Wednesday, July 06, 2011

Carpet Dealer’s Renewed Refusal to Deal Claims Were Viable

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

A carpet dealer, its owner, and a manufacturer-supplier could have unreasonably restrained trade in violation of Sec. 1 of the Sherman Act by slandering and refusing to deal with a competing dealer, the U.S. Court of Appeals in Cincinnati has ruled.

Allegations of refusals to deal that took place since the execution of a settlement agreement resolving antitrust charges stemming from a conspiracy among the defendants that began nearly a decade earlier were sufficient to state a claim under the pleading standard set forth in Bell Atlantic Corp. v. Twombly (2007-1 Trade Cases ¶75,709). Dismissal of the competitor’s claims (2011-1 Trade Cases ¶77,504) was therefore reversed and remanded.

Settlement Release

The lower court properly concluded that the competitor’s antitrust claims were beyond the scope of a settlement release entered into by the competitor, the defending dealer, and that dealer’s owner in March 2007, to the extent that the claims were based on conduct occurring after the date of the settlement, the appellate court held.

When the defending dealer and its owner settled with the complaining competitor, they bargained away their liability for refusals to sell occurring in 1999, 2005, and 2006. However, they did not withdraw from the conspiracy, which was presumptively ongoing, the court explained. As co-conspirators with the carpet supplier, the defendants remained liable for the supplier’s post-release actions that furthered the conspiracy, including a May 2007 refusal to sell.

Sufficiency of Allegations

The complaining dealer specifically alleged both an agreement to restrain trade and acts that furthered the conspiracy within the limitations period, the appellate court decided. The carpet supplier’s proffering of alternative explanations for its refusals to sell to the complaining dealer could not function to undo the adequacy of the dealer’s pleading.

To survive a motion to dismiss, the complaining dealer needed to allege only that the defendants’ agreement plausibly explained the refusals to sell, not that the agreement was the probable or exclusive explanation, in the court’s view.

The decision is Watson Carpet & Floor Covering, Inc. v. Mohawk Industries, Inc., 2011-1 Trade Cases ¶77,505.

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