Neither State Action Doctrine Nor Implied Preemption Exemption to Antitrust Liability Apply to Actions/Regulatory Schemes of Foreign Nations

From In re Transpacific Passenger Air Transp. Antitrust Litig., 2011 U.S. Dist. LEXIS 49853 (N.D. Cal. May 9, 2011):

This case involves allegations that 26 airlines engaged in a ten year international conspiracy to fix the prices of transpacific air passenger travel, in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. ***

ANA, China Airlines and Thai Airways jointly filed a "Japan Regulatory Brief," moving to dismiss on two grounds. See generally Mot. *** First, they argue that the case must be dismissed under the state action doctrine because "Japan, pursuant to its Air Services Agreement with the United States, its Air Services Agreements with other governments and aeronautical authorities, and its own law and regulatory regime, [] actively supervises" these airlines' fares and charges. *** Second, they argue that the case must be dismissed under the implied preemption doctrine because "Japan, pursuant to its Air Services Agreement with the United States, its Air Services Agreements with other governments and aeronautical authorities, and its own law and regulatory regime, exercises such close and extensive regulatory supervision of international air services into and out of Japan, and the fares and charges therefore, that the conduct of private sector actors cannot . . . be judged reliably by[] U.S. antitrust courts." *** These arguments, although novel and skillfully made, are nonetheless unpersuasive.

The state action doctrine (also known as the Parker doctrine) applies to actions authorized and supervised by U.S. states; it is based on federalism. See Parker v. Brown, 317 U.S. 341, 350-52 (1943) ("In a dual system of government in which, under the Constitution, the states are sovereign, save only as Congress may constitutionally subtract from their authority, an unexpressed purpose to nullify a state's control over its officers and agents is not lightly to be attributed to Congress"); Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 105 S. Ct. 1721, 1729 (1985) ("The Parker doctrine represents an attempt to resolve conflicts that may arise between principles of federalism and the goal of the antitrust laws, unfettered competition in the marketplace"); F.T.C. v. Ticor Title Ins. Co., 504 U.S. 621, 633 (1992) ("[I]n Parker . . . [o]ur decision was grounded in principles of federalism"). As Defendants conceded at the motion hearing, the doctrine has never before been applied to actions authorized and supervised by foreign governments. See Tr. (dkt. 446) at 8-11 (in which Defendants' counsel argued to the Court that this was a case of first impression). The Court does not agree with Defendants that foreign states should benefit from this doctrine, born of federalism, because they "have the core elements of sovereignty." ... This Court will not be the first to extend the state action doctrine so far beyond its original purpose. Cf. Outboard Marine Corp. v. Pezetel, 461 F. Supp. 384, 397 (D. Del. 1979) ("Defendant's motion to dismiss on grounds of state action finds no support in an antitrust law that expressly covers corporations organized under the laws of foreign states.").

Similarly, the implied preclusion doctrine arose in the context of securities law. In Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264, 267 (2007), a group of investors brought an antitrust suit against several investment banks that "had acted as underwriters, forming syndicates that helped execute the IPOs of several hundred technology-related companies." The Court found that there was a "'plain repugnancy' between these antitrust claims and the federal securities law." Id. Accordingly, the Court held that the securities law implicitly precluded the application of the antitrust laws to that case. Id. Although Defendants cite to one case applying the doctrine outside of the securities context, see Mot. at 16 (citing McCarthy v. Middle Tenn. Elec. Membership Corp., 466 F.3d 399, 414 (6th Cir. 2006) (affirming dismissal of electrical cooperative services case based on the same authority relied on in Credit Suisse)), application outside of that context is indisputably rare, see, e.g., Energy Mktg. Servs, Inc. v. Columbia Gas Transmission Grp., LLC, 639 F. Supp. 2d 643, 650-51 (D. W. Va. 2009) (non-securities case, finding that the defendant had "not made a strong case for the potential applicability of Credit Suisse . . . . [which] dealt with the intersection of securities law and antitrust law," and noting that the defendant "failed to cite any case applying the Credit Suisse framework outside of the securities context"). Moreover, Defendants point to no authority applying the implied preclusion doctrine to actions authorized and supervised by foreign governments. Indeed, Defense counsel conceded at the motion hearing that Credit Suisse had never been applied in this context. See Tr. (dkt. 446) at 36:18-23. "[I]mplied preclusion is disfavored." In re Delta/AirTran Baggage Fee Antitrust Litig., 733 F. Supp. 2d. 1348, 1364 (N.D. Ga. 2010) (citing Gordon v. N.Y. Stock Exch., 422 U.S. 659, 682 (1975)). The Court is again unwilling to extend a doctrine so far beyond its original purpose. 15

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