Justia U.S. 2nd Circuit Court of Appeals Opinion Summaries

Articles Posted in Antitrust & Trade Regulation
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Plaintiffs, investors in 22nd Century Group, alleged on behalf of an investor class that (1) Defendants engaged in an illegal stock promotion scheme in which they paid authors to write promotional articles about the company while concealing the fact that they paid the authors for the articles; and (2) Defendants failed to disclose an investigation by the Securities and Exchange Commission (“SEC”) into the company’s financial control weaknesses. Plaintiffs alleged they were harmed after public articles revealed the promotion scheme and stock prices fell. The district court dismissed the complaint for failing to state a claim.   On appeal, Plaintiffs argued (1) they adequately alleged material misrepresentations sufficient to sustain claims under SEC Rule 10b-5; (2) their claim under Section 20(a) of the Securities Exchange Act was premised on a valid predicate violation of Section 10(b); and (3) the district court erred in dismissing the complaint with prejudice.   The Second Circuit affirmed in part and vacated in part. On the first and second points, the court agreed that the allegation that Defendants failed to disclose the SEC investigation states a material misrepresentation and could also support Section 20(a) liability. However, the court found no merit in the remaining challenges. The court reasoned that because the complaint does not adequately allege that Defendants had a duty to disclose that they paid for the articles’ publication, Plaintiffs fail to state a claim that the existence of the stock promotion scheme constituted a materially misleading omission. View "Noto v. 22nd Century Grp." on Justia Law

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Defendant appealed a judgment entered in district court following a jury trial, convicting him of conspiracy to restrain trade in violation of Section 1 of the Sherman Act. On appeal, Defendant argued that the district court erred by failing to consider his proffered evidence that the illegal trading activity lacked anticompetitive effects and had procompetitive benefits and by refusing to conduct a pre-trial assessment as to whether the per se rule or the rule of reason applies. He further contended that the district court abused its discretion in precluding his competitive effects evidence from admission at trial and in conducting only a limited post-trial inquiry into juror misconduct.   The Second Circuit affirmed the ruling, concluding that the district court was not required to make a threshold pre-trial determination as to whether the per se rule or the rule of reason applies to the alleged misconduct in this case. The court reasoned that the grand jury indicted Defendant for a per se antitrust violation and the government was entitled to present its case to the jury. The district court properly assessed the sufficiency of the evidence of the alleged per se violation and the sufficiency decision upholding the verdict is not challenged on appeal. In addition, the district court acted within its broad discretion in strictly limiting the admission of Defendant’s competitive effects evidence at trial. Finally, the district court did not abuse its discretion in ending its post-trial investigation into alleged juror misconduct. View "United States v. Aiyer" on Justia Law

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Plaintiffs filed a putative class action alleging that Haitian government officials and multinational corporations conspired to fix the prices of remittances and telephone calls from the United States to Haiti. Plaintiffs allege a price-fixing claim under the Sherman Act and related state law claims, alleging that defendants agreed to produce official instruments (a Presidential Order and two Circulars of the Bank of the Republic of Haiti) to disguise their agreement as a tax for domestic education programs.The Second Circuit held that the act of state doctrine does not bar adjudication of a claim merely because that claim turns on the "propriety" of the official acts of a foreign sovereign. Instead, the doctrine forecloses a claim only if it would require a court to declare that an official act of a foreign sovereign is invalid, i.e., to deny the act legal effect. In this case, even assuming the Presidential Order and Circulars have their full purported legal effect under Haitian law, the court concluded that plaintiffs' antitrust claim under U.S. federal law remains cognizable. Accordingly, the court reversed the district court's dismissal of the antitrust claim under the act of state doctrine and vacated the dismissal of the fifteen state law claims for reanalysis under the proper standard. The court also vacated the dismissal on the alternative grounds of forum non conveniens because the district court did not give due deference to U.S.-resident plaintiffs' choice of forum. The court remanded for further proceedings. View "Celestin v. Caribbean Air Mail, Inc." on Justia Law

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This case stemmed from a multidistrict litigation alleging that some of the world's largest banks and affiliated entities conspired to suppress the London Interbank Offered Rate (LIBOR). Plaintiffs appeal the district court's grant of defendants' motions to dismiss antitrust claims in 23 cases based on plaintiffs' lack of antitrust standing and/or based on lack of personal jurisdiction over defendants.The Second Circuit affirmed in part, reversed in part, and remanded for further proceedings. The court agreed with the district court that plaintiffs who purchased LIBOR‐indexed bonds from third parties lack antitrust standing. The court explained that, to have antitrust standing, plaintiff must be an "efficient enforcer" of the antitrust laws whose alleged injury was proximately caused by a defendant. In this case, the third parties' independent decisions to reference that benchmark severed the causal chain linking plaintiffs' injuries to defendants' misconduct, thereby rendering plaintiffs unsuitable as efficient enforcers.However, the court disagreed with the district court's personal jurisdiction analysis and held that jurisdiction is appropriate under the conspiracy‐based theory first articulated by the court in Charles Schwab Corp. v. Bank of Am. Corp., 883 F.3d 68 (2d Cir. 2018), which post‐dated the district court's ruling. The court concluded that the facts alleged by plaintiffs – specifically, that executives and managers for several banks were directing the suppression of LIBOR from within the United States – were sufficient to establish personal jurisdiction over the banks under a conspiracy‐based theory of jurisdiction. View "In re LIBOR-based Financial Instruments Antitrust Litigation" on Justia Law

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Plaintiffs, commercial merchants seeking monetary and injunctive relief under both federal and California antitrust laws against American Express, filed suit alleging that American Express's anti-steering rules caused merchant fees to rise across the market. The district court considered the four "efficient enforcer" factors and concluded that plaintiffs lacked antitrust standing, dismissing the claims.The Second Circuit affirmed, concluding that the efficient-enforcer factors structure a proximate cause analysis according to which there must be a sufficiently close relationship between the alleged injury and the alleged antitrust violation to establish antitrust standing. In cases of economic harm, the court explained that proximate cause is demarcated by the "first step" rule, which limits liability to parties injured at the first step of the causal chain of the defendants' actions. Here, American Express restrained trade to raise its own prices and only later did its competitors follow suit. The court stated that plaintiffs were harmed at that later step, and thus failed the first-step test. After considering all four factors, the court concluded that—taking the allegations of the complaint as true—plaintiffs are not efficient enforcers of the antitrust laws and therefore lack antitrust standing. View "In re American Express Anti-Steering Rules Antitrust Litigation" on Justia Law

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Defendants in these tandem cases (collectively, "Takeda") are a brand pharmaceutical manufacturer and related entities that began producing and marketing the Type-2 diabetes drug ACTOS in 1999. Purchasers of ACTOS filed suit against Takeda for improperly describing its patents to the FDA, in effect extending the duration of its patent protection over ACTOS and delaying generic competition. The district court denied Takeda's motion to dismiss, concluding that the alleged patent descriptions were incorrect under the Hatch–Waxman Act and pertinent regulations.On this interlocutory appeal, the Second Circuit held that under the "Listing Requirement" of 21 U.S.C. 355(b)(1), a combination patent does not "claim" any of its component drug substances past their individual patent expiration dates. The court also held that the purchasers were not required to allege that Takeda's interpretation of the Listing Requirement was unreasonable in order to plead a monopolization claim under the Sherman Act. Accordingly, the court affirmed the district court's denial of Takeda's motion to dismiss and remanded for further proceedings. View "United Food & Commercial Workers Local 1776 v. Takeda Pharmaceutical Co." on Justia Law

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Plaintiffs, American purchasers of bulk Vitamin C, filed a class action alleging that four Chinese exporters of Vitamin C conspired to inflate prices and restrict supply in violation of the Sherman Act and the Clayton Act. The district court denied defendants' motion to dismiss on the basis of the act of state doctrine, foreign sovereign compulsion, and international comity. After the district court denied defendants' motion for summary judgment, the case proceeded to trial where all defendants settled except for Hebei and its parent company NCPG. Following the jury verdict, the district court entered treble damages against Hebei and NCPG and denied their renewed motion for judgment as a matter of law. The Second Circuit reversed. The Supreme Court then reversed the Second Circuit's judgment and remanded.On remand from the Supreme Court, the Second Circuit once again concluded that this case should be dismissed on international comity grounds. Giving careful consideration but not conclusive deference to the views of the Ministry of Commerce of the People's Republic of China, the court read the relevant Chinese regulations—as illuminated by contemporaneous administrative documents and industry reports—to have required defendants to collude on Vitamin C export prices and quantities as part and parcel of China's export regime for Vitamin C. The court balanced this true conflict between U.S. and Chinese law together with other established principles of international comity, declining to construe U.S. antitrust law to reach defendants' conduct. Accordingly, the court reversed and remanded with instructions to dismiss the case. View "Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. Ltd." on Justia Law

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The Second Circuit granted 1-800 Contacts' petitions for review of the FTC's final order finding that agreements between 1-800 Contacts and various competitors to, among other things, refrain from bidding on "keyword" search terms for internet advertisements, violate Section 5 of the Federal Trade Commission Act (FTC Act).The court held that, although trademark settlement agreements are not immune from antitrust scrutiny, the FTC (1) improperly considered the agreements to be "inherently suspect" and (2) incorrectly concluded that the challenged agreements are a violation of the FTC Act under the "rule of reason." In this case, where the restrictions that arise are born of typical trademark settlement agreements, the court cannot overlook the challenged agreements' procompetitive goal of promoting trademark policy. In light of the strong procompetitive justification of protecting 1-800 Contacts' trademarks, the court concluded that the challenged agreements merely regulate and perhaps thereby promote competition. Therefore, the court stated that they do not constitute a violation of the Sherman Act and thus an asserted violation of the FTC Act fails of necessity. Accordingly, the court vacated the FTC's final order and remanded to the Commission with orders to dismiss the administrative complaint. View "1-800-Contacts, Inc. v. Federal Trade Comission" on Justia Law

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The Second Circuit reversed the district court's dismissal of plaintiffs' Sherman Act, RICO Act, and common-law claims against defendants for lack of Article III standing. Plaintiffs are a group of investment funds and defendants are a collection of financial institutions. Plaintiffs' claims stemmed from a scheme to fix the benchmark interest rates used to price financial derivatives in the Yen currency market.The court held that plaintiffs alleged an injury in fact sufficient for Article III standing, because plaintiffs plausibly alleged that defendants' conduct caused them to suffer economic injury. In this case, plaintiffs alleged that they entered into financial agreements on unfavorable terms because defendants manipulated benchmark rates in their own favor. Accordingly, the court remanded for further proceedings. View "Sonterra Capital Master Fund Ltd. v. UBS AG" on Justia Law

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King Mountain appealed the district court's judgment granting partial summary judgment for the State on its claims that King Mountain violated state laws on cigarette sales, and enjoining future violations. The State cross-appealed from the district court's dismissal of its claims under the Contraband Cigarette Trafficking Act (CCTA) and the Prevent All Cigarette Trafficking Act (PACT Act).The Second Circuit reversed with respect to the district court's grant of summary judgment for King Mountain and the denial of summary judgment for the State on the PACT Act claim. The court agreed with the State that Congress's decision to separately define "Indian country" and "State" in the PACT Act evidenced Congressional intent to expand the traditional understanding of "interstate commerce" rather than narrow it. The court held that the definition of "commerce between a State and any place outside the State," encompassed King Mountain's sales from the Yakama reservation in Washington State to Indian reservations in New York. The court agreed with the district court's holding that King Mountain, which was organized under the laws of the Yakama Nation, wholly owned by a member of the Yakama Nation, and located on the Yakama reservation, qualified as an "Indian in Indian Country," and thus was exempt from the CCTA.The court held that King Mountain failed to establish a violation of the dormant Commerce Clause; there was no error in the district court's determination that the State's third claim for relief was not barred by res judicata; the district court correctly granted summary judgment for the State on its third claim for relief; and, to the extent King Mountain's argument related to trade, there was no right to trade in the Yakama Treaty. Therefore, the court affirmed in all other respects. View "New York v. Mountain Tobacco Co." on Justia Law