Archive for the 'Private Actions' Category
In a bit of a setback to the defendants in the ongoing e-books cartel case, the New York District Court for the Southern District of New York recently dismissed a motion by the defendants to have the plaintiffs’ class action dismissed.
In a detailed judgment, justice Denise Cote provides a rather thorough restatement of pleading rules in federal antitrust cases and evidence required to establish a violation of Section 1 of the Sherman Act (the U.S. federal parallel to section 45 of Canada’s Competition Act), which prohibits unreasonable restraints of trade (including horizontal price-fixing agreements, market allocation agreements and in some instances group boycotts).
Some of the interesting aspects of this recent judgment that stood out to me, and there are a number of others, include:
1. Rather strong language that the Court accepted, at least at this preliminary stage, the plaintiffs’ arguments of a horizontal price-fixing conspiracy. For example, the Court held that the alleged agreement is “fundamentally horizontal”.
2. An acceptance of the plaintiffs’ argument that the relevant standard should be a per se (not rule of reason) review, holding that the alleged agreement is “at root, a horizontal price restraint”. In Canada, section 45 of the Competition Act makes price-fixing, market allocation and supply/output restriction agreements per se illegal, although it largely remains to be seen what types of cases will be challenged by the Competition Bureau under section 90.1 of the Act (which has parallels to the rule of reason standard in the U.S.).
3. A recap of recent U.S. jurisprudence on hub-and-spoke cartels, including discussions of the Interstate Circuit and Toys “R” Us cases.
4. A restatement of the types of indirect (i.e., circumstantial) evidence sufficient to establish a cartel, including simultaneous price changes. In Canada, like the U.S., a number of different types of indirect or circumstantial evidence (sometimes also referred to as “facilitating factors”) can be relied upon to establish a conspiracy, including evidence of meetings, simultaneous price increases and language or conduct that can only be explained by the existence of an agreement.
5. Distinguishing recent U.S. vertical price maintenance decisions, notably the U.S. Supreme Court’s decision in Leegin Creative, from horizontal arrangements between competitors.
6. A general review of the necessary elements to establish a violation of section 1 of the Sherman Act (many of which being the same or paralleling Canadian requirements).
Given that class actions have now also been commenced in Canada (in British Columbia, Ontario and Quebec), it will be interesting to see what arguments, if any, may be made by the defendants in Canada in response to the Canadian plaintiffs’ claims.
For a copy of the Court’s Opinion see:
UBS disclosed earlier today in its 2011 Annual Report that the Competition Bureau has granted it conditional immunity in relation to the ongoing global LIBOR price-fixing investigation:
“The Canadian Competition Bureau has granted UBS conditional immunity in connection with potential competition law violations related to submissions for Yen LIBOR. As a result of these conditional grants, we will not be subject to prosecutions, fines or other sanctions for antitrust or competition law violations in the jurisdictions where we have conditional immunity or leniency in connection with the matters we reported to those authorities, subject to our continuing cooperation. However, the conditional leniency and conditional immunity grants we have received do not bar government agencies from asserting other claims against us. In addition, as a result of the conditional leniency agreement with the DOJ, we are eligible for a limit on liability to actual rather than treble damages were damages to be awarded in any civil antitrust action under US law based on conduct covered by the agreement and for relief from potential joint-and-several liability in connection with such civil antitrust action, subject to our satisfying the DOJ and the court presiding over the civil litigation of our cooperation. The conditional leniency and conditional immunity grants do not otherwise affect the ability of private parties to assert civil claims against us.”
In Canada, the Competition Bureau has established formal Immunity and Leniency programs, under which companies or individuals that may have been involved in cartel (e.g, price-fixing) or other criminal conduct under the Competition Act may, if all conditions are satisfied, receive full immunity from prosecution or reductions in fines for cooperating with a Bureau investigation.
On Friday March 9, 2012 the British Columbia Court of Appeal, in an unanimous judgment by Justices Hinkson, Finch and Hall, decided an interesting defamation case involving the publication of a newspaper column in the Vancouver Sun entitled “Ambitious claims to a trillion-dollar jackpot” written by David Baines.
The article in dispute contained allegedly defamatory statements relating to the Honorable Edward M. Lawson, a former Senator and executive of the International Brotherhood of Teamsters (the respondent in this case).
Mr. Baines’ article referred, among other things, to how a company named Arctic Oil and Gas, a “tiny U.S. company with big ambitions and some interesting Vancouver connections” had been promoting itself by claiming ownership of “a 30 per-cent interest in a claim to all the oil and gas resources within the entire Arctic Ocean ‘commons area’” allowing them access to the “Trillion Dollars in oil and natural gas!” in the Arctic. The article also dismissed this claim as overly “ambitious” for a company that “trades at only eight cents per share on the lowly ‘pink sheets’ in the United States”.
The dispute in this case, however, arose in relation to the following underlined portion of the article describing the company’s “Vancouver connections” (the Senator):
“Which makes it all the more curious that a retired Canadian senator would be a director of this company. But more on that later. …
At the same time that Bulldog morphed into Arctic Oil & Gas, Sterling appointed Senator Edward Lawson as a director and gave him 50,000 restricted shares.
Lawson served 34 years in the Canadian Senate before retiring in 2004, making him the longest-serving senator in B.C. history. He also served as international vice-president of the Teamsters Union for more than 26 years, a position which often landed him in controversy.
In June 1988, the US. Department of Justice filed a lawsuit under the Racketeer-Influenced [and] Corrupt Organizations Act alleging that the Teamsters Union and the union’s entire executive board (including Lawson), plus 26 purported mob figures, had hijacked the union from its members.
Several months later, the suit was dropped after union executives signed a settlement agreeing to union reform.
In 2003, the union presented Lawson with the James R. Hoffa Lifetime Achievement Award in honour of the former Teamsters president. This is an award that only a Teamster could love.
Lawson also suffered the embarrassment of being identified as a close associate of Ed Carter, who along with partner David Ward was caught in a huge stock bribery scam in the mid-1980s.
Evidence at the criminal trial of Carter and Ward was that the two promoters gave Lawson shares of their rigged companies, and Lawson flew them, often free of charge, on the Teamsters executive jet he had at his disposal.
In 1986, David Ward’s wife, Carol, and Lawson’s wife, Beverly, became embroiled in another stock fiasco while serving as directors of an Alberta Stock Exchange company called Boston Financial Group Inc.
A Bahamian bank called Charterhouse Bank and Trust, long suspected of acting as a front for insiders, had bought 90 per cent of Boston’s free-trading stock and had promptly dumped $291,000 worth of stock without filing insider trading reports.
The bank claimed it was acting as agent and couldn’t reveal its clients’ identity. Although regulators suspected the stock belonged to insiders or related parties, its beneficial ownership was never established.
Sterling said he met Lawson in Vancouver several months ago. “He offered to come on board [with Arctic Oil & Gas] because he believes that there is a significant benefit to be had for the country of Canada from this project,” he said in an interview Tuesday.”
Trial Decision
The Senator’s defamation claim succeeded at trial and the appellants, including Mr. Baines and several Vancouver Sun editors, appealed taking the position that the lower court judge erred in finding for the Senator.
Appeal
On appeal, the appellants argued that the words in the article were incapable in being defamatory and, if they were capable of being defamatory, they were not in fact defamatory.
In hearing the Appeal, the Court set out some of the essential law of defamation, in particular holding that in defamation actions there are two essential issues: first, the legal issue of whether or not words are capable of being defamatory (determined on a standard of review of correctness); and second, if capable of being defamatory, the factual issue of whether the words are in fact defamatory (typically subject to a standard of reasonableness).
Julius Melnitzer writing for the Financial Post reported earlier today that Mr. Justice Paul Perell of the Ontario Superior Court of Justice set hearing dates for of November 21-30 for the certification motions and application for leave to institute statutory proceedings for secondary market misrepresentation under the Ontario Securities Act in the Sino-Forest class action case.
Our friend and colleague Marius Adomnica (Gratl & Company) has written this good case note on the recent Tim Hortons class action case in Ontario:
The Ontario Superior Court of Justice recently released its reasons striking the Plaintiffs’ claim in Fairview Donut Inc. v. The TDL Group Corp., 2012 ONSC 1252, a widely reported Ontario class action arising out of a conflict over how the donuts in Tim Hortons stores are prepared.
Among the claims dismissed were claims the Plaintiffs had brought under the Competition Act.
While Tim Hortons donuts were traditionally baked from scratch in each individual store, in 2002 Tim Hortons partnered with an Irish company to establish a manufacturing plant that makes frozen, pre-cooked donuts and sells them to individual franchises, eliminating the need for the donuts to be baked from scratch at each store.
A number of dissatisfied franchise owners brought a lawsuit against Tim Hortons over this change, arguing essentially that the price they were required to pay for these donuts under their franchise agreements unfairly cut into their profits. Among other claims, the Plaintiffs argued that the company’ actions violated sections 61 (Price Maintenance) and 45 (Conspiracy) of the Competition Act.
New (2012) advertising, competition/antitrust, cartel, trade and class action law books from Oxford University Press:
The Class Action Playbook – Brian Anderson and Andrew Trask
From OUP:
“The Class Action Playbook is a unique and strategic “how to” guide for practitioners seeking to bring or defend a class action. Every important issue is addressed, including the initial shape of the proposed action, choice of forum, case-management schedules, pre-certification discovery and motions activity, briefing and argument of the class-certification motion, class notice, preparation for trial, class settlements, and the binding effects of class action judgments.
Experienced practitioners Brian Anderson and Andrew Trask analyze what decisions the plaintiff and defendant must make at each stage of a proposed class action, and the considerations that might drive different strategies at each stage. The authors explain the importance of every issue, the choices available to each side, and the factors each side should consider in choosing the best path to follow.
This Second Edition covers six relevant cases from the historic 2010 and 2011 Supreme Court terms; official commentary on class actions with citations to the new American Law Institute’s statement of the Principles of Aggregated Litigation, and where it upholds plaintiffs’ or defendants’ arguments; a discussion on emerging class action litigation tactics, including the use of arbitration clauses and the use of motions to strike class allegations; new appellate-court trends in class-action law, including developments in adequacy of representation, superiority, and use of experts at class certification.”
For more see: OUP: Class Action Playbook
On February 13, 2012, the Federal Court of Appeal released an important limitations period judgment in Garford Pty Ltd. v. Dywidag Systems International.
In this case, the Australian company Garford commenced an action against Dywidag Systems International and several individual defendants seeking damages for alleged infringement of some of Garford’s Canadian patents and based on alleged violations of section 45 of the Competition Act (criminal conspiracy agreements).
In a lower court decision, the Federal Court granted the defendants summary judgment dismissing Garford’s claim on the basis that it was limitation barred under the Competition Act.
Section 36 of the Competition Act contains specific limitation periods that require, among other things, claims to be brought within two years of the relevant conduct (“two years from … the day on which the conduct was engaged in”).
Garford appealed, and the Federal Court dismissed its appeal. The Court of Appeal held that it could find no error in the lower court’s application of the law or factual findings and was “in substantial agreement with [its] reasoning with respect to the limitation period.”
Garford had argued that the lower court erred in failing to hold that the “discoverability principle” applied to extend the limitation period under section 36. The “discoverability principle” or “rule” operates on the theory that, in competition law matters, the start of the limitation period should be postponed until the time a plaintiff knew (or ought to have known) of the anti-competitive conduct.
The Court of Appeal held that the issue of discoverability did not arise on the facts of this case because, among other things, between April 10, 2006 (the date on which Garford’s solicitors sent a cease and desist letter to the defendants) and the date the action was commenced (August, 2008 – more than two years later) there were no new facts relevant to the alleged breaches of section 45. In the Court’s words: “the information available to Garford on April 10, 2006 was essentially the same information it had when it commenced the action.”
Interestingly, however, the Court of Appeal left the door open for the discoverability rule to apply in other cases:
“For these reasons, the judge’s findings of fact, which on the applicable standard of review cannot be set aside in this case, preclude any argument based on discoverability, assuming without deciding, it is legally available.”
As such, the applicability of the discoverability rule as a mechanism to extend the limitation period under section 36 of the Competition Act remains unsettled.
On January 6, 2012 the Competition Bureau announced its first conspiracy (i.e., cartel) case under Canada’s amended Competition Act, partially brought under the amended section 45 of the Competition Act.
In this case, two companies pleaded guilty of fixing the price of polyurethane foam and were fined a total of C $12.5 million (see: Cartels Update: Bureau Announces $12.5 Million Fine in First Price-fixing Case Under Amended Competition Act and Competition Bureau Sends Signal to Price-Fixers with $12.5 Million Fine).
In making the announcement, believed to be one of a number of new cartel cases currently being investigated, the Bureau highlighted its stepped-up enforcement of cartels described as “reinvigorated”:
“’Yesterday’s guilty plea is the first conviction under Canada’s amended conspiracy law,’ said Melanie Aitken, Commissioner of Competition. ‘This investigation highlights the Bureau’s reinvigorated mandate to stop consumer harm caused by price-fixing, and to secure significant fines for these serious criminal offences.’
In other recent remarks, the Bureau has similarly indicated that it intends to enhance its investigation of cartels under Canada’s new conspiracy (cartel) rules:
“In our Criminal work, we continue to concentrate on the, admittedly, lengthy process of ‘changing the game’— reorienting our approach at the Bureau, our processes, and our mindset to a more appropriately aggressive stance to respond, as we must, to our new more powerful criminal provisions.
As we move forward with our new criminal regime, consistency, consistency, and consistency is our focus. There will be no arbitrary relaxing of standards under the Bureau’s watch — a practice that can only impair predictability and fairness in enforcement. Further, we will use our investigative tools such as searches, wiretaps and section 11 orders.
Cartels and bid–rigging continue to be our focus, given the seriousness of this conduct, and its unambiguously harmful nature. We are committed to advancing cases that matter to Canadians, doing so in a timely manner, and following them through to the end.”
(See: Commissioner of Competition, Keynote Speech at the Canadian Bar Association 2011 Fall Conference).
Based on these and other recent developments, we will be posting overviews of Canadian conspiracy and bid-rigging laws, each concluding with practical steps companies can take to reduce potential criminal liability (and overviews of the Bureau’s Immunity and Leniency Programs, which are increasingly key to Bureau investigations and parties implicated in criminal conduct to reduce liability).
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
