Opinion

Alison Frankel

The next great benchmark manipulation case?

Alison Frankel
Jul 16, 2013 19:27 UTC

Last spring, when U.S. District Judge Naomi Reice Buchwald of Manhattan decimated the consolidated private litigation over banks’ manipulation of the London Interbank Offered Rate, the only claims that remained upright in the rubble of her ruling were those brought under the Commodity Exchange Act, which makes tampering with the price of exchange-traded commodities or futures illegal. Buchwald’s opinion cited a plethora of Manhattan federal court decisions that permitted victims of futures price manipulation to move forward with their suits, including three consolidated class actions involving rigged prices for oil futures. I suspect we’re going to be hearing a lot more about those cases over the next several months. Even as the class action bar tries to persuade the 2nd Circuit Court of Appeals to reinstate the Libor antitrust claims that Buchwald dismissed, plaintiffs lawyers are gearing up for the next big litigation: claims that BP, Royal Dutch Shell, Statoil and other unidentified conspirators violated commodity and antitrust laws by reporting false prices for North Sea Brent crude oil to the price-setting agency Platts.

Lowey Dannenberg Cohen & Hart filed the first class action, in federal court in Manhattan, on May 22, just days after investigators from the European Commission raided oil company offices in a probe of alleged collusion to distort prices for crude oil and biofuels during the half-hour window in which Platts sets prices. Five more class actions have since hit the docket in Manhattan and one in federal court in Louisiana, all naming BP, Statoil and Shell as defendants. (EC investigators also collected information from Platts, a division of McGraw Hill, but it has not been targeted in the private suits.) Last Thursday, Lowey Dannenberg petitioned the Judicial Panel on Multidistrict Litigation to consolidate the cases before U.S. District Judge Andrew Carter, who’s been assigned to oversee all of the New York filings.

The complaints are light on specific details of the alleged collusion, but with Britain’s Serious Fraud Office and the U.S. Federal Trade Commission reportedly investigating crude oil price-setting along with the European Commission, class action lawyers should eventually be able to piggyback on regulatory findings. Plaintiffs lawyers seem to have filed now because they’re worried about the statute of limitations for claims of alleged price-fixing that go back to 2002. Several of the complaints, in fact, assert that the statute should be tolled because the defendants conspired to cover up their conspiracy.

Many of the firms that have already submitted complaints are veterans of commodity manipulation litigation. Lowey Dannenberg, for instance, was lead counsel in a long-running consolidated class action over natural gas futures. Kirby McInerney and Lovell Stewart Halebian Jacobson represent the Commodity Act claimants in the ongoing Libor case. Labaton Sucharow was on the steering committee in a consolidated class action over manipulation of silver futures, which U.S. District Judge Robert Patterson dismissed in March. (The Labaton lawyers involved in the silver futures case have since migrated to Robins, Kaplan, Miller & Ciresi. They’ve also filed a Brent crude complaint.) Robbins Geller Rudman & Dowd, which is better known in the securities arena than in CEA and antitrust litigation, is another early entrant in the Brent crude litigation.

Some big names in the antitrust class action bar aren’t yet in the Brent case, such as Cohen Milstein Seller & Toll; Hausfeld; Susman Godfrey; Lieff Cabraser Heimann & Bernstein; and Hagens Berman. Those firms are less experienced in Commodity Act litigation than the plaintiffs shops that have already filed Brent complaints, but there’s still plenty of time for them to join the scrum before firms are selected to lead the litigation. In antitrust and CEA cases, unlike securities class actions, judges don’t have specified guidelines for selecting lead counsel. Typically, after the multidistrict litigation panel consolidates suits before a single judge, plaintiffs firms try to negotiate a leadership structure to suggest to the court. But that’s months away in the Brent crude litigation. The defendants haven’t even submitted papers indicating whether they support consolidation and what court they’d like the cases to be transferred to. (I’d be shocked if they opposed the MDL, though.)

SCOTUS pay-for-delay ruling: New scrutiny for nonpharma patent deals?

Alison Frankel
Jun 17, 2013 21:08 UTC

In the U.S. Supreme Court’s ruling Monday on pay-for-delay settlements in the pharmaceutical industry – in which a brand-name drugmaker pays generic rivals to drop challenges to its patent, thus assuring its monopoly – five justices agreed with the Federal Trade Commission that the key question isn’t whether pay-for-delay deals exceed the scope of the brand-maker’s patent. Courts cannot simply rubber-stamp such settlements as presumptively legal, the majority said in FTC v. Actavis. But nor can they assume that pay-for-delay settlements are illegal by their very nature. Instead, according to the majority, trial courts must conduct a “rule of reason” analysis to determine whether reverse-payment settlements violate antitrust law.

Those inquiries, the majority concedes, are probably going to be “time consuming, complex and expensive” – a much less convenient alternative to the simple scope-of-the-patent test endorsed by the 11th Circuit Court of Appeals in the underlying case and by several other federal circuits in previous pay-for-delay suits by the FTC and private plaintiffs. But the scope-of-the-patent approach “throws the baby out with the bath water,” the majority said. A patent holder has monopoly rights only when its patent is valid, the very inquiry that is aborted through pay-for-delay settlements.

The justices concluded that trial judges need not conduct a full-blown inquiry into a patent’s validity to evaluate the anticompetitive impact of a pay-for-delay deal, but can consider (among other factors) the size of the reverse payment as a proxy for the patent’s weakness. “An unexplained large reverse payment itself would normally suggest that the patentee has serious doubts about the patent’s survival,” the majority said, in an opinion written by Justice Stephen Breyer. “And that fact, in turn, suggests that the payment’s objective is to maintain supracompetitive prices to be shared among the patentee and the challenger rather than face what might have been a competitive market – the very anticompetitive consequence that underlies the claim of antitrust unlawfulness.”

Why Apple is settling EC’s e-books antitrust case – but not DOJ’s

Alison Frankel
Sep 20, 2012 22:09 UTC

On Wednesday, Reuters confirmed what it first reported last month: Apple and four book publishers have offered to settle a European Commission investigation of price-fixing in the market for e-books. That’s particularly notable because Apple and two of those publishers – Macmillan and Viking – have refused to settle with the U.S. Justice Department’s antitrust division, which reached an agreement last April with three other publishers accused of conspiring with Apple to change the pricing model for e-books. Neither the DOJ settlement nor the proposed EC deal involve a financial penalty, so why would Apple, Viking and Macmillan agree to settle with antitrust regulators from the European Union but not their U.S. counterparts?

Two reasons: EC procedure and U.S. liability.

First, a caveat. I reached out to Macmillan’s lawyers at Sidley Austin, Penguin’s counsel at Akin, Gump, Strauss, Hauer & Feld and Apple’s lawyers at Gibson, Dunn & Crutcher, but none would comment, nor did Apple respond to a request for comment. In other words, I’m offering informed speculation rather than from-the-horse’s-mouth reporting.

That said, consider the way antitrust cases proceed at the EC, which is the trade section of the European Union. After regulators complete their investigation and conclude that defendants have engaged in anti-competitive behavior, they have the power to levy a fine before there’s any court ruling on liability. Those fines, moreover, can be huge. In 2008, the EC levied a $1.3 billion penalty against Microsoft for failing to comply with a previous EC directive to permit competitors to run programs on Windows. The following year European regulators set a new record with a $1.4 billion fine for the accused chip monopolist Intel.

Barclays hit with Libor securities class action

Alison Frankel
Jul 13, 2012 05:02 UTC

There’s a new entry in the category of no-brainers: A holder of Barclays American Depository Receipts has brought the first of what is sure to be a string of Libor-related securities fraud class actions. The 47-page complaint, filed by Wolf Haldenstein Adler Freeman & Herz in federal court in Manhattan, asserts that Barclays and its former CEO, Bob Diamond, and outgoing chairman, Marcus Agius, lied to shareholders when they failed to disclose the bank’s manipulation of reports to the authorities who calculate the daily London interbank offered rate (or Libor), a benchmark for short-term interest rates.

Barclays told shareholders that it was a model corporate citizen even though since at least 2007 it was “participating in an illegal scheme to manipulate rates in a way that would allow defendants and other bankers to exploit the market,” the complaint asserted. On the day Barclays’ settlements with U.S. and British financial regulators were announced, the complaint said, the price of its ADRs fell 12 percent; the next day the ADRs tumbled an additional 5 percent. (If you’re wondering why the complaint was filed by ADR holders, it’s because Morrison v. National Australia Bank bars claims in the United States by common stockholders in the British-listed bank.)

Barclays obviously has far bigger problems than a securities class action, what with Libor hearings in Parliament, talk of criminal actions, and billions of dollars in potential exposure in a Libor antitrust class action that’s already under way in federal court in Manhattan, plus the recently filed antitrust class action based on Barclays’ admitted manipulation of the European interbank offered rate.

Apple and Microsoft v. Google: patent war shifts to antitrust

Alison Frankel
Apr 4, 2012 19:27 UTC

In a really smart piece last month, my Reuters pal Dan Levine wrote that Steve Jobs’ promise to kill Google’s Android operating system has not been fulfilled. Instead, wrote Levine and co-author Poornima Gupta, Apple’s patent war against Android users Motorola, Samsung, and HTC had become “a costly global war of attrition.” Both sides have won skirmishes, but no battle has been decisive. The Reuters story quoted Judge Richard Posner of the 7th Circuit Court of Appeals, who is overseeing a Motorola case in U.S. District Court in Chicago. “You’re not going to shut down the smartphone,” Posner told Apple’s lawyer. “[And] they’re not going to shut down the iPhone.”

The exact same thing could be said of Microsoft’s patent war with Google and its Android acolytes. When the smartphone patent infringement cases launched in 2009 and 2010, maybe it was feasible that one or two of the big three could kill off another of them. But since then, with Apple and Microsoft teaming up to buy Nortel patents and Google countering with its purchase of Motorola Mobility, this war has become a standoff that can only be resolved with cross-licensing deals.

That’s why antitrust arguments — as opposed to patent infringement claims — have been creeping into the spotlight over the last few months. On Tuesday, the European Union announced that it has opened antitrust investigations of Motorola’s demands for licensing fees on standard-setting patents, following complaints by both Microsoft and Apple. (Google’s Android partners, of course, have lobbed similar allegations of patent extortion at Microsoft.) The goal of such claims is to drive down the cost of licensing one another’s patents. In other words, if you can’t beat ‘em, pay as little as possible to join ‘em.

Nortel IP sale will help Google win OK for Motorola bid

Alison Frankel
Aug 18, 2011 22:43 UTC

Remember the Cold War military doctrine of Mutually Assured Destruction? The idea was that if the United States and the Soviet Union both knew the enemy had enough weapons to wipe the entire country off the map, neither would actually use those weapons. Mutually Assured Destruction got the entire world through the age of fallout shelters and Barry Goldwater. So the doctrine should be powerful enough to get Google, Apple and Microsoft past Justice Department antitrust regulators.

It’s a given that Google’s $12.5 billion Motorola bid is going to be scrutinized for its antitrust implications. Google’s law firm on the deal, Cleary Gottlieb Steen & Hamilton, has conceded that point; the firm announced that David Gelfand – who previously escorted Google unscathed through antitrust reviews of its DoubleClick and AdMob acquisitions — will be antitrust counsel on the Motorola bid. The $4.5 billion acquisition of Nortel’s intellectual property by a consortium led by Microsoft and Apple is already under review by the DOJ’s antitrust division. I’m betting that each patent plays will have an easier time passing regulatory muster because of the other.

Before I get to why, there’s the issue of which agency will be investigating the Google deal. Both the Federal Trade Commission and the Justice Department have the power to conduct premerger antitrust reviews. They’ve both looked at Google acquisitions in the past: the FTC green-lighted the 2007 DoubleClick and 2010 AdMob deals; the DOJ rejected Google’s proposed advertising partnership with Yahoo in 2008 and approved, with some modifications, its deal with ITA Software in 2011. The FTC is also reportedly conducting a widespread antitrust investigation of Google’s search engine business. But I have it on good authority that the Justice Department will be handling the Motorola review, partly because DOJ has historically overseen competition in the telephone industry and is already reviewing the AT&T merger with T-Mobile and the Nortel IP sale.

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