- Antitrust enforcement continues against nonprofits.
- Nonprofits have litigated in other areas, including lawsuits brought by members, governance, and tax.
- Nonprofits can enhance compliance by learning from the legal outcomes of others.
The Cedar Shake & Shingle Bureau (CSSB) is the trade association serving the cedar shake and shingle industry, which operates a quality control rating labeling program that grades different varieties of shakes and shingles. Plaintiff, a mill competing with CSSB’s largest members, sued CSSB and two of the largest mills in the industry, alleging that they engaged in a conspiracy to restrain trade in violation of the Sherman Act, through a series of maneuvers within CSSB allegedly intended to consolidate their power, fix prices on their products, and eliminate bureau members attempting to price their products more competitively. Plaintiff also sued CSSB for breach of contract related to plaintiff’s removal from the trade association. The court dismissed the claim because the plaintiff did not plead facts sufficient to support its claims. Specifically, the court stated that under the Ninth Circuit’s holding in Kendall v. Visa U.S.A., plaintiff was required to, “allege facts such as a ‘specific time, place, or person involved in the alleged conspiracies’ to give a defendant seeking to respond to allegations of a conspiracy an idea of where to begin.” Additionally, the court held that the Defendants did not per se violate the Sherman Act because plaintiff did not plead evidence persuasive enough to show manifestly anticompetitive effects lacking any redeeming virtue. As such, the court dismissed plaintiff’s antitrust claims. The court denied, however, CSSB’s motion to dismiss plaintiff’s breach of contract claims, holding that the complaint adequately alleged that (1) the notice provision of CSSB’s bylaws was violated by a “non-noticed” termination meeting, and (2) CSSB’s forced “recusal” of plaintiff’s representative from the Board was an ultra vires act not sanctioned by the bylaws.
In re Cedar Shakes & Shingles Antitrust Litig., No. C19-288 MJP (W.D. Wash. 2020)
Three class action lawsuits against a number of “Manufacturer Defendants” and the Cedar Shake & Shingle Bureau trade association were consolidated. Plaintiffs alleged, via claims of a price-fixing conspiracy, violations of the Sherman Act, violations of various antitrust and consumer protection statutes, and unjust enrichment. Plaintiffs asserted that the Certi-Label™ certification brand controlled by CSSB accounts for 95% of the cedar shakes and shingles (CSS) sold in the United States, and further that the “Manufacturer Defendants” control the CSSB with a “combined voting power of more than 50%.” Plaintiffs alleged that the Manufacturer Defendants have utilized their majority voting bloc to institute a series of measures within the CSSB (e.g., reducing the number of seats on the Board of Directors and changing quorum requirements) to consolidate their power. Plaintiffs further claimed that the enforcement of an “All or Nothing Rule” (which they alleged prohibits CSSB members from selling non-Certi-Label™ products) and the convening of “secret” meetings “plausibly establish that Defendants have the means, motive, and ability to implement, police, and enforce a price-fixing conspiracy.”
The court found that the plaintiffs failed to adequately plead a “direct evidence” case of price-fixing. Citing the Ninth Circuit’s holding in Kendall v. Visa U.S.A., the court found that plaintiffs’ complaints were devoid of any allegations which plausibly suggested that anyone actually conferred, discussed and/or consented to any plan of action to fix the prices of any Certi-Label™ product; “the fact there were opportunities to do so is not enough.” On the issue of the sufficiency of plaintiffs’ pleadings to adequately allege a circumstantial price-fixing conspiracy case, the court found that, plaintiffs’ “parallel conduct” allegations did not disqualify them. However, the plaintiffs did not succeed in adequately alleging the “plus” factors (“economic actions and outcomes that are largely inconsistent with unilateral conduct but largely consistent with explicitly coordinated action”) required to convert indirect evidence into a satisfactory antitrust complaint, as generic price increase data, without more, is not sufficient to plausibly establish the required “plus” factors. Further, the court found plaintiffs’ allegations concerning the structure of the CSS (i.e., the relatively restricted number of major manufacturers, the fact that there really is no substitute for Certi-Label™ products, that the market is vertically integrated, demand is inelastic, and that the major players are all personally acquainted) insufficient to support an inference of plausibility that their antitrust allegations are true, “as industry structure alone cannot get the complaint across the finish line.” The court granted Defendants’ motion of dismissal of the Sherman Act claims with prejudice. The court declined to exercise supplemental jurisdiction over plaintiffs’ remaining state law claims.
Kenney v. Am. Bd. of Internal Med., 412 F. Supp. 3d 530 (E.D. Pa. 2019)
Internist doctors brought a class action against the American Board of Internal Medicine (ABIM) alleging unjust enrichment, Sherman Antitrust Act, and Racketeer Influenced and Corrupt Organizations Act (RICO) claims and alleging ABIM’s restraint on competition in the market for internists’ services, demonstrated conflicts of interests, and private anticompetitive motives forced internists, other than those grandfathered by ABIM, to purchase a maintenance of certification product or lose their certification. ABIM filed a motion to dismiss.
The court granted ABIM’s motion to dismiss the complaint for failure to state a claim upon which relief could be granted. The court found that ABIM was not tying its initial certification and maintenance of certification, which the court held do not occupy distinct markets and instead constituted a single product. The court also held that the conditioning requirement for tying claim was not met as internists are able to court ABIM’s initial certification without also buying maintenance of certification. The court also dismissed the plaintiffs’ monopolization claims as supported by mere conclusory allegations that are insufficient to defeat a motion to dismiss and dismissed the RICO claims, finding that the requirement to purchase the maintenance of certification, and consequences for failure to do so, came from plaintiffs’ employers rather than any fraudulent acts by ABIM. Finally, the court dismissed the unjust enrichment claim because it is not inequitable for ABIM to keep the benefit of fees paid since it did not “force” plaintiffs to purchase the maintenance of certification.
Siva v. Am. Bd. of Radiology, 418 F. Supp. 3d 264, 271 n.1 (N.D. Ill. 2019)
A certified radiologist brought an antitrust action against the American Board of Radiology (ABR) contending that the maintenance of certification requirements for ABR-certified physicians constituted unlawful tying and monopolization under the Sherman Antitrust Act and unjust enrichment under Illinois law. The court held that the initial certification and maintenance of certification are not separate products, and therefore cannot be unlawfully tied. The court also found that the plaintiff failed to state a claim under the Sherman Act, in part because plaintiff offered no factual details in support of plaintiff’s argument that the maintenance of certification program provides no benefit to physicians, that ABR lied by extolling the maintenance of certification program benefits, or that ABR engaged in anticompetitive conduct. The court declined to exercise supplemental jurisdiction over the state law unjust enrichment claim, having determined that the plaintiff failed to state a federal claim.
Lazarou et al. v. Am. Bd. of Psychiatry and Neurology, 2020 WL 5518476 (N.D. Ill. 2020)
Two psychiatrists filed a complaint on behalf of themselves and as a class action against the American Board of Psychiatry and Neurology (ABPN), a nonprofit organization that offers certification that is separate from any state medical licensing requirement. In 1994, ABPN stopped issuing lifelong certifications and instead began offering 10-year initial certificates and requiring participation in a new maintenance of certification program; physicians who purchased initial certifications before October 1, 1994, are exempt from the maintenance of certification requirement. The complaint alleges that the ABPN maintenance of certification requirement constitutes unlawful tying under Section 1 of the Sherman Antitrust Act, monopolization under Section 2, and unjust enrichment under Illinois law. ABPN moved to dismiss.
The court granted ABPN’s motion to dismiss the complaint for failure to state a claim upon which relief could be granted. The court held that ABPN’s initial certification and maintenance of certification are not distinct products, and that, even if they were distinct products, tying occurs only when a firm sells the tying product on the condition that the buyer also purchase the tied product. The court found that if initial certification were deemed a separate product, it is a product known to have a fixed duration at the time of purchase and the plaintiffs are not forced to buy maintenance of certification. The court also dismisses the plaintiff’s claim that ABPN illegally monopolizes the maintenance of certification market because there is no separate maintenance of certification market and ABPN “cannot have a monopoly in a market that does not exist.” The court...
