The Continuing Violations Doctrine: Limitation in Name Only, or a Resuscitation of the Clayton Act's Statute of Limitations?
| Publication year | 2015 |
| Author | By Stephen McIntyre and Kenneth R. O'Rourke |
By Stephen McIntyre and Kenneth R. O'Rourke1
Congress first gave private plaintiffs a right to sue for federal antitrust violations in 1914, when it passed the Clayton Antitrust Act.2 Congress did not initially enact a statute of limitations. For the next several decades, courts looked to state statutes to determine the applicable limitations period in each case.3 As a result, "a plaintiff injured in several jurisdictions [was] permitted to select as his forum the State with the most favorable statute," and defendants "remain[ed] in constant jeopardy until the longest period of limitations ha[d] transpired."4 Finally, in 1955, Congress took action to remedy the problem by mandating a "uniform statute of limitations applicable to all private treble damage actions."5 It enacted Section 4B of the Clayton Act, which requires antitrust plaintiffs to bring suit within four years from the time their cause of action accrues.6
Sixty years later, defendants once again face an unsettling lack of uniformity in federal antitrust actions. Though the Clayton Act imposes a four-year limitation on treble damage actions, several courts of appeals have created an exception that all but swallows the rule. These courts hold that the "continuing violations" doctrine permits a plaintiff to sue at any point after a defendant's allegedly unlawful conduct has ceased, so long as inflated prices—the prototypical effect of an antitrust violation—persist. This interpretation of the doctrine turns Section 4B on its head, permitting plaintiffs to keep the limitations period running—and treble damages accumulating—for years after the underlying collusion has ended. Instead of a "uniform statute of limitations" with a definitive ending point, defendants now face a limitless statute of limitations depending on the jurisdiction in which a federal antitrust claim is litigated.
The "continuing violations" doctrine, properly understood, applies where defendants have committed an "overt act" during the four-year limitations period. Neither passively receiving serial payments, nor pricing products pursuant to a prior agreement, constitutes an overt act. This interpretation comports with a century of Supreme Court
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jurisprudence, the purposes of the Clayton Act's statute of limitations, and commonsense. In contrast, decisions that apply the continuing violations doctrine to the receipt of serial payments or to continued pricing do so based on a mere five words of dicta. We think it illogical to upend decades of prior decisions on the basis of so little.
In Zenith Radio Corporation v. Hazeltine Research, Inc.,7 the Supreme Court laid down the standard for when an antitrust claim accrues under the Clayton Act's statute of limitations. "Generally," the Court held, "a cause of action accrues and the statute begins to run when a defendant commits an act that injures a plaintiff's business."8 Therefore, "if a plaintiff feels the adverse impact of an antitrust conspiracy on a particular date, a cause of action immediately accrues to him," and "he must sue within the requisite number of years" from that date.9
At the same time, the Supreme Court noted exceptions to the general accrual rule. One of these has become known as the "continuing violations" or "continuing conspiracy" doctrine. As the Court put it in Zenith Radio, "[i]n the context of a continuing conspiracy to violate the antitrust laws, . . . each time a plaintiff is injured by an act of the defendants[,] a cause of action accrues to him to recover the damages caused by that act and that, as to those damages, the statute of limitations runs from the commission of the act."10
The Court was not announcing a new doctrine, but rather was restating one that had been in place for decades. The continuing violations doctrine has long been applied in a variety of contexts, including antitrust, as a matter of federal common law.11 As early as 1910 (prior to passage of the Clayton Act), in an opinion by Justice Oliver Wendell Holmes, the Supreme Court held that an antitrust conspiracy may "have a continuance in time."12 Specifically, an antitrust conspiracy is "continuing" where "the plot contemplates bringing to pass a continuous result that will not continue without the continuous co-operation of the conspirators to keep it up, and there is such continuous co-operation."13 Reversing the circuit court's dismissal of the case, the Court held that the government's indictment was timely.14
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The following general rule has emerged from these and other decisions: there can be no "continuing violation" of the antitrust laws—meaning that the statute of limitations cannot be extended past the usual four years—unless the defendants are shown to have committed an "overt act" during the limitations period.15 In the words of Justice Holmes, there must be "continuous co-operation . . . [by] the conspirators" to keep the antitrust conspiracy alive.16 Without this "continuity of action,"17 the violation is not a continuing one, and normal statute of limitations accrual principles apply.
As this history suggests, the continuing violations doctrine focuses "'on the timing of the causes of injury, i.e., the defendant's overt acts, as opposed to the effects of the overt acts.'"18 Defendants' conduct may produce an effect that endures over a period of time, but unless the plaintiff can point to overt action during the limitations period, the continuing violations exception will not apply. Therefore, to sustain an antitrust cause of action, the plaintiff must base his or her claim for damages "on some injurious act occurring during the limitations period, not merely the abatable but unabated inertial consequences of some pre-limitations action."19
What constitutes an "overt act"? The classic definition, provided by the Ninth Circuit, consists of two elements: "1) It must be a new and independent act that is not merely a reaffirmation of a previous act; and 2) it must inflict new and accumulating injury on the plaintiff."20 With the notable exception of the Third Circuit, which holds that a reaffirmation can keep the limitations period running,21 this formulation of the "overt act" rule has been adopted by courts across the country, including five courts of appeals.22
Additionally, since the continuing violations doctrine is an equitable rule,23 it ordinarily does not apply where the plaintiff had actual or constructive knowledge of the defendants' conduct—even if the conduct might otherwise be considered a continuing
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violation.24 Any other interpretation of the doctrine would "permit plaintiffs who know of the defendant's pattern of activity simply to wait, 'sleeping on their rights,' as the pattern continues and treble damages accumulate."25
Indeed, the continuing violations doctrine is often described as "narrow,"26 and even "disfavored."27 In construing the Clayton Act's statute of limitations, the Supreme Court has held that any rule that could potentially "extend[] the limitations period to many decades" would violate Congress' intent in passing the statute and "thwart[] the basic objective of repose underlying the very notion of a limitations period."28
A recurrent but unresolved issue in antitrust cases brought by direct or indirect purchasers is whether making sales at allegedly supracompetitive prices during the limitations period gives rise to a "continuing violation." In the absence of clear direction from the Supreme Court, the lower courts have starkly split on this important question.
Numerous federal courts have held that the continued receipt of fixed or inflated payments does not constitute a continuing violation of the antitrust laws.29 As the Sixth Circuit explained in a 2014 decision, "profits, sales, and other benefits accrued as a the result of an initial wrongful act are not treated as 'independent acts.' Rather, they are uniformly viewed as 'ripples' caused by the initial injury."30 Though the defendants may have benefitted from earlier conduct during the limitations period, that consequence "does not render the [pre-limitations] act a continuing violation of the antitrust laws."31
The First and Second Circuits have also held (albeit in non-antitrust contexts) that receiving unlawful payments pursuant to a pre-limitations conspiracy is not an "overt act," and therefore does not give rise to a continuing conspiracy. In United States v.
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Doherty, for example, then-Judge Stephen Breyer wrote for the First Circuit that "where receiving the payoff merely consists of a lengthy, indefinite series of ordinary, typically noncriminal, unilateral actions, such as receiving [allegedly inflated] salary payments . . . we do not see how one can reasonably say that the conspiracy continues."32 For its part, the Second Circuit has applied the Doherty rule to hold that receiving "serial payments" as a result of a "multi-year scheme to fix below-market rates on interest" does not constitute an overt act.33
In contrast, the Fourth, Eighth, Ninth, and Eleventh Circuits have held that continued sales at supracompetitive prices do qualify as a continuing violation.34Remarkably, each of these courts has reached this conclusion without engaging in any extended analysis of the doctrine. In fact, in the most recent of these decisions, the Eighth Circuit premised its holding on a hypothetical fear that failing to apply the continuing violations doctrine would permit "two parties [to] agree to divide markets for the purpose of raising prices, wait four years to raise prices, then reap the profits of their illegal agreement with impunity."35 However, this situation is already covered by the "speculative damages"...
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