DNAML Pty, Limited v. Apple, Inc. et al
OPINION & ORDER.....The Defendants September 18 motion for summary judgment is granted and the claims asserted in this action are dismissed with prejudice. The Clerk of Court shall close the case. (Signed by Judge Denise L. Cote on 12/16/2015) (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
DNAML PTY, LIMITED,
APPLE INC.; HACHETTE BOOK GROUP,
INC.; HARPERCOLLINS PUBLISHERS, LLC;
VERLAGSGRUPPE GEORG VON HOLTZBRINCK
GMBH; HOLTZBRINCK PUBLISHERS, LLC
d/b/a/ MACMILLAN; THE PENGUIN GROUP, A :
DIVISION OF PEARSON PLC; and SIMON &
OPINION & ORDER
For plaintiff DNAML PTY, Ltd.:
Michael J. Guzman
Derek T. Ho
Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC
1615 M Street, N.W., Ste. 400
Washington, D.C. 20036
For Apple Inc.:
Theodore J. Boutrous, Jr.
Daniel G. Swanson
Gibson, Dunn & Crutcher, LLP
333 South Grand Ave.
Los Angeles, CA 90071
Lawrence J. Zweifach
Gibson, Dunn & Crutcher, LLP
200 Park Ave.
New York, NY 10166
Gibson, Dunn & Crutcher, LLP
1050 Connecticut Ave., N.W.
Washington, D.C. 20036
For Simon & Schuster, Inc.:
James W. Quinn
Yehudah L. Buchweitz
Jeff L. White
Weil Gotshal & Manges LLP
767 Fifth Ave.
New York, NY 10153
For Penguin Group (USA) Inc.:
Saul P. Morgenstern
Amanda C. Croushore
Margaret A. Rogers
Kaye Scholer LLP
425 Park Ave.
New York, NY 10022
For Hachette Book Group USA, Inc.:
Samuel J. Rubin
Freshfields Bruckhaus Deringer US LLP
601 Lexington Ave.
New York, NY 10022
For HarperCollins Publishers LLC:
C. Scott Lent
Arnold & Porter LLP
399 Park Ave.
New York, NY 10022
For Macmillan Publishers Inc. and Verlagsgruppe Georg Von
Joel M. Mitnick
Sidley Austin LLP
787 Seventh Ave.
New York, NY 10019
DENISE COTE, District Judge:
DNAML Pty, Ltd. (“DNAML”) brings this action against Apple
Inc. (“Apple”) and five book publishers (“Publisher Defendants”)
(collectively “Defendants”), pursuant to Section 1 of the
Sherman Antitrust Act, to recover damages DNAML asserts it
sustained due to the Defendants’ conspiracy to fix prices and
reduce competition in the e-book industry.
completion of fact discovery, the Defendants have moved for
summary judgment on several grounds, including DNAML’s lack of
Because the plaintiff was not the entity injured by
the violation of the antitrust laws alleged here, and did not
receive an assignment of the right to pursue this claim from the
injured party, it lacks standing to bring its antitrust claim
and the defendants’ motion for summary judgment is granted.
The following facts are undisputed or taken in the light
most favorable to plaintiff.
The business that became DNAML was
first established in 1999 as 1st Element Pty (“1st Element”).
In 2000 and 2001, 1st Element transferred its assets to DNAML
Pty, Ltd. (“Old DNAML”) in return for 960,000 shares of Old
As explained by their CEO, these businesses were focused
on providing solutions for the electronic publishing industry.
Among other things, Old DNAML developed a proprietary digital
rights management system as well as a proprietary e-book format
known as “.DNL.”
DNAML sold e-books published by only two of
the five Publisher Defendants, Hachette Book Group USA, Inc.
(“Hachette”) and HarperCollins Publishers LLC (“HarperCollins”).
In early 2010, the Publisher Defendants adopted an agency
model for the distribution of e-books.
DNAML alleges that the
Publisher Defendants adopted this model pursuant to their
participation with Apple in an antitrust conspiracy.
1, 2010, DNMAL entered into an agency agreement that gave
Hachette the right to “determine the retail price of each
Digital Book . . . and all price policies applicable to sales to
end users . . . .”
While DNAML began negotiating an agency
agreement with HarperCollins in early 2010, the agreement was
Plaintiff alleges that the Defendants’ adoption of the
agency model directly harmed Old DNAML and caused it to go out
According to the plaintiff, Old DNAML’s “business
model was predicated on aggressive price competition” and the
implementation of the Defendants’ agency model in January 2010
destroyed retail price competition and “forced” DNAML to price
e-books in line with other sellers, making Old DNAML “unable to
distinguish itself through offering attractive prices, offering
innovative means to purchase e-books through bundles or loyalty
rewards, [and] attractive cross-platform support.”
2010, Old DNAML had decided to cease its e-book retail business.
On December 23, 2011, well after the implementation of the
agency model and DNAML’s decision to shut down its e-book retail
business, Old DNAML executed an Asset Purchase Agreement (the
“Agreement”) through which it transferred all of its assets to a
newly formed entity referred to as ACN 154 689 111 Pty LTD (“New
DNAML” or “DNAML”).
In the Agreement, New DNAML purchased the
“Business and Assets free of any Security Interest” of Old DNAML
in exchange for $14,000 and the assumption of all of Old DNAML’s
“Assets” is defined as “all of the assets owned by
the Vendor and used in connection with the Business including
its cash, the Book Debts, the DNAML UK Shares, the Business
Agreements, Leasehold Property interest, Equipment, Intellectual
Property, and the Goodwill.”
“Business” is defined as “the
business carried on by the Vendor, being the business of owning
and operating eBook technologies, including the sale of eBooks.”
According to the plaintiff, Old DNAML continues to exist but has
no active business.
Beginning on August 9, 2011, American class action
complaints were filed against the Defendants alleging violations
of the Sherman Act, culminating in a consolidated amended
complaint filed on January 20, 2012.
In re Elec. Books
Antitrust Litig., 859 F. Supp. 2d 671, 680 (S.D.N.Y. 2012).
April 11, 2012, the Department of Justice and various States
filed antitrust lawsuits against the Defendants.
Defendants settled these actions.
was found liable in July 2013.
Apple proceeded to trial and
United States v. Apple Inc., 952
F. Supp. 2d 638, 709 (S.D.N.Y. 2013).
On September 16, 2013, DNAML filed this action alleging
that Apple and the Publisher Defendants conspired to
unreasonably restrain trade in violation of the Sherman Act, 15
U.S.C. § 1.
On June 5, 2014, the Defendants’ motion to dismiss
was largely denied.
DNAML Pty, Ltd. v. Apple Inc., 25 F. Supp.
3d 422, 432 (S.D.N.Y. 2014).
On September 18, 2015, following
the completion of fact discovery, the Defendants filed a joint
motion for summary judgment.
The Defendants argue that DNAML
cannot show antitrust injury, that the failure of Old DNAML’s
business was not caused by the alleged conspiracy, and that New
DNAML lacks standing to bring an antitrust claim.
was fully submitted on October 31.
Because New DNAML lacks
standing to pursue claims stemming from antitrust injuries
allegedly inflicted on Old DNAML, it is unnecessary to address
the remaining grounds the Defendants advance for summary
The Defendants argue that DNAML’s claim fails because it
cannot establish standing to bring this action.
Section 4 of
the Clayton Act establishes a private right of action for
violations of the federal antitrust laws.
It entitles “[a]ny
person who [is] injured in his business or property by reason of
anything forbidden in the antitrust laws” to treble damages.
U.S.C. § 15.
As the Supreme Court has explained, in passing
this law, “Congress was primarily interested in creating an
effective remedy for consumers who were forced to pay excessive
prices by . . . combinations that dominated certain interstate
Associated Gen. Contractors of Ca., Inc. v. Ca. State
Council of Carpenters, 459 U.S. 519, 530 (1983).
not intend the antitrust laws to provide a remedy in damages for
all injuries that might conceivably be traced to an antitrust
Id. at 534 (citation omitted).
have imposed “boundaries” on the invocation of this private
enforcement tool to ensure that an action for treble damages is
invoked in service of “the purpose of the antitrust laws: to
Gatt Commc’ns, Inc. v. PMC Assoc., LLC,
711 F.3d 68, 75 (2d Cir. 2013).
There are “two imperatives” for
A plaintiff must plausibly
Id. at 76.
plead both that it suffered an antitrust injury and that it is
an efficient enforcer of the antitrust laws.
It is undisputed that Old DNAML, not the plaintiff, was the
only entity in existence during and allegedly harmed by the
antitrust conspiracy which resulted in the adoption of the
agency model by the Publisher Defendants in early 2010.
thus does not dispute that it lacks standing to sue absent an
assignment of antitrust claims from Old DNAML.
The parties do
dispute, however, whether Old DNAML successfully assigned its
antitrust claims to New DNAML almost two years later through the
Agreement of December 23, 2011.
The first issue is whether federal antitrust claims may be
assigned by the injured party to another.
Whether a federal
antitrust claim may be assigned is itself a matter of federal
In the words of the Hon. John Gibbons, “it would be
intolerable to permit the states to determine the
transferability and thus the value, of interests created by
Lowry v. Baltimore & Ohio R. Co., 707 F.2d 721,
739 (3d Cir. 1983) (Gibbons, J., dissenting).
the issue of assignability of a federal statutory claim is
itself an issue of federal law is entirely consistent with
ordinary choice of law principles.
Under virtually all choice-
of-law regimes, the jurisdiction’s law that governs whether a
cause of action exists will also be the jurisdiction that
decides whether that cause of action can be assigned.
Nelson, The Persistence of General Law, 106 Colum. L. Rev. 503,
Although federal antitrust laws do not expressly
permit assignment, it has been long acknowledged by federal
courts that these claims may be assigned.
See, e.g., In re Fine
Paper Litig. State of Wash., 632 F.2d 1081, 1090 (3d Cir. 1980)
(the Sherman and Clayton Acts); see also Bluebird Partners, L.P.
v. First Fid. Bank, N.A. N.J., 85 F.3d 970, 973 (2d Cir. 1996)
(federal securities laws).
Having determined that the plaintiff’s claims are subject
to assignment, the next issue is what law will be used to
determine whether its causes of action have been validly
There is, of course, “no federal general common law.”
Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).
In the absence
of congressional guidance on the issue of what law to apply,
courts look to the three-part test enunciated by the Supreme
Court in United States v. Kimbell Foods, Inc., 440 U.S. 715,
728-29 (1979), to determine whether to create a uniform federal
standard or to incorporate state law.
VKK Corp. v. Nat’l
Football League, 244 F.3d 114, 122 (2d Cir. 2001).
Kimbell Foods, courts determining whether federal common law
should displace state law must consider whether: “(1) the issue
requires a nationally uniform body of law; (2) application of
state law would frustrate specific objectives of the federal
programs; and (3) application of a federal rule would disrupt
commercial relationships predicated on state law.”
244 F.3d at 122 (citation omitted); see also New York v. Nat’l
Serv. Indus., Inc., 460 F.3d 201, 207 (2d Cir. 2006).
Supreme Court concluded long ago that the first two sections of
the Sherman Act, with their “sweeping language,” are among those
instances in which courts are empowered to create governing
rules of law.
Texas Indus., Inc. v. Radcliff Materials, Inc.,
451 U.S. 630, 644 (1981).
“The legislative history [of the
Sherman Act] makes it perfectly clear that [Congress] expected
the courts to give shape to the statute’s broad mandate by
drawing on common-law tradition.”
Id. at 643.
Accordingly, it is unsurprising that Courts of Appeals have
fashioned a uniform rule for the assignment of a federal
To effect a transfer of the right to bring an
antitrust claim, the transferee must expressly assign the right
to bring that cause of action, either by making specific
reference to the antitrust claim or by making an unambiguous
assignment of causes of action in a manner that would clearly
encompass the antitrust claim.
In Gulfstream III Associates, Inc. v. Gulfstream Aerospace
Corp., 995 F.2d 425 (3d Cir. 1993) (“Gulfstream”), the Third
Circuit applied federal common law to find that the assignment
of antitrust claims must be express.
Id. at 437-38.
held that under federal common law, a general assignment of
“rights, title and interest in and to” an aircraft and a
purchase agreement for an aircraft was insufficient to validly
assign a federal antitrust claim.
Id. at 431, 438.
explained that “a general assignment would be disfavored under
the direct purchaser rule” because of the “highly speculative
inquiries” required to determine “the relative extent of injury
incurred by the direct or remote purchasers.”1
Id. at 439.
Thus, “any assignment of antitrust claims, as a matter of
federal common law, must be an express assignment; general
assignments, without specific reference to antitrust claims,
cannot validly transfer the right to pursue those claims.”
at 440; see also Knott v. McDonald’s Corp., 147 F.3d 1065, 1068
n.4 (9th Cir. 1998) (noting the “unique concerns underlying
antitrust assignments”); Sullivan v. Nat’l Football League, 34
F.3d 1091, 1106 (1st Cir. 1994) (finding that a transfer of “all
The “direct purchaser” rule states that “only direct purchasers
have standing to bring civil antitrust claims.” Simon v.
KeySpan Corp., 694 F.3d 196, 201 (2d Cir. 2012). The rule stems
from Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S.
481, 467-94 (1968), which held that a Clayton Act defendant
could not assert a defense that the plaintiff had suffered no
injury because it had passed on any illegal overcharges to
consumers. Illinois Brick Co. v. Illinois then made this rule
bilateral by holding that only direct purchasers of concrete
blocks produced by manufacturer Illinois Brick Co. could pursue
price-fixing claims against the manufacturer. 431 U.S. 720, 730
(1977). In Illinois Brick, the Supreme Court laid out two
rationales for the direct purchaser rule. First, defendants may
otherwise face a serious risk of multiple liability. Id.
Second, there are too many “uncertainties and difficulties in
analyzing price and out-put decisions in the real economic world
rather than an economist’s hypothetical model.” Id. at 731-32
(citation omitted). “In other words, it is nearly impossible
for a court to determine which portion of an overcharge is
actually borne by the direct purchaser and which portion is
borne by a subsequent indirect purchaser.” Simon, 694 F.3d at
other assets” to buyers did not include antitrust cause of
Cf. Texas Life, Accident, Health & Hosp. Serv. Ins.
Guar. Ass’n v. Gaylord Entm’t Co., 105 F.3d 210, 218 (5th Cir.
1997)(requiring express assignment of ERISA claim); Bluebird
Partners, 85 F.3d at 974 (rejecting automatic assignment of
federal securities claim with sale of the security).
Third Circuit later relaxed its rule, in the context of an
assignment of a Racketeering Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq., claim, to
include the express assignment of “all . . . causes of action,
claims and demands of whatsoever nature,” Lerman v. Joyce Int’l
Inc., 10 F.3d 106, 112 (3d Cir. 1993) (citation omitted), it has
continued to insist that the assignment of claims be express.
The requirement that the assignment of claims be express is
fully consistent with general principles of contract law.
matter of common law, the right to bring a “chose in action” was
a personal right separate from the property that gave rise to
Sprint Comm. Co., L.P v. APCC Servs., Inc., 554 U.S.
269, 275-79 (2008) (describing the history of common law choses
in action); see also W. S. Holdsworth, The History of the
Treatment of Choses in Action by the Common Law, 33 Harv. L.
Rev. 997, 1008 (1920).
Accordingly, the transfer of property
was a separate act from the transfer of a right incident to the
See David C. Profilet, Express Versus Automatic
Assignment of Section 10(b) Causes of Action, 1985 Duke L.J.
813, 818 (1985).
There was no presumption of an automatic
assignment of the right to bring a claim associated with the
property when the property was sold.
See, e.g., Wilson v. Haley
Live Stock Co., 153 U.S. 39, 46 (1894) (trespass cause of action
did not run with cattle sale); see also Indep. Inv’r Protective
League v. Saunders, 64 F.R.D. 564, 572 (E.D. Pa. 1974) (While a
cause of action “may be transferred . . . by express
assignment,” the causes of action belonging to a prior holder of
a security “do not pass with the transfer of the security.”);
Profilet, supra, at 822-23.
Instead, the law has required an
express assignment of the right to bring a cause of action.
This principle is reflected in the Restatement of
Contracts, which requires an assignor to “manifest an intention
to transfer the right to another person without further action
or manifestation of intention by the obligee.”
(Second) of Contracts § 324; see also 29 Williston on Contracts
§ 74:3 (4th ed.).2
For example, under New York law “where the
assignment of a fraud or other tort claim is intended in
conjunction with the conveyance of the contract or note, there
While the manifestation of intent “may be made orally or by a
writing,” since the Statute of Frauds applies to any assignment,
an oral assignment is ineffective when the value of the assigned
right is $5,000 or greater. Restatement (Second) of Contracts §
324 cmt. b (1981); see also U.C.C. § 1-206.
must be some language -– although no specific words are required
–- that evinces that intent and effectuates the transfer of such
Commonwealth Pa. Pub. Sch. Emps.’ Ret. Sys. v. Morgan
Stanley & Co., 25 N.Y.3d 543, 550 (2015); see also Banque Arabe
et Internationale D’Investissement v. Maryland Nat. Bank, 57
F.3d 146, 151 (2d Cir. 1995) (“Under New York law, the
assignment of the right to assert contract claims does not
automatically entail the right to assert tort claims arising
from that contract.”); Coca-Cola Bottling Co. v. Coca-Cola Co.,
654 F. Supp. 1419, 1442 (D. Del. 1987) (finding that specific
rights conveyed by assignors did not include right to enforce
provision of consent decree).
By ensuring that the parties’
expressed intent determines who receives redress for a wrong,
the value of the cause of action will be figured into any sale
of property, and a purchaser will be less likely to realize a
See Profilet, supra, at 830.
In determining whether the Agreement has effectively made
an assignment of the right to bring an antitrust claim, ordinary
principles of contract law will be applied.3
precept of contract law is that agreements are to be construed
in accordance with the parties’ intent,” “the best evidence” of
The Agreement does not contain a choice of law provision, nor
do the parties argue for the application of any law outside of
the Third Circuit’s federal common law framework.
which “is what they say in their writing.”
In re World Trade
Ctr. Disaster Site Litig., 754 F.3d 114, 122 (2d Cir. 2014)
(citing New York law) (citation omitted).
written agreement that is complete, clear and unambiguous on its
face must be enforced according to the plain meaning of its
Id. (citation omitted).
Thus, “[a]t the outset, the
court must determine whether the language the parties have
chosen is ambiguous . . . .”
Gary Friedrich Enters., LLC v.
Marvel Characters, Inc., 716 F.3d 302, 313 (2d Cir. 2013).
“A contract is unambiguous when the contractual language
has a definite and precise meaning about which there is no
reasonable basis for a difference of opinion.”
Harlequin Enters. Ltd., 751 F.3d 64, 69 (2d Cir. 2014).
contrast, ambiguity exists where a contract’s term could
objectively suggest more than one meaning to one familiar with
the customs and terminology of the particular trade or
“Whether a contract is ambiguous is a question
But ambiguity does not arise merely by virtue of
the fact that the parties volunteer different definitions.
Debenture Trust Co. of New York v. Maverick Tube Corp., 595 F.3d
458, 467 (2d Cir. 2010).
For instance, the proposal of an
interpretation that “strains the contract language beyond its
reasonable and ordinary meaning” does not create ambiguity where
none otherwise exists.
Seiden Assocs., Inc. v. ANC Holdings,
Inc., 959 F.2d 425, 428 (2d Cir. 1992) (citation omitted).
existence of an ambiguity is to be ascertained from the face of
an agreement without regard to extrinsic evidence.”
In re World
Trade Ctr. Disaster Site Litig., 754 F.3d at 122 (citation
The Agreement does not assign antitrust claims from Old
DNAML to New DNAML.
The Agreement contains no express
assignment of Old DNAML’s antitrust claims, and no general
assignment of all claims.
While the Agreement transfers all of
Old DNAML’s “Business and Assets” to New DNAML, neither the term
“Assets” nor “Business” is defined in the Agreement to include
claims of any kind.
As explained above, a transfer of assets
does not effect an assignment of antitrust claims.
Sullivan, 34 F.3d at 1106 (transfer of “all other assets” did
not include antitrust cause of action).
Where the Agreement intended to transfer legal claims, it
made that intention explicit.
The Agreement states that Old
DNAML “assign[ed] to [New DNAML] all the rights which [Old
DNAML] may have under, and against the other party or parties
to, the Business Agreements and Licenses and Trading Agreements
. . . .”
“Business Agreements” is defined as “the current
uncompleted agreements entered into in connection with the
Business at the Settlement Date.”
“Licenses and Trading
Agreements” is defined as “the Vendor’s rights, licenses and
trading arrangements in connection with the Business.”
the principle expressio unius est exclusion alterius, the
inclusion of these specific transfer provisions confirms that
the parties to the Agreement were aware of how to transfer legal
claims, chose to transfer specific rights that they delineated,
and did not intend a general transfer of all legal claims.
Matter of New York City Asbestos Litig., 838 N.Y.S.2d 76, 80
(1st Dep’t 2007).
Notably, plaintiff does not argue that this
assignment provision effected a transfer of antitrust claims
from Old DNAML to New DNAML.
DNAML argues that the purchase of Old DNAML’s “Business”
was sufficiently “unambiguous and all inclusive” to effect an
assignment of federal antitrust claims under the standard
described in Lerman.
See Lerman, 10 F.3d at 112.
notes that the Agreement provides that “a reference to a thing
includes each part of that thing” and argues that the
Agreement’s reference to DNAML’s e-book “Business” should
therefore be read to include litigation claims arising from that
First, DNAML misreads Lerman, which holds only that
there may be a sufficient assignment of antitrust claims if
there is an express assignment of all causes of action.
Sullivan, 34 F.3d at 1106 (describing Lerman).
Agreement’s definition of “Business,” which is defined as the
“business of owning and operating eBook technologies,” is not an
“express” assignment of any accrued legal claims, much less
accrued antitrust claims.
The “business of owning and operating
eBook technologies” does not plainly include bringing antitrust
claims in court.4
Finally, the plaintiff offers 2015 deposition testimony and
a 2011 email as evidence that the asset transfer from old DNAML
to New DNAML was intended to include antitrust claims.5
Since the Agreement is unambiguous, it would be inappropriate to
turn to extrinsic evidence to supplement its terms.
See In re
World Trade Ctr. Disaster Site Litig., 754 F.3d at 122.
Agreement does not expressly transfer Old DNAML’s antitrust
The plaintiff relies as well on Vasilliow Co., Inc. v.
Anheuser-Busch, Inc., 117 F.R.D. 345, 347 (E.D.N.Y. 1987), for
the proposition that a transfer of all corporate assets effects
an assignment of antitrust claims. In that brief decision, the
court dismissed individual claims brought by one class
representative on standing grounds because the plaintiff “agreed
to sell all of its business assets” and “[t]he contract does not
exempt from the sale of assets this or any other cause of
action.” The decision did not cite or grapple with any of the
precedent or legal principles discussed above. Accordingly, it
does not provide a basis to depart from the analysis undertaken
In the 2011 email discussing the Agreement, DNAML CEO Adam
Schmidt states that “[t]he net effect on the going concern is
zero -- the new company assumes all the Assets and Liabilities
of DNAML.” Even if it were appropriate to consider this
extrinsic evidence, and it is not, this reference to the
transfer of assets does not evidence an intent to assign legal
claims to New DNAML, nor do the written terms of the Agreement
manifest an intent to do so.
The Defendants’ September 18 motion for summary judgment is
granted and the claims asserted in this action are dismissed
The Clerk of Court shall close the case.
New York, New York
December 16, 2015
United States District Judge
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