6 minute read | January.26.2024
The U.S. Supreme Court declined to review a district court decision upholding the validity and enforceability of a judgment-sharing agreement (JSA) among defendants in an antitrust civil price fixing action.
The decision not to take up the appeal may make it more difficult as a practical matter for plaintiffs to prevent defendants from using JSAs to manage settlement incentives created by mandatory treble damages and joint and several liability in antitrust cases.
The unique procedural context of the case limits the implications of the Supreme Court’s order. Even so, the high court’s action in Amory Investments LLC v. Tyson Foods may signal that the Supreme Court has little interest in tipping the settlement incentive scales further in plaintiffs’ favor in multi-defendant antitrust conspiracy cases.
Federal antitrust enforcement has long relied on private antitrust litigation to accomplish the law’s goals. To encourage private enforcement and to deter violations, antitrust law provides both for treble damages and for joint and several liability among defendants without the right of contribution.
Thus, in an alleged multi-year price-fixing conspiracy – like the broiler chicken price fixing conspiracy alleged in the Amory case – any defendant might face a catastrophic damages award, even for minor involvement in the scheme.
For example, in November 2023, a Missouri jury awarded plaintiffs almost $1.8 billion in damages before trebling against three defendants in an antitrust conspiracy case challenging certain real estate commission rules.
Because of joint and several liability, the plaintiffs in that case can seek the full amount of the award from any of the three defendants. Moreover, the absence of contribution rights means the defendants against whom the judgment is enforced cannot force settling defendants to indemnify non-settling for any portion of the judgment. The potential for trebled damage awards accounting for codefendants’ liability in antitrust cases can incentivize defendants to settle cases with little or no merit.
JSAs like the one at issue in Amory Investments allocate responsibility among the defendants in the event of a damages award. This sharing of risk is one avenue defendants have pursued to mitigate the pressure to settle weak antitrust cases and, thereby, counterbalance leverage that the law provides to antitrust plaintiffs. Antitrust plaintiffs argue, however, that this counterbalancing undermines the public policy behind private antitrust enforcement as well as public policy favoring settlements.
District courts tend to reject these public policy arguments, yet no higher court had weighed in on the debate. Accordingly, antitrust insiders have been watching this case closely.
Shortly after plaintiffs filed the Amory case, fourteen defendants entered into a JSA that:
In addition, a settling signatory would be excused from its agreed ultimate “market share liability” for any plaintiff’s judgment only if, as part of the relevant settlement, that plaintiff agreed to reduce any future trial judgment against remaining defendants by the settling defendant’s market share percentage.
Plaintiffs challenged these provisions as contrary to public policy and thus unenforceable. Additionally, plaintiffs argued that the provisions constituted independent Sherman Act violations, characterizing the JSA as a “group boycott.”
The district court denied plaintiffs’ challenge, noting that nearly every other court to consider the legality of such provisions found them permissible.
The district court acknowledged that the JSA provisions could reduce the sword of Damocles impact of joint and several liability and thus make it “more difficult for a plaintiff to settle on more advantageous terms.” The court, however, explained that such agreements do not violate public policy unless they prohibit or discourage defendants from settling individually or unless they alter plaintiffs’ rights. The court found that the JSAs in Amory did not deter individual defendants from settling and that plaintiffs could preserve their full remedies at law by pursuing the case to judgment against any or all defendants.
The judge further concluded that the JSA did not constitute a boycott under the Sherman Act in part because, while the agreement required the defendants to share responsibility for a judgment, each defendant remained free to settle with any plaintiff on any terms.
The broiler chicken cases remain pending, meaning that plaintiffs could appeal the district court’s order solely by invoking the “collateral order doctrine.” They argued that the public interests involved in their appeal are so important – and plaintiffs’ practical ability to raise those issues in a traditional post-trial appeal is so limited – that the Seventh U.S. Circuit Court of Appeals should hear plaintiffs’ appeal while the case is ongoing.
The Seventh Circuit, however, rejected plaintiffs’ appeal in a terse two-paragraph opinion, holding that “the interests plaintiffs raise do not meet the [collateral order] doctrine’s high bar.”
Plaintiffs then turned to the Supreme Court to review the Seventh Circuit’s decision not to take the appeal. The Supreme Court, however, also declined to take up the case, leaving the district court’s decision in place.
Neither the Supreme Court’s certiorari denial nor the Seventh Circuit’s opinion on intermediate appeal addressed plaintiffs’ public policy arguments. While there is no higher court blessing of JSAs, the Supreme Court’s action makes it more difficult for antitrust plaintiffs to challenge antitrust defendants’ use of JSAs because:
For now, one can expect that antitrust defendants will continue to use JSAs and that plaintiffs will continue to argue that such agreements undermine the public policy behind Congress’s choice to provide for joint and several liability. Any defendant considering a JSA should seek counsel in negotiating the agreement.