United States: Unilateral Refusal-To-Deal Claims: The Significance Of The Parties’ Prior Course Of Dealing

Last Updated: September 26 2014
Article by Stephanie Gyetvan and Thomas W. Pippert

In the seminal decision, Aspen Skiing Co. v. Aspen Highlands Skiing Corp.  472 U.S. 585, 611 (1985) the U.S. Supreme Court affirmed a jury verdict for a plaintiff on a Section 2 claim and set forth the standard for unilateral refusal-to-deal claims.  More recent U.S. Supreme Court and Second Circuit cases suggest that Aspen Skiing may reflect the "outer boundary" of liability under Section 2.  What are the markers of that boundary? The Second Circuit has lately emphasized that whether the parties engaged in prior dealings may be the key allegation  in determining whether a refusal-to-deal claim can survive a motion to dismiss. But the FTC is attempting in the Third Circuit to achieve a different result, perhaps aiming for a circuit court split and a future opportunity for Supreme Court review.

In Aspen Skiing, the plaintiff, an independent ski company, sued when its competitor refused to continue to offer an "All-Aspen" ticket that allowed customers access to mountains operated by different ski companies.  Id. at 591-595.  There was no dispute that the competitors had previously offered the All-Aspen ticket for a period of years and that the All-Aspen ticket was profitable for competitors.  In sustaining the verdict for the plaintiff, the U.S. Supreme Court emphasized several factors, including that: (1) "the monopolist had elected to make an important change in distribution that had originated in a competitive market and had persisted for several years"; (2) the "superior quality of the All-Aspen ticket"; (3) the "adverse impact" that defendant's conduct caused the plaintiff; and (4) "most significant[ly]" that the defendant had no 'business justification' for its refusal to continue to offer the All-Aspen ticket.  See id. at 603-08.

Almost twenty years later, the Supreme Court re-visited unilateral refusal-to-deal claims in Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004).  In Trinko, the defendant entered into a consent decree with the FCC over its alleged failure to fill local exchange carriers' service orders in violation of its statutory obligations.  See id. at 404.  A local telephone service customer filed suit, alleging that the defendant's conduct discouraged customers from switching.  See id. at 404-05.  In reversing the reinstatement of the Section 2 claim, the Second Circuit characterized Aspen Skiing as a "limited exception" that is "at or near the outer boundary of § 2 liability."  Id. at 409.  The Trinko  court stressed the significance of the parties' prior dealings, noting that "the complaint does not allege that [the defendant] engaged in a course of dealing with its rivals, or would ever have done so absent statutory compulsion."  Id.  In addition, "the defendant's prior conduct sheds no light upon the motivation of the refusal to deal – upon whether its regulatory lapses were prompted not by competitive zeal but by anticompetitive malice."  Id.

The Second Circuit reached a similar conclusion in In re Elevator Antitrust Litigation, a case in which a plaintiff brought a unilateral refusal-to-deal claim based on defendants' alleged failure to sell competitors elevator parts.  502 F.3d 47 (2d Cir. 2007) (per curiam).  In affirming the grant of a motion to dismiss, the Second Circuit built upon the reasoning of the Trinko court and held that "the unilateral monopolization claims in this case do not fall within the sole exception to the right of refusal-to-deal: the complaint does not allege that defendants terminated a prior relationship with elevator service providers – a change which . . . could evince monopolistic motives."  Id. at 54 (emphasis added).

And most recently, in In re Adderall XR Antitrust Litigation, the Second Circuit affirmed the 12(b)(6) dismissal of a refusal-to-deal claim that was grounded in contract.  See 754 F.3d 128 (2d Cir. 2014).  In Adderall, a drug wholesaler brought a refusal-to-deal claim when the defendant brand drug manufacturer failed to provide generic manufacturers with sufficient supplies of their drugs in violation of a requirements contract.  See id. at 131.  The Adderall court noted that "it is today a common refrain that [Aspen Skiing] lies at or near the outer boundary of Section 2 liability."  Id. at 134 (quotation and alteration omitted).  The Second Circuit explained that the conduct at issue did not give rise to a refusal-to-deal claim because the defendant "did not terminate any prior course of dealing─let alone a presumably profitable one that had, as in Aspen Skiing, originated in a competitive market and had persisted for a period of years."  Id. at 135 (quotation omitted).

So where does this leave refusal-to-deal claims? In the aftermath of Aspen Skiing, the key U.S. Supreme Court and Second Circuit cases that have examined unilateral refusal-to-deal claims have dismissed these claims at the pleading stage.  One of the key factors to these courts' decisions was the lack of any allegation of prior dealings between the parties. At least in the Second Circuit, prior dealings appear to have been elevated to an element of the claim for relief.

What about claims in other circuits?  The answer is not as clear cut.  For example, in a recent amicus curiae brief filed in the Third Circuit, the FTC argued that "neither the Supreme Court nor the Third Circuit has ever held that a prior course of dealing is an essential element of a refusal to deal claim."  Federal Trade Commission's Brief as Amicus Curiae at 11-12, Mylan Pharma., Inc. v. Celgene Corp., No. 14 Civ. 2094 (3d Cir. June 17, 2014).  But even if a circuit court has not opined on this issue, a defendant should still consider relying on Trinko to argue that Aspen Skiing represents a "limited exception" that should not  apply when a party does not allege that a defendant "engaged in a prior course of dealings with its rivals."  Trinko, 540 U.S. at 409.

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