Unpacking Antitrust: Help! My Company is a Defendant in an Antitrust Class Action
January 3, 2024
Author: Molly Donovan
When allegations of industry-wide price fixing or other cartel conduct come to light, plaintiffs’ lawyers almost always respond with class-action lawsuits, naming all the relevant competitors as co-defendants. Often the defendants comprise all or most sellers of the at-issue product across an entire industry, plus parents and subsidiaries, both domestic and foreign, even if there are no known factual allegations against each named defendant at the time a lawsuit is filed.
The lawsuits typically get filed in federal courts around the country and by various plaintiff groups: direct purchasers, indirect purchasers and individual “opt out” purchasers. The result is a morass of relatively unique procedural (not to mention substantive) issues: joint defense groups; international service; multi-district-litigation consolidation; and a slew of group and individual motions to dismiss, among other things.
Because industry-wide lawsuits don’t occur often and are somewhat distinctive to antitrust, companies who must defend them inevitably have a number of questions upfront about what to expect from the start of the litigation until the start of discovery.
We’re going to answer them here.
Why was the class action filed now?
Class-action lawyers often file antitrust cases as soon as news breaks that the Antitrust Division of the Department of Justice (“DOJ”) is investigating a particular industry, or that foreign enforcers are investigating companies whose products are sold in the United States. Sometimes lawsuits are filed immediately after dawn raids or one company’s decision to publicly report that it is being investigated. You might call this an antitrust blizzard.
Besides the class actions, should I expect additional civil litigation?
Companies that prefer to pursue claims on their own, rather than as part of a putative class, often file individual complaints. They may do so quickly, along with the classes —or they may wait to see how the class-action complaints fair in the motion to dismiss process. Some individual companies may wait even longer—hoping to “freeride,” rather than share in the bulk of the discovery burdens that will be borne by other plaintiffs.
Should I do anything viz the DOJ?
Most likely, the DOJ is aware of the civil lawsuits, but assuming your company is cooperating to some extent with the government’s investigation, your outside counsel probably should inform the government of the lawsuits and ask if the staff plans to move to stay or take any other action. In some cases, the government argues for a stay on the basis that the civil lawsuits will impede the criminal proceedings. The judge overseeing the civil lawsuit will then decide what to do.
Otherwise, the DOJ is unlikely to actively participate in the civil litigations but will monitor and will care if a defendant that is seeking criminal leniency takes a legal or factual position in the civil litigations that is inconsistent with admissions it made to the government. Consistency across the two processes is important.
My company has been named as a defendant, but is not being investigated and/or did not participate in the alleged conduct…what should I do?
This is not infrequent. You should discuss strategies for an early exit with your outside counsel. One obvious tactic is to file an individual motion to dismiss arguing that the complaint lacks sufficient factual content specific to your company and a motion to amend would be futile. Unfortunately, these motions are often unsuccessful because judges would rather wait until after discovery to let any one defendant off the hook.
Should the court deny your motion to dismiss, there may be other ways to achieve an early exit through a negotiated settlement.
If not, consider “laying low” and letting the larger and/or more culpable companies bear the brunt of the litigation burdens until another exit opportunity arises.
Speaking of, should my company join the joint defense group?
Typically all defendants participate in a joint defense group that coordinates logistics and substantive defenses that are common amongst the group. Sometimes the fact of the joint defense group—and the rules of engagement, including cost sharing—are memorialized in writing.
Generally, there are benefits to participating in the group: reduced burdens and costs and the ability to influence strategy and the framing of defenses in a way most beneficial to your company.
Whether your company should lead the joint defense group—or participate more passively—will depend on the circumstances. There may be projects of special interest to your company that require your increased participation even if your general participation is less active. Companies should be aware at the outset that freeriding will be tolerated only to some extent—doing some work (i.e., billable hours) will be required. The joint defense group itself will discuss who does what.
Participation in the group needs to be by outside counsel.
Should my company waive service?
Sometimes hard-to-serve defendants, particularly foreign ones, will not agree to waive service in hopes that service will never be achieved, and they’ll be dropped from the lawsuit as a result. If your company is hard-to-serve and not culpable, there may be an opportunity to negotiate an early exit.
Otherwise, it usually makes sense to waive service and to negotiate timing for responses to the complaints along with the joint defense group.
Will my company have to respond to the complaint right away?
There will be several procedural steps before motions to dismiss (or answers to the complaint). Most importantly, there will be JPML (Judicial Panel on Multi-District Litigation) proceedings if the complaints are filed in more than one federal district court. Defendants should determine which district is most preferable to them and should advocate that all relevant proceedings be consolidated (or “MDL’ed”) in that district. Typically, this effort will be coordinated amongst the defendants in the joint defense group.
Once the MDL is established, and if several plaintiffs’ firms have filed similar complaints, there will be motions about who should lead as class counsel. Defendants don’t usually enter this battle.
When it’s time to respond to the complaint, should my company file an individual motion to dismiss?
It depends, but usually. Twombly and Iqbal require facts to state a claim as to each defendant. This is true even for corporate families who are not supposed to be “lumped together” for purposes of stating a claim against each individual company. If there are not enough facts as to how your company joined and participated in the conspiracy, you should consider an individual motion to dismiss on that basis.
Your company may also have a personal jurisdiction motion.
Typically, most other arguments are common to all defendants—and are not individualized.
Should I join the group motion to dismiss?
There’s probably no reason not to. The group generally files a motion to dismiss that – short of dismissing the complaint in full – may be successful in narrowing its scope. For example, defendants often argue that plaintiffs have overreached in alleging the scope of the conspiracy as to products, time period and/or geography.
For planning – including as to budget – it’s good to know that there may be multiple rounds of motions to dismiss to give plaintiffs second (and sometimes third) opportunities to add facts sufficient to state a claim against individual defendants or to allege facts sufficient to toll the statute of limitations (as examples).
The end result will be a complaint that moves forward to discovery or an outright dismissal with prejudice subject to appeal.
How expensive is discovery?
Very. Industry-wide cases can involve hundreds of depositions, review and production of millions of pages of documents, hundreds of joint-defense calls, and thousands of pages of written discovery responses. Your outside counsel should be focused on opportunities to exit the litigation while also participating in discovery to be sure your company’s specific interests are being protected.
How long will it be until discovery starts?
From the time the complaints are first filed, it could be a year or more until discovery starts. This largely depends on how long it takes for the judge to resolve all motions to dismiss and whether the judge stays discovery until that occurs.