West Virginia Business Litigation Lawyer & Attorney : Law Office of Jeffrey V. Mehalic : Charleston, Huntington, Parkersburg

    In addition to Paul Ratchford’s lawsuit claiming that he was forced out of his job as president of The Greenbrier, CSX Transportation, Inc. is also defending an action filed on March 25, 2008 by Archer Daniels Midland Company, which alleges that CSX and four other railroads violated federal and state antitrust laws.  The other defendants are Union Pacific Railroad Company, BNSF Railway Company, Norfolk Southern Railway Company, and Kansas City Southern Railway Company.   Archer-Daniels-Midland Company v. Union Pacific Railroad Company, et al., Civil Action No. 08-CV-00857 (D.Minn.).

    Here is the complaint, which was filed in United States District Court in Minnesota, and which alleges that the railroads engaged in “a conspiracy to fix prices of rail fuel surcharges” in violation of the Sherman Act, the Clayton Act, and Minnesota antitrust law, and “imposed upon ADM rail fuel surcharges that constitute unreasonable ‘practices’” because they did not correspond with actual fuel costs and were in excess of actual fuel costs. 

    ADM is not alleging that the rail fuel surcharges are illegal; according to the complaint, the surcharges are "itemized charges for transportation services assessed by railroads to shippers -- including ADM -- that are designated for the sole purpose of recovering unanticipated costs associated with sharp increases in fuel prices."   Rather, ADM's allegation is that the railroads improperly conspired to fix the rail fuel surcharge prices and agreed not to compete against each other with their prices:

Defendants used the rail fuel surcharges as a means of extracting profit, rather than for their designated purpose of recovering unexpected costs from fuel... ADM has paid over a quarter of a billion dollars in rail fuel surcharges to Defendants since 2003.

CSX has denied that its fuel surcharge practices violate any laws or regulations.  Todd Sullivan wrote about the lawsuit at the stock investing blog, Seeking Alpha, and suggests that ADM's lawsuit may serve as a model for smaller shippers who are affected by high fuel costs more acutely than large corporations like ADM.  The Sherman and Clayton Acts provide for treble damages if a plaintiff prevails under those statutes.

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    The Fourth Circuit Court of Appeals has ruled that Novell has standing to pursue two antitrust claims against Microsoft. Novell, Inc. v. Microsoft Corp., 2007 WL 2984372 (October 15, 2007). 

    Novell, which manufactured WordPerfect and Quattro Pro until 1996, claimed that Microsoft required original equipment manufacturers to pre-install its office-productivity software, such as Word and Excel, as a condition of getting Windows licenses.  Novell alleged that Microsoft’s conduct decreased Novell's market share and its products’ popularity, thus causing it damage.  However, because Novell did not directly compete against Microsoft in the operating system market, Microsoft challenged Novell’s standing to bring the claims.

    Novell also asserted four claims against Microsoft in which it alleged harm to competition in the software-application market, where Novell did compete directly against Microsoft. 

    The Court pointed out that as all of Novell’s claims arose before 1996, the claims, which Novell asserted in 20056, were time-barred unless the applicable four year statute of limitations was tolled by an action brought by the Department of Justice in 1998.  The Clayton Act provides that government antitrust proceedings toll the statute of limitations for private antitrust proceedings that are “based in whole or in part on any matter complained of” by the government.

    The Court concluded that even though Novell was neither a consumer nor a competitor, Microsoft’s allegedly anticompetitive conduct in the operating system market was “directly aimed” at Novell, which gave Novell standing to pursue its two claims.  Further, Novell’s claims "echoed” the government’s theory in the 1998 complaint, and therefore were not barred by the statute of limitations. 

    Novell’s other four claims alleged injury to competition in the office-productivity-applications market.  The Court concluded that those claims did not overlap with the DOJ’s complaint, and were also barred by the “different markets” rule, which requires a private plaintiff’s claims to be “in markets identical to, or completely encompassed by, those at issue in the earlier government suit.”  Because the office-productivity-applications market was neither identical to nor encompassed by the PC operating system market, Novell’s claims were barred.

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    In June, Mylan Laboratories Inc. and UDL Laboratories, Inc., one of its subsidiaries, sued their former counsel, Eliot G. Disner and his firm, Eliot G. Disner, P.C., in the Circuit Court of Monongalia County, West Virginia (Morgantown), for what they claimed was negligence and breach of contract regarding advice he provided on antitrust issues.  Here's the complaint. 

    Mylan alleges that Disner committed malpractice in three ways.  First, he "allowed Mylan to enter into the exclusive supply agreement with Profarmaco/GYMA [who were to supply Mylan with the "active pharmaceutical ingredients" for lorazepam and clorazepate for the generic versions of the drugs on an exclusive basis] without fully investigating the issues or apprising Mylan of the substantial risks."  Mylan also alleges that Disner allowed it "to engage SST/FIS [another supplier of lorazepam and clorazepate] in discussions on a similar exclusive arrangement, introducing a damaging horizontal element into an antitrust equation."   Finally, Mylan alleges that after the FTC initiated an investigation into Mylan's conduct, Disner "offered no advice to mitigate the problems facing Mylan or suggesting the risks that Mylan faced -- instead advising that the FTC would accept a harmless consent decree, that the FTC had no ability to seek damages, and that the states would drop their claims when the FTC dropped its claims."

    According to the complaint, after acting on Disner's advice, Mylan was hit with an investigation by the FTC, which turned into an action seeking disgorgement of Mylan's profits of more than $120 million on certain products.  Mylan was also sued by several states, various direct purchasers, who obtained class certification for their suit, and several indirect purchasers.  Mylan ended up settling with the FTC, the states, and the indirect purchasers for $147 million, and also paid $14.6 of the $35 million settlement of direct purchasers' class action.  In 2005, Mylan went to trial against four of the plaintiffs who opted out of the class settlement, and was found to be liable for slightly more than $12 million.  But with attorney's fees and treble damages, the plaintiffs seek judgment for approximately $80 million.  Finally, Mylan alleges that it has spent more than $55 million in attorney's fees and expenses for itself and for Profarmaco/ GYMA, which Mylan indemnified.

    Disner, who is representing himself and his firm, last month removed the case to the Northern District of West Virginia where it is pending before Chief District Judge Irene M. Keeley.  Mylan Laboratories, Inc. v. Eliot G. Disner, Civil Action No. 1:07-CV-00095-IMK.  The defendants' answer or responsive pleading is due by August 24. Continue Reading...

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    Daily Kos, perhaps the best known of the liberal blogs, offers a political perspective on the reason the Department of Justice has challenged the Charleston Gazette's 2004 purchase of the Daily Mail:

    "Of all the media mergers that have happened over the last six years, the Justice Department decides to punish a paper known for its investigative journalism, and restore one known for parroting conservative talking points.  How's that for a coincidence?"

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    In 2004, the Daily Gazette Company, publisher of the Charleston Gazette (the morning newspaper), purchased the Daily Mail  (the afternoon newspaper), from MediaNews Group, Inc.  Yesterday, the United States Department of Justice filed an antitrust lawsuit against the Daily Gazette Company and MediaNews Group, Inc., seeking to overturn the sale.  According to the Associated Press, the DOJ contends that the sale violated  three provisions of antitrust law:

    "The first argues the transaction resulted in a monopoly over the sale of daily papers and advertising in Charleston. The second argues the transaction eliminated the incentives and ability of MediaNews to compete with the Gazette. The third argues the Gazette will continue to maintain unlawful monopoly power."

    The DOJ seeks to restore the competition between the newspapers by reversing the sale and returning the papers (and their parent companies) to their prior positions.

    Lawrence Messina, another AP reporter, posted about the lawsuit on his blog, Lincoln Walks at Midnight, and has links to the stories appearing in today's editions of the Gazette and the Daily Mail.

    Under the purchase agreement, MediaNews no longer shares in the Daily Mail's profits, but provides "management and supervision" for a fee. The newspapers operated under a Joint Operating Agreement from 1958 until the sale in 2004.

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