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www. NYLJ.com
©2009 Incisive Media US Properties, LLC
TUESDAY, APRIL 21, 2009
Volume 241—NO. 75
ANTITRUST TRADE AND PRACTICE
In the Event of a Tie,
Federal Trade Commission Wins
I
n golf, when the Ryder Cup is contested, the
team seeking possession of the trophy must
win at least 14½ of the 28 avail­able points.
In the event of a tie, the current holder of the
Ryder Cup retains possession of the trophy.
Similarly, in professional football, if a forward
pass is caught simul­taneously by the receiver
and the defender, the ball is awarded by rule
to the offensive team. The rationale of these
and other “tie­breakers” is that the side seeking possession (i.e., the party with the burden of
proof), must win the con­test outright.
In July 2008, the U.S. Court of Appeals for the
D.C. Circuit’s split ruling in FTC v. Whole Foods
Mkt. Inc., 548 F.3d 1028 (2008), appeared to signifcantly reduce the Federal Trade Commission’s
burden for obtaining preliminary injunctive
relief in merger cases. Pursuant to §13(b) of the
FTC Act, whenever the commission has reason
to believe that a proposed merger would vio­late
antitrust laws, it may bring suit in a district court
to enjoin the merger pending an administrative
trial on the merits.1
Unlike the traditional four-part equity standard for granting prelim­inary injunctions in private cases, §13(b) provides that a district court
may grant a preliminary injunction to the FTC in
a merger case “[u]pon a proper showing that,
weighing the equities and considering the
Commission’s likelihood of ulti­mate success,
such action would be in the public interest.”2 In
light of Congress’ view that antitrust matters
investigated by the FTC be determined initially
through the administrative process, just how
likely need “ultimate success” be demonstrated
by the FTC in a district court for it to obtain a
pre­liminary injunction?
Relying heavily on the circuit court’s opinion in FTC v. H.J. Heinz Co., 246 F.3d 703 (D.C. Cir.
2001), in Whole Foods, Judge Janet Rogers Brown
NEAL R. STOLL and SHEPARD GOLDFEIN are partners
at Skadden, Arps, Slate, Meagher & Flom. ANNE K. SIX,
an associ­ate in the D.C. office of the firm, assisted with
the preparation of this article.
By
Neal R.
Stoll
And
Shepard
Goldfein
held that, in the D.C. Circuit, the “likelihood
of success” stan­dard is met when the commission has raised “serious, substantial,
diffcult, and doubtful” questions about the
merits of the transac­tion such that thorough
review and investigation is warranted. 3 By
raising “serious and substantial” questions,
the FTC creates a presumption in favor of
preliminary injunctive relief. 4 While the
merging parties are entitled to oppose the
preliminary injunction with their own evi-
Judge Brown’s opinion appears to dictate
that the FTC’s showing of a “serious”
structural case is sufcient to meet the
D.C. Circuit Court’s interpreta­tion of the
§13(b) standard warranting the award
of injunctive relief.
dence, the presumption can only be overcome when the equities favoring the merging par­ties outweigh the public interest in
effective enforcement of the anti­trust laws.
Judge Brown reasons, “the FTC—an expert
agency acting on the public’s behalf—should
be able to obtain injunctive relief more readily than private parties.”5
Despite Judge Brett M. Kavana-ugh’s concern that this formulation signifcantly dilutes
the statutory “likelihood of success on the
mer­its” standard and ignores the need for
concrete, economic evidence of anticompetitive effects,6 the major­ity reversed the district
Expert Analysis
court’s denial of a preliminary injunction using
Judge Brown’s formulation.
Specifcally, Judge Brown held that the FTC
had raised the thresh­old “serious and substantial” ques­tions about the transaction by introducing evidence that went to the existence of
a particularized product submarket of grocery
stores in which core customers of such stores
had limited options. Ignoring Judge Kavanaugh’s
fnd-ings that the FTC failed to exhibit credible
economic evidence that would give credence
to a natural and organic supermarket submarket, Judge Brown’s opinion appears to dictate
that the FTC’s showing of a “serious” structural
case is suffcient to meet the D.C. Circuit Court’s
interpretation of the §13(b) standard warranting the award of injunctive relief.
The original July 28, 2008 deci­sion in Whole
Foods was split two to one, with Judge Brown
writing for the court, Judge David S. Tatel con­
curring in Judge Brown’s opinion, and Judge
Kavanaugh dissenting. By Nov. 21, 2008, however,
when the court denied Whole Foods’ petition for
a rehearing en banc, an “opinion of the court”
no longer existed. Judge Tatel had revised his
opinion. Instead of concurring in Judge Brown’s
opinion, he con­curred only in the judgment. With
Judge Brown’s opinion no longer standing for
the court, commenta­tors questioned what
precedential value the decision would have.
While the U.S. Supreme Court has routinely
articulated that in most decisions without a
major­ity opinion there is still a binding precedent available for application by lower courts,7
Judge Kavanaugh foreshadowed “enormous
uncer­tainty, debate, and litigation” over the
meaning and effect of the decision.8 Would
district courts be able to glean a holding from
Whole Foods? Would they be more likely to
grant preliminary injunctions to the FTC than
they had in the past, even when the agency
is unable to meet the traditional “likelihood
of success” standard?
Enter the proposed merger of CCC Information Services Inc. (CCC) and Mitchell
TUESDAY, APRIL 21, 2009
International Inc. (Mitchell). In April 2008,
CCC and Mitchell entered into a merger agreement valued at Supreme Court in Pearson v.
Cal-lahan, in granting the defendant officers’
petition for certiorari, directed the parties to
brief and argue whether Saucier v. Katz should
be overruled.10
There were major indicators at the oral argument in Pearson that Saucier v. Katz had seen
better days. For one thing the justices were
struggling with the merits of the plaintiff’s
Fourth Amend­ment claim that consent to the
undercover agent did not extend to the other
offcers. Chief Jus­tice John G. Roberts Jr. stated
that when he was a circuit court judge he
thought it was very odd that I had to go
and decide a diffcult constitutional issue
and then not worry about it because in
one sentence you say well, but the issue
is not clearly estab­lished and so it’s qualified immunity…
[I]n my experience it was unworkable,
or at least frustrat­ing, in that we had to
decide…a constitutional question where
it wasn’t necessary.11
He suggested that when a court rules
for the defendant because the law was not
clearly established,the court’s ruling on the
consti­tutional merits is “purely an advi­sory
opinion…”12 Justice Stephen G. Breyer, too,
questioned why courts shouldn’t be able to
take the “easier path” by proceeding directly
to the “clearly established” law issue.13
And, so, it did not exactly come as a shock
when the Court in Pear­son v. Callahan overturned Saucier and held “that the Saucier protocol should not be regarded as manda­tory in
all cases….”14 The criticism of the mandatory
protocol by Supreme Court justices and circuit
court judges provided the justifca-tion for overturning precedent and deviating from stare decisis. At the same time, the Court acknowledged
that adherence to the Saucier meth­odology
“is often benefcial [,]”15 that its “decision [in
Pearson] does not prevent the lower courts
from following the Saucier procedure; it simply
recognizes that those courts should have the
discretion to decide whether the procedure is
worth­while in particular cases.”16
Circumstances
The Court in Pearson v. Callahan detailed
several circumstances in which it may make
sense for a court to bypass the “constitutional mer­its” step and proceed directly to
the “clearly established” law issue:
1. where “it is plain that a constitutional
right is not clearly estab­lished but far from obvious whether in fact there is such a right”17;
2. where “the constitutional question is so
fact-bound that the decision provides little
guidance for future cases”18;
3. where it is likely that the con­stitutional
question will soon be decided by a higher
court or by an en banc court19;
4. where the constitutional deci­sion rests
“on an uncertain interpre­tation of state law [,]”
rendering the constitutional ruling “of doubtful
precedential importance”20; and
5. where “qualified immunity is asserted at
the pleading stage, [and] the precise factual
basis for the plaintiff’s claim…may be hard
to identify.”21
Furthermore, as a general propo­sition, following the Saucier two-step dance runs counter
to the Ashwander22 principle of judicial selfrestraint that federal courts decide federal constitutional issues only when necessary, that is,
as a last resort rather than as a frst resort.23
The Court in Pearson was conf-dent that deviation from the Saucier methodology would not
leave sig-nifcant numbers of constitutional issues
unresolved. “Most” constitu­tional issues that are
presented in §1983 actions subject to qualifed
immunity also arise in other types of actions,
such as criminal cases, §1983 municipal liability
actions, and §1983 suits for injunctive relief.24
Practical Considerations
So, how is Pearson likely to impact the
adjudication and litigation of qualifed immunity? Under the Saucier regime, courts were
mandated to adhere to the two-step protocol.
Armed with this knowledge, the attorneys for
the parties knew that they had to be brief and
be prepared to orally argue both Saucier steps,
the con­stitutional merits and the clearly established federal law issue. That certainty was one
of the virtues of the mandatory approach.
By contrast, under Pearson, a court has discretion whether to follow or deviate from the Saucier
methodology. Because a court may choose to follow the two-step approach, the attorneys should,
as pre-Pearson, brief both issues and be prepared
to argue both, even though the court may decide
to bypass the frst step and proceed directly to
the clearly established law issue.
Under Pearson, counsel for the parties may
choose to convince the court as to how it should
exercise its discretion over whether or not to
follow the two-step approach. Plaintiffs generally
favor the two-step approach because resolution
of the constitutional merits in plaintiff’s favor may
enhance the likelihood of the court also reject­ing
the qualifed immunity defense. Then, too, the
two-step approach promotes the development
of constitutional standards, thereby enhancing
the likelihood of plain­tiffs being able to overcome
quali-fed immunity in future cases.
By contrast, defendants gener­ally like to
see the courts proceed directly to the “clearly
established” qualifed immunity issue, because
this approach both enhances the likelihood of
prevailing under quali-fed immunity in the case
at hand, and slows the process of establish­ing
constitutional norms. Neverthe­less, the Pearson Court thought it unlikely that its decision
will result in a “new cottage industry of litiga­
tion” over the standards for exercis­ing this
discretion.25 Only time will tell whether or not
a new “cottage industry” will in fact evolve.
Oh, yes, how did the Pearson case turn out?
The Supreme Court bypassed the constitutional merits issue and, on the clearly established
issue, had no diffculty ruling for the offcers.
The Court found that lower court decisional
law adopting the “consent-once-removed”
doctrine demonstrated that the defendant
offcers’ reliance upon the doctrine was not
unreasonable, even though their own circuit
(the Tenth) had not yet passed on the issue
when defendants conducted their search.
The Court reasoned that because “the divergence of views on the consent-once-removed
doctrine was created by the decision of the
[Tenth Circuit] Court of Appeals in this case, it
is improper to subject [defendants] to money
damages for their conduct.”26
•••••••••••••••••••••••••••••
1. 129 S.Ct. 808 (2009).
2. 533 U.S. 194 (2001).
3. See, e.g., Anderson v. Creighton, 483 U.S. 635 (1987).
4. Pearson, 129 S.Ct. at 818.
5. Id. (quoting Lyons v. Xenia, 417 F.3d 565, 581 (6th
Cir. 2005) (concurring opin­ion)).
6. Id. at 818.
7. Id. at 817.
8. Id.
9. See, Leval, “Judging Under the Consti­tution:
Dicta About Dicta,” 81 N.Y.U.L. Rev. 1249 (2006), cited in
Pearson, 129 S.Ct. at 817.
10. Pearson v. Callahan, 128 S.Ct. 1702 (2006).
11. Pearson v. Callahan, No. 07-751, Tr. of Oral Arg. 36
(Oct. 14, 2008).
12. Id. at 25.
13. Id. at 23.
14. Pearson v. Callahan, 129 S.Ct. at 818.
15. Id.
16. Id. at 821.
17. Id. at 818.
18. Id. at 819.
19. Id.
20. Id. at 819.
21. Id.
22. Ashwander v. TVA, 297 U.S. 288, 347 (1936)
(Brandeis, J. concurring).
23. Pearson, 129 S.Ct. at 821.
24. Id. The Court in Pearson did “not think that relaxation of Saucier’s mandate is likely to result in a proliferation of damages claims against local governments.” Id.
25. Pearson, 129 S.Ct. at 822.
26. Id. at 823.
Reprinted with permission from the April 21, 2009 edition of
the NEW YORK LAW JOURNAL © 2009. Incisive Media US
Properties, LLC. All rights reserved. Further duplication without
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or [email protected]. # 070-04-09-08