Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Court declines to enter judgment without discovery to evaluate tolling doctrine, continuing violation theory, (Jan 19, 2024)

By Justin Marcus Smith, J.D.

In this antitrust dispute between competing hospital bed manufacturers, defendant Hill-Rom Holdings, Inc. clarified it was not challenging the viability of Linet Americas, Inc.’s antitrust claims based on a statute of limitations affirmative defense.

Arguments about the applicability of the discovery rule or continuing violation theory to the accrual of antitrust claims could not be decided on a defendant’s motion for judgment on the pleadings, held the federal district court in Chicago. Neither theory involved affirmative tolling of the limitations period because both theories were accrual-based. The theories turned on questions of fact. The court accordingly declined to enter judgment on the pleadings without the benefit of a complete factual record (Linet Americas, Inc. v. Hill-Rom Holdings, Inc., January 17, 2024, Daniel, J.).

Background. Linet Americas, Inc. (Linet), the U.S. subsidiary of one of Europe’s largest hospital bed manufacturers, alleged that Hill-Rom Holdings, Inc., Hill-Rom Company, Inc., and Hill-Rom Services Inc. (collectively, Hillrom), comprising a U.S. -based competitor, engaged in anticompetitive conduct including the use of Corporate Enterprise Agreements (CEAs), a “closed digital connectivity” ecosystem, threats to discourage CEA disclosure, and disparagement. Linet asserted claims of unlawful monopolization and exclusive dealing in violation of the Sherman Act; unlawful exclusionary bundling in violation of the Clayton Act; anticompetitive conduct in violation of the Illinois Antitrust Act, 740 ILCS 10/3; and unfair competition and unfair or deceptive acts or practices in violation of the Illinois Consumer Fraud Act, 815 ILCS 505/1. As part of its complaint, Linet invoked certain accrual and tolling doctrines that affect the running of the limitations period. These included the doctrine of fraudulent concealment, the discovery rule, and the continuing violation doctrine.

After Hillrom filed an answer, it moved for judgment on the pleadings under Fed. R. Civ. P. 12(c). Hillrom’s motion focused on challenging Linet’s affirmative, fraud-based “tolling claims,” specifically, the discovery rule and the doctrine of fraudulent concealment, as insufficiently pleaded under Fed. R. Civ. P. 9(b).

Discovery rule. The court declined to determine when Linet’s claims accrued under the discovery rule without the benefit of discovery. The court said Hillrom tried to frame fraudulent concealment as an affirmative claim and asked the court to enter judgment limiting the scope of discovery and recoverable damages in connection with it. The court began its analysis noting that the viability of a given legal theory is learned through discovery. Legal viability is not a ground for judgment at the pleadings stage. The court continued that fraudulent concealment is a tolling doctrine grounded in the general equity principle of equitable estoppel. The court said winnowing of claims was not an appropriate task at the pleadings stage, and plaintiffs do not bear the burden of pleading that an exception to a possible affirmative defense applies. Hillrom could address discovery concerns in the context of a R. 26(c) motion for a protective order.

Turning to the merits of Hillrom’s arguments, the court said the discovery rule is a doctrine of accrual that postpones the beginning of the limitations period. It is not a tolling doctrine. To the extent accrual of a federal claim is generally a question of fact, the court assessed Linet’s diligence in light of a 2015 suit Hillrom cited. In that suit, UHS sued Hillrom for a similar alleged bundling scheme, but the court found it involved “different customer targets,” and challenged agreements did not include the “strategic overlay” that Linet was now alleging facilitated Hillrom’s ability to monopolize the Relevant Markets at issue here. More specifically, Linet alleged here that Hillrom introduced the CEAs specifically to thwart only Linet, and they involved confidentiality agreements which kept their nature hidden from Linet. Even assuming Linet should have formed suspicions from the UHS suit, the court said it remained “unclear at this stage” whether any reasonable Linet investigation would have revealed enough evidence to pursue an antitrust claim any earlier than it had here.

As to Hillrom’s argument that Linet could not rely on the doctrine of fraudulent concealment to extend the four-year limitations period, the court held that Hillrom bore the burden on the facts. Hillrom had to show there was no conceivable set of facts where Linet could rely on an exception to Hillrom’s limitations period affirmative defense, but the court determined that Hillrom did not meet that burden. For one thing, as already mentioned, the UHS suit was different from Linet’s. In addition, although Hillrom pointed to various 2014 and 2016 contract announcements, Linet’s complaint alleged these “disclosures revealed only that Hillrom had reached long-term, product level agreements with major IDNs.” The court said those disclosures provided no indication that Hillrom had structured the agreements to foreclose competition in the relevant markets. Any uncertainty about this only served to highlight a question for a jury about fraudulent concealment tolling of the limitations period.

Continuing violation theory. The court identified the continuing violation theory, also accrual based, as a second basis for denying Hillrom’s attempt to limit discovery to events within the four-year limitations period. The court found Linet’s complaint raised a plausibility of continuing violation in connection with its allegations that Hillrom entered into new CEAs with IDNs or renewed, extended, or expanded existing CEAs. The court found Hillrom did not challenge these allegations or Linet’s ability to invoke the continuing violation doctrine. Hillrom only argued Linet could not assert both fraudulent concealment and continuing violation theories. However, as it ruled earlier, the viability of either was only ascertainable with the benefit of discovery. Having rejected Hillrom’s arguments, the court denied Hillrom’s motion for judgment on the pleadings.

The Case is No. 1:21-cv-06890.

Attorneys: Christopher C. Brewer (Paul Hastings LLP) for Linet Americas, Inc. Elizabeth P. Papez (Gibson, Dunn & Crutcher LLP) for Hill-Rom Holdings, Inc.

Companies: Linet Americas, Inc.; Hill-Rom Holdings, Inc.

Cases: Antitrust IllinoisNews