion to compel one of the named plaintiffs to arbitrate. In Re Papa John’s Employee and Franchisee Employee Antitrust Litigation, NO: 3:18-CV-00825-JHM (W.D. Ky. 2019). The case involves three consolidated putative class actions filed by current and former employees against defendants, alleging no-poach, or no-hire, clauses in the company’s franchise agreements are a horizontal restraint on trade and a per se violation of Section 1 of the Sherman Act. The Court ruled that plaintiffs adequately alleged a per se violation, but that discovery would be necessary to determine what standard of review would apply moving forward.
Seventh Circuit Allows Beer Conspiracy Allegations One More Shot
On September 5, 2019, Judge Kenneth Ripple, writing for a unanimous panel of the U.S. Court of Appeals for the Seventh Circuit, partially reversed a lower court’s dismissal of antitrust claims alleging that two brewers conspired to restrict a competitor’s exports of beer to Ontario, Canada. Mountain Crest SRL, LLC v. Anheuser-Busch InBev SA/NV, No. 18-2327, 2019 WL 4198809 (7th Cir. Sept. 5, 2019). The Seventh Circuit held that agreements with a Canadian government-controlled entity (the Liquor Control Board of Ontario, or “LCBO”) were immune from antitrust scrutiny under the act of state doctrine. However, the Court held that claims of an alleged conspiracy between competitors to strong-arm the LCBO into entering into the agreements did not implicate the act of state doctrine and were improperly dismissed.
Eastern District Of Michigan Slices No-Poach Antitrust Claims Against Pizza Franchise
On July 29, 2019, Judge David M. Lawson of the U.S. District Court for the Eastern District of Michigan dismissed, with prejudice, antitrust claims stemming from a fast-food pizza franchise’s use of “no-poach” hiring agreements in its standard franchise contracts. Judge Lawson determined that plaintiff, who did not attempt to advance a rule of reason antitrust claim, had not pled a viable per se or quick look antitrust violation. Moreover, plaintiff did not plausibly allege that the no-poach agreements caused him a cognizable antitrust injury. Ogden v. Little Caesar Enterprises, Inc., No. 18-12792, 2019 WL 3425266 (E.D. Mich. July 29, 2019).
Plaintiffs’ No Poach Class Claims Run Off The Rails
On June 20, 2019, Judge Joy Flowers Conti of the Western District of Pennsylvania dismissed plaintiffs’ class claims that defendant employers colluded to suppress market wages by agreeing not to hire each other’s employees. The Court found that the complaint failed to adequately plead that all or nearly all employees in the proposed class were harmed by the alleged collusion. In re Railway Industry Employee No-Poach Antitrust Litigation, No. 18-798 (W.D. Pa. June 20, 2019). The Court, however, acknowledged plaintiffs had sufficiently pled the existence of an overarching conspiracy among defendants from 2014 to 2016 and individual agreements among each of the three defendants beginning at different times since 2009. Since the class claims were dismissed without prejudice, plaintiffs have the opportunity to remedy their class-related pleading defects.
Eastern District Of Michigan Allows Sherman Act Suit Based On Employee No-Poach Agreement To Proceed
On May 24, 2019, Judge Victoria A. Roberts of the United States District Court for the Eastern District of Michigan denied defendant Domino’s Pizza Franchising LLC’s and other related Domino’s corporate entities’ motion to dismiss, finding that plaintiff, an employee of one of defendants’ franchisees, had adequately alleged a no-poach agreement in violation of Section 1 of the Sherman Act. Blanton v. Domino’s Pizza Franchising LLC, No. 18-13207 (E.D. Mich. May 24, 2019). The Court also found that plaintiff plausibly pleaded that defendants’ fraudulently concealed their conduct such that the Sherman Act’s four-year statute of limitations was tolled.
Second Circuit Revives Direct Injury Claims In Group Boycott Lawsuit
On May 10, 2019, the Second Circuit Court of Appeals, in a panel consisting of Judges John M. Walker, Jr., Dennis Jacobs, and Rosemary S. Pooler, affirmed in part and vacated in part a decision by Judge Brian M. Cogan of the United States District Court for the Eastern District of New York on antitrust standing. IQ Dental Supply, Inc. v. Henry Schein, Inc., 18-175-cv (2d Cir. May 10, 2019). The court agreed with Judge Cogan that plaintiff, IQ Dental Supply, Inc. (“IQ”), had failed to establish antitrust standing to challenge the alleged boycott of an online distribution portal, SourceOne, Inc. (“SourceOne”), which it used to distribute dental supplies to dental practices nationwide. However, the court found that IQ had pled sufficient facts to establish antitrust standing regarding a boycott of its own business and vacated the district court’s judgment.
Northern District Of California Grants NCAA Athletes Partial Victory In Antitrust Challenge To NCAA Rules
On March 8, 2019, after a bench trial, Judge Claudia Wilkin of the United States District Court for the Northern District of California found that the NCAA’s restrictions on the amount of grants-in-aid and other benefits that universities can provide to student-athletes constitute anticompetitive restraints of trade. In re: National Collegiate Athletic Association Athletic Grant-in-Aid Cap Antitrust Litigation, No. 4:14-md-02541-CW (N.D. Cal. Mar. 8, 2019). Based on this finding, the Court abrogated the NCAA’s limits on “education-related benefits” that its member colleges may provide the student-athletes. However, the Court did not eliminate all restrictions on the benefits that schools may provide to athletes. Instead, using a “less restrictive alternatives” analysis, the Court permitted the NCAA to continue to limit non-education related benefits and compensation, as well as cash payments, to student-athletes.
Southern District Of New York Dismisses CDOR Benchmark Manipulation Complaint In Its Entirety
On March 14, 2019, Judge Analisa Torres of the United States District Court for the Southern District of New York granted defendants’ motion to dismiss a complaint alleging they improperly manipulated the Canadian Dollar Offered Rate (“CDOR”) benchmark. Fire & Police Pension Association of Colorado v. Bank of Montreal, et al., Case No. 1:18-cv-00342 (S.D.N.Y Mar. 14, 2019).
Reversing Prior Order, Utah District Court Holds Per Se Rule Applies To Customer Allocation Agreement
On February 21, 2019, Judge David Sam of the U.S. District Court for the District of Utah reversed course and found that a per se standard applies to a market allocation agreement among competitors in the heir location services market. Judge Sam initially found that the more lenient rule of reason standard should apply. However, following a recent Tenth Circuit ruling, Judge Sam held it is the form of the agreement—not the type of industry—that compels the appropriate standard of review. United States of America, v. Kemp & Associates, Inc. and Daniel J. Mannix, No. 2:16CR403 DS, 2019 WL 763796 (D. Utah Feb. 21, 2019).
Delaware District Court Dismisses Antitrust Suit Against Lab Testing Company Alleging Conspiracy To Exclude Smaller Lab From Market
On February 14, 2019, Judge Maryellen Noreika of the United States District Court for the District of Delaware dismissed a complaint alleging violations of Sections 1 and 2 of the Sherman Act. Prescient Medicine Holdings, LLC v. Laboratory Corporation of America Holdings et al, No. 1:18-cv-00600 (D. Del. Feb 14. 2019). The complaint was filed by Prescient Medicine Holdings, LLC, a provider of laboratory testing services. Plaintiff alleged that an agreement between a competitor laboratory testing service—Laboratory Corporation of America and Laboratory Corporation of America Holdings (“LabCorp”)—and a managed care organization—AmeriHealth, Inc. and AmeriHealth Caritas Delaware Inc. (“AmeriHealth”) was a collusive scheme to monopolize the in-network Medicaid market and exclude plaintiff from that market. Judge Noreika held that plaintiff failed to adequately plead antitrust standing and failed to define a relevant market.
Department Of Justice Seeks To Intervene In No-Poach Class Action To Counter Arguments That Such Agreements Are Per Se Illegal
On January 25, 2019, the Justice Department’s Antitrust Division filed a Notice of Intent to File a Statement of Interest in Myrriah Richmond et al. v. Bergey Pullman Inc., et al., No. 2:18-cv-00246, in the United States District Court for the Eastern District of Washington. The Notice follows a barrage of settlements between fast-food chains and state antitrust enforcers involving the chains’ “no-poach” agreements—that is, agreements between a franchisor and franchisees that restrict the hiring of one franchisee’s employees by another franchisee. The Justice Department’s decision to involve itself in Myrriah Richmond is significant. By emphasizing—as its Notice did—that such franchisor-franchisee no-poach agreements are “vertical restraints” subject to the rule-of-reason (rather than illegal per se, or subject to only a “quick look” analysis of legality), the Justice Department provides analytic clarity and useful guidance as courts address the growing number of actions challenging different variations of no-poach agreements in different factual scenarios.
Middle District Of Florida Limits Statute Of Limitations Tolling Arguments For Alleged Output Restrictions In Milk Market
On January 16, 2019, Judge Brian J. Davis of the United States District Court for the Middle District of Florida issued an order granting in part and denying in part defendants’ motion for summary judgment. Winn-Dixie Stores, Inc. v. Southeast Milk, Inc. et al., Case No. 3:15-cv-01143 (M.D. Fla. Jan. 16, 2019). The Court ruled that plaintiffs should not receive equitable tolling of the statute of limitations for fraudulent concealment, that only a limited subset of claims were eligible for class action tolling, and that other theories for the timeliness of plaintiffs’ claims depended on the jury’s determination of the facts.
Oregon District Court Allows Claim Against Association Of Colleges And Universities To Proceed And Accepts Harm To Defendant’s Members As Evidence Of Antitrust Injury
On November 28, 2018, Judge Marco A. Hernández of the United States District Court for the District of Oregon, on remand from the Ninth Circuit, reversed its prior grant of a motion to dismiss and held that plaintiff — which brought antitrust conspiracy claims against a non-profit corporation made up of 549 member colleges — sufficiently demonstrated antitrust injury by alleging harm to the member colleges. CollegeNET, Inc. v. The Common Application, Inc., No. 3:14-CV-00771-HZ (D. Or. Nov. 28, 2018).
Western District Of Washington Rejects Per Se Rule, But Allows Cinnabon Worker’s No-Poach Class Action To Proceed After “Quick Look” Analysis
On November 13, 2018, Judge Robert J. Bryan of the United States District Court for the Western District of Washington denied a motion to dismiss a class action complaint by a former fast-food worker alleging that the company’s agreement to prohibit the re-hiring of one franchisee’s employees by another franchisee violates the Sherman Antitrust Act. Yi v. SK Bakeries LLC, et al., No. 3:18-cv-05627, Dkt. No. 33 (W.D. Wa. Nov. 13, 2018). Judge Bryan did, however, caution plaintiff against relying solely on a “quick look” theory, and suggested that whether franchisees are, in fact, a “single entity” incapable of conspiring with one another is a fact-specific question that did not merit a pleading-stage dismissal.
Eastern District Of Pennsylvania Dismisses Antitrust Suit Against Lab Testing Company Alleging Unfair Competition In Specialized Testing Services
On October 9, 2018, Judge Gerald J. Pappert of the U.S. District Court for the Eastern District of Pennsylvania granted defendant Independence Blue Cross’s (“IBC”) and defendant Laboratory Corporation of America Holdings’s (“LabCorp”) motions for summary judgment on an unfair competition claim filed by Medical Diagnostic Laboratories, LLC (“MDL”). MDL is a lab testing company that provides specialized testing services for sexually transmitted infections. MDL alleged that defendants violated Sherman Act Section 1 and Pennsylvania state unfair competition law, and tortiously interfered with existing and prospective relationships with healthcare providers, by requiring IBC in-network providers to exclusively refer patients needing lab work to LabCorp. The Court granted defendants’ motions to dismiss the Section 1 and tortious interference with existing business relationships claims on August 30, 2017, but allowed MDL to take discovery on its claims of tortious interference with prospective contractual relations and unfair competition. In his summary judgment opinion, Judge Pappert rejected these remaining claims.
Illinois District Court Denies Sandwich Franchisor’s Motion To Dismiss Sherman Act Claim Alleging Damages From No-Poach Agreement
On July 31, 2018, Judge Michael J. Reagan of the United States District Court for the Southern District of Illinois granted in part and denied in part defendant-franchisor’s motion to dismiss an antitrust claim filed by a purported class of former employees of defendant’s franchisees. Butler v. Jimmy John’s Franchise, LLC, No. 18-CV-0133-MJR-RJD, 2018 WL 3631577 (S.D. Ill. July 31, 2018). Plaintiffs alleged that provisions included in defendant’s franchise agreements with its franchisees in which the franchisees agreed not to hire each other’s employees—commonly known as “no-poach” agreements—violated Section 1 of the Sherman Act and various state antitrust laws by suppressing employee wages and mobility in the labor market. Defendants moved to dismiss all claims, arguing that plaintiffs failed to allege an injury that would confer Article III standing, and that plaintiffs failed to plausibly allege an antitrust conspiracy under Section 1 of the Sherman Act.
United States Supreme Court Rules That Foreign Government Submissions As To Disputed Issues Of Foreign Law, While Entitled To Deference, Are Not Binding On U.S. Courts
06/19/2018On June 14, 2018, Justice Ginsburg, writing for a unanimous Supreme Court, revived Sherman Act claims against Chinese vitamin manufacturers, reversing a 2016 opinion by the Second Circuit in In re Vitamin C Antitrust Litigation, 837 F.3d 175 (2d Cir. 2016), and holding that a foreign government’s interpretation of its own law is not binding on U.S. courts. Animal Science Prods., Inc. v. Hebei Welcome Pharm. Co., No. 16-1220 (June 14, 2018).
Read more.CATEGORY: Horizontal Restraints
Utah District Court Denies Defendants’ Motion To Dismiss Complaint Alleging Restraint Of Trade In Online Lens Retail Market
On May 17, 2018, Judge Tena Campbell of the United States District Court for the District of Utah denied three leading contact lens retailer defendants’ motion to dismiss a putative class action complaint alleging violations of Section 1 of the Sherman Act. J. Thompson, et al. v. 1-800 Contacts, et al., Case No. 2:16-CV-1183-TC (D. Utah May 17, 2018). Plaintiffs, who purchased contact lenses online from defendants, alleged that they paid artificially-inflated prices for those contact lenses due to defendants’ anticompetitive trademark litigation settlement agreements. Defendants moved to dismiss the claims because the plaintiffs lacked antitrust standing, failed to properly plead a relevant product market, did not allege a single overarching conspiracy, and with respect to damages claims prior to 2012, failed to file a lawsuit within the Clayton Act’s four-year statute of limitations.
United States Federal Trade Commission Administrative Law Judge Dismisses Complaint Challenging Reverse Payment Settlement Between Pharmaceutical Manufacturers
On May 11, 2018, U.S. Federal Trade Commission (“FTC”) Administrative Law Judge D. Michael Chappell issued an initial decision ruling that a reverse payment settlement by Endo Pharmaceuticals (“Endo”) with Impax Laboratories (“Impax”) did not violate Section 5 of the FTC Act, and dismissing the FTC’s complaint. In the Matter of Impax Labs., Inc., Docket No. 9373 (Initial Decision, May 11, 2018). Judge Chappell concluded that despite the reverse payment Endo made to Impax, the anticompetitive harm arising from the settlement was “largely theoretical,” and that the settlement’s procompetitive benefits outweighed any anticompetitive effect from the agreement. The initial decision is the first administrative ruling on a reverse payment trial since the U.S. Supreme Court’s 2013 Actavis decision. The decision has been noticed for appeal to the Commission.
Ninth Circuit Overturns Dismissal Of Antitrust Suit Against City’s Ordinance Allowing App-Based Drivers To Collectively Bargain
On May 11, 2018, the United States Court of Appeals for the Ninth Circuit Court partially reversed the district court’s dismissal of claims brought by the U.S. Chamber of Commerce, on behalf of ride-share app companies, that a Seattle ordinance allowing for-hire drivers to bargain collectively violated and was preempted by the antitrust laws. In an opinion by Circuit Judge Milan D. Smith, the Ninth Circuit held that the state-action defense did not protect the ordinance from preemption by the Sherman Act because: (1) the State of Washington had not clearly articulated and affirmatively expressed a state policy authorizing for-hire drivers to fix the prices of their service fees when using a ride-share app; and (2) the active-supervision requirement of the state-action defense was not met.
Seventh Circuit Rejects Preliminary Injunction As Overbroad In Auto Dealership Management Software Case Alleging Agreement To Restrain Trade
On November 6, 2017, the Seventh Circuit Court of Appeals vacated a preliminary injunction in an action alleging an agreement in restraint of trade under Section 1 of the Sherman Act against defendants CDK Global, LLC and Reynolds & Reynolds Co. Authenticom, Inc. v. CDK Global LLC, No. 17‐cv‐318‐jdp (7th Cir. Nov. 6, 2017). In an opinion by Chief Judge Diane Wood, the Court held that the preliminary injunction exceeded the proper scope of a preliminary injunction to preserve the status quo and improperly imposed on the defendants a duty to deal with the plaintiff.
Administrative Law Judge Upholds FTC Complaint Alleging That 1-800 Contacts Violated Section 5 Of The FTC Act By Unlawfully Restricting Online Competitor Advertising Through Anticompetitive Settlement Agreements
On October 27, 2017, the Federal Trade Commission announced a ruling by Administrative Law Judge D. Michael Chappell finding that online contact lens retailer 1-800 Contacts unlawfully restrained competition in violation of Section 5 of the FTC Act by restricting its competitors’ online search-based advertising through series of settlement agreements resolving trademark litigation it had filed against those competitors. In the Matter of 1-800 Contacts, Inc., Docket No. 9372 (U.S. Trade Commission, Oct. 27, 2017). In upholding the FTC’s complaint, ALJ Chappell found that the FTC had proved that the restrictions on the use of certain keywords in search-based advertising caused actual harm to consumers and competition in the market for the online sale of contact lenses in the United States and that the respondent 1-800 Contacts had failed to prove that the settlement agreements had countervailing procompetitive benefits that outweighed their harm to competition. As relief, the ALJ issued a broad remedial order prohibiting 1-800 Contacts from, inter alia, entering into any agreement that restricts a competitor’s ability to participate in search advertising auctions. Just as the Supreme Court’s landmark decision in Federal Trade Commission v. Actavis, Inc., 133 S. Ct. 2223 (2013), raised difficult questions as to how litigants could resolve patent disputes over pharmaceutical products, this decision raises difficult questions over potential settlements of trademark disputes, particularly in the context of internet search advertising.
Ninth Circuit Holds That Stare Decisis Bars Reconsideration Of ‘Business Of Baseball’ Antitrust Exemption As To Minor League Players
On June 26, 2017, a three-judge panel of the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a putative class action brought by professional minor league baseball players (“Players”) against the former commissioner of major league baseball and all thirty major league franchises (collectively “Major League Baseball” or “MLB”). Miranda v. Selig, No. 15-16938 (9th Cir. 2017). Players alleged that MLB’s hiring and employment policies violated federal antitrust laws and argued that minor league players did not fall within the well-established antitrust exemption for the business of baseball. Invoking the judicial principle of stare decisis, the panel held unanimously that the baseball exemption applied to Players’ claims and affirmed the lower court’s dismissal.