FEDERAL TRADE COMMISSION et al v. STAPLES, INC. et al
MEMORANDUM AND OPINION. Signed by Judge Emmet G. Sullivan on 2/28/2017. (lcegs4)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
FEDERAL TRADE COMMISSION,
COMMONWEALTH OF PENNSYVANIA, )
AND THE DISTRICT OF
) Civil Action No.15-2115 (EGS)
STAPLES, INC. and
OFFICE DEPOT, INC.
Pending before the Court is the motion of the Commonwealth
of Pennsylvania and the District of Columbia (hereinafter
“Moving Plaintiffs”) for attorneys’ fees and costs under Section
16 of the Clayton Act. ECF No. 457. Upon consideration of the
parties' submissions, the governing statutory and case law, and
for the following reasons, Moving Plaintiffs’ motion is DENIED.
On February 4, 2015, Staples and Office Depot entered into
an agreement under which Staples would acquire Office Depot. On
December 7, 2015, Moving Plaintiffs joined Co-Plaintiff Federal
Trade Commission (“FTC”) to bring suit to enjoin the merger.
Pls.’ Mot. Prelim. Inj., ECF No. 5. On May 10, 2016, this Court
determined that there was a reasonable probability that the
proposed merger would substantially impair competition and
granted Plaintiffs’ motion for a preliminary injunction under
Section 13(b) of the Federal Trade Commission Act, 15 U.S.C.
§53(b) (“FTC Act”). See Fed. Trade Comm'n v. Staples, Inc., 190
F. Supp. 3d 100 (D.D.C. 2016). After the Court’s ruling, Office
Depot and Staples abandoned the merger. Although the FTC is also
a plaintiff in this case, only Moving Plaintiffs seek attorneys’
costs and fees in the combined amount of $176,095.44.
A. Section 16 of the Clayton Act
In 1941, Congress passed the Clayton Act to address
provisions not covered by the Sherman Act, such as mergers and
acquisitions. See 15 U.S.C. §§ 12-27. In 1976, Congress amended
Section 16 of the Clayton Act, to provide that “[i]n any action
under this section in which the plaintiff substantially
prevails, the court shall award the cost of suit, including a
reasonable attorney's fee, to such plaintiff.” Hart-Scott-Rodino
Antitrust Improvements Act of 1976, Pub. L. No. 94-435, Title
III, § 302 (3), 90 Stat. 1383, 1396 (codified as amended at 15
U.S.C. § 26 (1998)). The party seeking attorneys’ fees “bears
the burden of establishing entitlement to an award and
documenting the appropriate hours expended and hourly rates.”
Hensley v. Eckerhart, 461 U.S. 424, 437 (1983).
B. Section 13(b) of the FTC Act
The FTC Act expanded the scope of illegal activities in
restraint of trade and provided a path for FTC enforcement of
antitrust laws. See 15 U.S.C. §§ 41-58. Section 13(b) of the Act
empowers the FTC to seek a temporary restraining order or
preliminary injunction in a federal district court if the
Commission believes “any person, partnership, or corporation is
violating, or is about to violate, any provision of law enforced
by the Federal Trade Commission.” 15 U.S.C. § 53(b). Unlike the
Clayton Act, the FTC Act does not grant attorneys’ fees to
prevailing plaintiffs. See generally id.
The parties disagree on two principal issues: (1) whether
Moving Plaintiffs are entitled to attorneys’ fees and reasonable
costs; and (2) if so, whether the calculated amounts that Moving
Plaintiffs have presented to the Court are reasonable.
Moving Plaintiffs rest their argument for attorney’s fees
and costs on the theory that this Court’s entry of the
preliminary injunction that halted the Staples and Office Depot
merger established that the Plaintiffs “substantially prevailed
in this litigation” under Section 16 of the Clayton Act. Pls.’
Mot., ECF No. 457 at 5. Moving Plaintiffs assert that the
preliminary injunction “is the functional equivalent of a final
judgment in this matter” because the Plaintiffs achieved the
relief they ultimately sought —— i.e., nonconsummation of the
Staples and Office Depot transaction. Id. at 4. Moving
Plaintiffs further claim that the attorneys’ fees and costs they
seek are reasonable in nature. See id. at 6-7.
Defendants contend that Moving Plaintiffs are not entitled
to any fees and costs, characterizing the relief Moving
Plaintiffs seek as an “unprecedented windfall.” Defs.’ Opp’n,
ECF No. 470 at 1. Highlighting the fact that this case was never
litigated under Section 16 of the Clayton Act, Defendants argue
that Moving Plaintiffs are not entitled to any shifting costs or
fees “as a matter of law because they did not litigate, much
less substantially prevail, under the more demanding Section 16
standard.” Id. Instead, according to Defendants, the parties
only litigated, and the Court only granted, relief relating to
the FTC’s claim for a preliminary injunction under the standard
set forth in Section 13(b) of the FTC Act. Id. at 2. Defendants
further contend that even if the Court assumed that Moving
Plaintiffs were entitled to attorneys’ fees and costs under
Section 16 of the Clayton Act, Moving Plaintiffs’ calculation is
unreasonable and excessive. In response, Moving Plaintiffs argue
that they have satisfied the four-part preliminary injunction
standard set forth in Section 16 of the Clayton Act and maintain
that their calculated fees are reasonable. Pls.’ Reply, ECF No.
471 at 4-14.
As an initial matter, the Court need not examine whether
the costs presented by Moving Plaintiffs are reasonable because
the Court finds that Moving Plaintiffs are not entitled to
attorneys’ fees and costs as a matter of law. Section 16 of the
Clayton Act provides for attorneys’ fees and costs “[i]n any
action under this section in which the plaintiff substantially
prevails[.]” 15 U.S.C. § 26 (emphasis added). Plaintiffs insist
that the term “prevail” is not restricted to final judgments.
Pls.’ Mot., ECF No. 457 at 3. While this may be correct, see
Mahr v. Gagne, 448 U.S. 122, 129 (1980), Moving Plaintiffs
ignore the remaining text of Section 16. Here, Moving Plaintiffs
did not prevail, much less “substantially prevail,” under the
Clayton Act. Instead, this Court granted Plaintiffs’ request for
a preliminary injunction under Section 13(b) of the FTC Act.
Staples, 190 F. Supp. 3d at 114 n.7 (distinguishing the Section
13(b) standard from the traditional preliminary injunction
standard used in Section 16 Clayton Act claims); 1 see also Hewitt
v. Helms, 482 U.S. 755, 760 (1987) (“Respect for ordinary
language requires that a plaintiff receive at least some relief
on the merits of his claim before he can be said to prevail.”).
As this Court explained, the preliminary injunction
standards under Section 13(b) of the FTC Act and Section 16 of
Indeed, the Court’s memorandum opinion does not even reference
Section 16 of the Clayton Act. See generally Staples, 190 F.
Supp. 3d 100.
the Clayton Act are not identical. See Staples, 190 F. Supp. 3d
at 114; see also Fed. Trade Comm'n v. Sysco Corp., 113 F. Supp.
3d 1, 22 (D.D.C. 2015) (“The Section 13(b) standard for
preliminary injunctions differs from the familiar equity
standard applied in other contexts.”). Section 16 claims follow
the traditional four-part preliminary injunction standard ——
i.e., a court must balance: (1) the likelihood of success on the
merits; (2) the threat of irreparable harm in the absence of an
injunction; (3) the possibility of substantial harm to other
interested parties; and (4) the public interest. United States
v. Gillette Co., 828 F. Supp. 78, 80 (D.D.C. 1993). In contrast,
a movant under Section 13(b) of the FTC Act need only satisfy
two elements: “(1) a likelihood of success on the merits; and
(2) that the equities tip in favor of injunctive relief.”
Staples, 190 F. Supp. 3d at 114. Under Section 13(b), the
Court’s task is to assess the likelihood of whether or not the
government can prevail at a subsequent administrative hearing
before the Federal Trade Commission, not whether the proposed
merger would violate the Clayton Act. Id. at 115.
Throughout this litigation, neither party disputed the
Court’s intended resolution pursuant to Section 13(b) of the FTC
Act, rather than Section 16 of the Clayton Act. While Moving
Plaintiffs make three fleeting references to Section 16 in their
Complaint, at no point in their preliminary injunction
submissions did they assert, much less prove at the hearing, the
elements of a preliminary injunction under Section 16. 2 See
Compl., ECF No. 3. Particularly revealing is the fact that
Plaintiffs’ proposed findings of fact and law specifically cites
to Section 13(b) as the applicable standard for a preliminary
injunction. See Sealed Pls.’ Proposed Findings of Fact and
Conclusions of Law, ECF No. 379-2 at 75-76. Defendants also rely
on the transcript from the preliminary injunction hearing in
which the FTC explained that the Court need not consider Section
16 of the Clayton Act in rendering its decision. 3 See Defs.’
Opp’n, ECF No. 470 at 7 n.3.
Simply put, Moving Plaintiffs cannot have it both ways.
They cannot ride the FTC’s claim to a successful preliminary
injunction under the more permissive Section 13(b) standard and
then cite that favorable ruling as the sole justification for
fee-shifting under the more rigorous Clayton Act standard.
Defendants point out that Moving Plaintiffs failed to mention
Section 16 once in pre-trial briefing, discovery, during the 10day preliminary injunction hearing, or in their proposed
findings of fact and conclusions of law. See Defs.’ Opp’n, ECF
No. 470 at 7.
3 At the hearing, this Court confirmed that the applicable
authorities “dictate[d] that the Court should not focus on
whether or not the merger will, as a matter of law, violate the
Clayton Act...That’s not before the Court... correct?.” Hr’g Tr.
at 3561:10 – 3562:7. The FTC replied, “That’s correct, Your
Honor.” Id. The record does not suggest that Moving Plaintiffs
disputed the FTC’s response or otherwise asserted that the
preliminary injunction standard set forth in Section 16 of the
Clayton Act should govern. Id.
Moving Plaintiffs’ decision to join the FTC’s Section 13(b)
claim was a strategic one, one that ultimately lead to the
dissolution of the Office Depot and Stables merger. Nonetheless,
Moving Plaintiffs cannot bring a petition for fee-shifting under
a provision under which they did not prevail. See Section 16 of
the Clayton Act, 15 U.S.C. § 26 (providing for attorneys’ fees
and costs “[i]n any action under this section in which the
plaintiff substantially prevails”).
Moving Plaintiffs have failed to cite to a single case in
which a court has awarded attorneys’ fees and costs under
Section 16 of the Clayton Act where the moving party prevailed
only under Section 13(b) of the FTC Act. Instead, Moving
Plaintiffs effectively ask this Court to take an unprecedented
step. Defendants persuasively highlight that Moving Plaintiffs
have not requested fees and costs in analogous cases. See Defs.’
Opp’n, ECF No. 470 at 2 n.2.
Rather than citing factually analogous cases to support
their claim for fees and costs, Moving Plaintiffs chiefly rely
on F&M Schaefer Corp. v. C. Schmidt & Sons, Inc., 476 F. Supp.
203, 206 (S.D.N.Y. 1979) and Grumman Corp. v. LTV Corp., 533 F.
Supp. 1385, 1390 (E.D.N.Y. 1982) for the proposition that courts
use the “catalyst rule” to determine whether a party has
substantially prevailed. See Pls.’ Mot., ECF No. 457 at 5. Under
the catalyst rule, a court examines the situation immediately
prior to the commencement of the suit, the situation today, and
the role that the litigation played in causing any changes
between the two. Schaefer, 476 F. Supp. at 206; Grumman, 533 F.
Supp. at 1390. Moving Plaintiffs argue that because the Court’s
entry of a preliminary injunction directly caused Defendants to
dissolve the merger, Moving Plaintiffs substantially prevailed.
Pls.’ Mot., ECF No. 457 at 5. Moving Plaintiffs’ argument is
unpersuasive for two reasons. First, as Defendants point out,
the catalyst rule as a mechanism for obtaining attorneys’ fees
in certain circumstances was rejected by the Supreme Court in
2001. See Buckhannon Bd. & Care Home, Inc. v. W. Virginia Dep't
of Health & Human Res., 532 U.S. 598, 600 (2001) (concluding
that fees may not be awarded on a catalyst theory simply because
plaintiff “achieved the desired result” or “because the suit
brought about a voluntary change in defendant’s conduct”).
Second, Schaefer and Schmidt are readily distinguishable because
they do not concern, as here, litigation under the FTC Act.
Moving Plaintiffs fare no better with their attempt to
argue, for the first time in their reply brief, that they
substantially prevail under each element of the traditional
preliminary injunction test used in a Section 16 cases. See
Pls.’ Reply, ECF No. 471 at 4-10. As Defendants explain, this
four-factor injunction standard was never argued, briefed or
mentioned in the litigation up to this point. In any event,
Moving Plaintiffs’ argument that they could have prevailed under
that standard is irrelevant in light of the fact that this Court
resolved the case under Section 13(b) of the FTC Act which, as
explained supra, does not provide for fee-shifting. Because this
Court did not resolve the motion for preliminary injunction
under Section 16 of the Clayton Act, the Court finds that as a
matter of law, Moving Plaintiffs are not entitled to attorneys’
fees or costs.
For the foregoing reasons, Moving Plaintiffs’ motion for
attorneys’ fees and costs is DENIED. An appropriate Order
accompanies this Memorandum Opinion, filed this same day.
Emmet G. Sullivan
United States District Judge
February 28, 2017
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