Legal enforcement and limitations

• Pages: 9-49

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CHAPTER II

LEGAL ENFORCEMENT AND LIMITATIONS

A. Statutory Framework

1. Civil Enforcement of Federal Antitrust Law by State Attorneys

General

States, cities, and other political subdivisions are considered

“persons” for purposes of the Clayton Act.1 Thus, a state attorney

general, on behalf of the state and other public entities or on behalf of

citizens who are directly harmed by antitrust violations, can sue for

damages under Section 4 of the Clayton Act and for injunctive relief

under Section 16 of the Clayton Act.2 States also have the authority

under Title III of the Hart-Scott-Rodino Antitrust Improvements Act of

1976 (HSR Act)3 to bring suit as parens patriae. This authority is

discussed in more detail in Part B.1 of this Chapter.

a. Treble Damages Lawsuits

States often sue under Section 4 of the Clayton Act to recover

damages they have incurred in their proprietary capacity as direct

purchasers of goods or services. In most of these lawsuits, the states

allege various forms of price-fixing and seek the overcharged amounts as

their damages.4 When the direct purchaser is not a state itself, but a state

1. See, e.g., Hawaii v. Standard Oil Co., 405 U.S. 251, 260–61 (1972);

Georgia v. Pa. R.R. Co., 324 U.S. 439, 447 (1945). A state acting as a

sovereign is generally not a “person” capable of violating the Sherman

Act. See Parker v. Brown, 317 U.S. 341, 350–51 (1943).

2. See 15 U.S.C. §§15, 26.

3. 15 U.S.C. §§15c–15h.

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

2000) (affirming summary judgment for plaintiff in bid-rigging case);

Complaint at 42–43, Florida, v. Hitachi-LG Data Storage, Inc., No. 3:13-

cv-01877 (N.D. Cal. April 24, 2013); Complaint, Washington v. AU

Optronics Corp., No. 10-2-29164-4 (King Cty. Super. Ct. Aug. 11, 2010) ;

California v. Infineon T echs. AG, 531 F. Supp. 2d 1124, 1130 (N.D. Cal.

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agency or institution, state law addresses whether the purchaser is

sufficiently related to the state to allow the attorney general to pursue

damages in the name of the state alone.5 If a state is otherwise a proper

plaintiff, its attorney general, acting pursuant to Rule 23 of the Federal

Rules of Civil Procedure, can pursue a class action on behalf of other

plaintiffs who have a right of action under Section 4 of the Clayton Act.6

The class can include political subdivisions of the state.7 There are

instances when federal law allows a state to bring a class action, but state

2007); In re Compact Disc Minimum Advertised Price Antitrust Litig.,

216 F.R.D. 197, 201, 207 (D. Me. 2003) (approving settlement with retail

stores in vertical case); cf. In re Petro leum Prods. Antitrust Litig., MDL

No. 150 AWT, 1992 WL 2207531992, at *2–4 (C.D. Cal. July 16, 1992)

(denying plaintiffs’ motion to allow state to recover damages as indir ect

purchaser of allegedly price-fixed gasoline).

5. See, e.g., In re Fine Paper Antitrust Litig., 82 F.R.D. 143, 156 (E.D. Pa.

1979), aff’d, 685 F.2d 810 (3d Cir. 1982); see also Alas ka v. Chevron

Chem. Co., 669 F.2d 1299, 1302 (9th Cir. 1982) (noting that Alaska law

authorizes attorney general to sue when state instrumentality is proper

party); In re N ASDAQ Market-Makers Antitrust Litig., 169 F.R.D. 493,

506–08 (S.D.N.Y. 1996) (noting that New York can sue on behalf of its

retirement systems, but state law does not allow attorney general to act as

real party in interest).

6. See, e.g., In re Cardizem, 218 F.R.D. 508, 520–22 (E.D. Mich. 2003)

(approving settlement class that included all state attorneys general); In re

Lorazepam & Clorazepate Antitrust Litig., 205 F.R.D. 369, 387 n.25

(D.D.C. 2002) (approving settlement class of consumers represented by

state attorneys general from jurisdictions that lack statutory or judge-

made parens patriae authority); Davis v. S. Bell Tel. & Tel. Co., 149

F.R.D. 666, 671 (S.D. Fla. 1993) (allowing attorney general to intervene

as class representative, but not to sue as parens patriae).

7. See, e.g., Alabama v. Blue Bird Body Co., 573 F.2d 309, 329 (5th Cir.

1978) (affirming certification of “state class” that included state and local

educational authorities); Illinois v. Bristol-Myers Co., 470 F.2d 1276,

1277 (D.C. Cir. 1972) (noting that Illinois Attorney General can sue on

behalf of state subdivisions and private purchasers) ; New York v. Cedar

Park Concrete Corp., 665 F. Supp. 238, 241–42 (S.D.N.Y. 1987)

(explaining that a state can sue on behalf of state subdivisions, but

subdivisions must be identified and must authorize action); cf. In re

Anthracite Coal Antitrust Litig., 78 F.R.D. 709, 715 (M.D. Pa. 1978)

(holding that proposed class of 141 public entities in Pennsylvania did not

meet numerosity requirement).

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law limits the state’s power to do so.8 Some courts have held that a state

attorney general can recover damages incurred by cities, counties, and

other political subdivisions without joining them as parties and without

seeking class certification.9 Most lawsuits by states as direct purchasers

allege bid rigging or other horizontal restraints. Some of these lawsuits

invoke federal antitrust law alone;10 others plead parall el claims under

federal and state antitrust statutes.11

Prior to the Supreme Court’s decision in Leegin Creative Leather

Prods. v. PSKS,12 states often challenged resale price maintenance

schemes under federal law, and they continue to challenge other vertical

8. See Fine Paper, 82 F.R.D. at 156 (noting that a uthority of attorney

general is a question of state law); In re Sugar Indus. Antitrust Litig.,

MDL No. 201, 1976 WL 1374, at *16 (N.D. Cal. May 21, 1976) (noting

that state law did not authorize plaintiff states to rep resent class that

included other states and their political subdivisions).

9. See, e.g., Florida ex rel. Shevin v. Exxon Corp., 526 F.2d 266, 268, 274

(5th Cir. 1976) (holding that Fl orida Attorney Gener al may sue on behalf

of government entities without their specific authorization); Michigan ex

rel. Kelley v. C.R. Equip. Sales, 898 F. Supp. 509, 514 (W.D. Mich.

1995) (deciding that Michiga n Attorney General had st anding to sue on

behalf of over 500 school districts because every Michigan taxpayer had

an interest in case). But see, e.g., Fine Paper, 82 F.R.D. at 156 (holding

that state-law authority to act for political subdivi sion must yield to need

for uniform procedure in federal class actions); New Jersey v. Gen.

Motors Corp., MDL No. 65, 1974 WL 958, at *1 (N.D. Ill. Mar. 7, 1974)

(same).

10. See, e.g., In re Petroleum Prods. Antitrust Liti g., 906 F.2d 432 (9th Cir .

1990) (resurrecting four parallel lawsuits by states under § 1 of the

Sherman Act, each of which alleged price fixing and output reduction).

11. See, e.g., In re Cardizem, 218 F.R.D. at 514 (approving $80 million

settlement agreement between twenty-seven litigating states and drug

manufacturers); New York v. Feldman, 210 F. Supp. 2d294, 298

(S.D.N.Y. 2002) (denying defendants’ motion to dismiss complaint that

alleged bid rigging at stamp auctions).

12. 551 U.S. 877 (2007).