Antitrust Law Daily Wrap Up, ANTITRUST—W.D. Va.: Lack of relevant markets dooms anticompetitive settlement claims, (May 29, 2015)

By Greg Hammond, J.D.

A group of resort sales representatives could not plausibly allege an agreement between two time-share resort companies that unreasonably restrained trade in recruitment and hiring of sales representatives, in violation of Section 1 of the Sherman Act or the Virginia Antitrust Act, the federal district court in Harrisonburg, Virginia decided. In dismissing the antitrust claims with prejudice, the court determined that the plaintiffs failed to identify a relevant geographic or product market (Hanger v. The Berkley Group, May 28, 2015, Urbanski, M.).

Background. Six at-will sales representatives for Great Eastern Resort Corp. filed suit against The Berkley Group, Inc. and Great Eastern, alleging that the companies’ Global Settlement Agreement (GSA) with Bluegreen Corporation violated Section 1 of the Sherman Act and the Virginia Antitrust Act. The GSA, according to the plaintiffs, ended recruitment and hiring between the competing employers and chilled employee mobility because Bluegreen repeatedly declined opportunities to hire current or former Berkley sales employees. In addition, the GSA allegedly disrupted the normal functioning of wage setting and hiring of skilled timeshare sales personnel, the plaintiffs asserted. Berkley Group argued that the plaintiffs’ allegations failed to plausibly allege an antitrust claim under federal or state law.

Naked restraint. The court first concluded that the GSA is not a naked restraint of trade subject to per se analysis. Rather, the GSA reflected only an agreement to honor each company’s non-competition, non-solicitation, and confidentiality agreements of which they have actual knowledge. Because the restrictive covenants were narrowly drawn in terms of substantive scope, time, and geography, the court determined that the alleged restraint posed by the GSA is correspondingly narrow. Because the court concluded that the GSA was plainly designed to forestall future litigation, it could not conclude that the GSA was a naked restraint of trade with obvious anticompetitive effects. The validity of the GSA was therefore required to be assessed under the rule of reason.

Rule of reason. Even under the rule of reason, the plaintiffs failed to plausibly allege an unreasonable restraint of trade. Specifically, the court concluded that the plaintiffs failed to adequately allege relevant product and geographic markets. Rather, at most, the amended complaint alleged that Bluegreen and Berkley Group are in the timeshare resort business and compete as buyers of timeshare salespersons’ services. However, the complaint was devoid of any factual allegation that the two entities have market power, that they enjoy any measure of market share, that the two entities are so unique as to constitute the entire product market, that timeshare sales personnel could not look elsewhere for employment, or that there is reasonable interchangeability and cross-elasticity of demand for their services.

Allegations concerning the relevant geographic market proposed by plaintiffs were equally unavailing. The court found that it was “utterly unrealistic” to suggest that the relevant geographic market be confined to two enclaves in non-contiguous regions of Virginia—Massanutten and Williamsburg. Specifically, it found that it makes “no economic sense” to allege a relevant geographic market exclusively limited to an 85 mile area surrounding the Berkley Group timeshare resorts in Massanutten and Williamsburg and to ignore competition posed by timeshare resorts in other parts of Virginia and surrounding areas.

The plaintiffs’ failure to properly allege relevant product and geographic markets, and, thus, to plausibly allege market share or exercise of market power, was fatal to their claims. Finding that further amendment would be futile, the claims were dismissed with prejudice.

The case number is 5:13-cv-113.

Attorneys: Timothy Lawrence Coffield (Coffield PLC) for Abigail Hanger. Francis H. Casola (Woods Rogers PLC) for The Berkley Group, Inc., Great Eastern Resort Corporation, Inc., and Williamsburg Plantation, Inc.

Companies: The Berkley Group, Inc.; Great Eastern Resort Corporation, Inc.; Williamsburg Plantation, Inc.

Cases: Antitrust VirginiaNews