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From Antitrust Law Daily, April 16, 2014

States have standing to pursue damages claims against Apple over e-books pricing

By Jeffrey May, J.D.

As 33 states are preparing to try their damages claims against Apple Inc. for orchestrating a conspiracy among publishers to fix retail prices for electronic books or e-books, the federal district court in New York City has denied Apple’s motion to dismiss the action on standing grounds. Also rejected was Apple’s alternative contention that the states should be required to obtain class certification under Rule 23 of the Federal Rules of Civil Procedure before seeking damages for consumers in their jurisdictions who were harmed by the challenged conduct (In Re: Electronic Books Antitrust Litigation, April 15, 2014, Cote, D.).

The court ruled that the states had standing to bring their parens patriae lawsuit against Apple for the injunctive relief that they had already been awarded and for damages that they would seek at trial in July. The states identified their own and their citizens’ concrete injury from Apple’s conspiracy with the publishers to raise e-book prices.

For purposes of standing under Article III of the U.S. Constitution, the states demonstrated: (1) an actual “injury in fact” based on an e-books market devoid of price competition; (2) causation between Apple’s conduct and the injury to their economies; and (3) a substantial likelihood that the injury would be redressed by a favorable decision. With respect to the “redressability” requirement for standing, the court noted that the states already had received injunctive relief and that the treble damages they sought would send a clear message that a violation of the antitrust laws carries consequences. The court also rejected Apple’s suggestion that there was a distinction between state standing to seek an end to an antitrust violation and standing to seek damages for that violation.

Apple failed to convince the court that the states lacked the requisite stake in a damages action against Apple to meet judicially-crafted prudential standing limitations on the maintenance of parens patriae actions. This was Apple’s principal arguments supporting its motion to dismiss.

Section 4C of the Clayton Act authorized the states to bring the antitrust action in parens patriae on behalf of their citizens. As a result, a finding of the states’ standing under Article III ended the standing inquiry.

“[T]he prudential standing doctrine has no role to play in analyzing the standing of the States to bring their antitrust lawsuit,” the court noted. “Congress has abrogated any prudential standing parens patriae requirements through the enactment of Section 15c [of Title 15].”

Class certification. Apple’s due process rights would not be violated by allowing the complaining states to pursue damages without moving for class certification, the court also ruled. While a class of consumers in jurisdictions other than the litigating states had already been certified, it was not appropriate in this case “to graft the requirements of Rule 23 onto Section 15c’s procedures.”

Section 15c parens patriae actions are not class actions, the court explained. Congress enacted Section 15c with Rule 23's provisions well in mind. Apple’s due process rights were protected by the requirements of the Clayton Act provision, in the court’s view.

The case is No. 1:12-CV-3394.

Attorneys: Gabriel Gervey, David Ashton, and Eric Lipman, Office of the Attorney General of Texas, and Joseph Nielsen and Gary M. Becker, Office of the Attorney General of Connecitcut, for plaintiff states. Theodore J. Boutrous, Jr., Daniel G. Swanson, and Cynthia Richman (Gibson, Dunn & Crutcher, LLP), and Howard Heiss and Edward Moss (O’Melveny & Myers, LLP) for Apple Inc.

Companies: Apple Inc.

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