Boycott SignLeegin as wrecking ball?

Since the Supreme Court struck down an almost century-old rule of per se antitrust liability in Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007),* defense lawyers have tried to turn a single sentence from Leegin into a per-se category killer.

The effort presents high stakes, principally because per se cases have several advantages over their rule-of-reason cousins. The former are simpler, cost millions of dollars less to work up and try, and have greater odds of success with a judge or jury. The per se rule:

  • does not require an economist to opine about the relevant product and geographic markets;
  • obviates the need to prove that the defendants had market (or monopoly) power or that their conduct was anticompetitive;
  • simplifies proof of damages; and
  • precludes defendants from claiming, and presenting evidence, that their agreement enhanced competition.

You would expect a kindly hearing from the Fifth Circuit — a court that, despite President Obama’s six years of judicial appointments, still counts twice as many Republican (10) as Democratic (5)  appointees in active service. But would the court drink the Kool-Aid?

The court answered on November 25. The panel gave a resounding no.

A boycott of steel

The ruling came in a “group boycott” case, by an upstart steel distributor against incumbent competitors and their steel-making suppliers.

In MM Steel, L.P. v. JSW Steel (USA) Inc., No. 14-20267 (5th Cir. Nov. 25, 2015), the new firm, MM Steel, alleged that steel-makers JSW, Nucor Corporation, and SSAB conspired with several distributors to run MM out of business by refusing to fill its orders. MM settled with SSAB before trial. After six weeks of evidence, it won a verdict against Nucor and JSW. The jury awarded MM damages of $52 million, which the district court trebled, as section 4 of the Clayton Act requires.

On appeal, Nucor and JSW raised two main points, the distributor defendants having settled post-verdict. The  steel-makers argued, first, that MM failed to prove that they knowingly joined a conspiracy to boycott MM and, second, that Leegin barred treating vertical facilitators of group boycotts among horizontal competitors of the plaintiff  as a per se violators of the Sherman Act.

The Fifth Circuit held that the evidence supported the boycott claim against JSW but not Nucor. No reasonable jury could find, the court ruled, that Nucor did anything more than continue a pre-boycott policy of favoring another steel buyer, Chapel Steel, over a new customer, MM. MM Steel, slip op. at 11-5. Because the evidence showed that JSW agreed to facilitate the distributors’ agreement to isolate MM, the court affirmed the verdict and judgment as to JSW.

Per-se appeal

But the big moment came in the panel’s handling of the per-se versus rule-of-reason question.

A good statement of the defendants’ arguments appears in the dissent by Second Circuit Judge Dennis Jacobs in United States v. Apple Inc., 791 F.3d 290, 346-47 (2d Cir. 2015):**

The [Supreme Court’s] most recent and explicit signal is given in Leegin, which explains that “the Sherman Act’s prohibition on ‘restraints of trade’ evolves to meet the dynamics of present economic conditions,” such that “the boundaries of the doctrine of per se illegality should not be immovable.” 551 U.S. at 899-900 (alterations omitted). Leegin held that a manufacturer did not commit a per se violation of § 1 when it agreed with several retailers on a minimum price that the retailers could charge–a holding that overruled a century-old principle articulated in Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911). See Leegin, 551 U.S. at 881. Leegin reasoned that Dr. Miles had “treated vertical agreements a manufacturer makes with its distributors as analogous to a horizontal combination among competing distributors,” but that, “[i]n later cases, . . . the Court rejected the approach of reliance on rules governing horizontal restraints when defining rules applicable to vertical ones.” Leegin, 551 U.S. at 888. Dr. Miles was held to be inconsistent with “[o]ur recent cases[,] [which] formulate antitrust principles in accordance with the appreciated differences in economic effect between vertical and horizontal agreements, differences the Dr. Miles Court failed to consider.” Id.

Although the express holding of Leegin does not extend beyond the overruling of Dr. Miles, the Court’s analysis reinforces the doctrinal shift that subjects an ever-broader category of vertical agreements to review under the rule of reason. The Court first stated the subsisting scope of per se liability: A horizontal cartel among competing manufacturers or competing retailers that decreases output or reduces competition in order to increase price is, and ought to be, per se unlawful. Leegin, 551 U.S. at 893. The Court then rejected per se liability for hub-and-spokes agreements, in wording that prescribes rule-of-reason review of vertical dealings that facilitate per se unlawful horizontal agreements (the type of agreement that the district court found Apple had undertaken):

To the extent a vertical agreement setting minimum resale prices is entered upon to facilitate either type of cartel [among 17 manufacturers or among retailers], it, too, would need to be held unlawful under the rule of reason.

Id. (emphasis added). After Leegin, we cannot apply the per se rule to a vertical facilitator of a horizontal price-fixing conspiracy; such an actor must be held liable, if at all, “under the rule of reason.” Id.

Judge Jacobs’ two colleagues on the Second Circuit panel in Apple of course rejected the arguments — and so did the unanimous panel of Fifth Circuit judges.

Judge Stephen A. Higginson, writing for the panel, first reviewed several pre-Leegin rulings by the Supreme Court in group boycott cases. He then essentially delivered the same answer that the 2-1 panel in Apple gave:

We decline to hold that the Supreme Court silently overruled this line of cases by stating that vertical agreements to regulate prices that facilitate horizontal agreements to regulate prices “too, would need to be held unlawful under the rule of reason.” Leegin, 551 U.S. at 893; see also Anderson News, LLC v. Am. Media, Inc., 680 F.3d 162, 183 (2d Cir. 2012) (recognizing, post-Leegin, that, under Klor’s [v. Broadway-Hale Stores, 359 U.S. 359 U.S. 207 (1959)], per se liability applies to group boycotts with horizontal and vertical components). But cf. Toledo Mack Sales & Serv., Inc. v. Mack Trucks, Inc., 530 F.3d 204, 225 (3d Cir. 2008) (holding that under Leegin per se liability did not apply to vertical agreements between manufacturers and distributors to refuse to deal with distributors that were not part of a horizontal price-fixing conspiracy, but not finding that the manufacturers joined a horizontal group boycott). The district court did not err when it instructed the jury that if they found that the manufacturers joined the conspiracy between the distributors, the manufacturers were per se liable for a § 1 violation.

MM Steel, slip op. at 18.


The Fifth Circuit’s rejection of the Leegin as a per se category-killer comes hard on the heels of the Second Circuit’s like ruling in the Apple e-books case. It signals a low probability that other courts of appeals will embrace the argument. The Third Circuit’s early reading of Leegin in Toledo Mack Sales may stand as the high water mark for interpretation of Leegin as potentially portending further cuts in existing per-se liability categories — not least because the same court’s “more recent opinions cast doubt on that decision.” Apple, slip op. at 80 n.20 (citing In re Insurance Brokerage Antitrust Litigation., 618 F.3d 300, 327 (3d Cir.2010)).

The Supreme Court of course sits a little offstage, for now at least. It could take up cudgels on per-se v. rule of reason again in Apple (with thanks to our friends at SCOTUSBlog). Facing a $156 million judgment, JSW also may well take a shot at high court review.

But the Court has not shown much interest lately in remaking substantive antitrust law, preferring to tinker in antitrust cases with procedural machinery involving motions to dismiss (Twombly), appeals in multi-district proceedings (Gelboim v. Bank of Am. Corp.), and class actions (Comcast Corp. v. Behrend) and in one case rejecting an effort to limit liability for antitrust conspiracies (American Needle).***

Although predicting the Court’s case selection involves a high degree of uncertainty, I doubt the justices will intervene now. The existence of a Circuit split on the question of whether facilitating a horizontal restraint falls within the per se rule is doubtful. Nor do I see much appeal in the notion of lowering the antitrust risk for suppliers that aid and abet per se anticompetitive agreements among distributors. The possibility that suppliers might thereby enhance competition with other suppliers provides no comfort to the customers of the price-fixing, bid-rigging, or market-allocating distributors. They, too, should face per se liability to the distributors’ customers, whatever the collateral effects on their own competition with other suppliers.



Supremes Kill Dr. Miles, Dance on His Grave.

** Per Se Melee in E-Books Case — Part 2.

*** See also The Antitrust Lawyer’s Guide to the Supreme Court’s No-Antitrust Term.

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.