“OBSERVATIONS FROM THE FIELD: ACPERA’S FIRST 13 YEARS”

BY MICHAEL D. HAUSFELD & BONNY E. SWEENEY

I. INTRODUCTION ................................................................................................. 1

II. THE DOJ’S CORPORATE LENIENCY PROGRAM AND THE PROVISIONS OF ACPERA ................................................................................. 3

A. The DOJ’s Corporate Leniency Program Has Been Enormously Successful .................................................................................................. 3

B. ACPERA Removes A Significant Disincentive To Reporting Antitrust Violations .................................................................................... 4

1. ACPERA’s Single Damages Protection ........................................ 8

2. ACPERA’s Duty of Cooperation ................................................... 9

3. ACPERA’s Requirement Of Judicial Determination Of Satisfactory Cooperation .............................................................. 10

III. ACPERA COOPERATION................................................................................. 11

A. To What Party is Cooperation Owed? ..................................................... 11

B. Timeliness of Cooperation ....................................................................... 14

1. Cooperation and Settlement ......................................................... 16

2. Pre-Filing ..................................................................................... 17

3. Motion To Dismiss Prior to Commencement of Discovery ........ 19

4. Class Certification ........................................................................ 21

5. Breadth of cooperation ................................................................. 21

6. Substantial Nature of Cooperation ............................................... 24

7. Case Studies of Cooperation ........................................................ 26

IV. ACPERA’S INTERSECTION WITH CIVIL AND CRIMINAL PROCEEDINGS .................................................................................................. 29

A. DOJ Investigations ................................................................................... 29

B. Foreign Antitrust Enforcement ................................................................ 32

V. CONCLUSION .................................................................................................... 33

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“Observations from the Field: ACPERA’s First 13 Years”1

By Michael D. Hausfeld & Bonny E. Sweeney

I. INTRODUCTION

While some areas of antitrust law enforcement enjoy varying degrees of support, price-fixing cartels are universally condemned.2 This is due to the near-unanimous recognition that “hard core cartels cause “tremendous harm . . . to businesses and consumers.”3 As the former Deputy Assistant Attorney General for the United States Department of Justice’s Antitrust Division put it, cartelists that fix prices have committed

1 This article is an updated and revised version of an article originally

published in 2009: Michael D. Hausfeld, Michael Lehmann and Megan Jones, “Observations from the Field: ACPERA’s First Five Years,” 10 The Sedona Conference Journal (Fall 2009). Special thanks to Reena Gambhir, Scott Martin and Kathryn Ryan for their contributions to this update.

2 See FTC v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411, 421-23 (1990); Ariz. v. Maricopa Med. Soc’y, 457 U.S. 332, 342 (1982); U.S. v. Socony-Vacuum Oil Co., 310 U.S. 150, 224 n.59 (1940); William J. Baer, former Assistant Att’y Gen., Dep’t of Justice, “Cooperation, Convergence, and the Challenges Ahead in Competition Enforcement: Remarks at the Ninth Annual Global Antitrust Enforcement Symposium” (Sept. 29, 2015), available at https://www.justice.gov/opa/speech/assistant-attorney-general-bill-baer-delivers-remarks-ninth-annual-global-antitrust (“Today, there is near unanimity about the importance of fighting price fixing, bid rigging and market allocation.”).

3 See, e.g., Anti-Cartel Enforcement in a Contemporary Age 263 (Caron Beaton-Wells & Christopher Tran eds., 2015) (“The United States Supreme Court has described price-fixing cartels as the ‘supreme evil of antitrust’, and for good reason.”); John M. Connor & Robert H. Lande, Cartels as Rational Business Strategy: Crime Pays, 34 CARDOZO L. REV. 427, 428 (2012) [hereinafter Crime Pays], at 428 (“Cartels have always been the highest concern of antitrust”); Maurice E. Stucke, Morality and Antitrust, 2006 Colum. Bus. L. Rev. 443, 492 (2006) (hard core cartels “have been consistently condemned by conservative and liberal judges, economists and antitrust lawyers throughout the twentieth century”). See Statement of Bill Baer, Assistant Att’y Gen., Dep’t of Justice, Oversight of the Enforcement of the Antitrust Laws: Hearing Before the Subcommittee on Antitrust, Competition Policy and Consumer Rights of the Senate Committee on the Judiciary (Mar. 9, 2016), available at https://www.justice.gov/opa/speech/assistant-attorney-general-bill-baer-antitrust-division-testifies-senate-judiciary (“[H]alting and deterring price fixing cartels, dubbed the ‘supreme evil’ of antitrust by the Supreme Court, is a top priority for us.”)

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“a crime – no different than common fraud or theft,” akin to stealing money “just as if they had lifted cash right out of their [victims’] wallets.”4

It is not surprising, then, that Justice Scalia described price-fixing cartels as “the supreme evil of antitrust.”5 Indeed, the U.S. Supreme Court has stated that the antitrust laws are “as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms.”6

Congress and the courts have also “recognized that private enforcement of [antitrust] laws is a necessary supplement to government action.”7 Such private enforcement--e.g., civil litigation and in particular class action lawsuits --is a vital part of “the federal scheme for deterring anti-competitive behavior.”8 In 2004, Congress enhanced both arms of antitrust enforcement by enacting the Antitrust Criminal Penalty Enhancement and Reform Act of 2004, P.L. 108-237 (“ACPERA”), which was re-enacted in 2010. Moreover, in the EU, courts have likewise determined that private enforcement is an integral part of enforcement generally, stating that “[t]he existence of such a right (of private enforcement) strengthens the working of the Community competition rules and discourages agreements or practices, which are frequently covert, which are liable to restrict or distort competition. From that point of view, actions for damages before the national courts can make a significant contribution to the maintenance of effective competition in the Community.”9

ACPERA enhanced public enforcement efforts by eliminating the threat of treble damages and joint and several liability to the leniency recipient. Before ACPERA, a cartel member considering whether to blow the whistle on its co-cartelists and take advantage of the leniency program had to weigh the benefits of immunity from criminal prosecution against almost-certain exposure to treble damages and joint and several liability in private litigation. ACPERA tips the balance in favor of self-reporting by

4 Speech by Scott D. Hammond, former Deputy Assistant Attorney Gen.,

Antitrust Div., U.S. Dep't of Justice, Caught in the Act – Inside an International Cartel, Presented at OECD Paris, France (October 18, 2005) at 1 (transcript available at http://www.usdoj.gov/atr/public/speeches/212266.htm )[hereinafter “Caught in the Act”].

5 Verizon Commc’ns, Inc. v. Law Offices of Curtis V. Trinko, 540 U.S. 398, 408 (2004).

6 Cmty. Commc’ns Co. v. City of Boulder, 455 U.S. 40, 56 n.19 (1982) (quoting U. S. v. Topco Associates, Inc., 405 U.S. 596, 610 (1972)).

7 Cumberland Farms, Inc. v. Browning-Ferris Indus., 120 F.R.D. 642, 645 (E.D. Pa. 1988) (citations omitted).

8 In re Bulk Extruded Graphite Prods. Antitrust Litig., 2006 WL 891362, at *4 (D.N.J. April 4, 2006); In re Vitamins Antitrust Litig., 209 F.R.D. 251, 258 (D.D.C. 2002) (noting that it has “long been recognized that class actions play an important role in the private enforcement of antitrust actions.”) [hereinafter Vitamins].

9 Sainsbury v. MasterCard Inc., et al. [2016] CAT 11, at 203 ¶3.

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limiting the leniency applicant’s civil damages liability.10 A leniency entity that provides “timely” and “satisfactory” cooperation to civil litigants is liable only for the actual damages attributable to its own commerce in the goods or services affected by the violation. At the same time, ACPERA was intended to benefit the civil claimants by providing timely and full cooperation from the leniency cartel participant.11 Likewise, the EU has rejected cooperation which came untimely and was not full. These two core principles of voluntary cooperation thus appear universal.12

II. THE DOJ’S CORPORATE LENIENCY PROGRAM AND THE PROVISIONS OF ACPERA

A. The DOJ’s Corporate Leniency Program Has Been Enormously Successful

The DOJ has long had “a policy of according leniency to corporations reporting their illegal antitrust activity at an early stage, if they meet certain conditions.”13 Under the current leniency policy, in effect since 1993, a corporation that either brings to the DOJ’s attention a cartel of which DOJ had been unaware, or is the first to come forward to cooperate in an investigation that is already underway, can obtain complete immunity from prosecution for itself and for all its executives who cooperate in the investigation if it meets certain conditions.14

10 See Bonny E. Sweeney, Earning ACPERA’s Civil Benefits: What

Constitutes “Timely” and “Satisfactory” Cooperation?, ANTITRUST, Summer 2015 [hereinafter, Earning ACPERA’s Civil Benefits], at 38 (in the first four years following ACPERA’s enactment, Type A leniency applications -- in which an applicant initiates contact with the Antitrust Division -- doubled, suggesting that ACPERA has succeeded in encouraging cartel members to self-report).

11 Id. at 38 and n.8 (citing ACPERA’s legislative history). 12 See European Commission Leniency Policy (Jan. 4, 2016), at 1,

http://ec.europa.eu/competition/cartels/leniency/leniency.html. “ 13 See Corporate Leniency Policy (Aug. 10, 1993), at 1,

www.usdoj.gov/atr/public/guidelines/0091.htm [hereinafter Corporate Leniency Policy]. “’Leniency’ means not charging such a firm criminally for the activity being reported.” Id.

14 The Corporate Leniency program automatically grants amnesty to any corporation that reports illegal pre-investigation antitrust activity provided six conditions are met: (1) DOJ has not received information about the illegal activity from any other source; (2) once discovered, it acted promptly and effectively to end its participation in the activity; (3) it is candid and complete in reporting and cooperates fully with the DOJ investigation; (4) its confession is truly a corporate act, not isolated confessions from individuals; (5) where possible, it makes restitution to injured parties (see discussion

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The policy behind the DOJ’s program is “to destabilize cartels, and [cause] the

members of the cartels to turn against one another in a race to the Government.”15 The success of this program is evident in its statistics: Before the mid-1990s, international cartels “were rarely discovered or indicted in the United States.” 16 In the period 2000-2015, in contrast, the number of international cartels discovered annually increased four-fold.”17 The success of the DOJ’s leniency program is illustrated by enormous increases in criminal fines, jail time, and the number of grand jury investigations. During the period 1990 through the end of 2015, total criminal fines imposed by the United States on international cartels totaled roughly $29.8 billion. The Division’s cartel enforcement efforts for that period also resulted in the imposition of more than 250,000 jail days for participating corporate executives and the opening of more than 700 grand juries.18

However, a leniency applicant is almost guaranteed to face private civil litigation

in the form of individual and class actions for damages in the United States and at present, for individual or group actions involving global cartels operating outside the United States. A leniency application is, in essence, the functional equivalent of an acknowledgement of the existence of an illegal cartel; therefore, the acknowledgement, by itself, establishes a strong foundation for future exposure to large civil damages awards.19

B. ACPERA Removes A Significant Disincentive To Reporting Antitrust Violations

ACPERA applies to corporate antitrust leniency applicants20 and their cooperating individuals21 who enter into either a conditional or final amnesty agreement22 with the DOJ.

infra regarding restitution); and (6) it did not coerce another party to participate in the illegal activity and was not the leader or originator of the activity.

15 See Cong. Rec. at S3614 (Apr. 2, 2004). 16 Countering the Evil of Cartels, AntitrustInstitute.org (Preview of Am.

Antitrust Inst. Cartel Chapter of Presidential Transition Rep., posted January 2017) [hereinafter “Countering the Evil of Cartels”], at 10.

17 Id. and Fig. 2. 18 Id., Table 1. 19 See Cong. Rec. at S3614 (Apr. 2, 2004). 20 Antitrust leniency applicant “means, with respect to an antitrust leniency

agreement, the person that has entered into the agreement.” See ACPERA at §212(3). 21 Cooperating individual “means, with respect to an antitrust leniency

agreement, a current or former director, officer, or employee of the antitrust leniency applicant who is covered by the agreement.” See ACPERA §212 (5) (emphasis added).

22 An amnesty agreement, or “antitrust leniency agreement” as it termed in ACPERA, “means a leniency letter agreement, whether conditional or final, between a

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The passage of ACPERA23 in June of 2004 allowed “the Justice Department, in appropriate circumstances, to limit a cooperating company’s civil liability to actual, rather than treble, damages in return for the company’s cooperation in both the resulting criminal case as well as any subsequent civil suit based on the same conduct.”24 Hewitt Pate, former Assistant Attorney General for the Antitrust Division, noted in June of 2004 that “the de-trebling provision of the Act removes a major disincentive for submitting amnesty applications,”25 aiming to increase the incentives “for participants in illegal cartels to blow the whistle on their co-conspirators and cooperate” with the DOJ and civil plaintiffs.26, One of the primary goals of ACPERA’s de-trebling provision was to encourage corporations to self-report their participation in a conspiracy, which is otherwise particularly difficult to uncover and prove without cooperation from a co-

person and the Antitrust Division pursuant to the Corporate Leniency Policy of the Antitrust Division in effect on the date of the execution of the agreement.” See ACPERA at §212(2). See also Gary R. Spratling, Dep. Ass’t Attorney Gen., Antitrust Div., U.S. Dept. of Justice, Making Companies An Offer They Shouldn’t Refuse,” The Bar Ass’n of D.C.’s 35th Annual Symposium on Associations and Antitrust (February 16, 1999) at Ex. 2 (transcript available at www.usdoj.gov/atr/public/speeches/2247.htm) [hereinafter “Making An Offer”] (“In cases in which the Division’s investigation ultimately reveals that the leniency applicant has not engaged in any criminal conduct, the Division will not grant amnesty because it is unnecessary.”) Thus, a corporation that is investigated, but is ultimately not found to have violated the antitrust laws, owes no duty of cooperation to civil plaintiffs.

23 ACPERA consists of five numbered sections (§§211-215), as Title II of H.R. 1086. It was introduced on March 5, 2003 by sponsoring Congressman Sensenbrenner. There were 16 co-sponsors, which notably included both Republican and Democratic sponsors. Senator Hatch, on November 6, 2003, at the Committee on the Judiciary, reported the bill with an amendment in the nature of a substitute -- which included the language of ACPERA -- without a written committee report. Representative Sensenbrenner appended a committee report to his floor statement in June of 2004. A helpful overview of the legislative history of ACPERA is found in Harrison & Bell at 219-21, infra note 26.

24 See Cong. Rec. at S3613 (April 2, 2004). 25 See ACPERA Press Release. Legislators also noted that ACPERA was

created to eliminate this same “disincentive to self-reporting.” See Cong. Rec. at S3614 (April 2, 2004).

26 See Cong. Rec. at S3613 (April 2, 2004). See Glenn Harrison & Matthew Bell, Recent Enhancements In Antitrust Criminal Enforcement: Bigger Sticks and Sweeter Carrots, 6 Houston Bus. & Tax L.J. 207, 226 (2006) [hereinafter Harrison & Bell].

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conspirator.27 As a result, the DOJ gets crucial 28 cooperation and can pursue and detect more cartels. “The central purpose of [ACPERA] is to bolster the leniency program already utilized by the Antitrust Division so that antitrust prosecutors can more effectively go after antitrust violators…. cognizant of the needs of victims.”29

Consequently, along with the reality that “[t]he bottom line is [that] a business is far more likely to be the victim of a cartel than a member of one,”30 ACPERA was met

27 See Makan Delrahim, Deputy Assistant Attorney General, U. S. Dep’t of

Justice Perspectives on International Antitrust Enforcement: Recent Legal Developments and Policy Implications, address before the American Bar Association Section of Antitrust Law Fall Forum at 8-9 (Nov. 18, 2003) (available at http://www.usdoj.gov/atr/public/speeches/201509.pdf).

28 Cooperation by cartelists is increasingly valuable as detection becomes more difficult, and cartelists employ more sophisticated means to conceal their crime. “[C]artelists are criminals” and “adept at concealment.” See Thomas O. Barnett, Ass’t Attorney General, Antitrust Div., U.S. Dep’t of Justice, Seven Steps to Better Cartel Enforcement, 11th Annual Competition Law & Policy Workshop (June 2, 2006) at 8 [hereinafter Seven Steps]. See also Caught in the Act, supra note 4, at 2 (“[t]he conspirators have discussed the criminal nature of their agreements; they have discussed the need to avoid detection by antitrust enforcers in the United States and abroad; and they have gone to great lengths to cover-up their actions – such as using code names with one another, meeting in secret venues around the world, creating false ’covers’ – i.e., facially legal justifications – for their meetings, using home phone numbers to contact one another, and giving explicit instructions to destroy any evidence of the conspiracy”); Seven Steps at 8 (“True to type, many [cartelists] react to an investigation by actively obstructing the investigations of antitrust prosecutors.”); Scott Hammond, Deputy Ass’t Attorney Gen., Antitrust Div., U.S. Dep’t of Justice, Ten Strategies for Winning the Fight Against Hardcore Cartels, (October 18, 2005) (“When No ‘Hot Documents’ Are Uncovered by Investigators — a Frequent Event As Increased Deterrence Will Cause Cartels to Become More Sophisticated — Individual Admissions Are Needed to Prove Existence of Cartels”).

29 See Cong. Rec. at H3660 (June 2, 2004). 30 See Scott Hammond, former Deputy Assistant Attorney Gen., Antitrust

Div., U.S. Dep't of Justice, Beating Cartels At Their Own Game—Sharing Information In the Fight Against Cartels (Nov. 20, 2003) at 12 (transcript available at http://www.usdoj.gov/atr/public/speeches/201614.htm) [hereinafter Beating Cartels] (“[i]t just makes no sense that honest businesses operating in a free market economy would not favor strong cartel enforcement.”). A similar sentiment was expressed in a recent letter to the editor of the U.K. newspaper, The Financial Times: “[i]f there is a guiding principle that dictates the way we do business in the U.K. it is that it should be conducted fairly…. Those operating a cartel are engaging in theft and should face [sanctions] . . . . I will not defend the indefensible….” The author was none other than David Lennan, who serves as Director General of the British Chamber of Commerce. Hollywood to Hong Kong, supra note 2.

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with little to no opposition and quickly passed into law less than one year after its introduction in committee. 31 Its sponsor in the U.S. House of Representatives described it as “truly bipartisan and bicameral in nature.”

This goal was reaffirmed in the 2010 re-enactment and extension of ACPERA as explained by one court in 2015:

In hearings on ACPERA's renewal in 2009, Rep. Henry Johnson (D–Ga .) reiterated that ACPERA was originally enacted to “address[ ] this shortcoming in the criminal leniency program by also limiting the cooperating party's exposure to liability with respect to civil litigation.” 155 Cong. Rec. H.R. 2675 (June 9, 2009). Rep. Johnson co-sponsored the renewal of the bill in the House with Rep. John Conyers (D–Mich.), Rep. Lamar Smith (R–TX), and Rep. Howard Coble (R–NC). House Congressional Record at 4, Ex. 4, ECF No. 196–4. During the 2009 renewal proceedings, the sponsoring representatives shared ACPERA's success in providing incentives to destabilize cartels.

Rep. Johnson's testimony emphasized the importance of incentivizing reporting as a key to destabilizing cartels and the success of ACPERA since 2004, as well as ACPERA's role in helping to secure jail sentences in 85 percent of individual prosecutions and over $900 million in criminal fines. Id. at 3–4. Given this legislative history, ACPERA should be read with the understanding it was enacted to incentivize stakeholders to report any anticompetitive behavior, and intended to prioritize criminal investigations and limit civil antitrust liability.32

At the same time, ACPERA’s de-trebling provision was intended to further the important restitutionary goals of the antitrust laws by requiring the leniency applicant to provide cooperation to the victims of the cartel. In enacting the statute, Congress envisioned a level of cooperation so great that victims would receive more compensation post-ACPERA than pre-ACPERA, even accounting for de-trebling. This raises the question whether the victims of price-fixing – who face the prospect of foregoing valuable treble damage rights– have gotten the benefit of the bargain struck by Congress on their behalf. As described below, leniency applicants have sought to obtain ACPERA’s civil benefits through late, grudging and partial cooperation, even going so far as arguing that their damages should be de-trebled simply because they responded to discovery requests without forcing plaintiffs to file motions to compel. This surely is not what Congress intended.

31 Cong. Rec. at H3657 (June 2, 2004). 32 Morning Star Packing Co. v. S.K. Foods, L.P., No. 2:09-cv--00208-KJM-

KJN, 2015 WL 3797774 at *6 (E.D. Cal. June 18, 2015) [hereinafter “Morning Star”].

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Shortcomings in leniency applicants’ civil cooperation have been addressed by only a few courts. A more effective and efficient route to achieving Congress’s goal of increasing restitution to cartel victims through cooperation might consider DOJ conditioning final leniency on the timeliness and fullness of the applicant’s cooperation and satisfactory restitution. In order to obtain leniency, a confessing cartelist, “[w]here possible . . . [must] mak[e] restitution to injured parties.”33 Yet the DOJ does not police whether leniency recipients ultimately provide such restitution, instead leaving the matter to private enforcement. In order to ensure that the victims receive adequate, the DOJ could make its grant of leniency conditional either on the applicant providing satisfactory and timely cooperation to the civil claimants or on proof of satisfactory restitution.

1. ACPERA’s Single Damages Protection34

Section 213(a) of ACPERA, entitled “Limitation on Recovery,” states that the “amount of damages recovered by or on behalf of a claimant from an antitrust leniency applicant . . . shall not exceed that portion of the actual damages sustained by such claimant which is attributable to the commerce done by the applicant in the goods or services affected by the violation of the antitrust laws. The Act effectively “amends the antitrust laws to modify the damage recovery from a corporation and its executives to actual damages.”35 In other words, “the total liability of a successful leniency applicant would be limited to single damages without joint and several liability.”36 The applicant is entitled to this significant damages reduction, however, only if it provides effective and meaningful cooperation. 37

Importantly, ACPERA affects only the leniency applicant’s responsibility for

damages, leaving the remaining co-conspirators jointly and severally responsible for remaining market-wide trebled damages, including the leniency applicant’s.38 This “damages-preserving” provision was explained by Senator Hatch as being necessary and justified: “because all other conspirator firms would remain jointly and severally liable for three times the total damages caused by the conspiracy, the victims’ potential total

33 DOJ Corporate Leniency Policy, issued August 10, 1993, updated July 29,

2015, https://www.justice.gov/atr/corporate-leniency-policy. 34 Although the same joint and several liability principles apply, in the

European Union, unlike in the United States, each cartelist has a right of contribution against the others. This right of contribution has the effect, as a practical matter (barring bankruptcy, or other proven financial inability), of limiting a cartelist’s liability to damages caused by transactions with its own customers. Cf. Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630 (1981) (federal antitrust laws do not provide defendants with right of contribution from other participants in the conspiracy).

35 Id. 36 See Cong. Rec. at S3614 (Apr. 2, 2004). 37 ACPERA § 213(a)-(b). 38 See ACPERA §214(3).

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recovery would not be reduced.”39 The remaining defendants “will be fully, jointly and severally liable for the treble damages the conspiracy caused, minus only the amount actually paid by the leniency applicant.”40 Indeed, Congress anticipated that ACPERA would actually increase the recovery by private plaintiffs.41 As a result, “the full scope of antitrust remedies against [non-ACPERA] parties will remain available to the government and private antitrust plaintiffs.”42

2. ACPERA’s Duty of Cooperation

One of the key components of ACPERA is its mandate of cooperation in private enforcement. Specifically, ACPERA provides:

1. the leniency applicant must provide a “full account” of “all facts known to the applicant. . . that are potentially relevant to the civil action;”

2. the leniency applicant must “furnish[] all documents or other items” that are “potentially relevant to the civil action” that are in the applicant's or cooperating individual's possession or control “wherever they are located;” and

3. the leniency applicant must use its “best efforts to secure and facilitate”” cooperation from those individuals covered by the leniency agreement.43

Thus, a leniency applicant should be required to uncloak the full nature, scope, extent and impact of the conspiracy to civil plaintiffs timely and fully in order to provide “satisfactory cooperation to the claimant with respect to the civil action.”44 This includes revealing the participants, dates, times, meetings, amounts, products, pricing, and

39 See Cong. Rec. at S3614 (Apr. 2, 2004). 40 See Cong. Rec. at H3658 (June 2, 2004). See also Cong. Rec. at S3615

(Apr. 2, 2004) (“and while a party that receives leniency would only be liable for the portion of the damages actually caused by its own actions, the rest of the non-cooperating co-conspirators would remain jointly and severally liable for the entire amount of damages, which would then be trebled, to ensure that no injured party will fail to enjoy financial redress.”)

41 Id. 42 See Cong. Rec. at H3657 (June 2, 2004). 43 See ACPERA § 213(b)(1)-(3). In addition to facilitating cooperation from

those employees and directors who have been granted immunity from prosecution as part of the agreement, leniency defendants, in order to satisfy their obligations to civil claimants, also should secure cooperation from employees who are not facing prosecution. The obligation to secure cooperation from former employees, however, is less clear.

44 See ACPERA §213(b).

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communications in any forum, directly or indirectly, relating to the conspiracy. In fact, it was expected that this cooperation be so complete and useful45 to civil plaintiffs that overall recoveries would be maximized.”46

An individual leniency applicant (e.g., a corporate executive with amnesty protection) is similarly subject to ACPERA’s cooperation requirements and can obtain the damages-limiting benefits of the statute only if he or she (i) “mak[es] himself or herself available for such interviews, depositions, or testimony in connection with the civil action as the claimant may reasonably require;” and (ii) “respond[s] completely and truthfully, without making any attempt either falsely to protect or falsely to implicate any person or entity, and without intentionally withholding any potentially relevant information, to all47 questions asked by the claimant in interviews, depositions, trials, or any other court proceedings in connection with the civil action.”48

3. ACPERA’s Requirement Of Judicial Determination Of Satisfactory Cooperation

In order to qualify for single damages, a leniency applicant must seek certification from the court that its cooperation to civil plaintiffs has been satisfactory. “The court in which the civil action is brought is empowered to determine whether the necessary

45 ACPERA cooperation makes civil litigation much more efficient because

it defines the contours of the cartel, rather than requiring deductions from discovery about cartels that “operate in secret, and [whose] members usually do not co-operate with investigations of their conduct.” See Organisation for Economic Co-operation and Development, Global Forum on Competition, “Prosecuting Cartels Without Direct Evidence of Agreement”, Sept. 11, 2006 at 18. Cartel “participants understand their conduct is unlawful, and that their customers would object to the conduct if they knew about it, and so they take pains to conceal it.” Id. at 20. They use “extreme measures to conceal the existence of a cartel, including everything from creating bogus trade associations, the use of code names, and sophisticated ruses to keep general counsel in the dark, to hiding incriminating evidence in the attic of a cartel member’s grandparent’s home, wholesale document destruction and witness tampering after an investigation begins.” Beating Cartels, supra note 30. Early ACPERA cooperation with civil plaintiffs can even indirectly benefit the remaining co-cartelists, relieving them from defending against an overly broad complaint.

46 See Cong. Rec. at S3614 (Apr. 2, 2004). 47 Civil plaintiffs who find themselves faced with recalcitrant corporate

leniency applicants may want to consider naming cooperating individuals as defendants. ACPERA’s testimony requirements appear to be more stringent for cooperating individuals than for corporations.

48 ACPERA § 213(b)(3)(A)(i)-(ii).

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cooperation has occurred.”49 Such a determination occurs “after considering any appropriate pleadings from the claimant.”50 Thus, the full scope of the cooperation required by ACPERA will ultimately be defined by the courts, after being informed by the claimants about the sufficiency of cooperation.51

III. ACPERA COOPERATION

Not surprisingly, leniency applicants and civil plaintiffs often interpret satisfaction of ACPERA’s cooperation requirements differently. And until recently, the precise contours of the cooperation required by ACPERA remained un-defined by the courts. To date, only one court—the district court in In re Aftermarket Automotive Lighting Products Antitrust Litigation52 —has issued an opinion providing detailed guidance to parties on what is required for a leniency applicant to satisfy ACPERA’s cooperation requirement. In that case, plaintiffs moved before trial for a determination that the leniency applicant had not provided satisfactory or timely cooperation and so was not entitled to the damages-limiting benefits of ACPERA. The court agreed with plaintiffs, finding that the leniency defendant’s cooperation was neither satisfactory nor timely. This decision provides useful guidance for plaintiffs and leniency defendants negotiating the scope of ACPERA cooperation.53

A. To What Party is Cooperation Owed?

A threshold question about the leniency applicant’s duty to cooperate under ACPERA is: to whom does that duty extend?

The statute answers this question to some degree, stating that a corporate leniency applicant must provide a full account of all potentially relevant facts of which it knows to the “claimant” and furnish all potentially relevant documents “to the civil action.”54

49 See Cong. Rec. at H3658 (“The power of the court is the same whether the court is a state or federal court and whether the antitrust claims have been brought under state or federal laws.”)

50 ACPERA § 213(b). 51 Id. (court will determine whether the leniency defendant “has provided

satisfactory cooperation to the claimant with respect to the civil action”). 52 In re Aftermarket Automotive Lighting Antitrust Litig., No. 09 MDL 2007-

GW(PJWx), 2013 WL 4536569 (C.D. Cal. Aug. 26, 2013) [hereinafter “Auto Lights”]. 53 See “Earning ACPERA’s Civil Benefits” at 37 (“Civil plaintiffs and the

leniency applicant now have a blueprint for what is required—both in terms of quality and timing of cooperation—to reduce the leniency applicant’s civil liability in the event the parties do not settle.”); but see Eric Mahr and Sarah Light, Making ACPERA Work, ANTITRUST, Summer 2015, at 31 (“[r]elying solely on Auto Lights as the standard interpretation of ACPERA places too much weight on that decision and ignores contradicting case law, ACPERA’s legislative history, and the need for cooperation between plaintiffs and defendants in cartel litigation.”).

54 Id. at § 213(a)(1)-(2).

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Cooperating individuals must also make themselves available for interviews, deposition or testimony to the “claimant.”55 “Claimant” is statutorily defined as “a person or class” that has brought an action under the Sherman Act or any similar state law (except for a state or its sub-divisions).56 The Congressional history refers to cooperation being provided to “any subsequent private plaintiffs bringing a civil suit based on the covered criminal conduct.”57 Commentators have routinely viewed the statute’s protections as applying to private plaintiffs generally who file such civil suits.

The Act itself raises several fundamental definitional issues, however.

Does the “claimant” include those who opt out of a class and pursue a separate action? No court has addressed the topic, but the statutory definition would seem to encompass such opt-out plaintiffs (“opt-out”), even if the opt-out does not identify itself until after proceedings have commenced. What if the civil actions are brought by classes of direct purchasers under federal law and indirect purchasers under state law? Again, although no court has addressed the topic, the statutory definition on its face seems to encompass suits raising state law claims as well.58

Both of these definitional issues have practical management considerations. Does the leniency applicant have to provide separate cooperation, for example, to a class of federal claimants, state claimants and multiple individual opt-outs? If one set of claims is filed significantly later than the other, does the obligation of cooperation require duplicate efforts on the part of the Applicant or does the court (or do the parties) have the authority to fashion an approach which controls, consolidates and coordinates such cooperation? In practice, the leniency defendant typically provides the same cooperation to different groups of civil claimants (direct purchaser class, indirect purchaser class, and individual plaintiffs) at the same time. This coordinated approach works well for both claimants and leniency defendants, so long as the leniency defendant recognizes that there might be some instances in which tailored cooperation is appropriate.59

Another issue arises with respect to the meaning of the civil liability exposure only to “that portion of the actual damages sustained by such claimant that is attributable to the commerce done by the applicant in the good or services affected by the

55 Id. at § 213(a)(3)(A)(i). 56 Id. at §212 (4). 57 Cong. Rec. at S3614 (Apr. 2, 2004). 58 In In re Air Cargo Shipping Servs. Antitrust Litig., No. 06-MD-

1775(J6)(VVP) (E.D.N.Y June 27, 2006). [hereinafter “Air Cargo”] the leniency applicant has provided cooperation to both direct and indirect purchaser classes. The legislative history also refers to cooperation in state law actions. Cong. Rec. at H3658 (June 2, 2004).

59 See Making ACPERA Work at 35.

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violation.”60 Does this mean the duty of cooperation extends only to plaintiffs or class members who did business with or made purchases from the leniency applicant? Again, the broad definition of “claimant” provided by ACPERA, as well as the inability to sever the effect of one member of a cartel on the entire market, militates against such a narrow construction.61

Further, the only court to address the issue –the district court in Auto Lights --decisively rejected such a narrow construction. Responding to the leniency defendant’s argument that it had provided satisfactory cooperation by settling separately with several large class members, the court was “not persuaded that a side settlement benefitting some but not all class members, is, in and of itself, evidence of ‘satisfactory cooperation’ under ACPERA.”62 Certainly, no such distinctions were drawn by the leniency applicants in cases such as Sulfuric Acid or Air Cargo. The better approach, and that supported by the limited case law to date, is that the leniency applicant’s cooperation inures to the benefit of all plaintiffs and all members of any class, all of whom have a collective and indivisible interest in receiving the benefits of such cooperation.

Lastly, cooperation is owed to civil plaintiffs until the conclusion of their lawsuit, accomplished by settlement, trial or appeal. In the Sulfuric Acid Litigation, civil plaintiffs observed that prematurely joining in a defendant’s motion to certify a finding of “satisfactory cooperation” under ACPERA may limit their ability to compel ACPERA cooperation after the court has entered an order certifying the cooperation as satisfactory.63 At the same time, the fact that the cooperation obligation continues until the end of the litigation does not preclude a court making that finding before trial, if warranted by the facts. In Auto Lights, the court granted plaintiffs’ request for a pre-trial

60 ACPERA, §213 (a). The duty of cooperation differs substantively from

the issue of whether the cooperation from the Applicant can be limited to its purchases, supra note 44.

61 See Dolphin Tours, Inc. v. Pacifico Creative Serv., Inc., 773 F.2d 1506, 1511 (9th Cir.1985) (“Defendants whose illegal conduct operates to exclude others from the relevant market, should not benefit because their wrongdoing makes it more difficult for the plaintiff to establish the precise amount of its injury.”); In re Aluminum Phosphide, 893 F.Supp. at 1499 (“[C]ausation of injury may be found as a matter of just and reasonable inference from proof of defendants' wrongful acts and their tendency to injure plaintiffs, and from evidence of change in prices not shown to be attributable to other causes.”); Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n. 9 (1969) (“It is enough that the illegality is shown to be a material cause of the injury; a plaintiff need not exhaust all possible alternative sources of injury in fulfilling his burden of proving compensable injury under § 4.”).

62 Auto Lights, 2013 WL 4536569 at *5. 63 In re Sulfuric Acid Antitrust Litig., 231 F.R.D. 320, 330 (N.D. Ill. 2005)

(plaintiffs that had already joined in leniency defendant’s ACPERA certification were subsequently barred from arguing that that defendant’s failure to produce a witness for deposition was a violation of its ACPERA cooperation obligation.

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determination that the leniency defendant had not satisfied its ACPERA cooperation obligations. By that time, the leniency defendant was the only remaining defendant, discovery was closed, expert discovery had been completed, and pretrial motions had been filed. Thus, plaintiffs argued – and the court agreed -- that the leniency defendant was likely not going to be providing any additional cooperation. Because the ACPERA cooperation finding would affect joint and several liability and damages findings, a post-trial ACPERA determination could require a second trial of damages and expert issues.64

B. Timeliness of Cooperation

In a 2010 amendment, Congress reauthorized ACPERA’s detrebling provision for another 10 years and added a requirement that the leniency applicant provide cooperation to the civil claimants in a “timely manner” in order to obtain the damages-limiting benefits of the statute.65

This amendment clarified existing law, as it was recognized before 2010 that a leniency applicant’s cooperation must be provided in a “timely” fashion in order to be “satisfactory”. The legislative history, for example, emphasizes the materiality of this element. Congressmen in both the House of Representatives and the Senate preconditioned single damages on the provision of such timely ACPERA cooperation to civil plaintiffs. On the Senate side, Senator Hatch stated that “[i]mportantly, the limitation on damages is only available to corporations… if they provide adequate and timely cooperation . . .to any subsequent private plaintiffs bringing a civil suit.”66 On the House side, Representative Scott stated that the DOJ “will only grant such leniency if the company provides adequate and timely cooperation to both the government and any subsequent private plaintiffs in civil suits.”67 A leniency applicant has an affirmative obligation under the Act to provide civil plaintiffs with full cooperation (as discussed

64 Earning ACPERA’s Civil Benefits, at 39. See In re Polyurethane Foam

Antitrust Litig., 314 F.R.D. 226, 290-91 (N.D. Ohio 2014) (following Auto Lights and declining to make a determination of satisfactory cooperation under ACPERA at the class certification stage of a case).

65 Antitrust Criminal Penalties Enforcement and Reform Act of 2004 Extension Act of 2010, H.R. 5330, Pub. L. No. 111-190, Sec. 124 Stat. 1275 (2010) (ACPERA Extension Act). Before the amendment, ACPERA imposed a timeliness requirement only where the leniency applicant initiated contact with the Antitrust Division after civil litigation had already begun, or a state had begun an investigation. ACPERA Sec. 213(c)

66 Cong. Rec. at S3614 (Apr. 2, 2004) (emphasis added). 67 Cong. Rec. at H3659 (June 2, 2004) (emphasis added). See also Remarks

of Rep. Conyers, at Cong. Rec. at H3660 (June 2, 2004) (the DOJ “will only grant such leniency if the company provides adequate and timely cooperation to both the government and any subsequent private plaintiffs in civil suits”) (emphasis added).

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below) early and continuously until their case is concluded (either through settlement(s) or trial).68

Although the statute does not specify when a leniency defendant must provide cooperation in order for it to be deemed “timely”, prudence dictates that an applicant seeking ACPERA’s civil benefits provide such cooperation at the earliest practicable time. Timeliness raises an issue as to whether a leniency defendant must self-identify. For instance, although the statute contains no requirement that the leniency applicant identify itself to the civil claimants at the time the civil litigation is filed or the defendant obtains conditional leniency, failure to do so may jeopardize the leniency defendant’s subsequent request for de-trebling.

In In re TFT-LCD Antitrust Litigation, for example, although the court denied class plaintiffs’ motion to compel the leniency applicant to identify itself, it agreed that “the value of an applicant’s cooperation diminishes with time.” Recognizing that plaintiffs were “about to embark on significant and costly discovery that, at least in part, could be obviated if the applicant cooperated with plaintiffs,” the court held that it would take this into account if and when a leniency applicant sought the de-trebling protection of ACPERA.69 This authority was cited with approval by the court in Morning Star to deny summary judgment on whether a leniency applicant had fully complied with the requirements of ACPERA.70

The DOJ had urged the court in TFT-LCD to deny the motion to compel,71 arguing, first, that it was premature because a leniency applicant may decide not to seek ACPERA’s civil benefits, and second, that early disclosure of the identity of the leniency applicant might impede the DOJ’s enforcement efforts. The first argument, though true, should not be persuasive to a leniency defendant that does intend to seek de-trebling, because it delays its cooperation with the civil claimants at its peril. The DOJ’s second argument, which reflects legitimate concerns about protecting an ongoing criminal investigation, can be addressed through non-disclosure agreements and phased discovery. A leniency defendant can provide useful early cooperation to the civil litigants through confidential attorney proffers that pose no threat to the government investigation.

In Auto Lights, the court held that the leniency defendant’s cooperation was not sufficiently timely where it was largely provided after the other defendants had already produced discovery that documented the price-fixing conspiracy. The applicant had

68 Id. at 3. 69 Id. 70 2015 WL 3797774 at *8. 71 See “United States’ Opposition to Direct Purchaser Plaintiffs’ Motion To

Compel the Amnesty Applicant Defendant To Comply With ACPERA Or Forfeit Any Right It May Have To Claim Reduced Civil Liability” (May 1, 2009), filed in In re TFT-LCD (Flat Panel) Antitrust Litig., MDL No. 1826 (N.D. Cal.).

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argued that its initial cooperation was limited by stays imposed by the Court at the request of the DOJ, and by DOJ’s request that it keep its cooperation confidential. The court did not fault the applicant for complying with the DOJ’s requests and the court’s stay orders, but found that the defendant could have earlier provided attorney proffers, which were not prohibited either by the stays or by the applicant’s agreement with the DOJ.72

As these decisions make clear, whether a leniency applicant’s cooperation is sufficiently timely depends upon the factual situation and stage of litigation. A leniency defendant that delays its cooperation until after discovery has commenced is unlikely to obtain the civil benefits of ACPERA. For the same reasons, an applicant that delays its cooperation until after another defendant has provided cooperation as part of a settlement may also be denied those benefits. That is because Congress intended that the leniency defendant be the first to provide cooperation at a point in the case where it is most useful to the civil plaintiffs.

1. Cooperation and Settlement

Is cooperation dependent on settlement? Can an applicant truly afford to cooperate before it finalizes its civil exposure even under its statutorily limited liability?

Some commentators have noted that leniency applicants negotiating a settlement face:

a chicken-and-egg problem. How can leniency applicants cooperate with plaintiffs without the protection of a finalized settlement agreement in hand? But how can leniency applicants achieve a settlement agreement based on the liability limitations of ACPERA until they first meet ACPERA’s requirements by cooperating?

The seeming circularity will usually be resolved through the same give and take of many other civil antitrust settlement negotiations. Each side will signal its willingness to assent both to the cooperation and to the settlement agreement. For example, these same negotiations occur when cooperation is a part of a settlement agreement outside the ACPERA context: the defendant must assure plaintiffs that the cooperation will be sufficient, but the defendant will not want to fully disclose its cooperation until after the settlement agreement is signed, lest it prematurely give away its bargaining chip. In that same spirit, plaintiffs and leniency applicants will likely be able to come to settlement agreements based on good faith negotiations, using the same mechanisms already present in settlement discussions. 73

72 Auto Lights, 2013 WL 4536569 at *3-4. 73 CGSH Article, supra note 76, at 14.

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In the many settlements that have been negotiated with leniency defendants since ACPERA’s enactment in 2004, this “chicken and egg” problem has not materialized, as the parties have successfully negotiated both settlements and cooperation while preserving their rights in the event the settlement discussions are unsuccessful. In the Air Cargo case, for example, Lufthansa, the leniency applicant, engaged in detailed and substantial cooperation74 with plaintiffs’ counsel prior to the approval of any settlement agreement and prior to the onset of any discovery.75 Thus, for example, the settlement agreement provided that documents given to investigating authorities had to be made available, and counsel had to provide descriptions of the conduct at issue, commencing ten business days after the execution of the agreement.76 Likewise, in the Hydrogen Peroxide Antitrust Litigation,77 the leniency applicant, Degussa, provided substantial cooperation in order to assure its entitlement to single damage protection under the Act while simultaneously advancing its probabilities of settlement.

These examples demonstrate that cooperation need not be coupled with nor

conditioned on settlement.

2. Pre-Filing

Does “timely” mean once a civil suit is filed or even before? Or does it mean once a civil suit is filed and a leadership organization for the putative settlement class is selected? While “timely” can certainly be defined differently by either the recipient or the provider of the cooperation, the legislative history sheds some light on its meaning. “[T]he legislation requires the Leniency applicant to provide full cooperation to the victims as they prepare and pursue their civil lawsuit.”78 Senator Hatch’s use of the words “prepare and pursue” would seem to indicate that a leniency applicant was obligated to cooperate early as the case is being prepared and continuously as the case is being litigated.79

74 Cooperation under the Lufthansa agreement was provided 10 days after

execution of the settlement agreement and over a year and a half prior to preliminary approval papers were entered by the court.

75 Infante Declaration at 10. 76 Hertzfeld Decl., Exh. 2 at ¶¶54(g), (j). 77 In re Hydrogen Peroxide Antitrust Litig., MDL No. 1682 (E.D. Pa., filed

Feb. 11, 2005). 78 Cong. Rec. at S3614 (Apr. 2, 2004) (emphasis added). 79 Statements on the floor by the committee member in charge of the bill

[Senator Hatch; Representative Sensenbrenner] “are regarded as being in the nature of supplemental committee reports and are accorded the same weight as formal committee reports.” 2A SUTHERLAND ON STATUTORY CONSTRUCTION §48.14 at 220 (4th ed. 1973); Me. Pub. Utils. Comm'n v. FERC, 454 F.3d 278, 282 (D.C. Cir. 2006) (“the court applies

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As discussed above, the Auto Lights decision demonstrates that the leniency applicant must provide cooperation as soon as it is able to do so, taking into account potential limitations imposed by the DOJ or court-ordered stays. At a minimum, cooperation that is provided after other defendants have responded to merits discovery requests is too late, particularly if that cooperation merely mirrors the evidence provided pursuant to the Federal Rules.80

Other cases demonstrate that the goals of efficiency and enhancing private enforcement can be undermined if the cooperation is not provided at the outset of the civil litigation. In a lawsuit involving bid rigging of municipal derivatives, Bank of America acknowledged that:

Plaintiffs and Defendant Bank of America have engaged in confidential discussions about some of the facts and circumstances detailed in this Complaint over the last eight months in the context of a settlement process, including a number of sessions overseen by the Honorable Daniel Weinstein (Ret.) of JAMS. Judge Weinstein is one of the nation’s preeminent mediators of complex civil disputes. These discussions have been conducted pursuant to, among other things, an agreement that requires full and timely cooperation by Defendant Bank of America, which has been received. The information contained in this Complaint comes in part from information obtained from Defendant Bank of America and in part from publicly-available information, including regulatory filings. 81

the traditional tools of statutory interpretation in determining congressional intent, looking to the text, structure, purpose, and legislative history of a statute.”) Disabled in Action of Metro. N.Y. v. Hammons, 202 F.3d 110 (2d Cir. 2000) (noting the “sponsor/floor manager statement” as an “authoritative and reliable” source of legislative history); See also Wis. Pub. Intervenor v. Mortier, 501 U.S. 597, 611 n.4 (1991) (“[c]ommon sense suggests that inquiry benefits from reviewing additional information rather than from ignoring it”); U.S. v. Am. Trucking Ass’ns., Inc., 310 U.S. 534, 543-544 (1940) (“when aid to construction of the meaning of words, as used in the statute, is available, there certainly can be no ‘rule of law’ which forbids its use, however clear the words may appear on ‘superficial examination’ ” (footnote omitted)); U.S. v. Fisher, 2 Cranch 358, 386 (1805) (“where the mind labours to discover the design of the legislature, it seizes every thing from which aid can be derived”). This approach has been utilized in interpreting ACPERA. Morning Star, 2015 WL 3797774 at *5-6.

80 2013 WL 4536569 at *3-5. 81 Class Action Complaint at 2, Fairfax County v. Bank of Am., No. 1:08-cv-

0433 (D.D.C. March 12, 2008). See In re Municipal Derivatives Antitrust Litigation, 232 F.R.D. 184, 185-87 (S.D.N.Y. 2008) (court discussed benefits of obtaining cooperation with the Bank of America in deciding whom to appoint as interim class counsel). While Bank of America may not statutorily owe ACPERA cooperation to municipalities or

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Even in this case, however, the cooperation that the Bank of America was able to provide was limited by what the DOJ allowed it to disclose, with the result that a consolidated amended complaint was dismissed with leave to replead, with the court saying that more defendants could be joined, once the bank was able to provide discovery about their participation in the alleged conspiracy,82

Similarly, in the Air Cargo case, leniency applicant Lufthansa provided cooperation prior to the filing of a consolidated amended complaint. This initial cooperation allowed “claimants” to assert their claims with greater specificity and clarity than they otherwise could have been able to do. It allowed the fashioning of a complaint that focused on the evidence for which Lufthansa received amnesty for its participation in a revealed conspiracy. And in In re Parking Heaters Antitrust Litigation, the leniency applicant provided cooperation before plaintiffs filed their consolidated amended complaints, allowing them to provide additional factual detail. In both of these instances, provision of early ACPERA cooperation accomplished one of ACPERA’s principal goals: to “reduce the cost for victims to recover the damages they suffer from criminal antitrust conspiracies.”83

3. Motion To Dismiss Prior to Commencement of Discovery

Ever since the Supreme Court’s decision in Twombly, defendants in price fixing cartels have sought mechanical refuge in the decisions language of “plausibility.” Seemingly without reflection, horizontal price fixing complaints are routinely met with motions to dismiss on the grounds of conspiratorial implausibility. If the cartel includes a leniency applicant, does ACPERA’s obligation of cooperation require the applicant to disclose the facts of the cartel as revealed to the DOJ so that the court is apprised of all information which must inform its decision on plausibility?

An applicant’s admission into the DOJ leniency program should alone be sufficient to establish that a similarly based complaint raises “enough fact to raise a reasonable expectation that discovery will reveal evidence of [a plausible] illegal agreement”.

Unquestionably, an applicant’s obligation to provide cooperation must be triggered by the filing of a “Twombly motion.” If not offered prior to such a filing, the states, it signed an agreement obligating itself to provide “ACPERA cooperation” to such municipalities and states.

82 See “Decision And Order” (Apr. 30, 2009) in In re Municipal Derivatives Antitrust Litig., MDL No. 1950 (S.D.N.Y.).

83 See An Overview of Recent Developments in the Antitrust Division's Criminal Enforcement Program Scott Hammond, Deputy Assistant Attorney Gen., Antitrust Div., U.S. Dep't of Justice, An Overview of Recent Developments in the Antitrust Division's Criminal Enforcement Program (Jan. 10, 2005) (transcript available at http://www.usdoj.gov/atr/public/speeches/207226.htm).

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applicant should be required to provide the factual “context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action” to civil plaintiffs to include in their response.84 Such cooperation would remove most ambiguity that the challenged conspiracy was just as “much in line with a wide swath of rational and competitive business strategy unilaterally prompted by common perceptions of the market.” 85

Indeed, in light of the fact that a leniency applicant must explicitly admit its guilt in order to obtain conditional or final leniency, 86 the Supreme Court’s concerns that an “implausible” conspiracy claim could involve the judicial system and the defendants in an unjustifiably expensive and protracted antitrust litigation evaporates.87 The existence of a leniency applicant should mandate the denial of the vast majority of Twombly motions.88 In fact, however, the case law on this topic is mixed.89

84 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1966 (2007). 85 Id. at 1964. 86 Supra note 17. 87 Rossi v. Standard Roofing, Inc., 156 F.3d 452, 466 (3d Cir.1998) (quoting

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986)) 88 Moreover, as the case law makes clear, even if the scope of the admitted-

to criminal conspiracy is unknown at the time of the Twombly motion, differences in scope between the civil conspiracy and criminal conspiracy do not detract from the plausibility of plaintiffs’ allegations that there was a conspiracy. See In re Capacitors Antitrust Litig., 106 F. Supp. 3d 1051, 1063 (N.D. Cal. 2015) (question of conspiracy’s scope cannot be resolved on a motion to dismiss); In re Lithium Ion Batteries Antitrust Litig., No. 13-MD-2420 YGR, 2014 WL 309192, at *2 (N.D. Cal. Jan. 21, 2014) (upholding a complaint that pleaded a conspiracy broader than guilty plea); In re Automotive Parts Antitrust Litig., No. 2:12-cv-00501, 2014 WL 4272772 at *8 (E.D. Mich. Aug. 29, 2014) (same); In re Vitamins Antitrust Litig., No. 99-197 (TFH) 2000 U.S. Dist. LEXIS 7397, at *77 (D.D.C. 2000) (denying defendants’ motion to sever based on the terms of their negotiated criminal pleas because “criminal guilty pleas do not establish boundaries for this civil litigation”)

89 Compare In re Automotive Parts Antitrust Litig., 29 F.Supp.2d 982, 993 (E.D. Mich. 2014) (“In addition to these Defendants, [plaintiffs] allege a leniency applicant under the Antitrust Criminal Penalty Enhancement and Reform Act (‘ACPERA’) is likely in this case, given the global nature of the conspiracy and its ever expanding reach into new automotive parts. One of the benefits for a conspirator that is accepted into the ACPERA leniency program is that it is not charged with a criminal offense and is not required to plead guilty”) and In re Automotive Parts Antitrust Litig., 50 F.Supp.2d 869, 880 (E.D. Mich. 2014) (“In addition to these guilty pleas, as alleged in IPPs' Complaints, a leniency applicant under the Antitrust Criminal Penalty Enhancement and Reform Act (‘ACPERA’) is likely in this case, given the global nature of the conspiracy and its ever-expanding reach into new automotive parts “) with In re Capacitors Antitrust Litig., 196 F.Supp.2d 1051, 1064-65 (N.D. Cal. 2016) (where

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4. Class Certification

What cooperation obligations are owed by a leniency applicant at the time of class certification?

The reality of routine class treatment of antitrust claims is specifically anticipated by the terms of ACPERA. First, the definition of a claimant under the act, to whom the duty of cooperation is owed, explicitly includes a “class,” on “whose behalf [a civil action] has been brought.”90 Thus, the duty of cooperation, described in Section 213(b) as being owed to the “claimant,” is, by its terms, extended to class members and the specifics of their civil action. Second, the satisfactory nature of cooperation, “with respect to the civil action” as a whole. Therefore, a duty of cooperation must be triggered by the time of class certification and in fact, is owed to the class of victims it injured.91 Breadth & Adequacy of Cooperation

5. Breadth of cooperation

How extensive is the obligation of cooperation under the Act?

The language of ACPERA and its legislative history emphasize that Congress anticipated that leniency applicants must provide civil plaintiffs with cooperation that extends beyond that required under the current federal discovery rules. Further, the Auto Lights court – the only court to rule squarely on the issue -- has affirmed that mere compliance with federal discovery rules will not constitute satisfactory cooperation.92

First, ACPERA requires that a leniency applicant provide comprehensive facts and documents to civil plaintiffs regarding its conduct: a “full account” of “all facts” are required as well as the production of “all documents” that are “potentially relevant to the defendant Panasonic Corporation admitted it was a leniency applicant and that it had an obligation to cooperate under ACPERA if it wished to avoid treble damages, the court said on motions to dismiss that “the ACPERA process is not transparent. There is in fact no guilty plea or similar formal acknowledgement of wrongdoing that plaintiffs, and more critically the Court, can see and evaluate. While it is tempting to ascribe a higher value to the application than to an investigation, its contents are unknown and the same concerns about the lack of transparency in investigative proceedings applies here. It is not possible for the Court to delimit the actual scope of Panasonic's alleged admissions and how they map on to the DPP civil complaint. Consequently, Panasonic's ACPERA application is a non-factor in the Court's analysis. The Court understands that Panasonic has proffered facts about its scope of conduct and documents to both groups of plaintiffs, but otherwise the Court finds that it is not particularly different from the other defendants for present purposes. Panasonic's application certainly is not the be-all and end-all confession that DPPs' motion to dismiss opposition suggests”).

90 ACPERA, §212(4). 91 Auto Lights, 2013 WL 4536569 at *5 92 Auto Lights, 2013 WL 4536569 at *3-5.

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civil action.”93 Congress did not limit the provision of such facts or documents to a subset of information or topics.94

Despite explicit language to the contrary, some defense counsel nonetheless attempt to limit or restrict ACPERA cooperation to “merits,” or “just what was proffered to the DOJ,” or “all non-jurisdictional facts,” or “only the facts contained within the leniency agreement.” However, the text of ACPERA is clear regarding the intended breadth of cooperation: an ACPERA leniency applicant must disclose “all facts” and “all documents” that are “potentially relevant to the civil action.”95

Second, ACPERA focuses on “potentially relevant” facts and documents needed to be provided to civil plaintiffs.96 The inclusion of the modifier “potentially” creates a discovery requirement broader both in scope and in reach than that allowed by the Federal Rules of Civil Procedure, which reaches only “relevant” documents. The Committee Report explicitly states that ACPERA’s “use of the term ‘potentially relevant’ is intended to preclude a parsimonious view of the facts or documents to which a claimant is entitled.”97 Indeed, this comports with recent interpretations generally of discovery obligations in antitrust cases.98

In Auto Lights, the court rejected the leniency defendant’s assertion that it was entitled to ACPERA’s benefits merely because it responded to plaintiffs’ discovery promptly and completely, without requiring a motion to compel production:

The production of documents, translations, responses to inquiries, depositions, and offers to make witnesses available were, in essence, compliance with discovery . . . . ACPERA, however, requires more. Section 213(b) obligates a leniency applicant in a civil action to provide a “full account” of “all facts known” and “all documents” that are “potentially relevant to the civil action.”

93 ACPERA §213(b)(1)-(2). 94 Occasionally, a leniency applicant seeks to limit its cooperation under

ACPERA by contending that a portion of its conduct was immunized or beyond the jurisdictional reach of U.S. courts. The propriety of such an attempted limitation has not yet been litigated.

95 Id. 96 Id. 97 See Cong. Rec. H3658 (June 2, 2004). 98 Courts presiding over antitrust cases generally take a liberal view of

relevance in determining the scope of discovery. See New Park Entertainment, LLC v. Elec. Factory Concerts, Inc., No. Civ. A. 98-775, 2000 WL 62315, at *3 (E.D.Pa. Jan.13, 2000) (internal quotations omitted) Accord In re Potash Antitrust Litig., No. 3-93-197, 1994 WL 1108312, at *14 n.20 (D.Minn. Dec. 5, 1994) (“[t]he Courts have traditionally allowed liberal discovery, particularly when there are allegations of conspiracy and where ‘broad discovery may be needed to uncover evidence of invidious design, pattern or intent.’”).

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The Committee Report indicates that ACPERA’s “use of the term ‘potentially relevant’ is intended to preclude a parsimonious view of the facts or documents to which a claimant is entitled.”99

Third, ACPERA requires that a corporate leniency applicant use its “best efforts” to secure testimony of individuals “covered by the [leniency] agreement.”100 Although no court has as yet defined this provision, its language imposes a higher degree of cooperation than mere “reasonable efforts.”101 The best efforts called for in the context of ACPERA could reasonably include making every available effort to ensure that the individuals covered by the leniency agreement provide cooperation to private plaintiffs.102 A cooperating leniency applicant may, for example, be required to pay for individuals’ counsel or otherwise pay expenses of those individuals cooperating with civil plaintiffs if such payment would encourage their cooperation. Further the leniency applicant should also make reasonable efforts to secure the cooperation of employees of the corporation that are not covered by the leniency agreement. If these individuals choose not to cooperate (either because they are retired, based abroad, or they take the Fifth Amendment), such non-participation should be weighed by the court in determining whether the leniency applicant has provided satisfactory cooperation to civil plaintiffs.

This is not a radical or unfair position. With regard to a corporation’s entry into the DOJ’s leniency program, for example, “the number and significance of the individuals who fail to cooperate, and the steps taken by the company to secure their cooperation, are relevant in the Division’s determination as to whether the corporation’s cooperation is truly ‘full, continuing and complete.”103 Similarly, the number and significance of individuals who fail to cooperate should also be relevant to the court’s

99 Auto Lights, 2013 WL 4536569 at *4 (emphasis in original). 100 ACPERA §Section 213(b)(3)(B). 101 Unfortunately, it seems probable that courts will also have to grapple with

the meaning of “best efforts.” Some counsel seem to think that merely extending the request to cooperate with civil plaintiffs – and no more – to former employees will satisfy this obligation. Cursory review of analogous case law shows that the standard for “best efforts” will not be that lightly interpreted. See e.g., E. Allan Farnsworth, On Trying to Keep One's Promises: The Duty of Best Efforts In Contract Law, 46 U. Pitt. L. Rev. 1, 8 (1984) (“courts sometimes confuse the standard of best efforts with that of good faith …. Good faith is a standard that has honesty and fairness at its core and that is imposed on every party to a contract. Best efforts is a standard that has diligence as its essence and is imposed only on those contracting parties that have undertaken such performance. The two standards are distinct and that of best efforts is the more exacting”).

102/ EEOC v. R.J. Gallagher Co., 181 F.3d 645, 652 (5th Cir.1999) (employment case; “Best efforts” means “such efforts as are reasonable in the light of that party's ability and the means at its disposal and of the other party's justifiable expectations.”)

103/ See Making an Offer, supra note 22, at 4.

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evaluation of an ACPERA leniency applicant’s cooperation with civil plaintiffs.104 If however, such a failure results despite the actual best efforts of the leniency applicant, the failure of the individual cannot and should not be attributed to the corporation. Practical solutions are available to distinguish the consequences of such a situation and should provide for the corporate retention of Amnesty benefits while removing those benefits only as to the truly recalcitrant individual.105 .

6. Substantial Nature of Cooperation

How material must the leniency applicant’s cooperation be under ACPERA?

The cooperation owed by a leniency applicant was designed to be “substantial.”106 The quality of cooperative information was the price for protection from joint and several treble damages, which often constitutes hundreds of millions of dollars. Under ACPERA, “to qualify for amnesty, a party must provide substantial cooperation . . . in any civil case brought by private parties that is based on the same unlawful conduct.”107 The enormous savings provided by de-trebling dwarfs any associated costs of providing cooperation by a leniency defendant. Indeed, the legal expenses and costs to the corporation associated with providing such substantial cooperation, even if required through trial, would rarely approach a defendant’s damage exposure for joint and several treble damages.

At a minimum, such cooperation to civil plaintiffs would appear to include: (a) a detailed account of all known facts108 relevant to the litigation through interviews with current and former employees109 and outside counsel; (b) production of all potentially relevant documents and data; (c) production and explanation of transactional data; (d)

104 See discussion of international approaches to leniency applicants, infra

note 111. 105 For example, in the Hydrogen Peroxide litigation, counsel anticipated

recalcitrant former employees and drafted the settlement agreement accordingly. Thus, individuals (whose right to assert the Fifth Amendment was preserved in the settlement agreement) were only able to “obtain the benefits of the Release contained in this Agreement if they cooperate with Plaintiffs….”

106 Cong. Rec., at S3615 (Apr. 2, 2004). 107 Id. 108 For a price-fixing case, such facts should at least include: a description of

the specific product that was fixed, including the dynamics of the market for it; specific mechanism of how the prices were fixed, including frequency; the identity of the primary actors that effectuated the price fix, including those of its co-cartelists; the dates, times and methods of communication between the co-cartelists; the effect of the price fix; the time period of the price fix; and the geographical scope of the price fix.

109 Under ACPERA, a leniency applicant is obligated to use its “best efforts to secure and facilitate” cooperation from individuals covered by the leniency agreement. ACPERA, §213(b)(3)(B).

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industry and merits witnesses for deposition; (e) discovery responses (e.g., interrogatories or requests to admit);110 (f) agreement to provide factual proffers as often as is reasonable and necessary to support plaintiffs’ prosecution of the action;111 (g) provision of means to authenticate a leniency applicant’s documents if needed at trial (via stipulation or testimony); and (h) access to and provision of witnesses if needed for trial.

The Auto Lights decision makes clear that, at a minimum, the leniency defendant must provide the civil claimants with the same information that it provides to the DOJ. In that case, the court compared the content of the cooperation provided by the leniency defendant to the civil plaintiffs to the cooperation it provided to the DOJ, and concluded that the former came up short. In particular, the defendant failed to inform plaintiffs of the earlier start date of the conspiracy, claiming that it withheld that information because it was unable to verify the accuracy of the information. The court rejected this explanation: because the information “was apparently reliable enough to provide to the DOJ,” by withholding that same information from the civil claimants, the defendant failed to satisfy ACPERA’s requirement that it provide the claimants with a “full account” of facts potentially relevant to the conspiracy.112

110 See Cong. Rec. H3658 (June 2, 2004) (“[r]ecognizing that there are

discovery tools that plaintiffs can use in discovery of entities, this section is intended to require cooperation of entities in such discovery”).

111 ACPERA, §213(b)(1) (ACPERA requires “a full account to the claimant of all facts known to the applicant . . . that are potentially relevant to the civil action”).

112 Auto Lights, at *13-14. Other international antitrust enforcement authorities have adopted similar approaches with respect to a leniency applicant’s duty to cooperate with investigating authorities. Under the EC’s 2006 Notice on Immunity from Fines and Reductions of Fines in Cartel Cases (which replaced earlier policies from 1996 and 2002), the undertaking seeking leniency must cooperate “genuinely, fully and on a continuous basis”; the EC spells out the requirements of such full cooperation in great detail. See Europa Press Release, Commission Notice on Immunity from Fines and Reduction of Fines in Cartel Cases, 2006/C 298/11, 2006 O.J. (C298) 17, ¶¶9, 12 (available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:298:0017:0022:EN:PDF). The U.K.’s Office of Fair Trading issued a leniency policy in 2000 OFT’s Guidance As to the Appropriate Amount of a Penalty, Office of Fair Trading (2004) (available at http://www.oft.gov.uk/shared_oft/business_leaflets/ca98_guidelines/oft423.pdf) (last visited March 24, 2008), which it updated in 2005 and 2006 with a Guidance on Leniency and No-Action, Office of Fair Trading (2006) (available at http://www.oft.gov.uk/shared_oft/reports/comp_policy/oft803a.pdf) (last visited March 24, 2008). The latter refers to the applicant’s “continuous and complete duty of cooperation.”

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ACPERA’s substantial civil damage limitation must be achieved the “old fashioned way,” by earning it.

7. Case Studies of Cooperation

The obligation of a leniency applicant to cooperate under ACPERA has had differing results.

In Sulfuric Acid, the two leniency applicants: (a) provided plaintiffs “with a detailed account of all known facts relevant to the litigation” through interviews with current employees, former employees and outside counsel; (b) furnished plaintiffs with 35,000 pages of documents; (c) furnished plaintiffs with interrogatory responses; (d) provided plaintiffs with “numerous documents and information” regarding the DOJ’s investigation of the sulfuric acid industry; and (e) “used their best efforts to locate witnesses with knowledge of the factual underpinnings of this litigation.”113 This cooperation commenced shortly after the defendants were named as parties.

In Il Fornaio (America) Corp. v. Lazzari Fuel Co., LLC,114 the leniency applicant provided early cooperation by “promptly producing all of the production to the Department of Justice before any formal discovery was served, producing all of its accounting records, providing interviews and deposition testimony regarding the alleged conspiracy, and so forth”115 and was the first to settle. The court took that into account in preliminarily approving that settlement.116

113 Marsulex Brief, p. 6. 114 Il Fornaio (America) Corp. v. Lazzari Fuel Co., LLC , Case No. C 13-

05197 WHA, 2014 WL 6985127 (N.D. Cal. Dec. 10, 2014). 115 Id. at *3 116 Id.

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Similarly, in Air Cargo, Lufthansa provided attorney proffers in advance of submission of any settlement for court approval. The settlement agreement required it to, inter alia: (a) provide current and former officers, directors and employees knowledgeable about the DOJ investigation into the airline industry and/or having knowledge of relevant facts for interviews, conferences, testimony, document authentication and declarations; (b) production of transactional and substantive documents, including documents produced to the DOJ; and (c) provide proffers relating to the conduct at issue and eventually to meet as often as is reasonable and necessary to support plaintiffs’ prosecution of the actions.117 As Judge Infante noted in Air Cargo, “[c]lass members have already received some of the benefit of the information provided by Lufthansa. This is clearly reflected in the recently-filed First Amended Consolidated Complaint, which substantially expands on the inner workings of the antitrust law violations at issue. As a further result of the information provided by Lufthansa, new parties were added and unnecessary defendants were removed.”118

And in Hydrogen Peroxide, Degussa, the leniency applicant met with plaintiffs’ counsel prior to class certification, made multiple evidentiary proffers, and provided documents and interviews that were quite valuable in shaping the claims in the case.119

There are contrary experiences, however. In the Urethanes Antitrust Litigation,120 for example, defendant Chemtura Corporation unilaterally decided that its obligation of cooperation could be satisfied by: (a) providing a full account of the alleged conspiracy at the commencement of merits discovery, (b) producing documents given to the DOJ at the commencement of class certification discovery; and (c) making some effort to procure the cooperation of two former employees. In mid-litigation, it sought a judicial determination that it had satisfied its ACPERA obligations even though the cooperation contemplated by the statute is an ongoing one that spans the entirety of the follow-on civil litigation.121

117 Infante Declaration, supra note 78, at 5-6. 118 Infante Declaration, supra note 78, at 9. 119 Memorandum of Law in Support of Direct Purchaser Class Plaintiffs’

Unopposed Motion for Final Approval of Proposed Settlement with Degussa Corp., In re Hydrogen Peroxide Antitrust Litig., No. 05-666 (E.D. Pa. Nov. 2, 2007).

120 In re Urethanes Antitrust Litig., MDL No. 1616, 2008 WL 696244 (D. Kan March 13, 2008).

121 See Motion for Leave to File Under Seal Chemtura’s Motion For a Finding of ‘Satisfactory Cooperation’ And Limitation of Damages Pursuant To The Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (June 20, 2007); In re Urethanes Antitrust Litig., 2008 WL 696244, No. 04-1616-JWL (D. Kan. March 13, 2008). The motion was not ruled on because Chemtura soon settled.

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In the Publication Paper Antitrust Litigation,122 the leniency applicant, UPM-Kymmere Corporation, delayed its cooperation substantially, asserting that it did not want to do anything that would cause it to run afoul of EC authorities, who were conducting a parallel investigation. A similar issue arose in the Automotive Paint Refinishing Antitrust Litigation,123 when the leniency applicant took the position that it would provide no cooperation under ACPERA until a parallel EC investigation was closed and any appeals were exhausted.124

Finally, in matters involving global cartels, foreign investigations may sometimes impede domestic statutory obligations. Cooperation with private plaintiffs required under ACPERA is sometimes delayed based on the excuse of a parallel EC investigation.125 The EC’s involvement in U.S. private antitrust actions contradicts U.S. policy with respect to leniency applicants. It appears that the EC is using the threat of revocation of amnesty if the leniency applicant for example, discloses the EC’s statement of objections to a cartel.126

This is highly problematic in any cartel infringement matter, domestic or

international. The Commission clearly acknowledges that the key to unravelling the presence and effects of cartel infringements is discovery of the secretive arrangements. Yet until recently, private enforcement has not had the ability to discover the documentary evidence otherwise available to public agencies.127 One professed justification by the Commission for opposing the discovery of leniency materials has been the unsupported contention that to do so would disincentivize entities from seeking leniency and reporting cartel activity. These very same materials have been available to private enforcers in the United States and the Department of Justice and there has been no reduction in the number of cartelists seeking leniency under those situations in the United States. There is no reason to suspect that there would be any different outcome in Europe.

122/ In re Publ’n Paper Antitrust Litig., 346 F. Supp. 2d 1370 (D. Conn. 2004). 123/ Automotive Paint, 229 F.R.D. 482. 124 Foreign blocking statutes can also potentially impose an obstacle. See,

e.g., Westinghouse Elec. Corp. v. Rio Algom, Ltd., 480 F.Supp. 1138, 1148 (N.D. Ill. 1979).

125 In a Notice of Correspondence from the European Commission (Dec. 11, 2006), filed In re Methyl Methacrylate (MMA) Antitrust Litig., No. 06-md-1768 (E.D. Pa.), the Director of Anti-Cartel Enforcement at the EC’s Directorate General for Competition took the positions that admissions of cartel activity to the EC should not be used to seek damages in other allegedly unaffected jurisdictions.

126/ The statement of objections is a statement that is distributed to all potential targets of the investigation so that each accused cartelist knows that information proffered by the EC.

127 Recently modified by the EU Directive on Antitrust Damages Actions signed into law on November 26, 2014. 2014/104/EU (Nov. 26, 2014), available at http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2014.349.01.0001.01.ENG.

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Further, the basis for the EC's authority to revoke amnesty is unclear, since the policy reason behind protecting the investigatory process is to keep confidential that information that is not known to the other accused cartelists. The EC’s Statement of Objections, however, is routinely made available to every named company. Arguably, there is a denial of due process to the civil plaintiffs who are precluded from obtaining that information while the defendants, including the leniency applicant, are in possession of it.128

IV. ACPERA’S INTERSECTION WITH CIVIL AND CRIMINAL

PROCEEDINGS

Delayed cooperation resulting from the pendency of public enforcement proceedings raises concerns about the integration of public and private antitrust enforcement.

A. DOJ Investigations

Compliance with the requirements of ACPERA necessarily intersects with a leniency applicant’s obligations to the DOJ, except in the rare case where the civil action commences after conclusion of the DOJ action. While civil plaintiffs have a right to cooperation as soon as possible, the DOJ may legitimately need to delay the start of such cooperation in order to protect its ongoing investigation.

Anticipating this intersection, Section 214(1) of ACPERA holds that nothing in ACPERA shall be construed to “affect the rights of the Antitrust Division to seek a stay or protective order in a civil action based on conduct covered by an antitrust leniency agreement to prevent the cooperation described in section 213(b) from impairing or impeding the investigation or prosecution by the Antitrust Division of conduct covered by the agreement.”

Courts have taken differing approaches on this issue, as reflected in numerous decisions. In the SRAM Antitrust Litigation, the court ordered immediate production of documents produced to the federal grand jury in the ongoing parallel criminal investigation.129 In the DRAM Antitrust Litigation, the court, in response to the DOJ’s request (and prior to ACPERA), stayed depositions on the merits, but allowed production

128 See generally Schad v. Ariz., 501 U.S. 624, 637 (1991) (the concept of due

process demands fundamental fairness and rationality that is an essential component of that fairness); Quill Corp. v. N.D. Bay and Through Heitkamp, 504 U.S. 298, 312 (1992) ("[d]ue process centrally concerns the fundamental fairness of governmental activity.").

129 Supplemental Case Management Order No. 1 (June 21, 2007) in In re Static Random Access Memory (SRAM) Antitrust Litig., No. C 07-1819 (N.D. Cal.).

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of grand jury documents.130 Numerous other courts have taken a similar approach. 131 In the TFT-LCD Antitrust Litigation, however, the court, again at the DOJ’s request, stayed all merits discovery, including documentary discovery.132 Other cases have taken a similar approach.133 As defense counsel, plaintiffs’ counsel and Antitrust Division

130 Stipulation & Order Limiting the Scope of Discovery, (Apr. 16, 2003) In re Dynamic Random Access (DRAM) Antitrust Litig., No. MDL C-02-1486 PJH (N.D. Cal.).

131 See, e.g., In re Lithium Ion Batteries Antitrust Litigation, No. 13-md-02420, 2013 U.S. Dist. LEXIS 72868, *25-32 (N.D. Cal. May 21, 2013) (court ordered the production of documents previously provided to the grand jury and DOJ, expressing its understanding that such documents are almost always produced prior to resolution of the motion to dismiss in MDL antitrust actions); In re Resistors Antitrust Litig., No. 5:15-cv-03820 (N.D. Cal.) (ECF No. 112) (“All DOJ documents are to be voluntarily produced to Plaintiffs by 4/29/2016. The Consolidated Amended Complaint shall be filed by 5/27/2016.”); Precision Associates, Inc., at al. v. Panalpina World Transport (Holding) Ltd., et al., No. 08-cv-0042 (E.D. N.Y.), ECF Nos. 754 (Plaintiff’s brief advocating production of Defendants’ DOJ documents); and ECF No. 933 at 29) (ordering production of DOJ materials prior to resolution of all issues on motions to dismiss); In re Dairy Farmers of America Inc. Cheese Antitrust Litig., No. 1:09-cv-03690 (N.D. Ill. March 4, 2010), ECF No. 75 at 4 (directing “targeted discovery including, but not limited to, materials produced to the CFTC” prior to resolution of the motions to dismiss); In re Pharmaceutical Industry Average Wholesale Price Litig., No. 1:01-cv-12257 (D. Mass. Oct. 28, 2002), (ECF No. 161) ordering defendants to produce documents previously produced “to any federal or state executive or legislative entity in connection with any investigation” less than two months after numerous related complaints were consolidated); In re Optical Disk Drive Antitrust Litig., No. 3:10-md-02143 (N.D. Cal.) , ECF Nos. 370, 379 ordering production of DOJ documents prior to resolution of motions to dismiss); In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices & Products Liability Litig., No. 10-ML-02151 (C.D. Cal. June 1, 2010) (ECF No. 180 at 2) (ordering production of documents already produced to the government prior to the filing of the consolidated complaint); In re Platinum & Palladium Commodities Litig., No. 10-cv-3617, ECF No. 59, at 2-3 (S.D.N.Y.) (ECF No. 59 at 2-3) (compelling defendants to produce, prior to the motion to dismiss decision, 250,000 pages of documents already produced to government authorities); In re Pool Products Distribution Market Antitrust Litigation, No. 12-md-023280 (E.D. La.) (ECF No. 93)(ordering production of the previously produced FTC documents prior to the motion to dismiss); In re High Tech Employee Antitrust Litig., No. 11-cv-2509 (N.D. Cal.) (ECF No. 88 at 1)(ordering production of government documents prior to resolution of the motions to dismiss).

132 In re TFT-LCD Antitrust Litig., No. M-07-1827 SI, 2007 WL 2782951 (N.D. Cal. Sept. 27, 2007). For the DOJ’s viewpoint on this intersection, see Niall E. Lynch, PARALLEL PROCEEDINGS: THE GOVERNMENT PERSPECTIVE, ABA SECTION OF ANTITRUST LAW 51ST ANNUAL SPRING MEETING COURSE MATERIALS 455 (Apr. 3, 2003).

133 See, e.g., “Memorandum Opinion & Order” (March 23, 2016) in In re Domestic Airline Travel Antitrust Litig., MDL No. 2656 (D.D.C.); “Stipulation And

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lawyers have gained experience in negotiating and litigating partial or complete discovery stays during the pendency of the government investigation, these different constituencies have more and more frequently come to a negotiated resolution that allows the civil plaintiffs to conduct some discovery – and obtain some non-discovery cooperation from the leniency defendant – prior to the conclusion of the DOJ investigation. In cases like the Packaged Seafood Products Antitrust Litigation and the Cathode Ray Tubes Antitrust Litigation, for example, the parties entered into stipulations that permitted limited discovery on specified items, followed by full discovery thereafter.134

And in In re Foreign Exchange Benchmark Rates Antitrust Litigation, civil plaintiffs, the DOJ and the leniency applicant agreed to stage cooperation and discovery so that it would not interfere with the government’s investigation.135 During the initial phase, there was a limited stay of discovery that allowed for defined attorney proffers, discovery of transactional data, and limited negotiations concerning discovery processes, such as an ESI protocol. Subsequently, the parties conducted document discovery. At yet a later point, plaintiffs can take Rule 30(b)(6) and other merits depositions upon the consent of the specific depositions by the DOJ.136 Such a compromise has permitted civil plaintiffs to pursue their case while still preserving the ability of the DOJ to investigate and prosecute the cartel. Specifically, during this period of hybrid cooperation and staged discovery, the DOJ’s investigation has resulted in two guilty pleas and three indictments

Order for Limited Discovery Stay” (Sept. 12, 2008), filed in In re Cathode Ray Tubes (CRT) Antitrust Litig., MDL No. 1917 (N.D. Ca.); Order of April 20, 2009 in Auto Lights; “Order Granting Motion of United States To Intervene And Stay Discovery” (Oct. 24, 2008) in Albee v. Korean Air Lines Co., Ltd., MDL No. 1891 (C.D. Cal.). See also “Order No. 4” (Feb. 18, 2009) in In re Hawaiian & Guamanian Cabotage Antitrust Litig., No. 08-md-1972 TSZ (W.D. Wash.).

134 E.g., “Joint Stipulation re Second Limited Stay of Discovery” (Nov. 21, 2016) in In Re Packaged Seafood Prods. Antitrust Litig., No. 3:15-md-02670-JLS-MDD (S.D. Cal.); “Stipulation And Order For Limited Discovery Stay” (Sept. 12, 2008) in In re Cathode Ray Tube (CRT) Antitrust Litig., No. C07-5944 SC (N.D. Cal.).

135 In re Foreign Exchange Benchmark Rates Antitrust Litig., 1:13-cv-07789, Letter addressed to Judge Lorna G. Schofield from Christopher M. Burke re: Status report on discovery, 1, Oct. 15, 2014, ECF No. 216 (S.D.N.Y.).. In re Foreign Exchange Benchmark Rates Antitrust Litig., 1:13-cv-07789, Memo Endorsement on re: Letter addressed to Judge Lorna G. Schofield from Jeffrey D. Martino and William J. Stellmach re: Discovery stay, Mar. 23, 2015, ECF No. 274 (S.D.N.Y.). In re Foreign Exchange Benchmark Rates Antitrust Litig., 1:13-cv-07789, Memo Endorsement on re: Letter addressed to Judge Lorna G. Schofield from Michael D. Hausfeld and Christopher M. Burke re: Discovery stay, Sept. 11, 2015, ECF No. 463 (S.D.N.Y.).

136 In re Foreign Exchange Benchmark Rates Antitrust Litig., 1:13-cv-07789, Corrected Civil Case Management Plan and Scheduling Order, Dec. 23, 2016, ECF No. 704 (S.D.N.Y.).

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with respect to former foreign exchange traders alleged to have participated in the conspiracy.137

This negotiated compromise approach offers the best solution for the civil plaintiffs and the DOJ. Because courts have taken widely divergent positions with respect to whether discovery should be stayed due to the pendency of a criminal investigation, a negotiated agreement between the DOJ and the civil plaintiffs is the best way to guarantee that the criminal investigation can proceed unimpeded by civil discovery. At the same time, a negotiated partial discovery stay that also permits non-discovery cooperation from the leniency applicant allows civil plaintiffs to begin building their case.

B. Foreign Antitrust Enforcement

Likewise, due to the international nature of some cartels, some defendants may be faced with the competing aspects and requirements of the U.S. and European Union leniency programs. If a leniency applicant is prohibited by the E.C. from disclosing potentially relevant facts or documents to the civil plaintiffs in the U.S., should that same leniency applicant be permitted to qualify for ACPERA single damages protection? If a civil plaintiff files, prepares, and litigates its case without the benefit of such cooperation, it seems inequitable to permit an leniency applicant to claim at the end of the litigation less than valuable cooperation (that a civil plaintiff has taken the time, expense and effort to already gather on its own) in exchange for single damages savings. Courts will need to determine under similar scenarios whether delayed or partial cooperation by global cartelists qualifies under ACPERA.

In cases in which parallel governmental investigations are proceeding in both the U.S. and elsewhere (such as the EC), the leniency applicant may believe that its cooperation should be deferred until the foreign investigation is completed or it may even be told by foreign regulators that it may not cooperate until the foreign investigation has run its course. This creates a clear conflict for an applicant. ACPERA requires the leniency defendant to provide all documents or other items potentially relevant to the civil action “wherever” they are located.138 Yet if it does so, it may be penalized by the foreign regulator. 139

137 United States v. Katz, 17-cr-003, Jan. 4, 2017, ECF No. 6 (S.D.N.Y.);

United States v. Cummins, 17-crim-067, Plea Agreement, Jan. 13, 2017, ECF No. 6 (S.D.N.Y.); United States v. Usher et al., 17-crim-019, Jan. 10, 2017, ECF No. 1 (S.D.N.Y.).

138 ACPERA, §213(b)(2); Cong. Rec. at H3658 (June 2, 2004) (legislative history shows that “[d]ocuments or other items in the applicant’s possession, custody or control [are to] be produced even if they are arguably located outside the jurisdiction of the U.S. courts.”)

139 Cong. Rec. at H3658 (June 2, 2004)

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Although no court has as yet squarely resolved this issue, the Auto Lights decision provides some guidance. In that case, the court did not fault the leniency defendant for not producing discovery materials during the court-imposed stay. It did, however, hold that the applicant could have provided non-discovery cooperation in the form of attorney proffers without violating the stay or its agreement with the DOJ, and its failure to do so meant that its cooperation was neither timely nor satisfactory. Similarly, a leniency defendant that faces restrictions from a foreign regulator has an obligation – if it wants to obtain the benefits of ACPERA—to explore the limits on its ability to cooperate. Simply asserting that it cannot cooperate because there is a pending investigation in Europe clearly will not suffice.

Foreign corporate leniency applicants (or foreign parents of U.S. Leniency applicants) may present additional complexities. For instance, a foreign leniency applicant may move to dismiss a civil case for lack of personal jurisdiction. This may be a first signal of non-cooperation under ACPERA. Since the applicant has presumably already consented to the jurisdiction of the U.S. Department of Justice, in the criminal context if it resists a U.S. court’s civil jurisdiction, a foreign leniency applicant is arguably not satisfying its duty under the leniency program to make restitution to injured parties. Similarly, civil plaintiffs could request that a cooperating foreign leniency applicant not resist service or insist on service of discovery under the cumbersome Hague Convention procedures.140

V. CONCLUSION

Leniency programs have dramatically altered the landscape of criminal antitrust enforcement, both in and outside the United States. The program implemented by the DOJ not only pioneered the field, it is the only system in place currently that provides material civil incentives to enhance its effectiveness. Within the DOJ system, an applicant can achieve criminal peace and unprecedented civil damage limitation to the entirety of a direct purchaser market. That benefit however has a price – timely and full cooperation with civil claimants in order to make full restitution throughout the market for the unlawful conduct of all cartel participants.

With the integration of a global public enforcement network, and the increasing recognition of corresponding private infringement enforcement internationally, the accountability of leniency defendants is vastly more complicated. Acknowledgement, for example, of cartel participation in one jurisdiction raises immediate risks of exposure to both public and private enforcement in jurisdictions around the world in cartels without borders. As public and private enforcement expands, so does the need for rules of their integration and coordinated prosecution. Although the objectives of neither should be jeopardized, the valid interests of all three parties – public agencies, private claimants and

140 The Hague Convention on the Taking of Evidence Abroad in Civil and

Commercial Matters: 23 UST 2555; TIAS 7444; 847 UNTS 231; 28 USCA 1782 (1975 Cum. Supp.); 28 USCA 1781 (Supp. 1979); 81 LM 37 (1969).

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defendants – should be procedurally and substantively harmonized to assure market integrity.