Tag Archives: hays gorey

Plaintiffs Win a Round in Sixth Circuit Milk Case: No Need to Show Relevant Geographic Market or Antitrust Injury to Avoid Pre-Trial Dismissal

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In reversing the decision of the district court, the Sixth Circuit held that the court should have considered the possibility that the fact nature of the restraint was sufficiently clear that a “quick look” analysis would have shown that the conduct had obvious, adverse anticompetitive consequences and that a detailed market analysis was not necessary. Even though the alleged conduct was not illegal per se, the allegations in the complaint were sufficient to shift the burden to the defendant to produce evidence of some of the procompetitive benefits of the alleged conduct.
Second, the circuit court found that the trial court’s exclusion of an expert economist’s testimony in dismissing the monopolization counts in respect to his opinion on geographic market was error.  In reaching his conclusion, the expert relied on the “hypothetical monopolist” construct to assess whether the territory alleged constituted a relevant geographic market.  While the district court ruled this approach was not  that this construct required speculation about a buyer’s likely reaction to a price increase, and was not, therefore, based upon actual evidence — and, hence, was unreliable.  The Sixth Circuit, however, viewed the approach as consistent with Supreme Court authority as well as with the DOJ and FTC merger guidelines for determining a relevant market. While defendants contended that the market was much smaller, the circuit court held that that issue should be left to the jury to decide:In re Southeastern Milk Antitrust Litigation

“My take is this deal is dead” states Allen Grunes in Bloomberg: “AMR-US Airways Antitrust Suit Seen as Difficult to Settle”

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From Bloomberg:

The challenge brought by the U.S. Justice Department can be compared with its lawsuit seeking to block AT&T Inc. (T)’s proposed takeover of T-Mobile USA Inc. in 2011, said Allen Grunes, an antitrust lawyer with GeyerGorey LLP. AT&T eventually dropped its bid for T-Mobile. “My take is that the deal is dead,” Grunes said. “Based on the complaint, this merger doesn’t look like it can be fixed with divestitures or slot sales.”

Read More By Clicking Below:

AMR-US Airways Antitrust Suit Seen as Difficult to Settle

 

“Upstart Start-Up” GeyerGorey LLP Opens Dallas Office

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“Rocketing from two to eleven attorneys in eight months, GeyerGorey LLP sports over 200 years of cross-disciplinary prosecutorial experience involving a host of domestic and international industries where each of its attorneys has worked on internal investigations and high stakes cases for an average of more than 20 years.”

For more, click the link below:

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Maurice Stucke Quoted in Wall Street Journal’s “Merging Airlines, Concessions May Not Be Enough.”

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Excerpt:
“In the case of United Airlines and Continental Airlines, the companies cleared the hurdle after agreeing to lease 18 daily “slot pairs” — the government-issued rights to take off and land – at Newark Liberty International Airport to Southwest Airlines.

‘The DOJ really drew a line in the sand,” said Mr. Stucke. “They basically looked at all of the consolidations up to this point and found that consumers haven’t significantly benefited but rather consumers have been harmed.'”

For entire article, click below:

For Merging Airlines, Concessions May Not Be Enough

 

Justice Department Files Antitrust Lawsuit Challenging Proposed Merger Between US Airways and American Airlines Merger Would Result in U.S. Consumers Paying Higher Airfares and Receiving Less Service; Lawsuit Seeks to Maintain Competition in the Airline Industry

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The Department of Justice, six state attorneys general and the District of Columbia filed a civil antitrust lawsuit today challenging the proposed $11 billion merger between US Airways Group Inc. and American Airlines’ parent corporation, AMR Corp.  The department said that the merger, which would result in the creation of the world’s largest airline, would substantially lessen competition for commercial air travel in local markets throughout the United States and result in passengers paying higher airfares and receiving less service.

The Department of Justice’s Antitrust Division, along with the attorneys general, filed a lawsuit in the U.S. District Court for the District of Columbia, which seeks to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate.   The participating attorneys general are:   Texas, where American Airlines is headquartered; Arizona, where US Airways is headquartered; Florida; the District of Columbia; Pennsylvania; Tennessee; and Virginia.

“Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure,” said Attorney General Eric Holder.   “By challenging this merger, the Department of Justice is saying that the American people deserve better.   This transaction would result in consumers paying the price – in higher airfares, higher fees and fewer choices.   Today’s action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace.”

Last year, business and leisure airline travelers spent more than $70 billion on airfare for travel throughout the United States.    In recent years, major airlines have, in tandem, raised fares, imposed new and higher fees and reduced service, the department said.

“The department sued to block this merger because it would eliminate competition between US Airways and American and put consumers at risk of higher prices and reduced service,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “If this merger goes forward, even a small increase in the price of airline tickets, checked bags or flight change fees would result in hundreds of millions of dollars of harm to American consumers.   Both airlines have stated they can succeed on a standalone basis and consumers deserve the benefit of that continuing competitive dynamic.”

American and US Airways compete directly on more than a thousand routes where one or both offer connecting service, representing tens of billions of dollars in annual revenues.   They engage in head-to-head competition with nonstop service on routes worth about $2 billion in annual route-wide revenues.   Eliminating this head-to-head competition would give the merged airline the incentive and ability to raise airfares, the department said in its complaint.

According to the department’s complaint, the vast majority of domestic airline routes are already highly concentrated.  The merger would create the largest airline in the world and result in four airlines controlling more than 80 percent of the United States commercial air travel market.
The merger would also entrench the merged airline as the dominant carrier at Washington Reagan National Airport, with control of 69 percent of the take-off and landing slots.   The merged airline would have a monopoly on 63 percent of the nonstop routes served out of Reagan National airport.   As a result, Washington, D.C., area passengers would likely see higher prices and fewer choices if the merger is allowed, the department said in its complaint.   Blocking the merger will preserve current competition and service, including flights that US Airways currently offers from Washington’s Reagan National Airport.

The complaint also describes how, in recent years, the major airlines have succeeded in raising prices, imposing new fees and reducing service.  The complaint quotes several public statements by senior US Airways executives directly attributing this trend to a reduction in the number of competitors in the U.S. market:

  • President Scott Kirby said, “Three successful fare increases – [we are] able to pass along to customers because of consolidation.”
  • At an industry conference in 2012, Kirby said, “Consolidation has also…allowed the industry to do things like ancillary revenues…. That is a structural permanent change to the industry and one that’s impossible to overstate the benefit from it.”
  • As US Airways CEO Parker stated in February 2013, combining US Airways and American would be “ the last major piece needed to fully rationalize the industry.”
  • A US Airways document said that capacity reductions have “enabled” fare increases.

“The merger of these two important competitors will just make things worse –exacerbating current airline industry trends toward reduced service, increasing fares and increasing passenger fees,” added Baer.

As the complaint describes, absent the merger, US Airways and American will continue to provide important competitive constraints on each other and on other airlines.   Today, US Airways competes vigorously for price-conscious travelers by offering discounts of up to 40 percent for connecting flights on other airlines’ nonstop routes under its Advantage Fares program. The other legacy airlines – American, Delta and United – routinely match the nonstop fares where they offer connecting service in order to avoid inciting costly fare wars.   The Advantage Fares strategy has been successful for US Airways because its network is different from the networks of the larger carriers. If the proposed merger is completed, the combined airline’s network will look more like the existing American, Delta and United networks, and as a result, the Advantage Fares program will likely be eliminated, resulting in higher prices and less services for consumers. An internal analysis at American in October 2012, concluded, “The [Advantage Fares] program would have to be eliminated in a merger with American, as American’s large, nonstop markets would now be susceptible to reactionary pricing from Delta and United.”   And, another American executive said that same month, “The industry will force alignment to a single approach–one that aligns with the large legacy carriers as it is revenue maximizing.”   By ending the Advantage Fares program, the merger would eliminate lower fares for millions of consumers, the department said.

The complaint also alleges that the merger is likely to result in higher ancillary fees, such as fees charged for checked bags and flight changes.   In recent years, the airlines have introduced fees for those services, which were previously included in the price of a ticket. These fees have become huge profit centers for the airlines.   In 2012, domestic airlines generated more than $6 billion in fees from checked bags and flight changes alone.   The legacy carriers often match each other when one introduces or increases a fee, and if others do not match the initiating carrier tends to withdraw the change.   By reducing the number of airlines, the merger will likely make it easier for the remaining carriers to coordinate fee increases, resulting in higher fees for consumers.

The department also said that the merger will make coordination easier among the legacy carriers.   Although low-cost carriers such as Southwest and JetBlue offer consumers many benefits, they fly to fewer locations and are unlikely to be able to constrain the coordinated behavior among those carriers.

American Airlines is currently operating in bankruptcy.   Absent the merger, American is likely to exit bankruptcy as a vigorous competitor, with strong incentives to grow to better compete with Delta and United, the department said. American recently made the largest aircraft order in industry history, and its post-bankruptcy standalone plan called for increasing both the number of flights and the number of destinations served by those flights at each of its hubs.

The department’s complaint describes US Airways executives’ fear of American’s standalone growth plan as “industry destabilizing.”   The complaint states that US Airways worries that American’s growth plan would cause “others” to react “with their own enhanced growth plans…,” and that the resulting effect would increase competitive pressures throughout the industry.   The department said the merger will allow US Airways’ management to abandon these aggressive growth plans and continue the industry’s current trend toward higher prices and less service.

The department’s complaint states that executives of both airlines have repeatedly said that they do not need the merger to succeed.   The complaint states that US Airways’ CEO observed in December 2011, that “A[merican] is not going away, they will be stronger post-bankruptcy because they will have less debt and reduced labor costs.”   US Airways’ executive vice president wrote in July 2012, that, “There is NO question about AMR’s ability to survive on a standalone basis.”   And, as recently as January 2013, American’s management presented plans that would increase the destinations it serves in the United States and the frequency of its flights, and would position American to compete independently as a profitable airline with aggressive plans for growth.

AMR is a Delaware corporation with its principal place of business in Fort Worth, Texas.   AMR is the parent company of American Airlines.   Last year American flew more than 80 million passengers to more than 250 destinations worldwide and took in more than $24 billion in revenue.   In November 2011, American filed for bankruptcy reorganization.

US Airways is a Delaware corporation with its principal place of business in Tempe, Ariz.   Last year US Airways flew more than 50 million passengers to more than 200 destinations worldwide and took in more than $13 billion in revenue.

Phillip Zane’s Game Theory: Ten Years On

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Ten years ago this spring, Zane published his definitive work on game theory which changed the way law-and-economics scholars and sophisticated prosecutors and defense counsel analyze whether, when, and how corporations and executive management teams should disclose white collar criminal conduct.

Phillip Zane be the only attorney whose colleagues and clients might expect to see an open book on games and strategy on his desk.

Ten years ago this spring, Zane published The Price Fixer’s Dilemma:  Applying Game Theory to the Decision of Whether to Plead Guilty to Antitrust Crimes, 48 Antitrust Bull. 1 (2003), which changed the way law-and-economics scholars and sophisticated prosecutors and defense counsel analyze whether, and when, to settle high-stakes antitrust cases.

Zane’s article strongly suggested that in a number of common situations, pleading guilty (or even seeking the protections of the corporate leniency program) is not always justified.  Zane’s article used a repeated, or iterative, version of the prisoner’s dilemma to demonstrate that pleading guilty was not always the best strategy for antitrust defendants facing criminal prosecution and civil liability in multiple proceedings or jurisdictions.

At the time, a few of the brainier Antitrust Division prosecutors breathed a sigh of relief when the defense bar did not seem to notice and they failed to incorporate Zane’s research into their negotiating strategies.

In 2007, Zane published “An Introduction to Game Theory for Antitrust Lawyers,” which he used in a unit of an antitrust class he taught at George Mason University School of Law. That paper was another milestone on the way to making game theory concepts accessible and useful to the antitrust defense bar.

Zane’s work, which now used game theory to criticize the settlement of the second Microsoft case and the Government’s approach to conscious parallelism, as well as the leniency program, was met with official grumblings within the Antitrust Division.

GeyerGorey LLP was founded on the principle that the chances for achieving the best possible outcome are maximized by having access to multiple, top-notch, cross-disciplinary legal minds that are synced together by an organizational and compensation structure that encourages sharing of ideas and information in client relationships.

As international enforcement agencies sprouted and developed criminal capabilities and as more hybrid matters included prosecutors from US enforcement agency components with sometimes overlapping jurisdictions, such as the Antitrust, Criminal, Civil and Tax Divisions of the Department of Justice, and the alphabet soup of regulatory agencies, particularly the Securities and Exchange Commission, it became apparent that Zane’s game-theoretic approach has application in almost every significant decision we could be called upon to make.  Since Zane has joined us we have been working to factor in the increased risks associated with what we call hybrid conduct (conduct that violates more than a single statute).  Our tools of analysis for identifying risks for violations of competition laws, anti-corruption laws, anti-money-laundering laws, and other prohibitions, include sophisticated game-theoretic techniques, as well as, of course, the noses of former seasoned prosecutors, taking into account, each particular client’s tolerance for risk.

To take one example, an internal investigation might show both possible price fixing and bribery of foreign government officials.  How, given the potential for multiple prosecutions, should decisions to defend or cooperate be assessed?  And how might such decisions trigger interest by the Tax Division, the SEC, the Commodities Futures Trading Commission, the Federal Energy Regulatory Commission or other regulators.  When should a corporation launch an internal investigation?  When should it make a mandatory disclosure?  What should it disclose and to which agency, in what order?  When should it seek leniency and when should it instead stand silent?  These tools are valuable in the civil context as well:  When should it abandon a proposed merger or instead oppose an enforcement agency’s challenge to a proposed deal?

These are truly the most difficult questions a lawyer advising large corporations is required to address.  We are well positioned to help answer these questions.

DLA Piper’s Robert Connolly pens MLEX article regarding “The DOJ Antitrust Division’s policy on independent compliance monitors: is it misguided?”

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Friend of the Firm, Robert Connolly, former Chief of the Philadelphia Field Office of the Antitrust Division of the US Department of Justice, now resident in DLA Piper’s Philadelphia Office last week penned an important contribution for MLEX regarding DOJ’s evolving policy regarding compliance monitors:  “The DOJ Antitrust Divsion’s policy on independent compliance monitors: is it misguided?”

 

Halliburton Pleads Guilty: New York Times (Interesting Tea Leaves)

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Important details about Halliburton Plea (raises very interesting questions for anyone who reads tea leaves).  Could this be sideways referral to Antitrust Division?:

Halliburton Pleads Guilty to Destroying Evidence After Gulf Spill

Health Care Clinic Director Sentenced for Role in $63 Million Health Care Fraud Scheme

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A former health care clinic director and licensed clinical psychologist at defunct health provider Health Care Solutions Network Inc. (HCSN) was sentenced today in Miami to serve 135 months in prison for her central role in a fraud scheme that resulted in more than $63 million in fraudulent claims to Medicare and Florida Medicaid.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Special Agent in Charge Michael B. Steinbach of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the Miami office of the U.S. Department of Health and Human Services’s Office of Inspector General (HHS-OIG) made the announcement.

Alina Feas, 53, of Miami, was sentenced by U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida.  In addition to her prison term, Feas was sentenced to three years of supervised release and ordered to pay $24.1 million in restitution.

On May 7, 2013, Feas pleaded guilty to one count of conspiracy to commit health care fraud and one substantive health care fraud count. During the course of the conspiracy, Feas was employed as a therapist and clinical director of HCSN’s Partial Hospitalization Program (PHP).  A PHP is a form of intensive treatment for severe mental illness.          HCSN of Florida (HCSN-FL) operated community mental health centers at two locations.  In her capacity as clinical director, Feas oversaw the entire clinical program and supervised therapists and other HCSN-FL personnel.  She also conducted group therapy sessions when therapists were absent, and she was aware that HCSN-FL paid illegal kickbacks to owners and operators of Miami-Dade County Assisted Living Facilities (ALF) in exchange for patient referral information to be used to submit false and fraudulent claims to Medicare and Medicaid.  Feas also knew that many of the ALF referral patients were ineligible for PHP services because many patients suffered from mental retardation, dementia and Alzheimer’s disease.

Feas submitted claims to Medicare for individual therapy she purportedly provided to HCSN-FL patients using her personal Medicare provider number, knowing that HCSN-FL was simultaneously billing the same patients for PHP services.  She continued to bill Medicare under her personal provider number while an HCSN community health center in North Carolina (HCSN-NC) simultaneously submitted false and fraudulent PHP claims.

Feas was also aware that HCSN-FL personnel were fabricating patient medical records. Many of these medical records were created weeks or months after the patients were admitted to HCSN-FL for purported PHP treatment and were used to support false and fraudulent billing to government-sponsored health care benefit programs, including Medicare and Florida Medicaid.  During her employment at HCSN-FL, Feas signed fabricated PHP therapy notes and other medical records used to support false claims to government-sponsored health care programs.

At HCSN-NC, Feas was aware that her co-conspirators were fabricating medical records to support the fraudulent claims she was causing to be submitted to Medicare on behalf of HCSN-NC. She knew that a majority of the fabricated notes were created at the HCSN-FL facility for patients admitted into the PHP at HCSN-NC.  In some instances, Feas signed therapy notes and other medical records even though she never provided services in HCSN-NC’s PHP.

From 2004 through 2011, HCSN billed Medicare and the Medicaid program more than $63 million for purported mental health services.

This case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.  This case was prosecuted by Trial Attorneys Allan J. Medina, former Special Trial Attorney Allan J. Medina, and Deputy Chief Benjamin D. Singer of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Halliburton Agrees to Plead Guilty to Destruction of Evidence in Connection with Deepwater Horizon Tragedy Third Corporate Guilty Plea Obtained by the Deepwater Horizon Task Force

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Halliburton Energy Services Inc. has agreed to plead guilty to destroying evidence in connection with the Deepwater Horizon disaster, the Department of Justice announced today.  A criminal information charging Halliburton with one count of destruction of evidence was filed today in U.S. District Court in the Eastern District of Louisiana.

Halliburton has signed a cooperation and guilty plea agreement with the government in which Halliburton has agreed to plead guilty and admit its criminal conduct.  As part of the plea agreement, Halliburton has further agreed, subject to the court’s approval, to pay the maximum-available statutory fine, to be subject to three years of probation and to continue its cooperation in the government’s ongoing criminal investigation.  Separately, Halliburton made a voluntary contribution of $55 million to the National Fish and Wildlife Foundation that was not conditioned on the court’s acceptance of its plea agreement.

According to court documents, on April 20, 2010, while stationed at the Macondo well site in the Gulf of Mexico, the Deepwater Horizon rig experienced an uncontrolled blowout and related explosions and fire, which resulted in the deaths of 11 rig workers and the largest oil spill in U.S. history.  Following the blowout, Halliburton conducted its own review of various technical aspects of the well’s design and construction.  On or about May 3, 2010, Halliburton established an internal working group to examine the Macondo well blowout, including whether the number of centralizers used on the final production casing could have contributed to the blowout.  A production casing is a long, heavy metal pipe set across the area of the oil and natural gas reservoir.  Centralizers are protruding metal collars affixed at various intervals on the outside of the casing.  Use of centralizers can help keep the casing centered in the wellbore away from the surrounding walls as it is lowered and placed in the well.  Centralization can be significant to the quality of subsequent cementing around the bottom of the casing.  Prior to the blowout, Halliburton had recommended to BP the use of 21 centralizers in the Macondo well.  BP opted to use six centralizers instead.

As detailed in the information, in connection with its own internal post-incident examination of the well, in or about May 2010, Halliburton, through its Cementing Technology Director, directed a Senior Program Manager for the Cement Product Line (Program Manager) to run two computer simulations of the Macondo well final cementing job using Halliburton’s Displace 3D simulation program to compare the impact of using six versus 21 centralizers.  Displace 3D was a next-generation simulation program that was being developed to model fluid interfaces and their movement through the wellbore and annulus of a well.  These simulations indicated that there was little difference between using six and 21 centralizers.  Program Manager was directed to, and did, destroy these results.

In or about June 2010, similar evidence was also destroyed in a later incident.  Halliburton’s Cementing Technology Director asked another, more experienced, employee (“Employee 1”) to run simulations again comparing six versus 21 centralizers.  Employee 1 reached the same conclusion and, like Program Manager before him, was then directed to “get rid of” the simulations.

Efforts to forensically recover the original destroyed Displace 3D computer simulations during ensuing civil litigation and federal criminal investigation by the Deepwater Horizon Task Force were unsuccessful.

In agreeing to plead guilty, Halliburton has accepted criminal responsibility for destroying the aforementioned evidence.

The guilty plea agreement and criminal charge announced today are part of the ongoing criminal investigation by the Deepwater Horizon Task Force into matters related to the April 2010 Gulf oil spill.  The Deepwater Horizon Task Force, based in New Orleans, is supervised by Acting Assistant Attorney General Mythili Raman and led by John D. Buretta, who serves as the director of the task force.  The task force includes prosecutors from the Criminal Division and the Environment and Natural Resources Division of the Department of Justice; the U.S. Attorney’s Office for the Eastern District of Louisiana and other U.S. Attorney’s Offices; and investigating agents from:  the FBI; Department of the Interior, Office of Inspector General; Environmental Protection Agency, Criminal Investigation Division; Environmental Protection Agency, Office of Inspector General; National Oceanic and Atmospheric Administration, Office of Law Enforcement; U.S. Coast Guard; U.S. Fish and Wildlife Service; and the Louisiana Department of Environmental Quality.

The case is being prosecuted by Deepwater Horizon Task Force Director John D. Buretta, Deputy Directors Derek A. Cohen and Avi Gesser, and task force prosecutors Richard R. Pickens II, Scott M. Cullen, Colin Black and Rohan Virginkar.

An information is merely a charge and a defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.