by Angela Tse on
The Bloomberg Law article, Shein, Temu Take Fast-Fashion Antitrust Showdown to US Courts, takes a deep dive into the legal feud between fashion giants Shein and Temu, shedding light on the inner workings of the ultra-fast fashion industry. Kathleen Bradish, VP of Legal Advocacy at AAI, notes that their decision to litigate in US courts highlights the advanced state of private antitrust enforcement in the US compared to nations relying on government enforcement. However, this move also exposes the companies to risks, as they may be required to reveal usually guarded internal documents. Bradish suggests that this transparency could provide valuable insights into the industry’s tactics and strategies, offering a unique view of the competitive landscape. From the article:
Shein and Temu’s move to duke it out in US courts reflects that US private antitrust enforcement is more highly developed than in nations that rely on government enforcement, said Kathleen Bradish, vice president of legal advocacy for the American Antitrust Institute. But it also carries risks: The companies likely will have to turn over internal documents that businesses, especially ones associated with China, rarely let anyone see.
“They are going to have to open to the doors a bit to scrutiny,” Bradish said. “US lawyers are going to see the documents. The judges are going to see the documents.”
In the meantime, Temu faces an uphill battle. Courts are reluctant to inhibit legitimate competition when trying to capture anti-competitive conduct, said Bradish of the American Antitrust Institute.
“There is a fear on the part of courts to interfere with the business decisions of a corporation,” Bradish said.
by Michael Doerrer on
On June 13, 2002, FTC Chair Lina M. Khan, joined by Commissioners Rebecca Kelly Slaughter and Alvaro M. Bedoya released a Statement in the matter of JAB Consumer Fund/Sage Veterinary Partners, a proposed acquisition of a veterinary practice group by a JAB, a private equity fund. The FTC determined the proposed acquisition would be anticompetitive and proposed an order allowing the transaction to proceed, but only with divestitures and with additional conditions to “establish key safeguards against future dealmaking that may also prove unlawful.” In particular, the proposed order would require JAB to seek advanced approval from the FTC for any acquisitions of veterinary practices within 25 miles of existing JAB facilities in three states and to provide advance notice for all veterinary acquisitions within 25 miles of a practice nationwide that is owned by JAB. The statement explains that the provisions “allow the FTC to better address stealth roll-ups by private equity firms like JAB/NVA….” Citing AAI’s pathbreaking May 2021 joint report with the Petris Center, Soaring Private Equity in the Healthcare Sector: Consolidation Accelerated, Competition Undermined, and Patients at Risk, the Commissioners noted that “[a] focus on short-term profits in the health care context can incentivize practices that may reduce quality of care, increase costs for patients and payors, and generate appalling patient outcomes.” In line with the recommendations in the AAI/Petris report, the Commissioners state: “Strategic use of prior notice and prior approval provisions is one way that the Commission can better track and prevent unlawful acquisitions by private equity firms and other corporations.”
by Michael Doerrer on
In a May 23, 2022 article, Who hacked the slaughterhouse? When robots and AI take over farms, Diana Moss highlighted how data and digital farming factor into competition issues involving agriculture and cropping systems. From the article:
…Still, even farmers with access to digitized tools are encountering problems, according to Diana Moss, president of the American Antitrust Institute. Farmers who sign technology agreements with big agricultural biotech companies often sign away their rights to the data, leading to what’s known as a “closed cropping system.”
“The closed cropping system basically says, ‘Look, you get to use Monsanto products only. Or you get to use Dow products only,’” Moss said of farmers’ choices for the proprietary seeds, chemicals, and more that go hand-in-hand with corporate data collection. “The big ag biotechs are engineering their cropping systems to be non-interoperative with rival technologies.”
Once farmers are locked into a company that holds their data, both farmers and consumers will pay higher prices, Moss said: “It contributes to a very, very fragile agricultural supply chain.”
How can the risks of automated agriculture be minimized? Advanced technology in agriculture is not inherently bad and is poised to deliver benefits. That said, problems arise when humans fail to predict and prevent the unintended consequences of its use.
“Much like in the digital tech sector with Facebook, Amazon, and Google, it’s all about having just a few or a single dominant player with really strong incentives to use data to control competition, to the detriment of growers and consumers,” Moss said. “Merger control and strong antitrust enforcement is really the starting point for controlling all of this.”
by client_admin on
AAI President Diana Moss joined a panel of antitrust experts at Mercatus Antitrust Forum: One Year of Biden Antitrust on January 26.
Panelists included:
by on
The American Antitrust Institute (AAI) seeks to preserve the effectiveness of antitrust class actions as a central and vital component of private antitrust enforcement.[1] As part of its efforts, AAI issues periodic updates on developments in the courts and elsewhere that may affect this important device for protecting competition, consumers, and workers. This update covers developments since our Spring 2021 update.
There is recurring debate in the federal courts over the rules and standards that govern the certification of classes that may contain some class members who were not injured by the defendant’s conduct. In our Spring 2021 update, we noted that a divided Ninth Circuit panel in Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 993 F.3d 774 (9th Cir. 2021), held that, in applying Rule 23(b)(3)’s predominance requirement, a district court must find that no more than a “de minimis” number of class members are uninjured. Because the district court did not make such a finding, the panel vacated the class certification order and remanded for further proceedings. Judge Hurwitz, partially dissenting, maintained that neither the text of Rule 23 nor Ninth Circuit precedent permit the court to create such a requirement.
Although neither party petitioned for en banc rehearing, the Ninth Circuit ordered briefing sua sponte on whether rehearing was warranted, specifically directing the parties to focus on the “de minimis” issue that divided the panel. On August 3, the court vacated the panel opinion, ordered en banc rehearing, and scheduled oral argument for September 20, after which the defendant sought and obtained another round of merits briefing without disrupting the court’s timeline. The case has now been briefed and argued before the en banc court, and a decision remains pending. AAI, which had submitted an amicus brief before the merits panel and an amicus brief in support of en banc rehearing, submitted an amicus brief on the merits before the en banc court as well.
On August 30, the same First Circuit panel that decided the controversial Asacol case, first discussed in our Fall 2018 update and cited frequently by the defendant in Bumble Bee, reaffirmed Asacol despite mounting criticism from First Circuit trial courts. In Asacol, Judge Kayatta, writing for himself and Judge Lynch, held that plaintiffs who lacked a common method for distinguishing injured from uninjured class members, and who sought to identify injured members using individual affidavits, did not satisfy Rule 23’s predominance requirement where the total amount of damages varied based upon the number of members in the class and defendants had “stated their intention to challenge any affidavits that might be gathered.” Judge Barron, concurring, emphasized that plaintiffs could still satisfy the predominance requirement by proving injury using individual affidavits where defendants make only a speculative case that they would be able to effectively contest an affiant’s representation, or where the subset of class plaintiffs that would actually need to rely on individualized testimony is small.
In Bais Yaakov of Spring Valley v. ACT, Inc., 12 F.4th 81 (1st Cir. 2021), Judge Kayatta, again writing for himself and Judge Lynch, applied Asacol in summary fashion. The court affirmed the district court’s refusal to certify a class of Telephone Consumer Protection Act (TCPA) plaintiffs where the defendant argued that it intended to individually challenge class members’ claims on the basis that individual class members gave permission to receive allegedly unsolicited faxes that formed the basis for the alleged violations. Judges Kayatta and Lynch held that the district court did not abuse its discretion in refusing to certify the class where an unknown number of class members “could be found by the factfinder to have given the requisite permission” and plaintiffs did not offer an administratively feasible way to “identify and cull out those who did give express permission.”
Judge Barron, again concurring in the judgment, as in Asacol, acknowledged “thoughtfully expressed” criticism from highly respected trial judges tasked with applying Asacol, including Chief Judge Smith in In re Loestrin 24 FE Antitrust Litig., 410 F. Supp. 3d 352, 403-04 (D.R.I. 2019), and Judge Burroughs in In re Intuniv Antitrust Litig., No. 1:16-cv-12396, 2019 U.S. Dist. LEXIS 141643, 2019 WL 3947262, at *7 n.8 (D. Mass. Aug. 21, 2019). However, Judge Barron maintained that the concern that the First Circuit is “unduly cutting back on Rule 23 through our construction of the predominance requirement” is “misplaced, or, at least, premature.” He emphasized (1) “the limits on the scope of our holding in Asacol,” (2) that the current opinion “break[s] no ground that Asacol did not already break,” and (3) that plaintiffs relying on individualized affidavits can still prevail in the First Circuit by “identify[ing] a persuasive ground for doubting the defendant’s showing that a stream of mini-trials likely awaits on the other side of certification.” Judge Barron encouraged district courts to undertake an inquiry into whether it is “highly unlikely” that the defendant’s showing of likely mini-trials would “survive typical pretrial screening (such as a [plaintiff’s] motion to strike or a motion for summary judgment).”
Bais Yaakov likely leaves First Circuit law after Asacol unchanged. Named plaintiffs in the First Circuit likely cannot obtain class certification if (1) they cannot separate injured from uninjured class members using a common method (or show that the number of uninjured members is small), and (2) the total amount of damages varies based upon the number of class members involved. Two First Circuit judges—Judges Kayatta and Lynch—have signaled that they continue to embrace Asacol’s reasoning. Judge Barron’s latest concurrence does not show how the identified tensions between the opinion and the language of Rule 23 can be overcome in practice. It remains to be seen whether other First Circuit judges assigned to First Circuit panels will seek to cabin the opinion in line with criticisms from other courts and the class action bar, or whether a different set of facts might persuade Judge Barron that the identified tensions have “matured.”
A circuit split persists over whether Rule 23 contains a heightened ascertainability requirement that demands class plaintiffs plead and prove an administratively feasible mechanism for identifying absent class members. In our Spring 2021 update, we noted that the tide of recent decisions has continuously moved against such a requirement, with each of the last six circuits to consider a heightened ascertainability requirement having ruled against it. The Second, Sixth, Seventh, Eighth, Ninth and Eleventh Circuits now reject an administrative feasibility prerequisite, while the First and Third Circuits have embraced some form of a heightened ascertainability requirement. The Fifth, Tenth, and D.C. Circuits have not yet explicitly adopted a position.
In our Fall 2017 update, we noted that the Third Circuit, where the heightened ascertainability theory first gained credence, gave a more forgiving interpretation in City Select Auto Sales Inc. v. BMW Bank of North America Inc., 867 F.3d 434 (3d Cir. 2017). The court vacated and remanded a district court’s denial of class certification, holding that affidavits from class members coupled with other reliable evidence could satisfy the standard. Concurring Judge Fuentes wrote separately to criticize the “the unnecessary burden on low-value consumer class actions” created by the heightened ascertainability requirement. He suggested that the Third Circuit should join the Second, Sixth, Seventh, and Ninth Circuits in repudiating it.
In our Fall 2020 update, we noted that the Third Circuit continued its retreat in Hargrove v. Sleepy’s LLC, 974 F.3d 467 (3d Cir. 2020). After a district court denied certification because a putative class of FLSA plaintiffs, confronted with gaps in defendants’ employment records, would have had to “piece together” the identities of class members using affidavits and other evidence, the court held that the district court “misapplied” the ascertainability requirement and overstated the requirement’s evidentiary demands. The court explained, “[A]ll that is required is that [the plaintiffs] show there is a reliable and administratively feasible mechanism,” and gaps in the record “do not undermine the conclusion that all the evidence taken together could at the merits stage be used to determine” the identities of class members. The district court’s test was “too exacting and essentially demand[ed] that Appellants identify the class members at the certification stage.” Citing City Select Auto Sales, the court reiterated, “Affidavits, in combination with other reliable and administratively feasible means, can meet the ascertainability standard.”
In October, the Third Circuit agreed to take up its heightened ascertainability standard yet again, this time in an antitrust case. In In re Niaspan Antitrust Litig. No. 21-8042 (3d Cir. docketed Oct. 7, 2021), a pharmaceutical reverse payment case, the district court denied class certification on grounds that plaintiffs had failed to establish an administratively feasible mechanism for identifying class members notwithstanding plaintiffs’ evidence of comprehensive and detailed electronic claims data that could show the identity of every potential class member. The plaintiffs petitioned for interlocutory appeal under Rule 23(f) and defendants opposed, and the court granted the petition before plaintiffs filed a reply brief. The plaintiffs’ opening appellate brief is due December 13, 2021.
In August, the Sixth Circuit, which does not impose a heightened administrative feasibility requirement, addressed the question of whether a class is sufficiently ascertainable where establishing membership in the class would “require individualized assessment and self-identification by each plaintiff.” In In re Sonic Corp., No. 20-0305, 2021 U.S. App. LEXIS 25403 (6th Cir. Aug. 24, 2021), the defendants petitioned for interlocutory appeal of a district court’s order granting class certification in a data breach case, arguing that the need for individual assessment and self-identification should have led to denial on administrative feasibility grounds. The court rejected the argument and denied the petition. It stated, “We have declined to endorse self-identification when there is no documentary evidence and potential class members would have to submit individual affidavits testifying to receipt of a single-page facsimile seven years in the past. But we have never rejected self-identification as a means of determining membership when there are records verifying that determination.” Here, the class plaintiffs could be ascertained using information from financial institutions affected by the data breach that could be cross referenced with third parties.
Since 2016, we have tracked recurring questions over the appropriate class certification standards to be applied when liability and damages are determined on the basis of statistical evidence. In the aforementioned Bumble Bee case, which is currently undergoing en banc review in the Ninth Circuit, the defendants argued that the class plaintiffs’ use of statistical evidence masked substantial differences among class members, partly because the plaintiffs’ reliance on average overcharges obscured the presence of class members who did not pay an overcharge at all and therefore were not impacted by the admitted price fixing. They argued that these differences defeated a showing of predominance.
The vacated Ninth Circuit panel opinion had affirmed the district court’s holding that plaintiffs’ reliance on common statistical evidence was capable of proving classwide impact (even though, as noted above, it had reversed on other grounds). Citing the Supreme Court’s holding in Tyson Foods, the vacated panel opinion held that “representative evidence can be relied on to establish a class” so long as it is “closely and carefully scrutinized” for conformance with Rule 23’s requirements. Here, the plaintiffs’ statistical evidence passed muster because (1) an individual plaintiff could have relied on the statistical models to show impact in a hypothetical individual case; (2) there was a sufficient nexus between the plaintiffs’ statistical evidence and their theory of liability in accordance with Comcast; and (3) the plaintiffs’ statistical methodology was capable of showing that virtually all class members suffered injury so long as the methodology is sufficiently reliable. Judge Hurwitz, who partially dissented on other grounds, joined this aspect of the vacated panel opinion, and the panel’s treatment of plaintiffs’ statistical evidence offered to prove common impact was not briefed or argued in en banc proceedings.
In August, in FWK Holdings, LLC v. Merck & Co. (In re Zetia (Ezetimibe) Antitrust Litig.), 7 F.4th 227 (4th Cir. 2021), the Fourth Circuit rejected a similar predominance challenge to class certification based on the plaintiffs’ reliance on statistical averages to help prove impact. The court held, “we find no issue with the practice of proving injury by class-wide averages, which the district court correctly characterized as ‘common.’ Moreover, even if some individualized-injury inquiry is ultimately required at trial for some defendants, common issues will still predominate.” The plaintiff’s burden was to show that “common proof could show antitrust injury to the class.” In a reverse-payment case, this means showing that “a reasonable jury could find that all class members would have purchased some generic form of the drug—rather than the more expensive brand—had a generic been available earlier.”
Since 2017, we have been tracking the lower federal courts’ application of the Supreme Court’s decision in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017), which prevents defendants who are engaged in nationwide conduct from being subject to a mass action by plaintiffs injured both within and outside the forum state if general jurisdiction is lacking and if the defendant otherwise has insufficient contacts with the forum states to establish specific jurisdiction over the claims of some of the plaintiffs in the forum state. That decision has engendered questions as to whether such defendants can be subject to a class action. If not, nationwide or multi-state classes of plaintiffs often might be unable to bring class actions except in a defendant’s home state. Among other things, this would result in significant litigation advantages for corporate antitrust defendants, as well as inefficiency.
In our Spring 2020 update, we explained that the 5th, 7th, and D.C. Circuits all ruled on the issue in the span of a two-week period, and all three held that Bristol-Myers did not bar nationwide class actions prior to class certification, notwithstanding that specific jurisdiction may be lacking for unnamed class members. The 7th Circuit, in an opinion by Chief Judge Wood in Mussat v. IQVIA, went further than the others in holding affirmatively that Bristol-Myers does not apply to class actions.
In January, the Supreme Court denied certiorari in Mussat. Two months later, in Lyngaas v. Curaden AG, 992 F.3d 412 (6th Cir. 2021), the 6th Circuit joined the 7th Circuit in holding that “Bristol-Myers Squibb does not extend to federal class actions.” Citing and quoting extensively from Chief Judge Wood’s opinion in Mussat, the court noted that a class action is formally one suit in which a defendant litigates against only the class representative, and, accordingly, precedent does not deem the absent class members to be “parties.” Therefore, the court held, “The different procedures underlying a mass-tort action and a class action demand diverging specific personal jurisdiction analyses.”
In August, in Moser v. Benefytt, Inc., 8 F.4th 872 (9th Cir. 2021), a divided Ninth Circuit panel purported to follow the 5th and D.C. Circuits in holding that a defendant may not interpose a personal jurisdiction objection to absent class members’ claims prior to class certification. After the district court held that the defendant had waived its personal jurisdiction defense by failing to raise it in its Rule 12(b) motion, the court held that a Rule 12 personal jurisdiction defense to the claims of unnamed putative class members was not waived because it was not available; unnamed class members are “not yet parties to the case” before class certification.
However, in a footnote, Judge Bress, who wrote the panel majority opinion for himself and Judge Bybee, allowed that while a personal jurisdiction defense is unavailable under Rule 12, it may conceivably be available under Rule 23. He maintained, “Nothing in the Federal Rules somehow requires a district court to assert its power over the claims of putative class members in the face of a class action defendant’s personal jurisdiction objection to class certification. And nothing in the Federal Rules prevents that objection to a plaintiff’s request for class certification from being interposed at the Rule 23 stage, as part of Rule 23 proceedings,” as distinct from Rule 12 proceedings.
Judge Cardone dissented based on a disagreement with the majority about the scope of appealable issues under Rule 23(f), which we discuss in Section V. below. However, in her own footnote, in response to Judge Bress’s footnote, she disagreed with Judge Bress’s supposition that a personal jurisdiction objection to absent class members’ claims can be raised prior to class certification as part of Rule 23 proceedings. She noted that the majority could cite no cases “suggesting personal jurisdiction is relevant to a Rule 23 factor,” and indeed the Ninth Circuit in Poulos v. Caesars World, Inc., 379 F.3d 654, 672 (9th Cir. 2004), has held that “personal jurisdiction and class certification ‘involve the application of different standards.’” She also believed the defendant’s Rule 23 argument was waived because the defendant never raised it below, and the district court never considered it.
Moser was remanded with instructions for the district court to consider the merits of the defendant’s Bristol-Myers objection to class certification in the first instance. It remains to be seen whether the case will return to Judges Bress and Bybee, and whether they will create a circuit split. To date, no circuit court has held that Bristol-Myers bars nationwide class actions in forum states that lack personal jurisdiction over absent class members.
In the aforementioned Moser case, Judges Bress and Bybee, to rule that a personal jurisdiction objection to putative class member claims could be attempted prior to class certification under Rule 23, had to first accept the appeal under Rule 23(f). Rule 23(f) provides, “A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule.” (emphasis added). The issue of whether personal jurisdiction is “relevant to a Rule 23 factor” thus also implicates whether a Rule 23(f) appeal can address personal jurisdiction.
Judges Bress and Bybee ruled that it can. They reasoned that the defendants made personal jurisdiction over putative class members relevant to class certification by arguing that the class should not be certified for want of personal jurisdiction over potential absent class members, and that the district was complicit because its class certification order rejected those arguments. They apparently would have denied appealability under Rule 23(f), consistent with the aforementioned Poulos decision, only if the defendant had chosen to challenge personal jurisdiction under a Rule 12 motion rather than under Rule 23.
Judge Cardone noted that no Ninth Circuit panel has ever interpreted Rule 23(f) to confer appellate jurisdiction over an exercise of personal jurisdiction. Moreover, she noted that Ninth Circuit precedent holds, “In a Rule 23(f) appeal, an appellate court must limit its review to whether the district court correctly selected and applied Rule 23’s criteria.” She observed, “Personal jurisdiction over putative class members is not one of those criteria.”
In response to Judge Bress’s determination that the present case is distinguishable because the defendant argued on appeal that its personal jurisdiction objection was made pursuant to Rule 23 rather than Rule 12, she noted that Rule 12(h)(1)(B) provides that “a personal jurisdiction challenge like [the defendant’s] can only be raised ‘by motion under [Rule 12].” She also noted that the defendant’s decision to make the arguments at class certification, and the district court’s disposal of what it called a “threshold issue” in its class certification order, does not render the issue appealable under Rule 23(f) under either Ninth Circuit or any other precedent.
In our Fall 2020 update, we noted that the Ninth Circuit in Stromburg v. Qualcomm, Inc., No. 19-15159 (filed Oct. 11, 2018), was considering whether state law variations with respect to Illinois Brick-repealer rules can defeat predominance. In August 2019, AAI filed an amicus brief arguing that California’s choice-of-law rules do not prevent the court from applying California’s rule permitting indirect-purchaser suits, which would render antitrust standing a common question for purposes of the predominance inquiry. California’s choice-of-law rules permit application of California law absent a “true conflict” with the laws of other states.
In September, a Ninth Circuit panel comprised of Judges Nelson and Bybee, and Sixth Circuit Judge Siler, sitting by designation, ruled squarely for Qualcomm, largely adopting Qualcomm’s arguments and the supporting arguments offered by the Department of Justice in an amicus brief signed by then-Assistant Attorney General Makan Delrahim. Although the Department of Justice had long maintained that the laws of Illinois Brick-repealer states do not irreconcilably conflict with the Illinois Brick regime and had explicitly argued the point to the Supreme Court in the Arc America case, the Delrahim-led Antitrust Division, in its amicus brief supporting Qualcomm, quietly reversed course without explanation, arguing that the regimes do irreconcilably conflict.
Without identifying or otherwise acknowledging numerous arguments to the contrary in the parties’ briefing and elsewhere in the record, the panel concluded that States which have not passed Illinois-Brick repealer legislation can be understood to have signaled a conflicting policy preference and a desire to prevent their citizens from recovering for their antitrust injuries under other states’ repealer laws. The conclusion seems impossible to square with the Supreme Court’s Arc America opinion, which held that “nothing in Illinois Brick suggests that it would be contrary to congressional purposes for States to allow indirect purchasers to recover under their own antitrust laws.”
The upshot of the court’s holding is that multi-state indirect purchaser class actions filed in California likely cannot include residents of states that lack Illinois-Brick-repealer legislation, unless other common issues collectively predominate over individual issues raised by variations in state indirect-purchaser laws.
Since our Fall 2016 update, we have been tracking the use of mandatory arbitration clauses in employment agreements, which the Supreme Court upheld in a 5-4 decision in Epic System Corp. v. Lewis, 138 S. Ct. 1612 (2018). In our Spring 2019 update, we noted that the FAA, by its terms, excludes “contracts of employment” with transportation workers from its coverage, provided they are “engaged in foreign or interstate commerce.” The Supreme Court, in New Prime, Inc. v. Oliveira, 139 S. Ct. 532 (2019), unanimously held that the FAA does not compel courts to enforce private arbitration agreements involving workers covered by the exclusion, and the Court also broadly interpreted the FAA’s use of “contracts of employment” to include both employees and independent contractors.
In the wake of New Prime, we noted that Epic Systems apparently will not bar transportation employees or independent contractors in interstate commerce from successfully challenging class-action waivers embedded in arbitration agreements, but that it remains unclear how the Court might rule on the validity of such waivers as a matter of contract law where the FAA does not apply.
In our Fall 2020 update, we noted that a circuit split arguably had arisen over how the “foreign or interstate commerce” requirement affects the scope of the transportation-worker exclusion, particularly as applied to gig economy workers. In cases involving Amazon workers, the First and Ninth Circuits held that local delivery drivers fell within the exclusion insofar as they hauled goods on the final legs of interstate journeys. The Seventh Circuit, in Wallace v. Grubhub Holdings, Inc., 970 F.3d 798 (7th Cir. 2020)—in an opinion authored by now-Justice Amy Coney Barrett—held that workers seeking to qualify for the exclusion must be connected not simply to the goods, but to the act of moving those goods across state or national borders.
In our Spring 2021 update, we noted that the Ninth Circuit, in the course of denying a mandamus petition in In re Grice, 974 F.3d 950 (9th Cir. 2020), surveyed the recent cases and concluded, consistent with Wallace, that the critical factor in each case “was not the nature of the item transported in interstate commerce (person or good) or whether the plaintiffs themselves crossed state lines, but rather ‘[t]he nature of the business for which a class of workers perform[ed] their activities.’”
We also noted that the Seventh Circuit, in Saxon v. Southwest Airlines, cited approvingly to Wallace and held that transportation workers must be “actively occupied in ‘the enterprise of moving goods across interstate lines’” to be sufficiently engaged in “commerce” in satisfaction of the FAA exclusion. The court interpreted the scope of work meeting that requirement expansively so as to mitigate the appearance of a circuit split and to maintain consistency with contemporary statutes from the 1920s when the FAA was passed, which recognized that the cargo loading workers at issue were engaged in interstate transportation if they were unloading or loading cargo onto a vehicle so that it may be moved interstate.
Over the last five months, three new circuit courts have issued opinions following an approach similar to that of Wallace, Grice, and Saxon. In June, the Eleventh Circuit, in Hamrick v. Partsfleet, Ltd. Liab. Co., 1 F.4th 1337 (11th Cir. 2021), held that the transportation worker exemption applies “if the worker belongs to a class of workers in the transportation industry and the class of workers actually engages in foreign or interstate commerce,” and that this determination requires “factfinding and the weighing of conflicting evidence.” It vacated and remanded a district court order finding that “final-mile delivery drivers” fell within the exclusion because the district court wrongly “focused on the movement of the goods and not the class of workers.”
In August, in Capriole v. Uber Techs., Inc., 7 F.4th 854 (9th Cir. 2021), the Ninth Circuit found Grice “instructive” and “persuasive” notwithstanding that Grice was decided in “the highly deferential context of a mandamus petition.” It held that “Uber drivers, as a nationwide ‘class of workers,’ are not ‘engaged in foreign or interstate commerce’ and are therefore not exempt from arbitration under the FAA.” The court reasoned that “Uber drivers, as a class, ‘are not engaged in interstate commerce’ because their work ‘predominantly entails intrastate trips,’ even though some Uber drivers undoubtedly cross state lines in the course of their work and rideshare companies do contract with airports ‘to allow Uber drivers . . . to pick up arriving passengers.’”
In September, in Harper v. Amazon.com Servs., 12 F.4th 287 (3d Cir. 2021), the Third Circuit held that district courts may appropriately order limited discovery designed to show whether the plaintiff belongs to a class of workers engaged in foreign or interstate commerce for purposes of claiming the FAA exclusion. However, the court held that, before ordering discovery, in the interests of efficiency, the district court must first determine whether state law grounds exist that would enforce arbitration even if the FAA does not apply. The court reasoned that this requirement “honors the principles of federalism and the expectations of the parties.” Judge Schwartz, dissenting, believed this was error. Judge Schwartz maintained that, under the Supreme Court’s holding in New Prime and prior Third Circuit precedent, “where the parties have selected the FAA as the law that governs arbitration, the court should first review whether the FAA covers the relevant class of workers.”
The losing defendant in Saxon, Southwest Airlines, petitioned for certiorari in August. ScotusBlog lists the filing among its “featured petitions.”
Since Epic Systems was decided in 2018, several legislative proposals that would fully or partially overturn the decision have circulated, including the Forced Arbitration Injustice Repeal Act (FAIR Act), which was first introduced by Sen. Richard Blumenthal (D-CT) and Rep. Hank Johnson (D-GA) in February 2019, and which we discussed in our Spring 2019 update. On November 3, the FAIR Act passed the House Judiciary Committee. In addition, on November 4, a narrower bill, the Ending Forced Arbitration of Sexual Assault & Sexual Harassment Act, introduced by Sen. Kirsten Gillibrand (D-NY) and Sen. Lindsey Graham (R-SC), passed the Senate Judiciary Committee.
The Gillibrand and Graham bill, which would not affect antitrust plaintiffs but rather would prevent forced arbitration from being imposed only in claims of sexual assault and harassment, is nonetheless significant because it marks the first time since Epic Systems that legislation limiting forced arbitration has advanced in the Senate. The bill has received bipartisan support from Republican Senators Chuck Grassley (R-IA), Lisa Murkowski (R-AK), John Kennedy (R-LA), Marsha Blackburn (R-TN) and Josh Hawley (R-MO), and Democratic Senators Dick Durbin (D-IL), Patrick Leahy (D-VT), Dianne Feinstein (D-CA), Sheldon Whitehouse (D-RI), Amy Klobuchar (D-MN), Chris Coons (D-DE), Richard Blumenthal (D-CT), Mazie Hirono (D-HI), Cory Booker (D-NJ), Alex Padilla (D-CA) and Jon Ossoff (D-GA).
In our Fall 2020 update, we discussed the Eleventh Circuit’s decision in Johnson v. NPAS Sols., LLC, 975 F.3d 1244 (11th Cir. 2020), which held that incentive awards paid to lead class plaintiffs—a longstanding feature of antitrust and other class actions—are unlawful under nineteen century Supreme Court precedent. In our Spring 2021 update, we noted that the Eleventh Circuit entered an order withholding the issuance of the mandate following the plaintiff’s petition for rehearing en banc. In May, the plaintiffs submitted a notice of supplemental authority regarding plaintiffs’ contention that the prohibition on incentive awards conflicts with decisions from every other circuit.
According to the submission, nine district court cases from outside the Eleventh Circuit and seven appellate panels had addressed the legality of incentive awards paid to lead class plaintiffs since the petition for rehearing en banc was submitted. The nine district court decisions had cited to and rejected the Johnson holding, permitting service awards to class representatives. The seven appellate decisions, most of which are unpublished, have affirmed service awards. In a response, the defendant countered that the cited cases are non-binding and did not directly consider the nineteen century precedent on which Johnson relied.
Since our last update, district courts within the Eleventh Circuit have joined courts outside the circuit in permitting payments to lead class plaintiffs where circumstances allow. In Broughton v. Payroll Made Easy, Inc., No. 2:20-cv-41-NPM, 2021 U.S. Dist. LEXIS 139514 (M.D. Fla. July 27, 2021), the Middle District of Florida narrowly interpreted Johnson as applying only to an incentive award “that compensates a class representative for his time and rewards him for bringing a lawsuit.” The court held that, although the parties’ settlement agreement contained “references to a ‘service award,’” the facts here were distinguishable from Johnson because the parties had clarified in a second amended motion and notice that the lead plaintiff was “receiving additional compensation for executing a supplemental agreement, which contains a much broader release of claims.”
Other district courts in the Eleventh Circuit have denied service awards without prejudice, pending disposition of the Johnson plaintiffs’ en banc rehearing petition. In Cotter v. Checkers Drive-In Rests., Inc., No. 8:19-cv-1386-VMC-CPT, 2021 U.S. Dist. LEXIS 160592 (M.D. Fla. Aug. 25, 2021), for example, the district stated, “it is important to note that the mandate has been withheld in Johnson and a ruling for rehearing en banc is pending. Accordingly, this Court will follow the lead of its sister courts in this Circuit and deny Plaintiffs’ request for service awards without prejudice, but it will retain jurisdiction for the limited purpose of revisiting the denial of service awards should Johnson ultimately be overruled.”
At least one district court in the Eleventh Circuit has applied Johnson to bar a service award. In Rosado v. Barry Univ., No. 20-21813-CIV, 2021 U.S. Dist. LEXIS 169196 (S.D. Fla. Sep. 7, 2021), the court held that Johnson barred a $5,000 service award, and it refused to reserve jurisdiction to allow class counsel to renew their request for a service award should Johnson be reversed en banc. Although the court acknowledged that several other district courts have taken this approach, it worried that allowing class counsel to renew their request for the service award in this case might delay the distribution of settlement payments or increase settlement administration costs.
As of this writing, the plaintiffs’ en banc rehearing petition in Johnson remains pending, and a mandate has yet to issue.
In August, the Fourth Circuit clarified the standard for assessing Rule 23(a)’s numerosity requirement when the proposed class contains 20-40 members, which the court called a “gray area” between those proposed classes that presumptively fail and those that presumptively satisfy the numerosity requirement, respectively. In FWK Holdings, LLC v. Merck & Co. (In re Zetia (Ezetimibe) Antitrust Litig.), discussed above in Section V., the court vacated and remanded a class certification order in a direct-purchaser reverse-payment case after the district court wrongly based its numerosity determination on the prospect of “multiple individual trials” in lieu of a class action. The court emphasized that the proper inquiry is “whether ‘the class is so numerous that joinder of all members is impracticable,’ not whether the class is so numerous that failing to certify presents the risk of many separate lawsuits.” It explained, “Plaintiffs must bring to bear some evidence” that it would be uneconomical for smaller claimants to be individually joined as parties in a traditional lawsuit.
Judge Niemeyer, concurring, wrote separately to identify additional factors beyond the number of class members that might be used to “give flesh to the numbers inquiry.” Relevant factors include “(1) judicial economy resulting from avoidance of joined or independent actions, (2) geographic dispersion of putative class members, and (3) the ability and motivation of class members to bring suit absent class certification.” The weight to be given any factor will depend on the facts of the case.
The judicial economy factor, Judge Niemeyer noted, will usually favor a class action regardless of whether joinder is practicable, because individual suits, even if joined, affect economy of docket management and courtroom space and correlated staffing, and they “naturally place a greater strain on a district court than having just two or three class members represent the whole.” A district court may also consider “the differential in costs of discovery between a class action and an action with many joined parties.” Moreover, “an aspect of broader practicality, and also, perhaps, judicial economy, might relate to the ability to identify class members.” If a majority of proposed class members have already been identified and reside within an established jurisdictional boundary, then joinder may be more practicable. But if absent class members are not yet “specifically identifiable,” then joinder might be more impracticable.
[1] The American Antitrust Institute is an independent, nonprofit organization devoted to promoting competition that protects consumers, businesses, and society. We serve the public through research, education, and advocacy on the benefits of competition and the use of antitrust enforcement as a vital component of national and international competition policy. For more information, see https://www.antitrustinstitute.org. Comments on this update or suggestions for AAI amicus participation should be directed to Randy Stutz, rstutz@antitrustinstitute.org, (202) 905-5420.
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The American Antitrust Institute (AAI) seeks to preserve the effectiveness of antitrust class actions as a central component of ensuring the vitality of private antitrust enforcement.[1] As part of its efforts, AAI issues periodic updates on developments in the courts and elsewhere that may affect this important device for protecting competition, consumers, and workers. This update covers developments since our Fall 2020 update.
There is recurring debate in the federal courts over the rules and standards that govern the certification of classes that may contain some class members who were not injured by the defendant’s conduct. In our Fall 2016 update, we noted that the Supreme Court’s opinion in Tyson Foods v. Bouaphakeo, 577 U.S. 442 (2016), strongly implied that the presence of uninjured class members does not necessarily defeat class certification.
In our Spring 2020 update, we noted that the Eleventh Circuit in Cordoba v. DirecTV, LLC, 942 F.3d 1259 (11th Cir. 2019), held that individualized questions of standing can be relevant to the predominance inquiry, and that the standing of allegedly uninjured class members presented an individualized question in the Telephone Consumer Protection Act (TCPA) case before the court. We also noted that the Ninth Circuit, in Ramirez v. TransUnion LLC, 951 F.3d 1008 (9th Cir. 2020), in a class action brought under the Fair Credit Reporting Act (FCRA), held that each class member must have Article III standing at the final judgment stage of a class action, subsequent to trial.
In December 2020, the Supreme Court granted certiorari in Ramirez, and in June, in a 5-4 opinion authored by Justice Kavanaugh, a sharply divided Court reversed. But the Court’s controversial holding turned on what it takes for any individual victim of a federal statutory violation to establish standing, not on the timing of the standing inquiry when plaintiffs seek to aggregate claims in a class action.
The majority opinion by Justice Kavanaugh, joined by Justices Roberts, Alito, Gorsuch, and Barrett, held that the vast majority of class members suffered no concrete injury—and lacked Article III standing to bring FCRA claims accordingly—because the parties stipulated that false information contained in their TransUnion credit reports was never distributed to businesses. As a result, it was not possible that they suffered the requisite harm, which the Court defined by analogizing to the tort of defamation. Impassioned dissents authored by Justice Thomas, joined by the Court’s three liberal members, and by Justice Kagan, joined by Justices Breyer and Sotomayor, chastised the majority for “transform[ing] standing law from a doctrine of judicial modesty into a tool of judicial aggrandizement,” and for holding, for the first time, “that a specific class of plaintiffs whom Congress allowed to bring a lawsuit cannot do so under Article III.”
As relevant to antitrust class actions, however, the Court expressly disclaimed any judgment as to the propriety or impropriety of certifying classes containing some class members who may be shown to lack standing at subsequent stages of litigation proceedings. In a footnote, citing the Eleventh Circuit’s decision in Cordoba, the Court said, “We do not here address the distinct question whether every class member must demonstrate standing before a court certifies a class.” But the Court did state, “On remand, the Ninth Circuit may consider in the first instance whether class certification is appropriate in light of our conclusion about standing.”
In early April, while the Supreme Court’s decision in Ramirez was still pending (and with potentially important implications for its future disposition on remand), the Ninth Circuit issued its highly anticipated decision in Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 993 F.3d 774 (9th Cir. 2021), discussed in our Fall 2020 update. In Bumble Bee, a divided Ninth Circuit panel held that, in applying Rule 23(b)(3)’s predominance requirement, a district court must find that no more than a “de minimis” number of class members are uninjured. Because the district court did not make such a finding, the panel vacated the class certification order and remanded for further proceedings. Judge Hurwitz, partially dissenting, maintained that neither the text of Rule 23 nor Ninth Circuit precedent permit the court to create such a requirement.
Although neither the plaintiffs nor the defendants sought en banc rehearing in Bumble Bee, the Ninth Circuit, acting sua sponte, ordered briefing on whether en banc rehearing is warranted and specifically directed the parties to focus on the “de minimis” issue that divided the panel. In May, AAI, which had submitted an amicus brief on the merits, submitted an amicus brief in support of en banc rehearing, identifying several legal and practical problems with the standard the panel majority articulated. As of this writing, the en banc rehearing vote remains pending, and a mandate has yet to issue.
The class plaintiffs have since settled with one of the defendants and moved the Court to begin settlement approval hearings. Although none of the remaining defendants objected to proceeding with settlement hearings, the district court has refused in light of the Ninth Circuit’s order vacating class certification, noting that, because the panel’s de minimis holding is grounded in predominance and not manageability, it will apply to both settlement and litigation classes if en banc rehearing ultimately is rejected and a mandate subsequently issues.
The aforementioned Ninth Circuit opinion in Bumble Bee also has important implications for another recurring question we have tracked for several years: the appropriate class certification standards when liability and damages are determined on the basis of statistical evidence. In Bumble Bee, the defendants argued that the class plaintiffs’ use of statistical evidence masked substantial differences among class members, partly because the plaintiffs’ reliance on average overcharges obscured the presence of class members who did not pay an overcharge at all and therefore were not impacted by the admitted price fixing.
The Ninth Circuit affirmed the district court’s holding that plaintiffs’ reliance on common statistical evidence was capable of proving classwide impact. Citing the Supreme Court’s holding in Tyson Foods, the Ninth Circuit held that “representative evidence can be relied on to establish a class” so long as it is “closely and carefully scrutinized” for conformance with Rule 23’s requirements. Here, the plaintiffs’ statistical evidence passed muster because (1) an individual plaintiff could have relied on the statistical models to show impact in a hypothetical individual case; (2) there was a sufficient nexus between the plaintiffs’ statistical evidence and their theory of liability in accordance with Comcast; and (3) the plaintiffs’ statistical methodology was capable of showing that virtually all class members suffered injury so long as the methodology is sufficiently reliable.
The Bumble Bee panel-majority’s treatment of plaintiffs’ statistical evidence offered to prove common impact has not been briefed in en banc proceedings.
When plaintiffs rely on expert testimony at the class certification stage, it is currently unsettled as to whether a court should perform a full Daubert analysis of the expert testimony or instead apply a tailored approach specific to the “rigorous analysis” required to satisfy Rule 23. In antitrust class actions, the Daubert and predominance standards can overlap when expert testimony is used to prove common impact and damages.
In January, in Prantil v. Arkema Inc., 986 F.3d 570 (5th Cir. 2021), the Fifth Circuit held in an environmental case that Daubert analysis is required at the class certification stage when scientific evidence is relevant to the Rule 23 standard. Class plaintiffs filed suit under two environmental statutes alleging adverse health effects and property damage caused by emissions emanating from the defendant’s Texas-based volatile chemical facility in the aftermath of Hurricane Harvey. The class plaintiffs relied upon four experts in seeking class certification, and on the defendant’s motion to exclude, the district court granted the motion as to plaintiffs’ damages expert but nonetheless certified the class. On appeal, the defendant argued that the district court erred in failing to ensure that the three remaining, relied-upon experts passed the Daubert test.
In an opinion by Judge Higginbotham, the Fifth Circuit agreed. Joining the Third, Seventh and Eleventh Circuits, the Fifth Circuit held that “the Daubert hurdle must be cleared when scientific evidence is relevant to the decision to certify.” Adopting Third Circuit reasoning, the Fifth Circuit found the application of Daubert analysis at the certification stage to be a “natural extension” of the need to conduct a “rigorous analysis” to determine whether the proposed class qualified under Rule 23. The court stated that expert testimony that “would not be admissible at trial … should not pave the way for certifying a proposed class.”
According to one analysis, the 8th Circuit holds that a Daubert review is unnecessary at the class certification stage, and the Ninth Circuit holds that Daubert standards do not apply when weighing certification. Another analysis describes the 8th and 9th Circuits as applying a “limited Daubert analysis” in which some inquiry is made into reliability but a finding establishing ultimate admissibility is not required. The Ninth Circuit panel majority in Bumble Bee did not explicitly address the role of the Daubert standard at class certification.
Since 2017, we have been tracking the lower federal courts’ application of the Supreme Court’s decision in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017), which prevents defendants who are engaged in nationwide conduct from being subject to a mass action by plaintiffs injured both within and outside the forum state if general jurisdiction is lacking and if the defendant otherwise has insufficient contacts with the forum states to establish specific jurisdiction over the claims of some of the plaintiffs in the forum state. That decision has engendered questions as to whether such defendants can be subject to a class action brought by such plaintiffs. If not, nationwide or multi-state classes of plaintiffs often might be unable to bring class actions except in a defendant’s home state. Among other things, this would result in significant litigation advantages for corporate antitrust defendants, as well as inefficiency.
In our Spring 2020 update, we explained that the 5th, 7th, and D.C. Circuits all ruled on the issue in the span of a two-week period, and all three held that Bristol-Myers does not bar nationwide class actions prior to class certification, notwithstanding that specific jurisdiction may be lacking for unnamed class members. The 7th Circuit, in an opinion by Chief Judge Wood in Mussat v. IQVIA, went further than the others in holding affirmatively that Bristol-Myers does not apply to class actions.
In January, the Supreme Court denied certiorari in Mussat. Two months later, in Lyngaas v. Curaden AG, 992 F.3d 412 (6th Cir. 2021), the 6th Circuit joined the 7th Circuit in holding explicitly that “Bristol-Myers Squibb does not extend to federal class actions.” Citing and quoting extensively from Chief Judge Wood’s opinion in Mussat, the court noted that a class action is formally one suit in which a defendant litigates against only the class representative, and, accordingly, precedent does not deem the absent class members to be “parties.” Therefore, the court held, “The different procedures underlying a mass-tort action and a class action demand diverging specific personal jurisdiction analyses.”
In our Fall 2020 update, we noted that the 9th Circuit is currently considering this question on interlocutory appeal in Moser v. Health Ins. Innovations, Inc. No. 19-56224 (9th Cir. docketed Oct. 23, 2019). The appeal has now been fully briefed, and oral argument was held on May 13, 2021. A decision remains pending. To date, no circuit court has held that Bristol-Myers bars nationwide class actions in forum states that lack personal jurisdiction over absent class members.
We also noted in our Fall 2020 update that the Supreme Court granted certiorari and heard oral argument in Ford Motor Co. v. Montana Eighth Judicial Dist. Ct., which addressed the “arise out of or relate to” requirement for specific personal jurisdiction. The petitioners sought a strict standard requiring a causal connection between the plaintiff’s claimed injury and the defendant’s contacts with the forum state, which would have raised the stakes as other circuit courts consider whether to apply Bristol-Myers to class actions. If, for example, personal jurisdiction were understood to require that the defendant’s contacts with the forum state must be the but-for or proximate cause of each plaintiff’s claimed injury, as the Ford defendants argued, then nearly all nationwide classes would be left without a venue other than the defendant’s home state.
In March, the Supreme Court unanimously rejected the petitioners’ strict causal connection standard. Justice Kagan’s opinion for the Court, joined by Justices Roberts, Breyer, Sotomayor, and Kavanaugh, held that the “relates to” language in the “arise out of or relate to” requirement “contemplates that some relationships will support jurisdiction without a causal showing.”
Justice Alito, concurring, would have held that “arise out of” and “relate to” are “are not really two discrete grounds for jurisdiction.” He would have reaffirmed the basic minimum contacts standard adopted in International Shoe and thereby “leave the law exactly where it stood before we took these cases.” Justice Gorsuch, in a concurring opinion joined by Justice Thomas, implied that he would have overturned International Shoe and begun creating “a new jurisprudence about corporate jurisdiction” rooted in the Fourteenth Amendment’s original meaning as it pertains to personal jurisdiction.
Although the Court’s holding leaves room for further development of its personal jurisdiction jurisprudence, the majority and concurring opinions arguably should quell concerns that the Court will look to adopt overly stringent causation requirements that could threaten the viability of nationwide antitrust class actions on personal jurisdiction grounds.
A circuit split persists over whether Rule 23 contains a heightened ascertainability requirement that demands class plaintiffs plead and prove an administratively feasible mechanism for identifying absent class members. In our Fall 2020 update, we noted that the tide of recent decisions has moved against such a requirement, with each of the last five courts to consider a heightened ascertainability requirement having ruled against it. The Second, Sixth, Seventh, Eighth, and Ninth Circuits now reject an administrative feasibility prerequisite, while the First and Third Circuits have embraced some form of a heightened ascertainability requirement. The Fifth, Tenth, and D.C. Circuits have not yet explicitly adopted a position. The Eleventh Circuit had addressed the issue in unpublished opinions but characterized its position as “unresolved.”
In February, in a 3-0 panel opinion authored by Chief Judge Pryor in Cherry v. Dometic Corp., 986 F.3d 1296 (11th Cir. 2021), the Eleventh Circuit joined the majority of circuits in holding that “administrative feasibility cannot be a precondition for certification” under Rule 23. The court reasoned that an ascertainability requirement is implicit in Rule 23’s requirement of a clearly defined class, but administrative feasibility is not. Class membership can be “capable of determination without being capable of convenient determination.” (emphasis in original). Administrative feasibility therefore has “no connection to Rule 23(a).”
The court did hold that administrative feasibility is relevant to the manageability criterion of Rule 23(b)(3). However, “because Rule 23(b)(3) requires a balancing test, it does not permit district courts to make administrative feasibility a requirement.”
Since our Fall 2016 update, we have been tracking the use of mandatory arbitration clauses in employment agreements, which the Supreme Court upheld in a 5-4 decision in Epic System Corp. v. Lewis, 138 S. Ct. 1612 (2018). In our Spring 2019 update, we noted that the FAA, by its terms, excludes “contracts of employment” with transportation workers from its coverage, provided they are “engaged in foreign or interstate commerce.” The Supreme Court, in New Prime, Inc. v. Oliveira, 139 S. Ct. 532 (2019), unanimously held that the FAA does not compel courts to enforce private arbitration agreements involving workers covered by the exclusion, and the Court also broadly interpreted the FAA’s use of “contracts of employment” to include both employees and independent contractors.
In the wake of New Prime, we noted that Epic Systems apparently will not bar transportation employees or independent contractors in interstate commerce from successfully challenging class-action waivers embedded in arbitration agreements, but that it remains to be seen how the Court might rule on the validity of such waivers as a matter of contract law where the FAA does not apply.
In our Fall 2020 update, we noted that a circuit split arguably had arisen over how the “foreign or interstate commerce” requirement affects the scope of the transportation-worker exclusion, particularly as applied to gig economy workers. In cases involving Amazon workers, the First and Ninth Circuits held that local delivery drivers fell within the exclusion insofar as they hauled goods on the final legs of interstate journeys, notwithstanding that they did not personally cross state lines. The Seventh Circuit, in Wallace v. Grubhub Holdings, Inc., 970 F.3d 798 (7th Cir. 2020)—in an opinion authored by now-Justice Amy Coney Barrett—held that workers seeking to qualify for the exclusion must be connected not simply to the goods, but to the act of moving those goods across state or national borders.
The Ninth Circuit, in the course of denying a mandamus petition in In re Grice, 974 F.3d 950 (9th Cir. 2020), surveyed the recent cases and concluded that the critical factor in each case “was not the nature of the item transported in interstate commerce (person or good) or whether the plaintiffs themselves crossed state lines, but rather ‘[t]he nature of the business for which a class of workers perform[ed] their activities.’”
In March, the 7th Circuit issued an opinion implying that the 9th Circuit’s statement is correct, and that there may be less to the perceived circuit split than meets the eye. In Saxon v. Southwest Airlines, in a unanimous panel opinion authored by Judge St. Eve, the court reversed a district court order holding that a ramp supervisor who manages and assists workers loading and unloading airplane cargo for Southwest Airlines fell outside the transportation-worker exclusion of the FAA. The court explained that the FAA’s residual phrase—“any other class of workers engaged in foreign or interstate commerce”—“cuts both ways.” A transportation worker need not work for a transportation company, but a person does not become a transportation worker simply because she does work for a transportation company.
Here, the 7th Circuit, citing approvingly to then-Judge Barrett’s opinion Wallace, maintained that transportation workers must be “actively occupied in ‘the enterprise of moving goods across interstate lines’” to be sufficiently engaged in “commerce” in satisfaction of the FAA exclusion. But it interpreted the scope of work meeting that requirement expansively, to avoid “put[ting] ourselves in conflict with the Third Circuit’s approach and in tension with the First and Ninth Circuits’ interpretation of § 1.”
The court held, “Actual transportation is not limited to the precise moment either goods or the people accompanying them cross state lines.” Rather, consistent with contemporary statutes from the 1920s when the FAA was passed, which recognized as much, the “loading and unloading [of] cargo onto a vehicle so that it may be moved interstate, too, is actual transportation.” In the aftermath of Judge St. Eve’s opinion, district courts in the Seventh Circuit may likewise resort to textualist analyses in determining whether any given class of workers is engaged in “the actual transportation of goods” under the FAA’s transportation-worker exclusion.
According to one analysis, federal courts in the last two years have issued more rulings on whether plaintiffs are transportation workers engaged in interstate commerce—and thus are exempt from the FAA—than they did over the preceding 17 years. Over the past two decades, courts have reportedly decided 92 cases involving worker claims that they are covered by the FAA’s transportation-worker exclusion, with workers prevailing in 30 percent of the cases.
In our Fall 2020 update , we discussed the Eleventh Circuit’s decision in Johnson v. NPAS Sols., LLC, 975 F.3d 1244 (11th Cir. 2020), which held that incentive awards paid to lead class plaintiffs—a longstanding feature of antitrust and other class actions—are unlawful under 19th Century Supreme Court precedent. The court entered an order withholding the issuance of the mandate following the plaintiff’s petition for rehearing en banc. In May, the plaintiffs submitted a notice of supplemental authority regarding plaintiffs’ contention that the prohibition on incentive awards conflicts with decisions from every other circuit.
According to the submission, nine district court cases from outside the Eleventh Circuit and seven appellate panels have addressed the legality of incentive awards paid to lead class plaintiffs since the petition for rehearing en banc was submitted. The nine district court decisions have cited to and rejected the Johnson holding, permitting service awards to class representatives. The seven appellate panels, most of which are unpublished, have affirmed service awards. In a response, the defendant counters that the cited cases are non-binding and did not directly consider the 19th Century precedent on which Johnson relied. As of this writing, the plaintiffs’ en banc rehearing petition remains pending.
As we noted in our Fall 2020 update, the majority and minority staffs of the House Antitrust Subcommittee issued dueling reports that found common ground after a year-long investigation into the market power of Big Tech firms, and how the antitrust laws can be strengthened to address it. However, the minority report emphasized that it “would rather see the subcommittee focus on legislation that removes barriers to agency antitrust enforcement rather than private enforcement.”
On June 11, 2021, Subcommittee members introduced five new antitrust bills aimed at curbing the monopoly power of Big Tech firms. Two of the five bills feature private enforcement and parens patriae provisions, as discussed below.
The American Choice and Innovation Online Act, sponsored by Rep. David Cicilline (RI-01) and Rep. Lance Gooden (TX-05), prohibits discriminatory conduct by dominant online platforms. This bill allows for an injured person to recover three-times the damages he or she sustained with simple interest on actual damages during the pendency of the suit, as well as the cost of the suit, including a reasonably attorney’s fee. It also has a parens patriae provision that empowers state attorneys general to bring civil actions to recover on behalf of their injured citizens.
The “Platform Competition and Opportunity Act,” sponsored by Rep. Hakeen Jeffries (NY-08) and Rep. Ken Buck (CO-04), prohibits covered platform operators from acquiring any entity that competes with or can augment the covered platform operator’s existing business. This bill contains private enforcement and parens patriae provisions that are identical to those of the American Innovation and Choice Online Act.
The “Ending Platform Monopolies Act,” sponsored by Rep. Pramila Jayapal (WA-07) and Rep. Gooden, prohibits covered platform operators from selling goods or services on their platforms, and also from vertically or horizontally integrating into any line of business if the platform would have the ability and incentive to favor its own products or exclude rivals. Unlike the aforementioned bills, this bill lacks private enforcement or parens patriae provisions. Enforcement is left to the Department of Justice and the Federal Trade Commission.
The “Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act,” sponsored by Rep. Mary Scanlon (PA-05) and Rep. Burgess Owens (UT-04), enhances standards for data security and data transferability to third-parties. This bill likewise lacks private enforcement or parens patriae provisions and vests enforcement authority solely with the Department of Justice and the Federal Trade Commission.
The “Merger Filing Fee Modernization Act,” sponsored by Rep. Joe Neguse (CO-02) and Rep. Victoria Spartz (IN-05), amends the Hart Scott Rodino Act to increase filing fees for certain large mergers and acquisitions and increases budget appropriations for the Department of Justice and the Federal Trade Commission. There are no enforcement provisions in this bill.
A sixth bill introduced in May, the State Antitrust Enforcement Venue Act, sponsored by Reps. Cicilline, Buck, Neguse, Owens and Sanford Bishop (GA-02), exempts states’ suits brought under federal antitrust law from being consolidated and relocated with private cases by the Judicial Panel on Multidistrict Litigation. In this regard, the bill would put states on equal footing with the federal government when enforcing federal antitrust law. It does not feature any enforcement provisions.
After a 29-hour markup session that ended on June 24, 2021, the House Judiciary Committee advanced all six bills with at least some bipartisan support for each. The American Innovation and Choice Online Act passed 24-20; the Platform Competition and Opportunity Act passed 23-18-1; the Ending Platform Monopolies Act passed 21-20; the ACCESS Act passed 25-19; the Merger Filling Fee Modernization Act passed 29-12; and the State Antitrust Enforcement Venue Act passed 34-7. The legislation is expected to receive a close vote in the full House, and as of this writing it is unclear when it will get to the floor.
Two analogous bills introduced in the Senate in February and April, respectively, lack private enforcement and parens patriae provisions: the Competition and Antitrust Law Enforcement Act of 2021, sponsored by Senator Amy Klobuchar (D-MN), and the Trust-Busting for the Twenty-First Century Act, sponsored by Senator Josh Hawley (R-MO).
[1] The American Antitrust Institute is an independent, nonprofit organization devoted to promoting competition that protects consumers, businesses, and society. We serve the public through research, education, and advocacy on the benefits of competition and the use of antitrust enforcement as a vital component of national and international competition policy. For more information, see https://www.antitrustinstitute.org. Comments on this update or suggestions for AAI amicus participation should be directed to Randy Stutz, rstutz@antitrustinstitute.org, (202) 905-5420.
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The American Antitrust Institute (AAI) and the Committee to Support the Antitrust Laws (COSAL) announced the creation of the Hollis Salzman Memorial Leadership Award to honor the life of Hollis Salzman, a friend, colleague, and incomparable member of the antitrust community.
One of the nation’s leading antitrust attorneys, Hollis spent more than 25 years litigating some of the world’s largest cases and recovered over $2 billion in settlements for victims of antitrust cartel and unfair competition practices. Her groundbreaking work as co-lead counsel in In re Air Cargo Shipping Services Litigation, a class action against many of the world’s biggest airlines, resulted in over $1.2 billion in settlements for purchasers of airfreight services. She also spent many years representing plaintiffs in In re Automotive Parts Antitrust Litigation, recovering more than $1 billion for purchasers of car parts affected by price-fixing agreements. Hollis joined Robins Kaplan in 2013 and was Managing Partner of the New York office and a member of the firm’s Executive Board.
Hollis was a champion of gender equality and diversity in her profession. She embraced her role as a mentor and role model to other female attorneys, helping to inspire them to shine on their own merit: “Women can succeed and lead blockbuster investigations, even in a male-dominated field, without losing their identity or acting in a way that is not true to themselves,” she said. Her tireless dedication to advocating on behalf of women included an extensive pro bono practice representing indigent women and victims of domestic violence.
Hollis was a longtime Advisory Board Member of the American Antitrust Institute. She served on the Antitrust Enforcement Awards Judging Committee in 2013, the year the awards were established. She was Vice Chair of the Committee in 2014 and Chair of the Committee from 2015 to 2017. The AAI staff greatly enjoyed working with her.
To be eligible for consideration for the Hollis Salzman Memorial Leadership Award, nominations for candidates must be submitted via this form before September 1, 2021. The honoree will be selected by a dedicated committee and the award will be presented at AAI’s Antitrust Enforcement Awards on November 10, 2021, in Washington, D.C. Both third-party and self-nominations will be accepted.
The American Antitrust Institute (AAI) and the Committee to Support the Antitrust Laws (COSAL) created the Hollis Salzman Memorial Leadership Award in 2021 to honor the life of Hollis Salzman, a friend, colleague, and incomparable member of the antitrust community.
Nominations for the 2023 award were due September 1, 2023. The honoree will be selected by a dedicated committee and the award will be presented at AAI’s Antitrust Awards Night on November 2, 2023, in Washington, DC.
One of the nation’s leading antitrust attorneys, Hollis spent more than 25 years litigating some of the world’s largest cases and recovered over $2 billion in settlements for victims of antitrust cartel and unfair competition practices. Her groundbreaking work as co-lead counsel in In re Air Cargo Shipping Services Litigation, a class action against many of the world’s biggest airlines, resulted in over $1.2 billion in settlements for purchasers of airfreight services. She also spent many years representing plaintiffs in In re Automotive Parts Antitrust Litigation, recovering more than $1 billion for purchasers of car parts affected by price-fixing agreements.
Hollis was a champion of gender equality and diversity in her profession. She embraced her role as a mentor and role model to other female attorneys, helping to inspire them to shine on their own merit: “Women can succeed and lead blockbuster investigations, even in a male-dominated field, without losing their identity or acting in a way that is not true to themselves,” she said. Her tireless dedication to advocating on behalf of women included an extensive pro bono practice representing indigent women and victims of domestic violence.
Hollis was a longtime Advisory Board Member of the American Antitrust Institute. She served on the Antitrust Enforcement Awards Judging Committee in 2013, the year the awards were established. She was Vice Chair of the Committee in 2014 and Chair of the Committee from 2015 to 2017. The AAI staff greatly enjoyed working with her.
Hollis served as Chair of the New York State Bar Association’s Antitrust Law Section, Co-Chair of the New York Women’s Antitrust Bar Association, and Co-Chair of the American Bar Association’s Section of Antitrust Law’s Competition/Consumer Protection Policy and U.S. Task Force Committee. She was the Past President of the Committee to Support the Antitrust Laws (COSAL).
Hollis joined Robins Kaplan in 2013 and was Managing Partner of the New York office and a member of the firm’s Executive Board. She is survived by her daughter Willa and son Finn. She is predeceased by her husband of 25 years, David Barry.
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The American Antitrust Institute (AAI) has released the White Paper, Update on Digital Technology: The Failure of Merger Enforcement and Need for Reform. The new White Paper updates and expands on analysis AAI originally released in July 2019.
The widely cited 2019 AAI White Paper, The Record of Weak U.S. Merger Enforcement in Digital Technology, was the subject of AAI testimony before the Senate Judiciary Committee and drew attention to the acquisitive history of the five largest multinational online service or computer hardware or software companies: Amazon, Apple, Facebook, Google, and Microsoft (“Big Tech”). It also unpacked the history of merger enforcement under Section 7 of the Clayton Act in a major segment of the digital technology sector. The White Paper concluded that, as compared to enforcement across all sectors, the rate of merger challenges in digital technology is exceptionally low.
Since then, much has happened in the digital technology sector. Big Tech has solidified its hold on the top-most slots, by market value, in the Fortune 500. Federal and state monopolization cases have been filed against Google and Facebook. Among other things, the Facebook complaints allege that acquisitions of small rivals, such as social media firms Instagram (2012) and WhatsApp (2014), were a strategy to snuff out potential competition to maintain a monopoly in personal social networking services. The public policy debate over the dominance of Big Tech has also generated numerous proposals to remedy competitive and consumer harm, including breakups and digital market regulation. A 2020 House Judiciary Committee report examined competitive issues raised by the platforms that are at the core of many of the large digital ecosystems. Moreover, the digital ecosystems have been the subject of ongoing economic, business, and policy research, which has advanced the state of thinking over potential policy solutions to the problems they raise.
Results of AAI’s updated analysis indicate that expansion by acquisition continues to be a leading method by which the large digital ecosystems grow. Enforcers can expect to see further growth that, when juxtaposed with persistent, weak merger enforcement in the sector, will likely exacerbate competition problems. Indeed, stronger merger enforcement over the last two decades would have mitigated the monopolization concerns that AAI sees now. As it stands, however, Section 2 of the Sherman Act is virtually the only antitrust tool left to combat dominance in the digital technology sector. This White Paper turns first to updating data on acquisitions by Big Tech through 2020 and merger enforcement statistics through the latest available reporting year, 2019. It then examines the implications of Big Tech’s likely trajectory of further expansion through acquisition and growth in critical cloud infrastructure capability. It closes with an analysis of reforms necessary to revitalize merger enforcement in digital technology.
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