Fourth Circuit

The Fourth Circuit did not issue any decisions in 2020 on antitrust issues. Notably, however, the court heard several appeals in antitrust cases in 2020, a few of which have already generated opinions in 2021 that will be addressed in next year’s edition.[1]

District court decisions

D&M Farms v Birdsong Corp (In re Peanut Farmers Antitrust Litigation)

In granting the plaintiffs’ motion for class certification, the court considered the standard for evaluating whether common questions of law or fact predominate over individualized issues in a price-fixing case. The plaintiffs, who are farmers who sell peanuts to the defendants to be processed and sold to food companies or other manufacturers, alleged that the defendants conspired to lower the price of peanuts in violation of section 1 of the Sherman Act.[2] Specifically, the plaintiffs alleged that the defendants used their collective market power to facilitate a price-fixing conspiracy to depress the price at which they purchased runner peanuts.[3] The plaintiffs’ proposed class consists of nearly 12,000 peanut farmers who sold raw, harvested runner peanuts to the defendants.[4]

Both parties agreed that the putative class satisfied the numerosity, commonality and typicality, and adequacy elements required for certification under Rule 23 of the Federal Rules of Civil Procedure.[5] The bulk of the court’s analysis therefore focused upon whether common questions of law or fact ‘predominate[d] over any questions affecting only individual members.’ [6] The court concluded that the predominance requirement turned on whether the plaintiffs demonstrated that each element of their claim (antitrust violation, antitrust injury, and damages) could be proven through evidence common to the class.[7] To satisfy their burden, plaintiffs relied on email communications between the defendants about pricing and an expert witness-generated analysis about the market’s structure.[8] The plaintiffs’ expert opined that six factors of the peanut market supported the claim of collusion: (1) high concentration; (2) barriers to entry; (3) the commodity-like nature of runner peanuts; (4) large volumes of repeat customers; (5) low elasticity of supply; and (6) industry trade associations.[9] The defendants did not challenge the allegations of email communications regarding pricing, and the court accepted them as true for the purposes of the class certification analysis.[10] The court reasoned that the plaintiffs’ expert’s analysis was ‘trustworthy’ in suggesting potential collusion and held that the expert’s findings were ‘supported by the mere fact that defendants occupy 80-90% of the market share.’ [11]

In support of the plaintiffs’ attempt to prove that the injury was common to all class members, the plaintiffs’ expert deployed a multi-variable regression model aimed at showing that lower peanut prices during the period of the alleged conspiracy harmed 99.8 percent of the putative class.[12] The defendants responded that the court should reject the regression model because it used market-wide ‘averages’ that exaggerated the commonality of the alleged injuries.[13] Nevertheless, the court held that the strength of the plaintiffs’ regression model was an issue to be decided by the finder of fact. [14] In support, the court relied on courts of appeals decisions outside the Fourth Circuit that have accepted the use of ‘averages’ in assessing antitrust injury.[15] Accordingly, the court held that the plaintiffs had met their burden to show that common issues predominated and granted the motion for class certification.

Jien v Perdue Farms, Inc

The plaintiffs, who allegedly work at poultry processing plants, brought claims under section 1 of the Sherman Act on behalf of a putative class of poultry processing plant workers against six defendants, which are a mixture of chicken and turkey producers, along with two companies that allegedly provide benchmarking services to most of the defendants.[16] The plaintiffs alleged two claims under section 1: (1) a ‘per se’ claim that the defendants fixed poultry workers’ hourly wages and compensation; and (2) a ‘rule of reason’ claim that the defendants unlawfully exchanged information, including wage and salary data.[17] The defendants moved to dismiss, arguing, among other things, that the per se claim was deficient because the plaintiffs failed to plead an agreement to fix wages through indirect or direct evidence, and that the rule of reason claim should be dismissed because the plaintiffs’ definition of the relevant market was implausible.[18]

The court sua sponte dismissed without prejudice some defendants because the plaintiffs failed to specify which of the defendants’ affiliates engaged in the purported conspiracy.[19] For the remaining defendants, which did not have affiliates named in the complaint, the court held that the plaintiffs had adequately pleaded a per se claim against all but one of the producers and one of the benchmarking services.[20] Although the court held that the plaintiffs had failed to plead their per se claim through circumstantial evidence because they had not alleged that the defendants paid similar wages, the court credited as direct evidence the plaintiffs’ allegations that some defendants had attended meetings to discuss employee wages that another poultry processor allegedly deemed ‘inappropriate.’ [21]

In seeking to dismiss the rule of reason claim, the defendants argued that the plaintiffs’ proposed relevant market of poultry processing jobs in the United States was simultaneously both too narrow and too broad.[22] Specifically, the defendants argued that it was implausible that the market for the plaintiffs’ labor was limited to only poultry processing plants, given other jobs available offering similar pay for similar skills.[23] The defendants also argued that it was implausible that the geographic market included all of the United States because poultry processing plant workers would not consider moving across the country for another poultry processing job.[24]

The court declined to adopt these arguments for the purposes of the motion to dismiss. With respect to the relevant product market, although the court reasoned that the complaint ‘offers only a handful of details regarding how [poultry processing] jobs can be treated together as one single product market separate from other facially similar industries,’ it held that the plaintiffs’ allegations that the processing plant employees ‘developed industry-specific skills . . . that would make transitioning to other jobs an imperfect substitute’ was sufficient to survive a motion to dismiss.[25] The court also held that the plaintiffs had plausibly alleged that the geographic market extended to the continental United States by reasoning that an overbroad labor market was not grounds for dismissal because an overbroad market only underestimates the defendants’ market power.[26] The court also relied upon the plaintiffs’ allegations that the defendants viewed the labor market as national by ‘set[ting] compensation at largely the same levels across the country regardless of region.’ [27] On both market definition issues, the court emphasized that ‘only a bare minimum level of specificity is required at this early stage of the proceedings,’ and the ‘[d]efendants may in fact succeed on their . . . argument[s] at a later stage of the case, depending on what facts are brought to light in discovery.’ [28]

Williams v Estates LLC

The plaintiffs brought a claim alleging that the defendants engaged in a scheme to rig bids on home foreclosure auctions in violation of section 1 of the Sherman Act.[29] The plaintiffs alleged that the defendant, Estates LLC, sold membership interests in a database listing North Carolina foreclosure sales.[30] Estates and its members supposedly agreed that only one member would bid on any given foreclosure property listed in the database after internally ranking which member had submitted the best bid.[31] Estates would then allegedly send an agent to the foreclosure auction, bid on behalf of the selected member, and divide the profits among Estates and its members.[32]

The defendants moved to dismiss the complaint, principally on the grounds that the court lacked jurisdiction under the Rooker-Feldman doctrine and that the plaintiffs had not suffered an antitrust injury. [33] Taking the former issue first, the court recognized that, under the Rooker-Feldman doctrine, lower ‘federal courts lack subject matter jurisdiction to hear “cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.” ’ [34] But the court held that the Rooker-Feldman doctrine was inapplicable because, although the state court’s entry of foreclosures in favor of the defendants technically caused the plaintiffs’ injuries, the plaintiffs’ claims were not ‘veiled appeals of state-court judgments’ because the plaintiffs sought only to review the defendants’ alleged anticompetitive conduct – an issue that was not decided by the state court.[35]

The court likewise rejected the defendants’ arguments that the plaintiffs lacked standing. The defendants argued that the plaintiffs did not suffer an antitrust injury because they failed to allege that anybody else had bid in the foreclosure auctions.[36] But the court held that ‘[w]hether this is required on these facts is not clear, and in any event the facts alleged certainly allow an inference that the plaintiffs received less money than they would have absent the bid rigging.’ [37]

In re Interior Molded Doors Indirect Purchaser Antitrust Litigation)

The indirect purchaser plaintiffs brought claims under a bevy of state antitrust statutes, claiming that the defendants’ conspiracy to fix prices in the market for interior molded doors (IMDs) inflated the prices at which the plaintiffs purchased IMDs from third-party distributors, who had purchased them from the defendants.[38] The court had previously dismissed 25 of the state law antitrust claims on the grounds that the plaintiffs lacked Article III standing because they failed to allege that any of the named plaintiffs had connections to those states.[39] The plaintiffs sought to remedy that defect by naming new plaintiffs who had either resided in some of those states or who had purchased an IMD from there.[40]

The defendants once again moved to dismiss these claims, contending that the plaintiffs still lacked standing to bring the claims where a plaintiff did not purchase an IMD in the state but instead just resided there.[41] The defendants also argued that the plaintiffs could not recover for the entire claim period because their claims did not relate back to the date when the first complaint was filed.[42]

On the issue of standing, the court held that it was unnecessary that the plaintiffs included a representative who had purchased an IMD in each state. Instead, the court held that it was sufficient, at least for the purposes of some state laws, that the named plaintiffs had lived in the state whose antitrust laws they had invoked, even if they had purchased the IMD in a different state.[43] Accordingly, the court denied this aspect of the motion to dismiss.[44]

On the issue of relating back, however, the court agreed with the defendants, holding that the applicable damage period was circumscribed by the time that had elapsed between the filing of the plaintiffs’ initial complaint and their attempt to revive those claims by adding representatives with the requisite standing.[45] In doing so, the court reasoned that ‘claims in an amended complaint cannot relate back to claims in an initial complaint over which the Court never had jurisdiction.’ [46] And because the court had already concluded that it lacked jurisdiction over the claims until the plaintiffs had added representatives who had Article III standing to assert them, ‘the new plaintiffs’ claims cannot “relate back” to placeholder claims in the initial complaint over which the Court lacked jurisdiction.’ [47] The plaintiffs argued that they were entitled to equitable tolling because the courts are divided on questions of Article III standing where the plaintiffs assert claims under state laws where they do not live.[48] Unpersuaded, the court held those arguments insufficient to establish an ‘extraordinary circumstance’ warranting tolling ‘because the plaintiffs were well aware of the unsettled nature of the law on Article III standing in antitrust class actions when they asserted state law claims.’ [49]


Notes

[1] Benitez v Charlotte-Mecklenburg Hosp. Auth., 992 F.3d 229, 221 (4th Cir. 2021) (holding that a hospital system functions as an arm of local government and thus is immune from suit alleging that it prevented insurers from steering patients to lower-cost providers; Steves & Sons, Inc. v. JELD-WEN, Inc., 988 F.3d 690, 699 (4th Cir. 2021) (affirming district court’s divestiture order in suit between two private parties); W. Star Hosp. Auth. Inc. v. City of Richmond, Virginia, 986 F.3d 354, 356 (4th Cir. 2021) (holding that city and its emergency management services were immune from antitrust suit alleging that the city had monopolized the ambulance market).

[2] D&M Farms, et al. v. Birdsong Corp. (In re Peanut Farmers Antitrust Litig.), No. 19-CV-463 (RAJ), 2020 WL 7074140 *1 (E.D. Va. Dec. 2, 2020).

[3] Id.

[4] Id.

[5] Id. at *2.

[6] Id. at *2 (quoting Fed. R. Civ. P. 23(b)(3)).

[7] See id.

[8] See id.

[9] See id.

[10] Id. at *5.

[11] Id.

[12] Id.

[13] Id. at *8.

[14] Id.

[15] Id.

[16] Jien v. Perdue Farms, Inc., No. 19-CV-2521 (SAG), 2020 WL 5544183, at *1 (D. Md. Sep. 16, 2020).xhe authors are counsel for one of the chicken producer defendants.

[17] Id.

[18] Id. at *1–4.

[19] Id. at *5.

[20] Id.

[21] Id.

[22] Id. at *11.

[23] Id.

[24] Id.

[25] Id.

[26] Id.

[27] Id.

[28] Id. and n.11.

[29] Williams v. Estates LLC, No. 19-CV-1076 (CCE), 2020 WL 887997, at *1 (M.D.N.C. Feb. 24, 2020).

[30] Id.

[31] Id.

[32] Id.

[33] Id. at *3.

[34] Id. (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005)).

[35] Id. at *4.

[36] Id. at *6.

[37] Id. at *10.

[38] In re Interior Molded Doors Indirect Purchaser Antitrust Litig., No. 18-CV-00850 (JAG), 2020 WL 2110931, at *1 (E.D. Va. May 4, 2020).

[39] Id.

[40] Id.

[41] See id. at *3.

[42] See id. at *4.

[43] See id.

[44] See id.

[45] See id. at *5.

[46] Id.

[47] Id.

[48] See id.

[49] Id. at *6.

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