Antitrust Law Daily Wrap Up, ANTITRUST—3d Cir.: Developer’s “inextricably intertwined” injury sufficiently supports monopolization claim, (Nov 13, 2015)

By Greg Hammond, J.D.

The U.S. Court of Appeals in Philadelphia partially vacated a decision by the federal district court in Newark, New Jersey, which found that a developer failed to state an antitrust injury to support its monopolization claims against a local supermarket. Finding the lower court’s view of antirust injury “too narrow,” the appellate court concluded that the developer’s allegations that its injury was “inextricably intertwined” with the supermarket’s anticompetitive conduct was sufficient to support antitrust standing (Hanover 3201 Realty, LLC v. Village Supermarkets, Inc., November 12, 2015, Fuentes, J.).

Hanover 3201 Realty, LLC signed a contract to develop a supermarket on its property in Hanover, New Jersey. However, after Village Supermarkets, Inc. allegedly caught wind of the development, it filed various administrative and court challenges to Hanover’s permit applications. Hanover consequently brought two antitrust claims, including attempted monopolization of and conspiracy to monopolize: (1) the greater Morristown full-service supermarket market; and (2) the greater Morristown full-service supermarket shopping center market, which is described as the market for supermarket rental space. The district court dismissed the monopolization claims, finding that Hanover lacked antitrust standing because it was not a competitor, consumer, or participant in the restrained markets and therefore did not sustain antitrust injury. Hanover appealed.

Antitrust standing. The appellate court first concluded that the lower court took too narrow a view of antitrust injury with regard to the claim for attempted monopolization of the market for full-service supermarkets. Under an “inextricably intertwined” injury theory, Hanover claimed that its harm was the essential component of the defendants’ anticompetitive scheme as opposed to an ancillary byproduct of it, which was sufficient to plead antitrust injury under the U.S. Supreme Court’s decision in Blue Shield of Va. v. McCready, 457 U.S. 465 (1982). In addition, the court found: (1) Hanover adequately alleged a causal connection between the purported antitrust violation and its harm, in that the defendants’ alleged sham petitioning caused Hanover to pay thousands of dollars in attorney fees and costs; (2) the sham legal challenges directly injured Hanover; and (3) there was no potential for duplicative recovery or complex apportionment of damages. Hanover therefore adequately alleged antitrust standing on its claim for attempted monopolization of the market for full-service supermarkets, the court determined.

The appellate court, however, affirmed the dismissal of Hanover’s attempted monopolization claim. Hanover alleged that it directly competes in this market for rental space with defendant Horse and Horsehill Development LLC, which owns the land on which Village Supermarkets’ building resides. The court rejected this argument, finding that Hanover failed to explain how it competes with Horse and Horsehill Development as a supermarket landlord in any meaningful way.

Noerr-Pennington. The defendants next argued that their alleged sham petitioning activity was protected by the Noerr-Pennington doctrine. The court found that based on Hanover’s allegations, the defendants had a policy of filing anticompetitive sham petitions. In particular, Hanover obtained the Flood and Wetlands Permits that the defendants challenged; obtained dismissal of a state court action attempting to nullify site plan zoning approvals; and avoided having to make significant highway improvements, as the defendants purportedly alleged would be needed. Further, Hanover sufficiently alleged that the defendants brought its actions under a policy of harassment with the effect of obstructing Hanover’s access to governmental bodies. Because Hanover sufficiently alleged that the defendants instituted the proceedings and actions with or without probable cause, and regardless of the merits of the cases, Hanover established that the sham exception to Noerr-Pennington immunity applied.

Monopoly power. The defendants lastly contended that Hanover failed to allege facts demonstrating there was a dangerous probability of the defendants achieving monopoly power, because Hanover had not adequately alleged a product or geographic market. Hanover alleged that full-service supermarkets were distinct from other grocery suppliers and that consumers have come to enjoy full-service supermarkets as a one-stop shopping experience that allows them to avoid driving to multiple stores. The court determined that because consumers plausibly treat full-service supermarkets as a distinct submarket, the allegations support the position that the market for full-service supermarkets encompasses all interchangeable substitute products. Hanover’s proposed product market was therefore not implausible at the current stage of litigation.

Lastly, the court concluded that Hanover plausibly alleged a distinct geographic market—Morristown and its neighboring communities. It reasoned that if Village Supermarkets raised its prices in Morristown, it was plausible that only the most diligent and frugal customer would move his or her grocery shopping to a more distant supermarket.

The case number is 14-4183.

Attorneys: John M. Agnello (Carella Byrne Cecchi Olstein Brody & Agnello) for Hanover 3201 Realty LLC. Anthony Argiropoulos (Epstein Becker & Green) and David W. Fassett (Arseneault & Fassett) for Village Supermarkets and Hanover and Horsehill Development LLC.

Companies: Hanover 3201 Realty, LLC; Village Supermarkets, Inc.; Hanover and Horsehill Development LLC

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