RICO / Sherman Act — Statute of Limitations — Non-Conspiracy Claims — “Acts That Are Merely Unabated Inertial Consequences (of A Single Act) Do Not Restart The Statute Of Limitations”

Z Techs. Corp. v. Lubrizoil Corp., 2014 U.S. App. LEXIS 9597 (6th Cir May 23, 2014):

Z Technologies alleges that The Lubrizol Corporation violated the Sherman, Clayton, and analogous state-law antitrust acts by raising prices and enforcing a non-compete clause following Lubrizol's acquisition of the assets of another  [**2]  company, which established a monopoly in the market for petroleum wax-based oxidates. Lubrizol moved to dismiss the claim on the pleadings. The primary question presented on appeal is whether Z Technologies's claims are barred by the statute of limitations. Z Technologies contends that the continuing violations and hold-and-use doctrines extend the statute of limitations on the Sherman and Clayton Acts, respectively.  [*2] The district court rejected the continuing-violations argument after determining that the increase in prices by Lubrizol and the alleged implementation of a non-compete clause did not constitute a "new and independent" injury. The district court likewise found the hold-and-use argument inapplicable because Lubrizol's alleged implementation of a non-compete clause from the acquisition agreement was not a "new use" of an "asset" extending the statute of limitations. As the district court correctly rejected Z Technologies's continuing-violations and hold-and-use arguments, we AFFIRM.

***

2. Sherman Act Claim

Z Technologies first alleges a violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2. The district court determined that the statute of limitations prevented the claim from proceeding. We agree.

The Sherman Antitrust Act makes it an offense to "monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States." Id. Claims brought under the Act are subject to a four-year statute of limitations from the date "the cause of action accrued." Id. § 15b; see also Zenith Radio Corp. v. Hazeltine Research Inc., 401 U.S. 321, 338 (1971).

Z Technologies alleges a "continuing antitrust" violation; that is, a violation where Z Technologies's interests "[we]re repeatedly invaded." Peck v. Gen. Motors Corp., 894 F.2d 844, 849 (6th Cir. 1990) (per curiam). When a continuing violation occurs, "the statute of limitations runs from the commission of the act that causes the plaintiff's damage." Id. As the Peck court further clarified, "even when a plaintiff alleges a continuing violation, an overt act by the defendant is required  [*9] to restart the statute of limitations and the statute runs from the last overt act." Id. (emphasis added) (internal citation and quotation marks omitted). Before assessing, however, whether the overt act requirement has been satisfied in the present case, we must determine whether the continuing violations doctrine even applies to price increases following a merger or acquisition. We conclude that it does not.

A. The Continuing Violations Doctrine Does Not Apply to Price Increases Following a Merger or Acquisition

Z Technologies argues that the continuing violations doctrine applies to a price increase following a merger or acquisition.2 There is simply no support for this contention. With only two exceptions, all of the cases cited by Z Technologies in which a price increase extended the  [**6]  statute of limitations involved antitrust conspiracy claims,3 and the excepted cases involved monopolization claims where a party unilaterally monopolized a market or undertook action, in addition to price increases, to monopolize a market.4 None of the cited cases indicate that a price increase following a merger or acquisition, by itself, extends the statute of limitations.

2   Z Technologies discusses  [*10] extensively two district court cases, In re Skelaxin (Metaxalone) Antitrust Litig., No. 1:12-md-2343, 2013 WL 2181185, at *27-29 (E.D. Tenn. May 20, 2013), and In re Wholesale Grocery Products Antitrust Litig., 722 F. Supp. 2d 1079, 1086-89 (D. Minn. 2010). As both of these cases involved price increases brought in conspiracy claims, not in merger monopolization or unilateral monopolization claims, they provide little guidance as to whether price increases that are not the result of two companies conspiring together should be treated as an overt act.

3   See In re Cotton Yarn Antitrust Litig., 505 F.3d 274, 291 (4th Cir. 2007) (price-fixing conspiracy); Morton's Mkt., Inc. v. Gustafson's Dairy Inc., 198 F.3d 823, 828 (11th Cir. 1999) (price-fixing conspiracy); In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1171-72 (3d Cir. 1993) (conspiracy by several railroads); In re Skelaxin (Metaxalone) Antitrust Litig., 2013 WL 2181185, at *6-10 (conspiracy to restrain trade); In re Wholesale Grocery Prods. Antitrust Litig., 722 F. Supp. 2d at 1082-83 (market and customer allocation conspiracy); Molecular Diagnostics Labs. v. Hoffmann-La Roche Inc., 402 F. Supp. 2d 276, 278-79 (D.D.C. 2005)  [*11] (conspiracy to maintain monopoly); In re K-Dur Antitrust Litig., 338 F. Supp. 2d 517, 525-26 (D.N.J. 2004) (conspiracy to restrain trade by delaying release of generic drug); In re Buspirone Patent Litig., 185 F. Supp. 2d 363, 365-67 (S.D.N.Y. 2002) (conspiracy to restrain trade by listing nonapplicable patent); In re Nine West Shoes Antitrust Litig., 80 F. Supp. 2d 181, 183-85 (S.D.N.Y. 2000) (price-fixing conspiracy).

4   The first case cited by Z Technologies that does not involve a conspiracy claim is Meijer, Inc. v. 3M, No. 04-5871, 2005 WL 1660188 (E.D. Pa. July 13, 2005), but that case involved an attempt to maintain a monopoly by charging supra-competitive prices to suppress competition, not a merger acquisition resulting in a monopoly like in the present action. Id. at *4. The second case is Free FreeHand Corp. v. Adobe Systems Inc., 852 F. Supp. 2d 1171 (N.D. Cal. 2012). There, contrary to Z Technologies's contention, the district court did not extend the statute of limitations solely on the basis of price. Instead, the district court determined that ceasing development of software, channeling existing customers to a different software, and bundling software constituted new post-merger  [*12] acts that extended the statute of limitations. Id. at 1187. These types of overt acts that the district court relied upon in Free FreeHand are absent in the present case.

The focus on conspiracy cases for a continuing violations offense makes intuitive sense. In a conspiracy, each price increase requires further collusion between multiple parties to maintain the monopoly; in a merger-acquisition case, however, the cause of harm is the merger itself. The subsequent price increases do not further the company's monopoly because the company has already obtained the monopoly.

Observations from our sister circuits, as well as limited guidance from the Supreme Court, support our conclusion that price increases in the merger-acquisition context do not extend the statute of limitations. In Concord Boat Corp. v. Brunswick Corporation, the Eighth Circuit noted that "[c]ontinuing violations have not been found outside the RICO5 or Sherman Act conspiracy context . . . because acts that simply reflect or implement a prior refusal to deal or acts that are merely unabated inertial consequences (of a single act) do not restart the statute of limitations." 207 F.3d 1039, 1052 (8th Cir. 2000) (internal  [*13] citation and quotation marks omitted). Similarly, while the Supreme Court has never directly limited the scope of the continuing violations doctrine, it appears to have employed the doctrine only in conspiracy and  [**7]  monopolization cases not involving mergers or acquisitions. See, e.g., Klehr v. A.O. Smith Corp., 521 U.S. 179, 189 (1997) (RICO conspiracy where the Court observed "in the case of a 'continuing violation,' say, a price fixing conspiracy that brings about a series of unlawfully high priced sales . . . each sale to the plaintiff, starts the statutory period running again" (emphasis added) (internal quotation marks omitted)); Zenith, 401 U.S. at 338-39 (involving a "continuing conspiracy to violate the antitrust laws"); Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 483-84 (1968) (applying continuing violations doctrine in a monopolization case not involving merger or acquisition); see also Phillip Areeda and Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application, ¶ 320, 297 (3d ed. 2007) ("While the cases are not consistent, they are significantly more likely to restart the statute when the action complained of is conspiratorial  [*14] rather than unilateral.").

5   See Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-68.

Similarly, this court has applied the continuing violations doctrine only to conspiracy claims, see, e.g., Peck, 894 F.2d at 849; Barnosky Oils, Inc. v. Union Oil Co. of Cal., 665 F.2d 74, 81 (6th Cir. 1981), and to unilateral monopolization claims when a party already possesses a monopoly and takes action to preserve the monopoly, see, e.g., DXS, 100 F.3d at 467. We have not discovered a case, let alone a Sixth Circuit authority, nor has Z Technologies identified one, in which the continuing violations doctrine has been applied to price increases following a merger or acquisition. Taken altogether, it is clear from the complete absence of supporting case law that the continuing violations doctrine does not apply to such claims.

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