Posts Tagged ‘antitrust’

U.S. v. Stolt-Nielsen: Unenforceable Contracts

Next week the Justice Department will file its response to a motion to dismiss made by Stolt-Nielsen Transportation Group and its two co-defendants in a criminal antitrust case now pending in Philadelphia. Four years ago, Stolt-Nielsen received amnesty from the DOJ in exchange for cooperating with the Antitrust Division’s price-fixing investigation of the parcel tanker industry. The amnesty was revoked less than three months later, however, after the Division accused Stolt-Nielsen of misrepresenting the timeline of the alleged conspiracy.

The Division had never revoked an amnesty granted under its 1993 Corporate Leniency Policy, and the unprecedented action against Stolt-Nielsen prompted the company to file a lawsuit to enjoin prosecutors from indicting the company. In January 2005, a judge granted the injunction, holding that Stolt-Nielsen did not breach the amnesty agreement. Specifically, the court said the terms of the amnesty agreement—which was drafted by the DOJ—made no reference to any specific timeline.

Read On…

Airport Parking, Antitrust & Eminent Domain

For the past three years, Stan Cramer has been fighting to save his parking garage near the Harrisburg International Airport from eminent domain seizure by the airport’s municipal operating authority. The airport wants to eliminate competition with its own parking lots, and when Cramer refused to sell voluntarily, the authority used its powers under Pennsylvania law to take the property by force. Recently, a Pennsylvania judge allowed Cramer’s lawsuit to stop the seizure to proceed to trial.

In a related case, Pennsylvania AG Tom Corbett filed a federal lawsuit last year to stop the airport authority’s seizure on the grounds that it violates federal antitrust law. It’s a strange setup: The Commonwealth of Pennsylvania suing one of its own subdivisions in federal court over the use of power granted by state law. In March, U.S. District Judge Christopher Conner dismissed the AG’s complaint, citing the airport authority’s immunity from federal antitrust lawsuit as a state actor. Conner said the airport’s anti-competitive motives were irrelevant; its actions were clearly authorized by the Pennsylvania legislature.

Corbett appealed the judge’s dismissal to the Third Circuit Court of Appeals. Briefs were filed in October, and a decision on the appeal is expected next year. Meanwhile, new management has taken over at the airport, and they are trying to negotiate a settlement with Cramer.

Read On…

Antitrust regulators tout destruction of capital

Last week, the Justice Department’s Antitrust Division issued a triumphant press release touting that 2006 recorded “the second highest level of criminal fines” in Division history. The Division is actually measuring the government’s 2006 fiscal year: From October 2005 through September 2006, the Division obtained criminal fines totaling $472,445,600, a 40% increase over the previous fiscal year. The Division also said that criminal prosecutions of individuals yielded a combined 5,383 days of jail time; and during the first three months of the current fiscal year, an additional 9,135 days of jail time have been imposed.

Thomas Barnett, the head of the Antitrust Division, said more fines for “cartels” and prison sentences for “price fixing” executives created substantial economic benefits:

“Sound enforcement of the antitrust laws ensures that illegal conduct is stopped, procompetitive transactions can proceed, and businesses are able to engage in vigorous competition resulting in lower prices, better quality and more choices for consumers.”

There’s no empirical evidence that any of this is true. Indeed, the DOJ is not legally required to demonstrate the economic effects of antitrust policy. Since price fixing is treated as a “per se” antitrust violation by the courts, it’s legally unnecessary to address such matters. Nevertheless, the Division insists that criminal enforcement improves consumer welfare. That doesn’t make sense if you think about it.

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More Guestblogging

Greetings, Overlawyered readers. I’m your other post-Christmas guestblogger, Skip Oliva. I’m not a lawyer, but I do write about legal subjects. For the past four years, I’ve run the Voluntary Trade Council, a public policy group that focuses on antitrust regulation. I maintain VTC’s weblog as well as write for the Mises Economics Blog. During my stint here I’ll be discussing some of the more interesting antitrust cases from the past year.

Update: cosmetics class action settlement

We’re tardy in noticing this, but it’s too colorful to omit: in the settlement of what we called the “no-blush, high-gloss, invisible-foundation antitrust class action” against cosmetics makers over pricing (see Jan. 14 and Mar. 14, 2005, and earlier links) the fee phase continued to generate showy highlights:

A bitter legal brawl over attorneys’ fees has erupted in a national cosmetics pricing class action lawsuit, with feuding camps of plaintiffs’ lawyers slinging allegations of flagrant billing abuses and extortion.

Among the alleged abuses were bills of $195 an hour for work by paralegals who were paid just $30, claims that attorneys and paralegals worked 24-hour or even 72-hour days, and charges of $90 an hour or more for cleaning desks and filing….

Read On…

Dr. Lawrence M. Poliner v. Presbyterian Hospital update

The ludicrous $366 million award on a conspiracy theory (Aug. 30, 2004; Sep. 2, 2004) was, as we predicted reduced by remittitur to a still ludicrous $22.5 million. (Plaintiff’s attorney’s press release, Sep. 21). Kevin M.D.’s commenters note that the trial bar simultaneously complains that doctors don’t do enough to police themselves and then hold doctors liable for policing other doctors.

Note that the doctors whom the verdict was issued against weren’t even the ones on the peer review committee that suspended Dr. Poliner’s privileges for a few months; they were just the ones who started the peer-review process.

Coffee shop owner sues Starbucks

On antitrust grounds:

In her lawsuit, [Penny Stafford of Belvi Coffee & Tea Exchange] says that Starbucks employees would make frequent runs past the deli with free samples. She said that Starbucks also had non-competitive leases that blocked her from the most desirable locations in Bellevue and Seattle.

The suit claims that Starbucks, fueled by “insatiable and unchecked ambition,” wanted to squash all competition.

John Stott, who owns Johnika’s Deli, said that he advised Stafford not to open a business so near a Starbucks.

Representing Stafford in the suit is Overlawyered favorite Hagens Berman Sobol & Shapiro. (“Coffee shop owner sues Starbucks”, UPI/MonstersAndCritics, Sept. 27; Melissa Allison, “Starbucks sued over ‘unchecked ambition'”, Seattle Times, Sept. 26; Keith Sharfman, Truth on the Market, Sept. 25; Lattman, Sept. 27).

The High Cost of Petitioning

A radical pro-affirmative action group, By Any Means Necessary (BAMN), joined by Detroit’s mayor, Kwame Kilpatrick, have filed a Voting Rights Act lawsuit against the sponsors of the Michigan Civil Rights Initiative (MCRI) in federal court. MCRI is a ballot initiative would ban racial and gender set-asides and preferences in state contracting, employment, and public education. It is modeled on an earlier measure passed by California voters and upheld by the federal courts. BAMN argues that black voters who signed the petition to put MCRI on the ballot did so only because they did not realize it would restrict affirmative action, because they were confused by MCRI’s title, text, or misleading statements by MCRI signature gatherers. That, it claims, amounts to fraud.

BAMN’s lawsuit is factually groundless. Its fraud claims were considered and rejected by the Michigan Court of Appeals, which ordered MCRI placed on the ballot. MCRI’s text, which was presented to all petition signers, expressly prohibits racial preferences, eliminating any confusion about its effect on affirmative action. Moreover, the Voting Rights Act generally applies to the acts of state election officials, not private parties, and cases such as Delgado v. Smith, 861 F.2d 1489 (11th Cir. 1988), hold that the Voting Rights Act does not apply to initiative petitions.

BAMN’s lawsuit appears to be part of a pattern of intimidation. One BAMN official is accused of threatening MCRI executive director Jennifer Gratz with a knife.

BAMN’s suit is another example of how civil rights lawsuits are increasingly misused as political weapons or tools of censorship. For example, in Affordable Housing Development Corporation v. Fresno, 433 F.3d 1182 (9th Cir. 2006), a developer used the Fair Housing Act to sue citizens who publicly opposed a housing development, arguing that their petitioning of city officials resulted in the city not funding the project. That, the developer argued, had an unlawful “disparate impact” on minority groups destined to live in the development. The trial court initially accepted this argument, holding that the Fair Housing Act overrode the citizens’ right of free speech. Years later, the Ninth Circuit Court of Appeals rejected the lawsuit, holding that the citizens’ opposition to the project was protected by the First Amendment and the Noerr-Pennington doctrine. (The Noerr-Pennington doctrine protects citizens from antitrust and civil rights claims based on their speech and petitioning activity). It ordered the developer to pay the citizens’ crippling legal bills, which had risen to hundreds of thousands of dollars.

BAMN’s lawsuit would raise First Amendment problems even if it were true that voters misunderstood MCRI’s purpose, and even if MCRI’s sponsors knew of any erroneous statements about MCRI by signature gatherers. The courts have generally held that the First Amendment bars liability for speech in ballot initiatives and other political campaigns, even if the speech is knowingly false.

Update: Constantine’s antitrust fees

Lloyd Constantine of Constantine Cannon and his co-counsel asked a judge for more than $600 million in fees and expenses for their work representing plaintiffs in the Visa/MasterCard antitrust litigation (see “$550 million? We’re worth it”, Aug. 22, 2003). He hired two big-name lawprofs, Columbia’s Jack Coffee and Harvard’s Arthur Miller, to draw up expert reports blessing the fees. However, the judge described the request as “absurd” and “fundamentally unreasonable”, instead allowing $220 million. Cue the violins! (Paul Braverman, “A $220 Million Payday”, The American Lawyer, Jan. 20). Incidentally, “before he started the firm, [Constantine] spent eight years at Legal Services Corp. and 11 at the New York state attorney general’s office, where he was in charge of antitrust enforcement”.

Antitrust enforcers get wiretap/bug powers

Quietly slipped into the reauthorization of the Patriot Act: first-time-ever authority for the Justice Department to engage in wiretapping and bugging of private premises for purposes of going after antitrust violators. The Patriot Act reauthorization was advertised as an emergency measure needed to combat international terrorism; very little was said about any supposed emergency need to enact miscellaneous prosecutorial wish lists at the expense of civil liberties. (Pamela A. MacLean, “Bugging the boardroom”, National Law Journal, Mar. 1; Skip Oliva, Voluntary Trade Council, Mar. 10 and Mar. 11; Reason “Hit and Run”, Mar. 10; Open Market (new Competitive Enterprise Institute blog), Mar. 10).