Antitrust Law Daily Wrap Up, ANTITRUST—8th Cir.: Claims against propane exchange tank distributors over ‘fill levels’ time-barred, (Aug 25, 2016)

By Jeffrey May, J.D.

A divided U.S. Court of Appeals in St. Louis has upheld dismissal of antitrust claims brought by service station operators and other entities that purchased pre-filled propane exchange tanks directly from distributors Ferrellgas and AmeriGas on statute of limitations grounds. The purchasers’ argument that the limitations period was restarted under the continuing violations doctrine by the distributors’ continuing sales and communications was rejected (In re: Pre -Filled Propane Tank Antitrust Litigation, August 25, 2016, Shepherd, B.).

The direct purchasers alleged that Ferrellgas and AmeriGas conspired to fix prices by maintaining a 2008 agreement to reduce the amount of propane contained in their tanks, while keeping the same price per tank. Their suits, which were consolidated in the federal district court in Kansas City, Missouri, for coordinated pretrial proceedings, followed a 2014 FTC enforcement action challenging the distributors’ conduct and earlier settlements between the distributors and indirect purchasers over the alleged 2008 agreement.

To avoid the statute of limitations defense, the direct purchasers attempted to rely on a continuing violations theory. Under that theory, the statute of limitations is restarted by an overt act of the defendant if the act: (1) is a new and independent act that is not merely a reaffirmation of a previous act, and (2) inflicts new and accumulating injury on the plaintiff.

The direct purchasers alleged two distinct types of overt acts that occurred within the limitations period: (1) defendants’ sales to Plaintiffs at artificially inflated prices; and (2) conspiratorial communications between the defendants regarding pricing and fill levels. However, these activities were not sufficient for a continuing violation under the Sherman Act, the court ruled.

The plaintiffs contended that, under the U.S. Supreme Court’s 1997 decision in Klehr v. A.O. Smith Corp., 521 U.S. 179—a RICO case—each sale the defendant made to the plaintiffs pursuant to the price fixing conspiracy restarted the statutory limitations period. However, the appellate court majority refused to accept Klehr as "a pronouncement of a new principle with respect to what constitutes a continuing violation under the Sherman Act."

The appellate court also was not convinced that its 2014 decision in In re Wholesale Grocery Prods. Antitrust Litig., which concluded that the timeliness question in that case was controlled by Klehr, required reversal in this case. The facts were distinguishable. In Wholesale Grocery, the defending wholesalers committed new and independent overt acts that were more than the mere inertial consequences of the initial non-compete agreement by raising prices, it was noted. "Wholesale Grocery is consistent with other decisions in which we held that in order to restart the statute of limitations, more than the mere performance or reaffirmation of an unlawful agreement is required to satisfy the overt act requirement of a continuing antitrust violation," the court explained. A dissenting judge contended that Klehr was controlling and, therefore, dismissal on statute of limitations grounds should have been reversed.

The plaintiffs did not allege any overt acts within the limitations period that were new and independent acts, uncontrolled by the initial agreement, which purportedly occurred in 2008. The sales of reduced-fill tanks were "the mere, unabated consequences of the original agreement between Defendants to lower the fill level of the propane tanks while maintaining the same price." There were no allegations that the defendants met to fine-tune their agreement, further increased the price of the propane tanks, further reduced the fill levels without reducing the price, or took any other novel overt act in furtherance of the conspiracy within the limitations period, according to the court. "Continued sales pursuant to an earlier unlawful agreement, under which prices were immediately raised, reflect mere reaffirmations of the agreement and are insufficient to restart the limitations period," the court held. Moreover, the purported communications merely reaffirmed and monitored the existing conspiracy and were not sufficient to restart the statute of limitations.

Objectives of Congress. The court also noted that its conclusion "reflects the objectives of Congress in encouraging timely lawsuits for the public good." It pointed to the earlier class action and the fact that there was public knowledge of Ferrellgas and AmeriGas’s alleged conspiracy to lower fill levels without reducing prices. The plaintiffs in this case did not plead overt acts sufficient to show a continuing conspiracy and they raised no new conspiratorial allegations, in the court’s view.

The case is No. 15-2789.

Attorneys: Brent W. Landau (Hausfeld LLP) and Gregory A. Frank (Frank & Bianco LLP) for Hartig Drug Co., Inc. Chris Hellums (Pittman, Dutton & Hellums), Jonathan M. Shaw (Boies, Schiller & Flexner LLP) and Tim J. Riemann (Berkowitz, Oliver, Williams, Shaw & Eisenbrandt, LLP) for Jason Moore's Texaco, LLC d/b/a Moore's Texaco. Emmy Levens (Cohen, Milstein, Sellers & Toll, PLLC) and Isaac Diel (Sharp McQueen, PA) for Glenville Shell LLC. Richard F. Lombardo (Shaffer Lombardo Shurin, Attorneys at Law) and Thomas P. Cartmell (Wagstaff & Cartmell) for Zarco USA, Inc. Alex Kaplan (Susman Godfrey, LLP) and J. Michael Ponder (Cook, Barkett, Ponder & Wolz, LC) for Morgan-Larson, LLC. Jennie Lee Anderson (Andrus Anderson LLP) and Thomas V. Bender (Walters Bender Strohbehn & Vaughan, PC) for Ashville General Store, Inc. Catesby Ann Major (Bryan Cave, LLP) and Daniel M. Wall (Latham & Watkins LLP) for Ferrellgas Partners, LP and Ferrellgas, LP. Brandon J.B. Boulware (German May, PC) and Elizabeth A.N. Haas (Foley & Lardner, LLP) for AmeriGas Partners, LP.

Companies: Hartig Drug Co., Inc.; Jason Moore's Texaco, LLC; Glenville Shell LLC; Zarco USA, Inc.; Morgan-Larson, LLC; Ashville General Store, Inc.; Ferrellgas Partners, L.P.; Ferrellgas, L.P.; AmeriGas Partners, LP; AmeriGas Propane, Inc.; AmeriGas Propane, LP

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