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From Antitrust Law Daily, April 9, 2014

Florida must allege sufficient in-state contacts to pursue state antitrust law claim against optical disk drive makers

By Jeffrey May, J.D.

The State of Florida’s claim for injunctive relief under state law in an action against optical disk drive (ODD) manufacturers for conspiring to rig bids and fix prices for the drives has been dismissed by the federal district court in San Francisco. Florida was, however, granted leave to amend its Florida Antitrust Act (FAA) claim in order to allege sufficient facts to permit application of Florida law (In re Optical Disk Drive Antitrust Litigation, April 8, 2014, Seeborg, R.).

The defendants contended that application of the FAA to their conduct violated the Due Process Clause of the U.S. Constitution. Florida had effectively conceded that the complaint lacked allegations that any of the purportedly assigned ODD purchases (on which Florida’s claims were based) were made in Florida; that any defendant had offices, ODD sales employees, or any type of relevant presence in Florida; or that any alleged misconduct took place in Florida.

According to the court, where purchases of price-fixed goods did not take place within a state, in order to avoid violating Due Process, state antitrust law can only be applied when more than a de minimis amount of a defendant’s alleged conspiratorial activity leading to the sale of price-fixed goods to plaintiffs took place in the state. Florida was permitted to amend its complaint to allege that direct sales occurred to its assignors in Florida or that other alleged conspiratorial activity related to those sales took place in the state. However, the court advised the state to amend its complaint “only if it has a good faith basis to do so.”

The court rejected Florida’s contention that dismissal on Due Process grounds was improper because the defendants failed to show a conflict between Florida law and the law of some other state. The interest of other states was a choice-of-law issue, not a Due Process issue, according to the court.

Florida’s invocation of its “sovereign enforcement” powers did not lessen its obligation to establish connections sufficient to satisfy due process, the court also ruled. Whether Florida was enforcing its laws as a damage claimant or a sovereign, the constitutional issues were the same, it was noted.

The defendants also questioned the state’s standing based on the assignment of the claims. However, Florida made adequately detailed and plausible allegations that the assignments on which it relied to establish standing for both its Sherman Act claim and its FAA claim existed. The court noted that the defendants would be able to bring a summary judgment motion on the standing issue, if they believed that the assignments were legally insufficient.

The court also concluded that it would be premature to rule of the defendants’ statute of limitations defense.

This is Case No. 3:13-cv-1877-RS (MDL No. 2143).

Attorneys: Lizabeth A. Brady, Office of the Florida Attorney General, for State of Florida. John F. Cove, Jr. (Boies Schiller & Flexner LLP) for Sony Corp. Ameri Rose Klafeta (Eimer Stahl LLP) for LG Electronics, Inc. Jane E. Willis (Ropes & Gray LLP) for Hitachi-LG Data Storage, Inc. Casandra Leann Thomson (Latham & Watkins) for Toshiba Corp. Evan Werbel (Baker Botts LLP) for Koninklijke Philips N.V.

Companies: Sony Corp.; LG Electronics, Inc.; Hitachi-LG Data Storage, Inc.; Toshiba Corp.; Koninklijke Philips N.V.

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