On December 9, Chief Judge Christina Reiss of the District of Vermont denied the plaintiff dairy farmers’ motion for class certification in Allen v. Dairy Farmers of America, Inc., 2011 WL 6148678 (D. Vt. Dec. 9, 2011).  However, Judge Reiss invited plaintiffs to renew their motion after addressing issues with their expert report. 

Plaintiffs are New York and Vermont dairy farmers.  Defendants are Dairy Farmers of America, Inc. (DFA) and Dairy Marketing Services LLC (DMS).  (Dean Foods was originally a defendant but it settled in May for $30 million.)  DFA is the largest dairy cooperative in the United States, and it not only produces, but also processes, markets and distributes raw Grade A milk.  DMS is a milk marketing agency allegedly created, owned and controlled by DFA and certain other cooperatives.  Some of the plaintiffs are members of DFA.  All of the plaintiffs have, at some point since 2002, sold their milk to processors through DMS. 

Plaintiffs sued DFA and DMS in October 2009 on behalf of all similarly situated dairy farmers in New York, Vermont and ten other Northeast states – an area designated by the USDA as “Federal Milk Market Order 1.”  Order 1 also is the relevant geographic market alleged by plaintiffs. 

Plaintiffs claim that defendants have conspired to fix and suppress the prices plaintiffs receive from cooperatives and processors for their raw Grade A milk, in violation of Sections 1 and 2 of the Sherman Act.  As damages, plaintiffs seek the amount they have been underpaid.  As injunctive relief, they seek to enjoin the alleged conduct and require divestiture of defendants’ processing plants.  

Judge Reiss evaluated plaintiffs’ motion under In re IPO, 471 F.3d 24 (2d Cir. 2006), which requires a “rigorous analysis” of the Rule 23 requirements and “enough evidence” that each of them has been met.  Where plaintiffs lost the motion was on Rule 23(a)(2)’s commonality requirement, specifically as to impact.  Commonality was satisfied as to “the formation, duration and implementation of the alleged conspiracy.”  However, as to adverse impact, Judge Reiss said there was “a clear failure of proof” with respect to plaintiffs’ expert report:  (1) adherence to opinions that plaintiffs had conceded were incorrect; (2) apparent use of incorrect prices in calculating damages; and (3) failure to consider the existence of either non-conspirator processing plants or class members who benefited or broke even from the alleged conduct. 

However, Judge Reiss also said that the expert analysis “may ultimately prove to be an acceptable means of analyzing causation and damages in this case,” though it is not “presently sufficient to perform this task because too many uncertainties remain . . . .”  Her other findings also indicate potential for success: Rule 23(a)(1) numerosity was satisfied, with 9,000 class members dispersed throughout several states.  Rule 23(a)(3) typicality was satisfied to the same extent as commonality, i.e., as to formation, duration and implementation but not adverse impact, for the same reasons as commonality.  And the 23(a)(4) adequacy of the named plaintiffs could be satisfied with subclasses represented by separate counsel, which would overcome the potential conflicts.  Given that prerequisite to certification, Judge Reiss declined to reach 23(a)(4)’s adequacy of class counsel.  She also declined to reach Rule 23(b)’s predominance requirement.

In light of the invitation to renew the class motion, defendants sought to extend their time to serve expert reports from December 16 until whenever plaintiffs serve their new report(s) (if they do).  Judge Reiss denied that motion, finding “no good cause to further delay the provision of expert reports in this ongoing litigation.”  No deadline has been set to renew the class motion.

Health insurance giant Aetna, Inc. has filed a complaint in a Michigan federal district court claiming that Blue Cross Blue Shield of Michigan has engaged in a scheme to force Aetna to pay more for hospital services as part of a campaign to limit or reduce Aetna’s presence in Michigan.  The complaint, filed on December 6, 2011, comes just over a year after the U.S. Department of Justice and the state of Michigan commenced a civil antitrust lawsuit against Blue Cross containing similar allegations.

Aetna claims that Blue Cross, the largest insurer in Michigan, has used most-favored nation clauses in deals it has with hospitals to force those hospitals to charge Aetna up to 39 percent more, and in other instances, to require Aetna to raise its rates until they are as high as those charged by Blue Cross.  According to the DOJ’s complaint, roughly half of Michigan’s general acute care hospitals have most-favored nation clauses in their contracts with Blue Cross. 

Blue Cross has denied doing anything wrong, and its Vice President of Corporate Communications, Andy Hetzel, called the complaint “sour grapes from a major national insurance company” trying to take advantage of the DOJ lawsuit.

The DOJ complaint was filed on October 18, 2010.  It has already survived Blue Cross’ motion to dismiss, though Blue Cross has appealed that decision to the Sixth Circuit Court of Appeals.  Trial has been scheduled for February 2013.

Right now, the smartphone patent wars are raging across the globe.

For example, Apple recently prevailed in a skirmish before the International Trade Commission that could theoretically stop the importation into the United States of all smartphones based on Google’s Android mobile operating system.  In Germany, Motorola Mobility, which Google is in the process of acquiring, won a victory against Apple for patent infringement that could lead to the iPhone and iPad being pulled from store shelves in that country.

Could patent pools, a 100-year-old legal device, provide a possible solution? Constantine Cannon recently published an article about the smartphone patent pools in Law360 and whether they would be a good way to foster innovation and protect intellectual property.  Click here to read the article.

The U.S. Department of Justice (the “DOJ”) and the European Commission have announced investigations of the e-book pricing arrangements of several international publishing companies.

The investigations focus on a 2010 change in the way e-books are sold.  Prior to Apple’s introduction of the iPad, e-books were sold though a wholesale method which allowed retailers to purchase books at discount prices and subsequently determine the price charged to consumers.  This model permitted Amazon to sell e-books at a discounted rate, helping to increase sales of its Kindle products.

It is alleged that after the release of the iPad as a competitor of the Kindle, Apple orchestrated an agreement among publishers to sell e-books through an agency model.  This agency model allowed publishers, not distributers, to set prices and impeded the ability of Amazon and other distributers to determine prices. 

The European Commission has initiated official proceedings to determine whether five publishers, aided by Apple, “engaged in anticompetitive practices affecting the sale e-books in the European Economic Area.”  The publishers are Hachette Livre (Lagardere, Publishing, France), Harper Collins (News Corp., U.S.A.), Simon & Schuster (CBS Corp. U.S.A.), Penguin (Pearson Group, U.K.), and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany).  The terms of the agency agreements are alleged to potentially violate Article 101 of the Treaty on the Functioning of the European Union, which prohibits cartels and restrictive business practices.  If these companies are found to have participated in agreements or practices that had the object or effect of restricting competition, they could be subject to liability.

The DOJ has confirmed the existence of its investigation related to e-book pricing practices.  Little additional information was provided on the investigation which has been reported, but unconfirmed, since last year.

State attorneys general in Texas and Connecticut, as well as a class action suit in federal court in the Northern District of California, are also addressing this issue.

Horizon Lines Inc., one of the largest ocean shipping companies in the United States, has entered into a $13.75 million settlement agreement with a group of shippers who had opted out of a class action against the company.

The shippers alleged that Horizon entered into a conspiracy with other carriers, including Sea Star Line, Crowley Maritime Corp. and Trailer Bridge Inc., to fix prices by increasing their rates to supracompetitive levels and by uniformly setting fuel surcharges for freight services between Puerto Rico and the U.S., which are largely controlled by the defendant carriers.

The case is In re: Puerto Rican Cabotage Antitrust Litigation, which was filed in 2008 in the United States District Court for the District of Puerto Rico.

Judge Daniel Dominguez dismissed the claims against Trailer Bridge, holding there was no evidence that it was involved in the price fixing conspiracy.  Horizon and the remaining carriers entered into a settlement with the class in 2009 for $52.25 million, which received final approval in September 2011. 

Several other shippers that had opted out of the class, including Home Depot and Wal-Mart, settled with Horizon earlier this year.

The settlement follows years of civil and criminal litigation.  In February, Horizon pled guilty to conspiring to fix prices and agreed to pay a $45 million fine which was lowered to $15 million to save the company from bankruptcy.  Sea Star agreed to pay a $14.2 million criminal fine in November.  Two former executives of Sea Star and three from Horizon also incurred fines and prison sentences.