Articles Posted in U.S. Supreme Court

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POM, which produces and sells a pomegranate-blueberry juice blend, filed a Lanham Act suit (15 U.S.C. 1125) against Coca-Cola, alleging that the name, label, marketing, and advertising of a Coca-Cola juice blend mislead consumers into believing the product consists predominantly of pomegranate and blueberry juice when it actually consists of less expensive apple and grape juices, and that the confusion causes POM to lose sales. The district court granted Coca-Cola partial summary judgment, ruling that the Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. 321(f), 331, and its regulations preclude Lanham Act challenges to the name and label of the juice blend. The Ninth Circuit affirmed. The Supreme Court reversed, holding that competitors may bring Lanham Act claims challenging food and beverage labels regulated by the FDCA. The Court noted that the issue was preclusion, not pre-emption. Even if the Court’s task is to reconcile or harmonize the statutes instead of to determine whether one is an implied repeal in part of another, the best way to do that does not require barring POM’s Lanham Act claim. Neither the Lanham Act nor the FDCA expressly forbids or limits Lanham Act claims challenging labels that are regulated by the FDCA. The laws complement each other in major respects: both touch on food and beverage labeling, but the Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety. The FDCA’s enforcement is largely committed to the FDA, while the Lanham Act allows private parties to sue competitors to protect their interests on a case-by¬case basis. Allowing Lanham Act suits takes advantage of synergies among multiple methods of regulation. Because the FDA does not necessarily pursue enforcement measures regarding all objectionable labels, preclusion of Lanham Act claims could leave commercial interests, and indirectly the general public, with less effective protection in the food and beverage labeling realm than in other less regulated industries. Neither the statutory structure nor the empirical evidence indicates there will be any difficulty in fully enforcing each statute. View "POM Wonderful LLC v. Coca-Cola Co." on Justia Law

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Lexmark sells the only type of toner cartridges that work with its laser printers; remanufacturers acquire and refurbish used Lexmark cartridges to sell in competition with Lexmark’s new and refurbished cartridges. Lexmark’s “Prebate” program gives customers a discount on new cartridges if they agree to return empty cartridges to the company. Every Prebate cartridge has a microchip that disables the empty cartridge unless Lexmark replaces the chip. Static Control makes and sells components for cartridge remanufacture and developed a microchip that mimicked Lexmark’s. Lexmark sued for copyright infringement. Static Control counterclaimed that Lexmark engaged in false or misleading advertising under the Lanham Act, 15 U.S.C. 1125(a), and caused Static Control lost sales and damage to its business reputation. The district court held that Static Control lacked “prudential standing,” applying a multifactor balancing test. The Sixth Circuit reversed, applying a “reasonable interest” test. A unanimous Supreme Court affirmed. The Court stated that the issue was not “prudential standing.” Whether a plaintiff comes within a statute’s zone of interests requires traditional statutory interpretation. The Lanham Act includes in its statement of purposes, “protect[ing] persons engaged in [commerce within the control of Congress] against unfair competition.” “Unfair competition” is concerned with injuries to business reputation and sales. A section 1125(a) plaintiff must show that its injury flows directly from the deception caused by the defendant’s advertising; that occurs when deception causes consumers to withhold trade from the plaintiff. The zone-of-interests test and the proximate-cause requirement identify who may sue under section 1125(a) and provide better guidance than the multi-factor balancing test, the direct-competitor test, or the reasonable-interest test. Static Control comes within the class of plaintiffs authorized to sue under section 1125(a). Its alleged injuries fall within the zone of interests protected by the Act, and it sufficiently alleged that its injuries were proximately caused by Lexmark’s misrepresentations. View "Lexmark Int'l, Inc. v. Static Control Components, Inc." on Justia Law

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An agreement between American Express and merchants who accept American Express cards, requires that all of their disputes be resolved by arbitration and provides that there “shall be no right or authority for any Claims to be arbitrated on a class action basis.” The merchants filed a class action, claiming that American Express violated section 1 of the Sherman Act and seeking treble damages under section 4 of the Clayton Act. The district court dismissed. The Second Circuit reversed, holding that the class action waiver was unenforceable and that arbitration could not proceed because of prohibitive costs. The Circuit upheld its reversal on remand in light of a Supreme Court holding that a party may not be compelled to submit to class arbitration absent an agreement to do so. The Supreme Court reversed. The FAA reflects an overarching principle that arbitration is a matter of contract and does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery. Courts must rigorously enforce arbitration agreements even for claims alleging violation of a federal statute, unless the FAA mandate has been overridden by a contrary congressional command. No contrary congressional command requires rejection of this waiver. Federal antitrust laws do not guarantee an affordable procedural path to the vindication of every claim or indicate an intention to preclude waiver of class-action procedures. The fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy. View "Am. Express Co. v. Italian Colors Rest." on Justia Law

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The Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act), 21 U.S.C. 355(j)(2)(A)(vii)(IV) established procedures for identifying and resolving patent disputes between brand-name and generic drug manufacturers. One procedure requires a prospective generic manufacturer to certify to the FDA that any listed, relevant patent is invalid or will not be infringed by the manufacture, use, or sale of the generic drug (paragraph IV). Generic manufacturers filed paragraph IV applications for generic drugs modeled after Solvay’s FDA-approved, patented drug AndroGel. Solvay claimed patent infringement, 35 U.S.C. 271(e)(2)(A). The FDA approved the generic product, but the generic companies entered into “reverse payment” settlements, agreeing not to bring the generic to market for a number of years and to promote AndroGel to doctors in exchange for millions of dollars. The FTC sued, alleging violation of section 5 of the Federal Trade Commission Act by agreeing to abandon patent challenges, to refrain from launching low-cost generic drugs, and to share in Solvay’s monopoly profits. The district court dismissed. The Eleventh Circuit affirmed. The Supreme Court reversed and remanded, calling for application of a “rule of reason” approach rather than a “quick look.” Although the anti-competitive effects of the reverse settlement might fall within the exclusionary potential of Solvay’s patent, the agreement is not immune from antitrust attack. It would be incongruous to determine antitrust legality by looking only at patent law policy, and not at antitrust policies. The Court noted the Hatch-Waxman Act’s general pro-competitive thrust, facilitating challenges to a patent’s validity and requiring parties to a paragraph IV dispute to report settlement terms to antitrust regulators. Payment for staying out of the market keeps prices at patentee-set levels and divides the benefit between the patentee and the challenger, while the consumer loses. That a large, unjustified reverse payment risks antitrust liability does not prevent parties from settling their lawsuits; they may settle in other ways, e.g., by allowing the generic to enter the market before the patent expires without payment to stay out prior to that point. View "Fed. Trade Comm'n v. Actavis, Inc." on Justia Law

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Comcast and its subsidiaries allegedly “cluster” cable television operations within a region by swapping their systems outside the region for competitor systems inside the region. Plaintiffs filed a class-action antitrust suit, claiming that Comcast’s strategy lessens competition and leads to supra-competitive prices. The district court required them to show that the antitrust impact of the violation could be proved at trial through evidence common to the class and that damages were measurable on a classwide basis through a “common methodology.” The court accepted only one of four proposed theories of antitrust impact: that Comcast’s actions lessened competition from “overbuilders,” i.e., companies that build competing networks in areas where an incumbent cable company already operates. It certified the class, finding that the damages from overbuilder deterrence could be calculated on a classwide basis, even though plaintiffs’ expert acknowledged that his regression model did not isolate damages resulting from any one of the theories. In affirming, the Third Circuit refused to consider Comcast’s argument that the model failed to attribute damages to overbuilder deterrence because doing so would require reaching the merits of claims at the class certification stage. The Supreme Court reversed: the class action was improperly certified under Rule 23(b)(3). The Third Circuit deviated from precedent in refusing to entertain arguments against a damages model that bore on the propriety of class certification. Under the proper standard for evaluating certification, plaintiffs’ model falls far short of establishing that damages can be measured classwide. The figure plaintiffs’ expert used was calculated assuming the validity of all four theories of antitrust impact initially advanced. Because the model cannot bridge the differences between supra-competitive prices in general and supra¬competitive prices attributable to overbuilder deterrence, Rule 23(b)(3) cannot authorize treating subscribers in the Philadelphia cluster as members of a single class. View "Comcast Corp. v. Behrend" on Justia Law

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Under Georgia’s Hospital Authorities Law, Ga. Code 31-7-75, political subdivisions may create special-purpose hospital authorities to exercise public and essential governmental functions, including acquiring public health facilities. The Albany-Dougherty County Authority owns Memorial, one of two hospitals in the county, and formed private nonprofit corporations (PPHS AND PPMH)to manage it. After the Authority decided to purchase the county’s other hospital and lease it to a PPHS subsidiary, the Federal Trade Commission issued an administrative complaint alleging that the transaction would violate the Federal Trade Commission Act and the Clayton Act. The FTC and Georgia sought an injunction. The district court dismissed, citing the state-action doctrine. The Eleventh Circuit affirmed, holding that the Authority, as a local governmental entity, was entitled to immunity because the challenged anti-competitive conduct was a foreseeable result of the Law. The Supreme Court reversed. Georgia has not clearly articulated and affirmatively expressed a policy allowing hospital authorities to make acquisitions that substantially lessen competition, so state-action immunity does not apply. State-action immunity is disfavored and applies only when it is clear that the challenged conduct is undertaken pursuant to the state’s own regulatory scheme. There is no evidence Georgia affirmatively contemplated that hospital authorities would displace competition by consolidating hospital ownership. The Authority’s powers, including acquisition and leasing powers, simply mirror general powers routinely conferred by states on private corporations; a reasonable legislature’s ability to anticipate the possibility of anti-competitive use of those powers falls short of clearly articulating an affirmative state policy to displace competition. View "Fed. Trade Comm'n v. Phoebe Putney Health Sys., Inc." on Justia Law

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Nike alleged that Already’s athletic shoes violated Nike’s Air Force 1 trademark; Already challenged the trademark. While the suit was pending, Nike agreed not to raise any trademark or unfair competition claims against Already or any affiliated entity based on Already’s existing footwear designs, or any future designs that constituted a “colorable imitation” of Already’s current products. Nike moved to dismiss its claims with prejudice and to dismiss Already’s counterclaim without prejudice. Already opposed dismissal of its counterclaim, indicating that Already planned to introduce new versions of its lines, that potential investors would not consider investing until Nike’s trademark was invalidated, and that Nike had intimidated retailers into refusing to carry Already’s shoes. The district court dismissed. The Second Circuit affirmed. The Supreme Court affirmed, finding the case moot. The breadth of the covenant suffices to meet the burden imposed by the “voluntary cessation doctrine.” The covenant is unconditional and irrevocable. Already did not establish that it engages in or has concrete plans to engage in activities that would arguably infringe Nike’s trademark yet not be covered by the covenant. The fact that some individuals may base decisions on hypothetical speculation does not give rise to the sort of injury necessary to establish standing. The Court rejected the “sweeping argument” that, as one of Nike’s competitors, Already inherently has standing because no covenant can eradicate the effects of a registered but invalid trademark. View "Already, LLC v. Nike, Inc." on Justia Law