Staples Gets A Win, Saves $175k In Legal Fees.
Pa., DC Can't Get Fees In Staples-Office Depot Merger Case.
By Cara Bayles.
Law360, San Francisco – A D.C. federal judge on Tuesday denied the state of Pennsylvania and the District of Columbia’s motion for attorneys’ fees and costs for their role in blocking a $6.3 billion deal between Staples and Office Depot, saying fee shifting in antitrust cases is only warranted when a plaintiff "substantially prevails.”
In February 2015, Staples was poised to acquire Office Depot in a $6.3 billion deal, but Pennsylvania and D.C. joined the FTC in moving to enjoin the merger. U.S. District Court Judge Emmet G. Sullivan granted a motion for preliminary injunction, finding that the merger could adversely affect competition in the limited business supply market. Soon after, the deal fell through.
In May 2016, Pennsylvania and D.C. — but not the FTC — sought $176,095 in attorneys’ fees and costs for their role in the case.
But the judge said in a 10-page order Tuesday that winning an injunction is not the same as winning a case, and because it was never litigated under the Clayton Act, Pennsylvania and D.C. hadn’t “substantially prevail[ed]” as required for fee shifting under the law. He sided with the companies, which contended that the injunction fell under the purview of the FTC Act.
“Simply put, moving plaintiffs cannot have it both ways. They cannot ride the FTC’s claim to a successful preliminary injunction under the more permissive Section 13(b) standard and then cite that favorable ruling as the sole justification for fee-shifting under the more rigorous Clayton Act standard,” the judge wrote. “Moving plaintiffs cannot bring a petition for fee-shifting under a provision under which they did not prevail.”
The judge also was unconvinced by the moving parties’ invocation of the “catalyst rule,” which says that to determine whether a party has substantially prevailed, a court should look at the situation before the lawsuit was filed and the way things stand now, and then determine whether the litigation played a role in the change. Pennsylvania and D.C. argued the rule applied to the case, since the lawsuit caused the merger to fall apart.
Judge Sullivan said the rule did not apply under the U.S. Supreme Court’s Buckhannon Board & Care Home Inc. v. West Virginia Department of Health & Human Resources case, which found a voluntary change in a defendant’s conduct didn’t count.
Nor was he persuaded by the late introduction of an argument that the plaintiffs substantially prevailed under each element of the four-prong preliminary injunction test used in a Clayton Act cases, saying that standard “was never argued, briefed or mentioned in the litigation up to this point” and that the argument was moot since the case wasn’t won on the Clayton Act.
Office Depot attorney Andrew M. Lacy of Simpson Thacher & Bartlett LLP said he was gratified by the decision.
"We agree with the court’s analysis that the states' request here was unprecidented," he said. "The judge did not get to the question of whether the fees were reasonable because he didn’t need to. At best, there was only passing reference to Section 16 in their complaint. The judge ruled in favor of the FTC on the basis of the section 13(b) standard, which is the more lenient standard."
Attorneys and representatives for Pennsylvania, D.C. and Staples did not immediately respond to requests for comment Tuesday.
The FTC is represented by in-house attorneys Tara L. Reinhart, Alexis Gilman, Amanda Lewis, Angel Prado, Charles A. Loughlin, David E. Owyang, Haidee L. Schwartz, Helder Agostinho, Joshua Smith, Kelly A. Horne, Kevin Hahm, Kimberley G. Biagioli, Krisha A. Cerilli, Maria M. DiMoscato, Rohan Pai, Ryan Quillian, Stelios S. Xenakis, Stephanie Greco and Thomas Hankins Brock.
Washington, D.C., is represented by Attorney General Karl A. Racine, Deputy Attorney General Elizabeth Sarah Gere, Assistant Deputy Attorney General Bennett Rushkoff of the Public Integrity Unit and Assistant Attorney General Catherine A. Jackson.
Pennsylvania is represented by Senior Deputy Attorney General Norman W. Marden.
Staples is represented by Diane Sullivan, Jeffrey Perry and Carrie Mahan Anderson of Weil Gotshal & Manges LLP.
Office Depot is represented by Matthew J. Reilly, Andrew M. Lacy and Peter C. Herrick of Simpson Thacher & Bartlett LLP.
The case is FTC v. Staples Inc., case number 1:15-cv-02115, in the U.S. District Court for the District of Columbia.