On December 9, Chief Judge Christina Reiss of the District of Vermont denied the plaintiff dairy farmers’ motion for class certification in Allen v. Dairy Farmers of America, Inc., 2011 WL 6148678 (D. Vt. Dec. 9, 2011).  However, Judge Reiss invited plaintiffs to renew their motion after addressing issues with their expert report. 

Plaintiffs are New York and Vermont dairy farmers.  Defendants are Dairy Farmers of America, Inc. (DFA) and Dairy Marketing Services LLC (DMS).  (Dean Foods was originally a defendant but it settled in May for $30 million.)  DFA is the largest dairy cooperative in the United States, and it not only produces, but also processes, markets and distributes raw Grade A milk.  DMS is a milk marketing agency allegedly created, owned and controlled by DFA and certain other cooperatives.  Some of the plaintiffs are members of DFA.  All of the plaintiffs have, at some point since 2002, sold their milk to processors through DMS. 

Plaintiffs sued DFA and DMS in October 2009 on behalf of all similarly situated dairy farmers in New York, Vermont and ten other Northeast states – an area designated by the USDA as “Federal Milk Market Order 1.”  Order 1 also is the relevant geographic market alleged by plaintiffs. 

Plaintiffs claim that defendants have conspired to fix and suppress the prices plaintiffs receive from cooperatives and processors for their raw Grade A milk, in violation of Sections 1 and 2 of the Sherman Act.  As damages, plaintiffs seek the amount they have been underpaid.  As injunctive relief, they seek to enjoin the alleged conduct and require divestiture of defendants’ processing plants.  

Judge Reiss evaluated plaintiffs’ motion under In re IPO, 471 F.3d 24 (2d Cir. 2006), which requires a “rigorous analysis” of the Rule 23 requirements and “enough evidence” that each of them has been met.  Where plaintiffs lost the motion was on Rule 23(a)(2)’s commonality requirement, specifically as to impact.  Commonality was satisfied as to “the formation, duration and implementation of the alleged conspiracy.”  However, as to adverse impact, Judge Reiss said there was “a clear failure of proof” with respect to plaintiffs’ expert report:  (1) adherence to opinions that plaintiffs had conceded were incorrect; (2) apparent use of incorrect prices in calculating damages; and (3) failure to consider the existence of either non-conspirator processing plants or class members who benefited or broke even from the alleged conduct. 

However, Judge Reiss also said that the expert analysis “may ultimately prove to be an acceptable means of analyzing causation and damages in this case,” though it is not “presently sufficient to perform this task because too many uncertainties remain . . . .”  Her other findings also indicate potential for success: Rule 23(a)(1) numerosity was satisfied, with 9,000 class members dispersed throughout several states.  Rule 23(a)(3) typicality was satisfied to the same extent as commonality, i.e., as to formation, duration and implementation but not adverse impact, for the same reasons as commonality.  And the 23(a)(4) adequacy of the named plaintiffs could be satisfied with subclasses represented by separate counsel, which would overcome the potential conflicts.  Given that prerequisite to certification, Judge Reiss declined to reach 23(a)(4)’s adequacy of class counsel.  She also declined to reach Rule 23(b)’s predominance requirement.

In light of the invitation to renew the class motion, defendants sought to extend their time to serve expert reports from December 16 until whenever plaintiffs serve their new report(s) (if they do).  Judge Reiss denied that motion, finding “no good cause to further delay the provision of expert reports in this ongoing litigation.”  No deadline has been set to renew the class motion.

Health insurance giant Aetna, Inc. has filed a complaint in a Michigan federal district court claiming that Blue Cross Blue Shield of Michigan has engaged in a scheme to force Aetna to pay more for hospital services as part of a campaign to limit or reduce Aetna’s presence in Michigan.  The complaint, filed on December 6, 2011, comes just over a year after the U.S. Department of Justice and the state of Michigan commenced a civil antitrust lawsuit against Blue Cross containing similar allegations.

Aetna claims that Blue Cross, the largest insurer in Michigan, has used most-favored nation clauses in deals it has with hospitals to force those hospitals to charge Aetna up to 39 percent more, and in other instances, to require Aetna to raise its rates until they are as high as those charged by Blue Cross.  According to the DOJ’s complaint, roughly half of Michigan’s general acute care hospitals have most-favored nation clauses in their contracts with Blue Cross. 

Blue Cross has denied doing anything wrong, and its Vice President of Corporate Communications, Andy Hetzel, called the complaint “sour grapes from a major national insurance company” trying to take advantage of the DOJ lawsuit.

The DOJ complaint was filed on October 18, 2010.  It has already survived Blue Cross’ motion to dismiss, though Blue Cross has appealed that decision to the Sixth Circuit Court of Appeals.  Trial has been scheduled for February 2013.

Right now, the smartphone patent wars are raging across the globe.

For example, Apple recently prevailed in a skirmish before the International Trade Commission that could theoretically stop the importation into the United States of all smartphones based on Google’s Android mobile operating system.  In Germany, Motorola Mobility, which Google is in the process of acquiring, won a victory against Apple for patent infringement that could lead to the iPhone and iPad being pulled from store shelves in that country.

Could patent pools, a 100-year-old legal device, provide a possible solution? Constantine Cannon recently published an article about the smartphone patent pools in Law360 and whether they would be a good way to foster innovation and protect intellectual property.  Click here to read the article.

The U.S. Department of Justice (the “DOJ”) and the European Commission have announced investigations of the e-book pricing arrangements of several international publishing companies.

The investigations focus on a 2010 change in the way e-books are sold.  Prior to Apple’s introduction of the iPad, e-books were sold though a wholesale method which allowed retailers to purchase books at discount prices and subsequently determine the price charged to consumers.  This model permitted Amazon to sell e-books at a discounted rate, helping to increase sales of its Kindle products.

It is alleged that after the release of the iPad as a competitor of the Kindle, Apple orchestrated an agreement among publishers to sell e-books through an agency model.  This agency model allowed publishers, not distributers, to set prices and impeded the ability of Amazon and other distributers to determine prices. 

The European Commission has initiated official proceedings to determine whether five publishers, aided by Apple, “engaged in anticompetitive practices affecting the sale e-books in the European Economic Area.”  The publishers are Hachette Livre (Lagardere, Publishing, France), Harper Collins (News Corp., U.S.A.), Simon & Schuster (CBS Corp. U.S.A.), Penguin (Pearson Group, U.K.), and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany).  The terms of the agency agreements are alleged to potentially violate Article 101 of the Treaty on the Functioning of the European Union, which prohibits cartels and restrictive business practices.  If these companies are found to have participated in agreements or practices that had the object or effect of restricting competition, they could be subject to liability.

The DOJ has confirmed the existence of its investigation related to e-book pricing practices.  Little additional information was provided on the investigation which has been reported, but unconfirmed, since last year.

State attorneys general in Texas and Connecticut, as well as a class action suit in federal court in the Northern District of California, are also addressing this issue.

Horizon Lines Inc., one of the largest ocean shipping companies in the United States, has entered into a $13.75 million settlement agreement with a group of shippers who had opted out of a class action against the company.

The shippers alleged that Horizon entered into a conspiracy with other carriers, including Sea Star Line, Crowley Maritime Corp. and Trailer Bridge Inc., to fix prices by increasing their rates to supracompetitive levels and by uniformly setting fuel surcharges for freight services between Puerto Rico and the U.S., which are largely controlled by the defendant carriers.

The case is In re: Puerto Rican Cabotage Antitrust Litigation, which was filed in 2008 in the United States District Court for the District of Puerto Rico.

Judge Daniel Dominguez dismissed the claims against Trailer Bridge, holding there was no evidence that it was involved in the price fixing conspiracy.  Horizon and the remaining carriers entered into a settlement with the class in 2009 for $52.25 million, which received final approval in September 2011. 

Several other shippers that had opted out of the class, including Home Depot and Wal-Mart, settled with Horizon earlier this year.

The settlement follows years of civil and criminal litigation.  In February, Horizon pled guilty to conspiring to fix prices and agreed to pay a $45 million fine which was lowered to $15 million to save the company from bankruptcy.  Sea Star agreed to pay a $14.2 million criminal fine in November.  Two former executives of Sea Star and three from Horizon also incurred fines and prison sentences.

Federal Judge James Ware of the Northern District of California has certified a class of iPod purchasers, allowing an antitrust class action to proceed against Apple Computer, Inc. (“Apple”). 

The plaintiffs in The Apple iPod iTunes Antitrust Litigation contend that Apple violated state and federal antitrust laws by monopolizing markets for digital music downloads and portable digital media players, excluding competing portable digital media devices, and charging supracompetitive prices for iPods. 

The amended consolidated class action complaint, filed on January 26, 2010, charges that Apple engaged in these alleged suppressions of competition by: (1) offering protected music files encoded with FairPlay, Apple’s proprietary software, thereby rendering music files sold by iTunes inoperable on competitors’ portable digital media devices; and (2) making Apple’s portable digital media devices (e.g., iPod) incapable of playing protected music content sold by competing digital music stores.

On May 19, 2011, the court granted summary judgment for Apple on plaintiffs’ claims relating to iTunes 4.7 and denied summary judgment for Apple on plaintiffs’ claims relating to iTunes 7.0. 

The court’s certification order dealt with the issue of whether to certify a putative class consisting of “[a]ll persons or entities in the United States (excluding [certain individuals and entities]) who purchased an iPod directly from Apple between September 12, 2006 and March 31, 2009.”  Specific models of iPods covered by the class definition are provided in the court’s November 22, 2011 Order and include iPod Standard, Classic, and Special Models; iPod shuffle Models; iPod touch Models; and iPod nano Models. 

Quoting the recent Supreme Court opinion in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), Judge Ware applied the applicable – albeit ambiguous – standard for deciding a motion for class certification: “A trial court’s ‘rigorous analysis’ under Rule 23 will frequently ‘entail some overlap with the merits of the plaintiff’s underlying claim.’”  Judge Ware held that the court’s earlier decisions that the plaintiffs met the certification requirements of Rules 23(a) and 23(b)(3) still stand.  Therefore, the balance of the certification order focused on two issues: (1) whether the plaintiffs provided sufficient evidence to establish that antitrust impact and damages may be shown through accepted class-wide methodologies; and (2) whether resellers—as opposed to end-user consumers—should be included in the class.  

First, with respect to the plaintiffs’ methodologies to prove impact and damages on a class-wide basis, the court considered whether the plaintiffs intended to use “generalized proof common to the class” and whether the common issues would “predominate.”  The court relied on its previous determination that the plaintiffs offered an adequate method of proof and, in particular, found the three methodologies offered by plaintiffs sufficient, at least for class certification purposes. 

Second, with respect to the inclusion of resellers, the court was persuaded by plaintiffs’ arguments that resellers should be included in the certified class.  The court relied on Meijer, Inc. v. Abbot Labs., 251 F.R.D. 431, 433 (N.D. Cal. 2008) and Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 489-92 (1968) for the proposition that a reseller’s ability to raise prices and effectively pass the overcharge to its customers is irrelevant as to whether the reseller suffered an injury.  Since the possibility that resellers may pass on any overcharge was found to be irrelevant to the issue of injury, the court included resellers in the class.

Delaware Judge J. Travis Laster has approved a settlement requiring Del Monte Corp. and Barclays Capital Inc. to pay $89.4 million to Del Monte shareholders to resolve claims relating to the March 2011 acquisition of Del Monte by funds affiliated with Kohlberg Kravis Roberts & Co. L.P., Vestar Capital Partners, and Centerview Partners.

Under the terms of the March 2011 sale of Del Monte, shareholders were entitled to receive $19 for each share of Del Monte common stock held.  The completion of the acquisition prompted investors to file suit in Delaware alleging that they were not being fairly compensated for their shares in the buyout and accusing Barclays of manipulating the acquisition of Del Monte to boost its revenues.  Investors also accused Barclays of not disclosing its conflict of interest in receiving $23.5 million to advise Del Monte on the deal while also receiving up to $24 million for financing the buyers.

Other investors also filed suit in federal court in California alleging that Kohlberg Kravis Roberts & Co. and Vestar Capital engaged in bid rigging and colluded on the offer amount for Del Monte Corp.  In this antitrust suit, shareholders alleged that the two private equity firms originally competed to buy Del Monte before joining forces to artificially drive down the sale price.  Following the filing of this suit, the Antitrust Division of the U.S. Department of Justice launched a probe into the antitrust claims.

The California claimants petitioned Judge Laster to allow an opt-out in order to pursue the federal antitrust claims in California.  Judge Laster refused to include an opt-out provision in certifying the shareholders as a class, noting that the antitrust claims were based on the same facts as those in the Delaware case and had been considered by attorneys for the shareholders in reaching the settlement.  The judge further noted that attorneys in the California case had yet to file an amended complaint following the dismissal of its antitrust lawsuit by a federal judge in August.

As part of the settlement, Del Monte agreed to pay $65.7 million in cash to be released from these and further shareholder claims and Barclays agreed to contribute $23.7 million.  Although the settlement bars shareholders from filing other lawsuits, the judge noted that the settlement will not affect the ongoing investigation by the Antitrust Division.

U.S. District Judge Patrick Schiltz has issued a stay in Butler v. NBA, the basketball players’ antitrust class action against the National Basketball Association and its 30 member teams, to give the parties time to work out a settlement.

The District of Minnesota federal judge issued the stay order after being informed by the players that the two sides have “tentatively agreed” to resolve their labor dispute.

On November 14, 2011, during the NBA lockout and after months of unsuccessful negotiations over the new collective bargaining agreement (“CBA”), the parties were unable to reach agreement and the players disavowed the National Basketball Players Association (“NBPA”) as their bargaining representative.  The players rebranded the NBPA as a trade association.

The next day, a number of basketball players filed two antitrust class action complaints against the NBA and its 30 member teams.  Initially, two separate lawsuits were filed in federal court – one in the Northern District of California and one in the District of Minnesota. 

The basketball players’ complaints alleged violations of Section 1 of the Sherman Act as well as breach of contract and tortious interference claims.  The players preemptively argued that in light of their disavowal of their bargaining representative, the defendants’ actions were not protected from antitrust scrutiny by any labor exemptions.

The cases were consolidated in the District of Minnesota after plaintiffs in the Northern District of California filed a notice of voluntary dismissal without prejudice.  The District of Minnesota, fresh from its decision in Brady v. NFL, in which football players brought a similar antitrust action against the NFL, was again positioned to resolve professional athletes’ antitrust claims against their league.

However, renewed negotiations proved fruitful.  The November 29, 2011, order staying litigation was followed by the players’ December 1, 2011, decision to authorize the NBPA to serve as their collective bargaining representative with the league.

The major negotiating issues are believed to be largely resolved.  The details of the new CBA are currently under negotiation.  NBA basketball is expected to return in a few weeks, on Christmas day.

A high-profile battle between two Pittsburgh-area health care networks that has already been fought in federal district and appellate courts is now headed to mediation.

In West Penn Allegheny Health System, Inc., v. UPMC, Judge Arthur Schwab of the U.S. District Court for the Western District of Pennsylvania ordered the parties to try an alternative form of dispute resolution after West Penn Allegheny Health System moved for leave to file a second amended complaint alleging an antitrust conspiracy against the larger University of Pittsburgh Medical Center (“UPMC”).    

In 2009, West Penn sued UPMC and Highmark, a dominant health insurance provider in western Pennsylvania, for damages stemming from an alleged agreement with Highmark to reimburse UPMC at a higher rate than West Penn.  West Penn argued that such an agreement put it at a competitive disadvantage against UPMC.  West Penn has struggled financially.  It recently agreed to be acquired by Highmark, which led to West Penn dropping Highmark from the lawsuit.

Judge Schwab had dismissed West Penn’s complaint in October 2009, finding that West Penn had not alleged any antitrust injury.  The U.S. Court of Appeals for the Third Circuit, however, reversed the dismissal and remanded for further proceedings.

Before deciding on West Penn’s motion for leave to file a second amended complaint, Judge Schwab ordered the parties to try mediation, which is to be concluded by the end of January 2012.  If the parties have not resolved their dispute by that time, Judge Schwab has ordered the parties may engage in expedited discovery on the motion to replead, focusing on the issues of prejudice, delay, and futility.