California Antitrust and Unfair Competition Law Update: Substantive Law

JurisdictionCalifornia,United States
AuthorBy Thomas A. Papageorge
Publication year2017
CitationVol. 26 No. 1

By Thomas A. Papageorge1


This outline provides a selection of litigation developments that may be of particular interest to the members of the Antitrust, Unfair Competition Law and Privacy Section presenting developments in cases brought under the Cartwright Act, the Unfair Practices Act, the Consumer Legal Remedies Act, the Unfair Competition Law, and False Advertising Law. The outline also highlights developments regarding covenants not to compete and privacy law.

A. First Appellate District Revives Class Action against Ford Canada In re Automobile Antitrust Cases I and II2

The First Appellate District breathed new life into a long-pending California class action against carmaker Ford Motor Co. of Canada and others, and in doing so provided a detailed insight into the contemporary application of the pleading standards governing Cartwright Act conspiracy cases after Aguilar v. Atlantic Richfield Co.3

In 2003, groups of California car purchasers brought later-consolidated class actions alleging that Ford Motor Co. (Ford Motor), Ford Motor Co. of Canada (Ford Canada), and various other car manufacturers, distributors, and trade associations violated the Cartwright Act and the Unfair Competition Law by conspiring to prevent the export of Canadian cars into California. In July of 2016, at the end of a decade-plus litigation process that eliminated many of the original carmaker defendants, the First Appellate District affirmed summary judgment as to defendant Ford Motor Co., but reversed the Superior Court's grant of summary judgment as to Ford Canada.

The First Appellate District, per Judge Reardon, first resolved key evidence questions, and then held that under the conspiracy pleading standards of Aguilar, the evidence of Ford Motor's alleged coordination with competitors and others was not sufficient to allow a jury to conclude that it was "more likely than not" that it was part of an unlawful agreement. However, as to Ford Canada, the appellate court found that plaintiffs had introduced sufficient evidence "that tends to exclude . . . the possibility that the [defendants] acted independently rather than collusively," necessitating remand for further proceedings as to that defendant.4

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Factual background. At issue was an alleged industrywide reaction by carmakers and others to the problem of "cross-border sales" of new cars. During 2001 to 2003, arbitragers purchased new cars in Canada at favorable prices (given changing currency exchange rates) and then brought those cars into the U.S., in violation of carmaker anti-export policies, for resale at prices lower than U.S. dealers could charge. The plaintiffs alleged that the major carmakers and various distributors and trade associations conspired to strengthen and enforce their anti-export policies to halt this arbitrage process, resulting in unlawful higher prices for U.S. car buyers.

Over the lengthy course of the litigation, most of the defendant car manufacturers, including GM and Chrysler affiliates and a number of international carmakers, were dismissed out of the case, went bankrupt, or settled. Ford Motor and its Canadian affiliate were the principal remaining defendants. The Superior Court ultimately certified the class but granted the summary judgment motions of both Ford Motor and Ford Canada.

Evidence admissibility. As a key threshold issue, the First District decided the admissibility of several crucial portions of the plaintiffs' evidence. Most important was the statement of a Toyota Canada executive, Pierre Millette, who testified that at a major trade group meeting "everyone supported the concept of trying to keep the vehicles in Canada" and that there was "some consensus" on the anti-export plan among "everyone at the meeting."

The court concluded that Millette's testimony about the "consensus" was not subject to exclusion as hearsay since the testimony was his "general impressions and conclusions" rather than the reporting of third-party statements.5 And testimony from his "personal knowledge and observations" was not inadmissible expert opinion evidence.6

Sufficient evidence to establish conspiracy. The First Appellate District next analyzed the plaintiffs' evidence in order to rule on the Superior Court's grant of summary judgment in favor of both Ford Motor and Ford Canada. The appellate court expressly undertook to determine if the evidence presented met the California Supreme Court's standard for adequate pleading of agreement as enunciated in Aguilar v. Atlantic Richfield Co. There the Supreme Court required that a trial court ruling on Cartwright Act conspiracy pleadings must determine that there is sufficient evidence to permit a reasonable jury to conclude that "it is more likely than not" that a defendant entered into an illegal agreement with another alleged co-conspirator.7

In contemporary antitrust pleading analysis after Mitsubishi, Twombly, and Aguilar, this determination turns on the sufficiency of the so-called "plus factors" that tend to eliminate the possibility of independent decision-making by the alleged conspirators.

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Ford Motor. As to Ford Motor Co., the First District affirmed the Superior Court's grant of summary judgment, finding that the plaintiffs' "plus factor" evidence was insufficient to adequately show Cartwright Act conspiracy.

First, the appellate court determined that, under the intracorporate conspiracy standard of Copperweld Corp. v. Independence Tube Corp.,8 the communications between Ford Motor and its wholly-owned Canadian subsidiary Ford Canada were not probative evidence of illegal conspiracy since the two related firms were not separate entities capable of antitrust conspiracy. Next, the court ruled that Ford Motor's motive to stop cross-border sales could not demonstrate conspiracy by itself without more. Finally, the court ruled insufficient the plaintiffs' proof of internal messages within the corporation and their proof of Ford Motor's efforts to gather information about other competitors' actions.

Based on this finding of insufficiently probative "plus" factors, the court ruled that no reasonable jury could properly conclude that Ford Motor had entered into an illegal agreement.9

Ford Canada. As to Ford Canada, the Court of Appeal again applied the Aguilar standard but reached a different result, holding that the plaintiffs' evidence here was sufficient to permit a jury to find Ford Canada had engaged in an unlawful agreement. At the outset, the appellate court rejected Ford Canada's argument that Ford's long history of anti-export policies prior to the alleged conspiracy disproved the existence of the alleged unlawful agreement, concluding that even collusive agreement to perpetuate existing industry policies could form the basis for a Cartwright Act violation.10

The First District then considered the evidence supporting the theory of an alleged unlawful industry agreement involving Ford Canada. The court evaluated the plaintiffs' additional "plus" factors, including the motivations of the alleged conspiracy group, the communications among the defendants aimed at reducing the cross-border sales, the efforts of Ford Canada and others to limit exports, and the information shared among the distributors.

Unlike the proof regarding Ford Motor, this evidence was sufficient for a reasonable jury to conclude that Ford Canada was party to an anticompetitive conspiracy. Taken together, the Millette testimony, the meeting evidence, and the other contextual factors constituted "evidence that tends to exclude the possibility that the alleged co-conspirators acted independently rather than collusively. Thus, [the evidence] is sufficient to support reversal of the trial court's summary judgment decision in favor of Ford Canada."11

Conclusion. This careful differentiation between these related fact-patterns is of special interest to all California practitioners dealing with Cartwright Act conspiracy cases. Here, as to one defendant, the First District found insufficient the plaintiffs' evidence of intracorporate discussions of plans, invitations to meet with competitors, and certain types of information exchanged among competitors—factors that have been used successfully in prior federal and state collusion cases. But the same court found credible witness testimony, meeting details, and certain related facts sufficient to meet the plaintiffs' burden as to another defendant.

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A review of the types of "plus factors" that did—and did not—suffice to support an inference of agreement here will be important to those litigating Cartwright Act collusion cases and especially to those designing discovery plans to search for evidence of the requisite factors.

Note on federal court analysis. The First District also provided an important reminder for California practitioners in the post-CAFA era when many state law class action claims, including antitrust and consumer claims, are pursued in federal court. In the First District's review of the issue of Cartwright Act conspiracy here, the court's opinion specifically noted that the federal district court's previous analysis of the viability of state law conspiracy claims "was not binding on [the California court] in any way."12

B. Second District Affirms Summary Judgment for DirecTV Basic Your Best Buy, Inc. v. DirecTV, Inc.13

In an unpublished decision providing an insight into state group boycott and distributional restraints analysis, the Second Appellate District affirmed a trial court's grant of summary judgment to DirecTV in an antitrust lawsuit brought by plaintiff Basic Your Best Buy (Basic), one of DirecTV's previous authorized retailers.

Basic, terminated as a reseller by DirecTV, claimed it was then forced to sell its valuable sales leads at below-market prices because of DirecTV's collusion with remaining retailers who would have bid more for the leads...

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