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.

The United States District Court for the Central District of California has denied Playtex’s motion for a preliminary injunction to enjoin rival diaper-pail producer, Munchkin, from advertising claims of a superior diaper pail.  

Munchkin is seeking a declaratory judgment in Munchkin, Inc. v. Playtex Products that Munchkin (1) is being truthful in claiming that its Diaper Pail is “The NEW #1 in Odor Control.  Proven Better at Odor Control than Diaper Genie II & Diaper Genie II Elite[, Playtex products,] in a laboratory test”; (2) has not engaged in unfair competition; and (3) has not engaged in deceptive trade practices.  Munchkin also alleges claims of false advertising and unfair competition against Playtex.  Playtex is asserting similar counterclaims.

In its motion for a preliminary injunction, Playtex argued that Munchkin’s superiority claim – and the associated fine print – is literally false as its tests (1) do not support the claim of superiority; and (2) are not reliable.  The court disagreed, finding that Playtex failed to carry the necessary burden of demonstrating literal falsity, thereby failing to establish the likelihood of success on the merits required for a preliminary injunction.

Judge Lawrence Piersol of the U.S. District Court for South Dakota has denied a motion by TCF National Bank to preliminarily enjoin the enforcement of anticipated regulations regarding debit card interchange fees.  TCF has appealed the denial of the preliminary injunction to the Eighth Circuit Court of Appeals and has asked for expedited briefing and argument.

The judge took under advisement a motion by the U.S. Department of Justice to dismiss the litigation – with the court anticipating further briefing on the motion after the Federal Reserve issues final rules pursuant to the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The Federal Reserve is expected to issue those final rules before July 21, 2011.

TCF National Bank, a unit of Minneapolis-based TCF Financial, filed a complaint last October claiming that the Durbin Amendment was unconstitutional.  TCF’s complaint seeks a declaratory judgment that no set of regulations the Board could adopt could pass constitutional muster.

TCF moved for a preliminary injunction, and was supported by amicus briefs filed by financial institutions.  The DOJ, representing the Federal Reserve and the Comptroller of the Currency, opposed the motion for a preliminary injunction and moved to dismiss TCF’s complaint on the merits.  The Government’s position was supported by amicus briefs filed by merchant and consumer groups.

Constantine Cannon has filed an amicus brief on behalf of the Retail Litigation Center.

Class action plaintiffs are breathing a little easier with last week’s decision by the U.S. Court of Appeals for the Eleventh Circuit to reverse its July decision that would have been the death knell for many class actions.

But the court still ruled against the individual plaintiff in the case before it.

In July, an Eleventh Circuit panel issued a surprising decision holding that CAFA – the Class Action Fairness Act of 2005 – required that in an original federal court action, at least one named plaintiff must meet the $75,000 damages threshold or face dismissal for lack of subject matter jurisdiction.  Cappuccitti v. DirecTV, Inc., 611 F.3d 1252 (11th Cir. July 19, 2010).

The decision was widely criticized.  One district court stayed proceedings in a CAFA matter to allow the appellate court time for rehearing, and the MDL court in the DirecTV matter declined to follow it.  See In re DirecTV Early Cancellation Litig., — F. Supp. 2d –, 2010 WL 3633079 (C.D. Cal. Sept. 7, 2010).

And on Friday, October 15, 2010, the panel admitted its error and reversed itself.  Cappuccitti v. DirecTV, Inc.,– F.3d –, 2010 WL 4027719, No. 09-14107 (11th Cir. Oct. 15, 2010).

The case involves a suit by a subscriber against DirecTV over a $420 cancellation fee – or rather, over the cancellation fees of an entire class of subscribers in the state of Georgia allegedly imposed in violation of state law.  The district court dismissed part of the complaint for failure to state a claim, but denied DirecTV’s motion to compel arbitration – finding the clause unconscionable because it denied a class action remedy – and allowed a claim for declaratory and injunctive relief to go forward. 

On interlocutory appeal of the arbitration ruling, the Eleventh Circuit sua sponte (apparently without briefing or hearing) dismissed the entire action, including the declaratory relief, because the plaintiff’s individual claim failed to meet the jurisdictional threshold of $75,000, even though the class exceeded the $5 million threshold required by CAFA.  Section 1332(D)(6) provides that “[i]n any class action, the claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs,” but makes no mention of a $75,000 amount in controversy requirement.

Many pending class actions could not meet this individual damage requirement – and indeed, it does not appear in the statute.  In fact, Congress intended to expand federal jurisdiction over class actions in CAFA, which removed the $75,000 amount in controversy and complete diversity jurisdictional requirements of Section 1332.  The Eleventh Circuit conflated the requirements of mass actions, which under the statute are required to meet the $75,000 requirement, with class actions under CAFA.  In mass actions, Section 1332(d)(11)(B)(i), combined with Section 1332(a), requires at least one plaintiff with more than $75,000 in controversy – there are no corresponding sections for class actions.

One thing was consistent in Friday’s opinion – the panel still ruled for DirecTV.  The court granted DirecTV’s petition to compel arbitration, overturning the lower court’s finding that the arbitration clause was unconscionable under Georgia law.