Chapter II. Multistate Investigations and Litigation

• Pages: 45-78

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CHAPTER II

MULTISTATE INVESTIGATIONS AND

LITIGATION

State antitrust investigations and the resulting litigation can take

several forms. States sometimes proceed individually to address matters

of unique concern to a particular state. In addition, state attorneys

general frequently conduct investigations and litigation jointly with other

states, a federal agency, private plaintiffs’ counsel, or any combination of

these. This multidimensional antitrust enforcement environment presents

major opportunities and major challenges for business counsel ors and

litigators.

Actions taken by states individually under state and federal law

represent a significant, but underreported, area of state antitrust

enforcement. These actions range from garden-variety criminal actions1

to the full range of civil antitrust actions.2 When conducting

1. See, e.g., Consent Judgment, Florida v. Saul & Co., No. 02-5768 (Fla.

Cir. Ct. May 23, 2002) (prosecution of rigging of tax certification bids);

Consent Judgment, New York v. Candle Bus. Sys., No. 402805102 (N.Y.

Sup. Ct. Aug. 29, 2002) (bribes and fictitious bids prosecuted as per se

illegal bid rigging); Consent Judgment, State v. Mason, No. F951464

(Wis. Cir. Ct. July 18, 1995) (criminal bid-rigging matter).

2. See, e.g., New York v. Julius Nasso Concrete Corp., 202 F.3d 82 (2d Cir.

2000) (construction bid rigging); New York v. Feldman, 210 F. Supp. 2d

294 (S.D.N.Y. 2002) (challenge to bid rigging at auctions of postal

stamps); New York ex rel. Spitzer v. Saint Fran cis Hosp., 94 F. S upp. 2d

399 (S.D.N.Y. 2000) (price-fixing challenge to two Poughkeepsie

hospitals’ joint rate negotiations with third-party payors); New York v.

Serv. Corp. Int’l, No. 99 Civ. 11391 (S.D.N.Y. Nov. 19, 1999)

(settlement of claims of monopolization of the market for Jewish funeral

services in the New York metropolitan area); In re W.N.Y. Coupon

Litig., No. 97 CV-0707, 1998 U.S. Dist. LEXIS 17982 (W.D.N.Y. 1998)

(settlement of civil claim regarding alleged agreement among product

manufacturers and grocery chain to reduce price competition by

eliminating discount coupons); Consent Decree, California v. Quality

Food Ctrs., No. 98 CV 01101 (C.D. Cal. Feb. 1, 1998) (California

reviewed merger and conditioned approval on divestiture of 19 grocery

stores); W isconsin v. Marshfield Clinic, No. Civ. A. 97C 0418 C, 1997

WL 599398 (W.D. Wis. 1997) (allowing merger between two

multispecialt y clinics, subject to prohibitions on further acqui sitions);

Wisconsin v. Kenosha Hosp. & Med. Ctr., No. 96-C-1459, 1996 WL

State Antitrust Enforcement Handbook

46

investigations regarding these matters, the states rely substantially on

their own investigative resources and typically use criminal or civil

process to obtain information relevant to the investigation. In particular,

many states have the authority under state antitrust statutes to issue and

enforce subpoenas similar to the civil investigative demands (CIDs)

issued by the federal authorities.3 Moreover, many state attorneys

general are authorized to use civil investigatory proceedings to develop

evidence on probable antitrust violations.4 Challenges to state subpoenas

are, of course, governed by state law. Generally speaking, challenges to

precomplaint discovery are difficult to win if the discovery is related to a

valid governmental enforcement concern.5 Confidentiality concerns are

784584 (E.D. Wis. 1996) (consent decree permitting merger, conditioned

on injunctive relief); Virginia ex rel. Gilmore v. Physicians Group, Civ.

A. No. 95-0015-D, 1995 WL 792064 (W.D. Va. 1995) (settlement of

health care boycott claims); Pennsylvania v. Playmobil USA, No. 1:CV-

95-0287, 1995 WL 787518 (M.D. Pa. 1995) (settlement regarding toy

manufacturer’s resale price maintenance); New Yor k v. May Dep’t

Stores, 881 F. Supp. 860 (W.D.N.Y. 1994) (granting preliminary

injunction against proposed merger of department stores); Butterworth v.

Nat’l League of Prof’l Baseball Clubs, 644 So. 2d 1021 (Fla. 1994)

(challenge to baseball’s antitrust exemption); State v. Pafford Oil Co.,

No. CV940473 (Fla. Cir. Ct. Leon County 1994) (settlement of gasoline

price-fixing case for damages); In re Blue & Gold & Red & White Fleets

Merger, No. 95-12-071 (Cal. Pub. Util. Comm’n approved June 11, 1997)

(resolving challenge to merger of San Francisco Bay tour boats).

3. See, e.g., CAL. GOV’T CODE §§ 11180-11181; HAW. REV. STAT. § 480-

18; KY. REV. STAT. ANN. § 367.240; MD. CODE ANN., COM. LAW § 11-

205; N.Y. GEN. BUS. LAW § 343; OHIO REV. CODE ANN. § 1331.16. A

more co mprehensive listi ng of thes e provisions, including the actu al

statutory language, appears in ABA SECTION OF ANTITRUST LAW, STATE

ANTITRUST PRACTICE AND STATUTES (3d ed. 2004) [hereinafter ABA

STATE ANTITRUST TREATISE]. A fourth edition of this treatise is

forthcoming. The laws of all 50 states, the District of Columbia, Puerto

Rico, and the Virgin Islands are discussed in separate chapters in the

treatise. Government enforcement is addressed in § 15 of each of those

chapters.

4. See, e.g., WIS. STAT. ANN. § 133.11. See generally ABA STATE

ANTITRUST TREATISE, supra note 3.

5. See, e.g., Younger v. Jensen, 605 P.2d 813 (Cal. 1980); Anheuser-Busch,

Inc. v. Abrams, 520 N.E.2d 535 (N.Y. 1988); Pharm. Soc’y v. Abrams,

522 N.Y.S.2d 298 (App. Div. 1987). But cf. MLB v. Butterworth, 181 F.

Supp. 2d 1316 (N.D. Fla. 2001) (enjoining state antitrust investigation of

major league baseball).

Investigations and Litigation

47

often addressed during the precomplaint investigatory process, as

Chapter VI of this Handbook discusses.

Perhaps most daunting to many practitioners, however, is the

prospect of multiple state investigations of the same conduct. Multistate

investigations take many forms. They are usually coordinated by the

relevant states through the Multistate Antitrust Task Force of the

National Association of Attorneys General (NAAG). A variety of state

laws potentially come into play on such central issues as jurisdiction, the

scope of precomplaint discovery, and confidentiality of information

obtained by states in an investigation. The trend toward multistate

investigations began in the mid-1980s, when the states sensed a vacuum

in federal enforcement of the antitrust laws.6 Since that time, multistate

activity has been an unsettling trend for some.7 Yet multistate

enforcement now has a track record that extends over almost two

decades and dozens of cases. This chapter explores that track record.

A. Coordinated State Enforcement

State attorney s general often coordinate the investigation and

prosecution of antitrust matters with other states, the Federal Trade

Commission (FTC), the U.S. Department of Justice (DOJ), and class

counsel. This chapter addresses how states interact as a group, with

federal enforcers, and with class counsel.

1. Multistate Coordination

a. The Multistate Antitrust Task Force

NAAG formed the Multistate Antitrust Task Force in 1983 “[t]o

improve, enhance, and coordinate state antitrust enforcement.”8 The

Task Force functions as a staff-level subcommittee of the NAAG

Antitrust Committee, the attorney general-level committee that addresses

antitrust policy issues. The Antitrust Committee, consisting of two

attorneys general, oversees and works with the Task Force.

6. See Lloyd Constantine, Antitru st Federalism, 29 WASHBURN L.J. 163,

164-67 (1990).

7. See, e.g., Mark Crane, The Future Direction of Antitrust, 56 ANTITRUST

L.J. 3, 9 (1987).

8. Michael Brockmeyer, Report on the NAAG Multi-State Task Force, 58

ANTITRUST L.J. 215, 216 (1989).