On The Case

In rare bipartisan move, 31 states ask SCOTUS to undo ban on consumer antitrust claims

(Reuters) - America’s gaping political divide turns out to be bridgeable – at least when state politicians decide to rally around the cause of overturning U.S. Supreme Court precedent that protects monopolists from consumer suits.

Last week, 31 state attorneys general from across the political spectrum united in an amicus brief asking the Supreme Court to overturn its 1977 precedent in Illinois Brick v. Illinois, which blocks downstream purchasers from asserting antitrust claims under federal law. The state AGs – including GOP stalwarts from Texas and Florida as well as activist Democratic AGs from New York, California and Massachusetts – argue that the Supreme Court’s Illinois Brick doctrine was ill-advised, judge-made policy that has been repudiated by decades of antitrust litigation under state laws passed in its wake.

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“Illinois Brick is an atextual ruling based on a judicial perception of the reliability and burdensomeness of proving indirect purchaser damages and of the resulting incentives for suit,” the AGs’ brief said. “Since 1977, the economic theory and methodology used to calculate antitrust damages have evolved considerably. And most states now authorize indirect-purchaser claims under state antitrust law. That has led to decades of judicial experience in indirect-purchaser cases with damages analyses, which can no longer be categorically condemned as unreliable or unadministrable.”

It’s no coincidence, of course, that federal antitrust law gives state AGs a right to sue on behalf of consumers in so-called parens patriae litigation. If the AGs pull off the unlikely feat of persuading the justices to renounce the court’s long-established precedent, they’ll be able to bring sweeping antitrust suits seeking the treble damages available under federal law.

Interestingly, neither of the actual parties in the case – a consumer class action by purchasers who claim Apple overcharged for iPhone apps – has asked the Supreme Court to do what the AGs want. As I’ve explained, Apple’s Supreme Court lawyers at Latham & Watkins contend that the 9th U.S. Circuit Court of Appeals misread Illinois Brick and other Supreme Court cases when it reinstated the consumers’ suit. Apple, they argue, is merely a platform for app developers to distribute their products. Under Illinois Brick, Apple said in its Supreme Court merits brief, app purchasers can’t sue Apple for passing through the allegedly inflated cost of apps.

The consumers, represented in the lower courts by Wolf Haldenstein Adler Freeman & Herz and at the Supreme Court by Kellogg Hansen Todd Figel & Frederick, argue that the 9th Circuit properly interpreted Illinois Brick – not that Illinois Brick precedent should be erased. Their brief said app purchasers can sue under Illinois Brick because they bought apps directly from Apple, which has the power to set prices for app developers’ products. (I’m stripping all of the nuance from arguments by Apple and the consumers, but you get the idea.)

The state AGs’ brief, said consumers’ lawyer Mark Rifkin of Wolf Haldenstein, actually came as a surprise to their side. Rifkin said he and Supreme Court counsel of record David Frederick of Kellogg Hansen didn’t even know state AGs were working on an amicus brief, let along that the brief would be submitted by a coalition of fervent Republican and Democratic AGs. He said it’s also notable that the AGs who signed the brief come from the 35 or so states that have passed state antitrust laws to counter Illinois Brick and states whose antitrust laws don’t allow claims by indirect purchasers. (A bipartisan Antitrust Modernization Commission, created by Congress just after the turn of the century, recommended in a 2007 report that Congress overturn Illinois Brick precedent, but that obviously hasn’t happened.)

Rifkin said it would be hard for the justices to ignore the large and politically diverse coalition of AGs calling for the end of Illinois Brick, even though the parties haven’t made that argument. The AGs’ brief suggested that the Supreme Court could order Apple and the consumers to brief overturning Illinois Brick. But even if the court doesn’t order supplemental briefing, the AGs said, the justices previously reconsidered precedent solely at the urging of amici in 1971’s Blonder-Tongue Laboratories v. University of Illinois.

“If for no reason other than a matter of courtesy, the court should consider the AGs’ position,” said Rifkin. “This will certainly add a colorful element to oral argument.” Rifkin said his side hasn’t yet figured out what to say about overturning Illinois Brick precedent since it has argued throughout the case that Illinois Brick permits claims by the app purchasers. The AGs, meanwhile, took no position in their brief about the effect on the app purchasers’ case of knocking down Illinois Brick.

I emailed the AGs’ counsel of record, Kyle Hawkins of the Texas state attorney general’s office, to ask how the coalition came together. He didn’t respond. Apple counsel of record Daniel Wall of Latham said in an email that he was traveling and unavailable for comment.

I should point out that Apple has plenty of amicus support for its reading of Illinois Brick, including a brief from the Justice Department, which has also requested time to present its views at oral argument. The U.S. solicitor general’s office argued that the Apple case shows exactly why the Supreme Court was right to worry about duplicative damages when the court set its Illinois Brick prohibition on treble-damages claims by indirect purchasers.

The Supreme Court hasn’t yet set a date for oral argument but it is expected to take place in November.