Antitrust Law Daily Wrap Up, ANTITRUST—SDNY: Refusal to Withdraw Allegation of Disputed Meeting Not Grounds for Sanctions, (Apr 25, 2013)

By Jeffrey May, J.D.

In a boycott action against magazine publishers, distributors, and wholesalers, a complaining magazine wholesaler was not sanctioned by the federal district court in New York City for refusing to withdraw an allegation about a meeting in furtherance of the purported conspiracy. In addition, the court refused to strike the allegation (Anderson News, L.L.C. v. American Media, Inc., April 23, 2013, Crotty, P.).

The challenged allegation described an after-hours meeting of key employees of certain defendants at the offices of defendant Hudson News Distributors L.L.C. in North Bergen, New Jersey, on or about January 29, 2009. The defendants contended that there was no evidentiary support for the allegation and that it was false. The alleged attendees denied being at the meeting, and it was asserted that one of the purported attendees was at home recovering from heart surgery at that time.

The plaintiff stood by the allegation, despite repeated requests to retract it. According to the complaining wholesaler, the allegation was "based on, among other things, information provided by a credible, confidential witness."

The source of the information worked as a consultant to magazine publishers, wholesalers, and retailers. While the source did not personally attend the alleged meeting, he said that he had discussed the meeting with two individuals, one of whom was an attendee. The other individual with whom the source discussed the meeting had confirmed occurrence of the meeting and the identity of some participants. At his deposition, the source refused to recant his belief that the meeting had occurred, although he did waiver on some of the details.

In denying the defendants’ request for sanctions pursuant to Rule of Civil Procedure 11(b)(3), the court concluded that the source's allegations were "relatively well-grounded, relying on several different sources and fitting into a broader pattern of alleged conduct by Defendants." The source, who was a non-party witness, repeatedly confirmed his story during meetings with the plaintiff and in his deposition.

While the allegations might prove to be inaccurate, they were not "objectively unreasonable" and were not sanctionable at this stage of the proceedings, in the court's view. Although the challenged allegation was not objectively unreasonable, the complaining wholesaler was not entitled to sanctions against the defendants for bringing their motion. In denying the plaintiff's cross-motion for sanctions, the court noted that the defendants had a sound basis for their assertions.

Motion to strike. Noting that motions to strike are disfavored, the court denied the defendants’ request, because they failed to meet the requirements of Federal Rule of Civil Procedure 12(f). The defendants did not demonstrate that (1) no evidence in support of the allegations would be admissible; (2) that the allegations have no bearing on the issues in the case; and (3) that to permit the allegations to stand would result in prejudice to the movant.

The case is 09 Civ. 2227 (PAC).

Attorneys: Constantine Z. Pamphilis (Kasowitz, Benson, Torres & Friedman, LLP) for Anderson News, LLC. David George Keyko (Pillsbury Winthrop Shaw Pittman, LLP) for American Media, Inc.

Companies: American Media, Inc.; Anderson News, LLC; Hudson News Distributors L.L.C.

Cases: Antitrust NewYorkNews