Federal Trade Commission et al v. Penn State Hershey Medical Center et al
MEMORANDUM (Order to follow as separate docket entry) (eo)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
FEDERAL TRADE COMMISSION
PENN STATE HERSHEY MEDICAL
Civil Action No.: 1:15-cv-2362
Hon. John E. Jones III
May 11, 2017
Presently before the Court is the Commonwealth of Pennsylvania’s Motion
for Attorney’s Fees and Costs under Section 16 of the Clayton Act. (Doc. 143).
This Motion arises following the Third Circuit’s opinion in Federal Trade
Commission v. Penn State Hershey Medical Center, 838 F.3d 327 (3d Cir. 2016)
(“Hershey”), issued on September 27, 2016. Therein, the Third Circuit considered
a proposed merger between Defendants Penn State Hershey Medical Center and
PinnacleHealth System (collectively, “Defendants”). The Third Circuit granted
Plaintiffs the Federal Trade Commission and the Commonwealth of Pennsylvania
preliminary injunctive relief, enjoining the merger pending the outcome of an
administrative adjudication on the merits, to be conducted by the Federal Trade
Commission. Hershey, 838 F.3d at 354.
Thereafter, the Commonwealth filed the instant Motion, which has been
fully briefed and is accordingly ripe for our review. (Docs. 144, 146 and 147).1
For the reasons to follow, the Commonwealth’s Motion shall be denied.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY 2
The above-captioned action commenced with the filing of a Complaint on
December 9, 2015. (Doc. 4). Therein, the Federal Trade Commission (“FTC”),
joined by the Commonwealth of Pennsylvania, sought a preliminary injunction
preventing the merger of two hospitals, Penn State Hershey Medical Center
(“Hershey”) and PinnacleHealth Systems (“Pinnacle”), pending the outcome of the
FTC’s adjudication on the merits. The suit was filed under Section 13(b) of the
Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b), and Section 16 of
the Clayton Act, 15 U.S.C. § 26.
On March 2, 2017, Defendants placed supplemental authority on the docket alerting the
Court to the existence of newly filed, relevant case law. (Doc. 150). The Court ordered, and has
since reviewed, submissions from both parties pertaining to that filing as well. (Docs. 159, 160).
This case involves a lengthy and complex factual history. As the Court writes primarily
for the benefit of the parties, who are intimately familiar with the background of this case, only
factual matter relevant to the resolution of the instant Motion is included here.
For a period of five days in mid-April, this Court held evidentiary hearings
and heard testimony from sixteen witnesses. On May 9, 2016, Plaintiffs’ Motion
for a Preliminary Injunction was denied. (Doc. 131). Plaintiffs timely filed a
Notice of Appeal (doc. 132), and thereafter our Court of Appeals heard oral
argument from the parties. On September 27th, the Third Circuit issued an opinion
reversing our denial of the Motion for Preliminary Injunction and remanded the
case, directing that the merger of Defendants be preliminarily enjoined pending the
outcome of the FTC’s administrative adjudication. FTC v. Penn State Hershey
Med. Ctr., 838 F.3d 327, 353-54 (3d Cir. 2016) (“Hershey”). We issued an order
so doing on October 20, 2016. (Doc. 142).
Meanwhile, on October 14, 2016, the Pennsylvania State University Board
of Trustees voted unanimously to accept Penn State Health’s recommendation
terminating the Affiliation Agreement with Pinnacle. (Doc. 143, ¶ 8). Similarly,
Pinnacle also announced that it was abandoning its merger efforts with Hershey
based on the Third Circuit’s opinion and judgment. (Id., ¶ 9).
As noted above, on November 2, 2016, the Commonwealth filed the instant
Motion for Attorney’s Fees and Costs under Section 16 of the Clayton Act. (Id.).
Therein, the Commonwealth seeks $1,033,355.50 in attorney’s fees and related
costs and $160,072.76 in litigation costs. (Id., ¶ 15). Defendants vigorously
oppose the Motion, arguing against it on a variety of procedural and substantive
grounds. We consider each argument in turn below.
Section 16 of the Clayton Act, entitled “[i]njunctive relief for private
[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.
15 U.S.C. § 26. Defendants argue that because the Third Circuit evaluated
Plaintiffs’ claims solely under Section 13(b) of the FTC Act, the Commonwealth’s
request for fees under Section 16 should be denied.
Whether Plaintiffs may seek attorney’s fees pursuant to Section
16 of the Clayton Act
Section 13(b) of the FTC Act and Section 16 of the Clayton Act employ
slightly different standards. Hershey, 838 F.3d at 337 (“The public interest
standard is not the same as the traditional equity standard for injunctive relief.”).
Section 13(b) is a specialized statute applicable only to suits brought by the FTC,
“[t[he purpose of [which] is to preserve the status quo and allow the FTC to
adjudicate the anticompetitive effects of the proposed merger in the first instance.”
Id. at 352. The public interest standard employs a two-pronged approach. Under
Section 13(b), “[a] district court may issue a preliminary injunction ‘[u]pon a
proper showing that, weighing the equities and considering the Commission’s
likelihood of success, such action would be in the public interest.’” Id. at 337
(citing 15 U.S.C. § 53(b)). Unlike Section 16 of the Clayton Act, Section 13(b)
does not permit fee shifting. See FTC v. Staples, Inc., -- F.Supp.3d ---, 2017 WL
782877, at *1, (D.D.C., Feb. 28, 2017) (“Unlike the Clayton Act, the FTC Act does
not grant attorney’s fees to prevailing plaintiffs.”).
Meanwhile, Section 16 of the Clayton Act states that:
Any person, firm, corporation, or association shall be entitled to sue for and
have injunctive relief . . . against threatened loss or damage by a violation of
the antitrust laws . . . when and under the same conditions and principles as
injunctive relief against threatened conduct is granted by courts of equity,
under the rules governing such proceedings . . . .
15 U.S.C. § 26. As noted above, Section 16 contains a fee shifting provision. 15
U.S.C. § 26.
Traditionally, “[a] plaintiff seeking a preliminary injunction must establish
that he is likely to succeed on the merits, that he is likely to suffer irreparable harm
in the absence of preliminary relief, that the balance of equities tip in his favor, and
that an injunction is in the public interest.” Glossip v. Gross, 135 S.Ct. 2726,
2736-37 (2015) (citing Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20
(2008)). Instead of two elements then, a court must consider four factors under the
traditional equity standard for injunctive relief.
The parties vigorously debate whether the Third Circuit applied the twopronged test appropriate for injunctive relief analyzed under Section 13(b), or the
four-pronged test set forth by the traditional equity standard. Careful review of the
Third Circuit’s opinion in Hershey shows that Defendants are correct to note that
our Court of Appeals solely applied the standard outlined by Section 13(b) of the
FTC Act. Indeed, at the outset of its analysis, the Third Circuit states that “the
Government seeks a preliminary injunction under Section 13(b) of the FTC Act”
with no mention of the Commonwealth’s pursuit of an injunction pursuant to
Section 16. Hershey, 838 F.3d at 337. The court goes on to describe the public
interest standard applicable to a motion for a preliminary injunction under Section
13(b), and specifically emphasizes that the standard differs from the traditional
equity standard for injunctive relief. Id. Most importantly, throughout the
remainder of its analysis, the court proceeds under the public interest standard and
does not consider the additional factor of irreparably harm required under the
traditional equity standard.3
However, it does not unequivocally follow, as Defendants assert, that
because the Third Circuit ruled under Section 13(b), the Commonwealth may not
claim costs and fees pursuant to Section 16. At the time that this matter was
initially briefed, no case law existed directly on point regarding whether, having
The Commonwealth argues that if the Commonwealth and the FTC had prevailed solely
under Section 13(b), the Commonwealth would have been an improper party and so lacked
standing to participate in the litigation. (Doc. 147, p. 5). This argument is misplaced; rather, the
parties proceeded under Section 13(b) and the Third Circuit, finding relief to be merited under
the more lenient standard, did not consider the second, more strenuous, standard. It does not
follow from this omission that the Commonwealth was necessarily not a proper plaintiff or that
its suit was misplaced.
partnered with the FTC and obtained relief under Section 13(b), a co-plaintiff may
nonetheless claim costs and fees through a different statute.
Since then, however, the federal district court for the District of Columbia
has issued an opinion directly on point regarding this issue, FTC v. Staples, Inc., -F.Supp.3d ---, 2017 WL 782877 (D.D.C., Feb. 28, 2017) (Sullivan, J.) (“Staples”).
Therein, Judge Sullivan determined that to allow plaintiffs to recover fees under
one statute while arguing under another was to impermissibly allow plaintiffs to
“have it both ways.” Staples, 2017 WL 782877, at *1 (“[Plaintiffs] 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.” ).
Though on point, Staples is not binding precedent here. Rather, we are
tasked to make a ruling of first impression within the Third Circuit. While we find
Judge Sullivan’s opinion well-reasoned, it is ultimately unpersuasive. Rather, for a
number of reasons to follow, we find that an individual plaintiff who partners with
the FTC to argue under Section 13(b) should not be barred from seeking attorney’s
fees under Section 16.
First, in drafting Section 16, Congress intended that an individual plaintiff
should not bear “the very high price of obtaining judicial enforcement of . . . the
antitrust laws.” H.R. Rep. No. 94-499, at 19-20 (1976).4 A ruling that allows the
Commonwealth to pursue its fees and costs under Section 16, despite its
partnership with the FTC, comports with that spirit. Pennsylvania brought value to
the case by providing the FTC with supplemental knowledge of the region and by
assuming the role of advocate on behalf of Pennsylvania citizens. To
disincentivize the participation of the Commonwealth and other individual
plaintiffs who seek to enforce our antitrust laws by burdening such individuals
with the high costs of litigation is to depart from congressional intent regarding the
enforcement of Clayton Act. This we shall not do.
Our second rationale is grounded in judicial efficiency. There is no dispute
that the Commonwealth could have pursued a preliminary injunction pursuant to
Section 16 apart from the FTC. Assuming it prevailed, the Commonwealth would
have then been entitled to pursue reasonable fees and costs. Of course, whether
Pennsylvania would have indeed achieved a preliminary injunction under the
slightly different standard remains unknown. However, to find now that
Pennsylvania may not pursue attorney’s fees under Section 16 implicitly
encourages duplicative litigation, separate filings, and repetitive arguments. Such
a finding would be, to say the least, highly inefficient. Rather, we decline to find
States were specifically contemplated as within the scope of individual plaintiffs. The
Commonwealth notes, and Defendants do not dispute, legislative history clarifying that “[s]tates
would be entitled to recover reasonable attorney’s fees whenever they prevail in Sec. 16 cases.”
Doc. 144, p. 5 (quoting H.R. Rep. No. 94-499, at 19-20 (1976)).
that the decision of the FTC and the Commonwealth to “speak in a unified voice,”
thereby conserving judicial resources and putting forth a consolidated argument,
precludes the Commonwealth from proceeding under Section 16 here, as it would
have done had it acted independently.
As noted above, no case law on point with the instant issue exists within our
Circuit. Third, however, the spirit of Maher v. Gagne, 448 U.S. 122 (1980) and its
progeny comports with our determination here. In Maher, the Supreme Court
determined that the Eleventh Amendment does not bar courts from awarding
attorney’s fees in a suit where the complainant alleges both statutory, non-civil
rights claims and constitutional violations, so long as those constitutional
violations are substantial enough to support federal jurisdiction and they remain in
dispute when the parties reach a settlement. Maher v. Gagne, 448 U.S. 122, 13032 (1980); Greene v. Gibraltar Mortgage Investment Corp., 529 F.Supp. 186, 18788 (D.D.C. 1981) (“The Supreme Court in Maher rejected the argument that
attorney’s fees should be denied where a fee-generating claim is joined with a nonfee-generating claim, and recovery is had on the latter without reaching the merits
of the former.”).
Similarly, in Greene v. Gibraltar Mortgage Investment Corp., 529 F.Supp.
186, 187-88 (D.D.C. 1981), the district court for the District of Columbia
considered an attorney’s fee award in a case where the plaintiff’s fee-generating
claims under the D.C. Consumer Protection Procedural Act and the Truth in
Lending Act had not been reached.5 The district court relied on Maher to find that
where those claims arose from the same operative facts as the claims the court did
reach, it “would defeat the legislative intent of fee provisions . . . which is to
encourage vindication of important rights on the part of plaintiffs who ordinarily
could not afford to ventilate their claims were [the court] to deny recovery.” Id.
Finally, in ADT Security Services, Inc., v. Lisle-Woodridge Fire Protection
District, 86 F.Supp.3d 857 (N.D. Ill., 2015) (“ADT”), the district court for the
Northern District of Illinois considered the defendants’ argument that “because this
Court entered the permanent injunction on the basis of the Illinois Act and not a
federal fee-shifting statute, [plaintiffs] did not “prevail” in respect to any feeshifting statute and hence are not entitled to fees.” ADT, 86 F.Supp.3d at 864.
Though involving the Illinois Act instead of the FTC Act, the ADT plaintiffs
sought attorney’s fees under the Clayton Act6 as the Commonwealth does here.
Citing Maher, the court disregarded the “cramped view” put forth by defendants
and instead observed that plaintiffs’ requests for relief were all premised on the
same set of facts, and thus were closely related. Id. at 865 (“[T]he standard for
determining whether a constitutional ground is ‘closely related’ to the
The plaintiff had prevailed on her common law contract claims alone. Greene, 529
F.Supp. at 187-88.
More specifically, Plaintiffs sought damages and attorney’s fees under § 1988, Section 26
of the Clayton Act, and Section 15 of the Clayton Act. ADT, 86 F.Supp.3d at 862.
nonconstitutional ground to support a fee award is the ‘common nucleus of
operative fact’ standard”) (citing Smith v. Robinson, 468 U.S. 992, 1005 (1984)).
In ADT, the court went on to conclude that “the fact that [plaintiffs’]
constitutional and anti-trust theories of relief went unadjudicated [does not] . . .
affect [plaintiffs’] express entitlement to fees under Section 1988. . . . While there
is no case as directly on point as Maher was in regard to Section 1988, there is also
no reason to construe Section 26 [of the the Clayton Act]7 more narrowly than
Section 1988.” Id. at 866 (concluding that plaintiffs were entitled to an award of
fees under both Section 1988 and the Clayton Act).
Here too, we find that the Commonwealth’s request for injunctive relief
under Section 16 of the Clayton Act arose primarily out of the same operative facts
Plaintiffs argued in support of their preliminary injunction requested under Section
13(b) of the FTC Act. Further, both claims, though arising under different
standards, considered primarily the same issues, the touchstone being the
likelihood of achieving an injunction preventing the hospital merger in an
adjudication before the FTC. Accordingly, for these and all the reasons discussed
above we find that the Commonwealth is entitled to seek fees as provided under
Section 16 of the Clayton Act.
The court in ADT chose to refer to the provision on the Clayton Act numbered internally
as Section 16 as Section 26, in reference to its citation, 15 U.S.C. § 26. Here, however, we refer
to Section 16 of the Clayton Act as Section 16 in accordance with its internal numbering and in
order to retain continuity with the parties. They are, in fact, the same provision.
Whether the Commonwealth “substantially prevailed” within the
meaning of Section 16 of the Clayton Act
Having determined that the Commonwealth may proceed under Section 16
of the Clayton Act, we now consider whether the Commonwealth’s Motion is
In order for the Commonwealth to succeed in its request for attorney’s fees,
it must “substantially prevail” on an action arising under Section 16. 15 U.S.C. §
26. Defendants argue that the Commonwealth did not “substantially prevail”
because it did not receive a judgment on the merits and instead obtained only
interim relief. Defendants also argue that, in support of its position as a prevailing
party, the Commonwealth puts forth a rendition of the “catalyst theory,” which was
rejected by the Supreme Court in Buckhannon Bd. & Care Home v. W. Va. Dep’t
of Health & Human Res., 532 U.S. 598, 602-05 (2001). We first consider whether
the catalyst theory or the new standard set forth in Buckhannon is appropriate here.
“The Supreme Court had previously recognized the ‘catalyst theory’ of
prevailing-party status, whereby attorney’s fees could be awarded in circumstances
where defendants ‘voluntarily changed their behavior to eliminate the complainedof conduct.’” Unite Here, Local 54 v. City of Atlantic City, Civil No. 11-6273,
2012 WL 1455249, at *3 (D.N.J., April 26, 2012) (citing Buckhannon Bd. & Care
Home v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598, 602-05 (2001)).
The catalyst theory was put aside by the Supreme Court in Buckhannon, a case
arising under the fee-shifting provisions of the Fair Housing Amendments Act and
the Americans with Disabilities Act. Buckhannon, 532 U.S. at 600-01 (“Numerous
federal statutes allow courts to award attorney’s fees and costs to the “prevailing
party.” The question presented here is whether this term includes a party that has
failed to secure a judgment on the merits or a court-ordered consent decree, but has
nonetheless achieved the desired result because the lawsuit brought about a
voluntary change in the defendant’s conduct. We hold that it does not.”).
The Commonwealth argues that the standard put forth by the Court in
Buckhannon is applicable only to civil rights fee cases and not those arising under
the Clayton Act. (Doc. 147, p. 6 n.6). The Commonwealth cites no case law in
support of this assertion, however, and argues only that the different public policies
behind the distinct fee-shifting provisions bolster its position.
We disagree with the Commonwealth’s assertion. Though it may be true
that no case law exists applying the standard established in Buckhannon to Section
16 of the Clayton Act in the Third Circuit, other courts such as the district court for
the District of Columbia in the aforementioned Staples case have found it
applicable. Staples, 2017 WL 782877, at *3 (“[T]he catalyst rule as a mechanism
for obtaining attorney’s fees in certain circumstances was rejected by the Supreme
Court in [Buckhannon].”); Saint Alphonsus Med. Center-Nampa Inc. v. St. Luke’s
Health System, Ltd., Civ. Action No. 1:12-cv-00560, 2015 WL 2033088, at *1 (D.
Idaho, April 29, 2015) (applying the Buckhannon standard to a motion for
attorney’s fees pursuant to Section 16 of the Clayton Act); ADT, 86 F.Supp.3d at
863, (N.D.Ill. 2015) (observing that “[i]t is not entirely clear to what extent
Buckhannon’s definition of “prevailing party” applies to [the Clayton Act’s]
“substantially prevails” but “there is also no reason to construe [the Clayton Act]
more narrowly than Section 1988”); see also Utility Automation 2000, Inc. v.
Choctawhatchee Elec. Co-op, Inc., 298 F.3d 1238, 1247-48 (11th Cir. 2002)
(applying the Buckhannon standard to a private contract providing for attorney’s
The most persuasive authority for our application of the Buckhannon
standard to the Clayton Act fee-shifting provision is the language of Buckhannon
itself. In rendering its decision, the Supreme Court listed a variety of statutes
Congress drafted authorizing the award of attorney’s fees to “prevailing part[ies]”
including not only the Civil Rights Act of 1964, but also the Voting Act
Amendments and the Civil Rights Attorney’s Fees Awards Act. The Court also
cited to an appendix attached to the dissenting opinion of Justice Brennan in Marek
v. Chesny, 473, U.S. 1 (1985). The appendix listed a variety of statutes with fee
shifting provisions, including the Clayton Act itself. The Court then went on to
explain that, “we have interpreted these fee-shifting provisions consistently . . .
and so approach the nearly identical provisions at issue here.” Buckhannon, 532
U.S. 602-03 n.4 (internal citations omitted). This language, along with the
unwavering decisions of other courts to apply Buckhannon to the fee-shifting
provisions of the Clayton Act, compels us to do the same here.
Having found the Buckhannon standard applicable, we turn now to
Defendants’ contention that the Commonwealth is not entitled to attorney’s fees
because it did not “substantially prevail” within the meaning of Section 16. In
support of their position, Defendants point us to Singer Management Consultants,
Inc. v. Milgram, 650 F.3d 223 (3d Cir. 2011) (“Singer”).
In Singer, the Third Circuit reviewed a district court’s refusal to grant
attorney’s fees where a plaintiff had succeeded in obtaining a Temporary
Restraining Order. See generally Singer, 650 F.3d 223 (3d Cir. 2011). During the
preliminary injunction hearing held by the district court, the defendant, the state of
New Jersey, changed its interpretation of the legislation in dispute to conform to
the plaintiff’s view, thus obviating the need for further litigation. Id. Citing
Buckhannon, the Third Circuit first set forth the definition of a prevailing party:8
To be eligible to make a prevailing-party claim under §1988, the plaintiff
must, “at a minimum, . . . be able to point to a resolution of the dispute
which changes the legal relationship between itself and the defendant.” The
change must be “judicially sanctioned,” and must “achieve[ ] some of the
benefit the part[y] sought in bringing suit,” . . . . A “voluntary change in
conduct . . . lacks the necessary judicial imprimatur on the change.” In other
In accordance with the Supreme Court’s instruction in Buckhannon, we interpret the
definition of a prevailing party and a party who has “substantially prevailed” to be consistent
with one another.
words, “a plaintiff does not become a ‘prevailing party’ solely because his
lawsuit cases a voluntary change in the defendant’s conduct.” Rather, the
change in the parties’ legal relationship must be the product of judicial
Id. at 228 (internal citations omitted).
In the case sub judice, as the parties well know, the Third Circuit’s
determination to enter a preliminary injunction contributed to Defendants’ decision
not to proceed with the merger. Because of Defendants’ decision, the FTC’s
administrative adjudication on the merits of the merger did not go forward.
However, this course of events is not sufficient evidence that the Commonwealth
was a “prevailing party.” Rather, only “enforceable judgments on the merits and
court-ordered consent decrees create the ‘material alternation of the legal
relationship of the parties’ necessary to permit an award of attorney’s fees.’”
Buckhannon, 532 U.S. at 604 (citing Tex. State Teachers Ass’n v. Garland Indep.
Sch. Dist., 489 U.S. 782, 792-93 (1989)); Providence Pediatric Med. Daycare Inc.,
v. Poonam Alaigh, -- Fed.Appx.---, 2016 WL 7104910, at *3 (3d Cir. Dec. 6, 2016)
(“As the Supreme Court has explained, a defendant’s voluntary change in conduct,
although perhaps accomplishing what the plaintiff sought to achieve by the
lawsuit, lacks the necessary judicial imprimatur on the change.” (internal citations
and quotations omitted)).
Here, as in Singer, the parties go on to dispute the meaning and
characteristics of an enforceable judgment on the merits. The merits requirement
dictates that any judgment a party seeks to use to obtain legal fees must have been
made on the merits of at least some of that party’s arguments. Singer, 650 F.3d at
229 (‘“Congress intended to permit the interim award of counsel fees only when a
party has prevailed on the merits of at least some of his claims.”’ (quoting
Hanrahan v. Hampton, 446 U.S. 754, 758, 100 S.Ct. 1987 (1980) (per curiam))).
However, the “merits” requirement is difficult to meet in the context of
TROs and preliminary injunctions, as the plaintiff in those instances needs
only to show a likelihood of success on the merits (that is, a reasonable
chance, or probability, of winning) to be granted relief. A “likelihood” does
not mean more likely than not. Because of this, we have held that a court’s
finding of “reasonable probability of success on the merits” is not a
resolution of “any merit-based issue.” As this “probability” ruling is usually
the only merits-related legal determination made when courts grant TROs
and preliminary injunctions, it follows that parties will not often “prevail”
based solely on those events.
Id. (internal quotations omitted).
Indeed, in Singer, the Third Circuit went on affirm the district court’s
holding that the plaintiff had failed to obtain a merits-based judgment, id. at 230,
noting the trial court’s observation that “[w]hile it may be true that this court’s
involvement aided in the resolution of the constitutional issues between the parties,
the fact remains that the issues were not resolved as the result of a court order.” Id.
at 228 (quoting trial court record). After explaining its finding, the Third Circuit
we do not mean to “cast doubt” on the “well-supported legal proposition”
that, in some cases, interim injunctive relief may be sufficient to warrant
attorney’s fees. We agree that “interim relief remains a proper basis for an
award of attorney’s fees when that relief is based on a determination of the
merits of the plaintiff’s claims.” We emphasize, however, that the
determination must be merits-based . . . and may not be merely a finding of a
likelihood of success on the merits . . . .
Id. at 230 n.4 (in response to Judge Roth’s dissenting view).9
With this legal standard in mind, we turn now to whether the Third Circuit in
Hershey awarded the Commonwealth an injunction based on the merits of its
argument, or merely a decision that the Commonwealth had a likelihood of success
on the merits before the FTC. For the forthcoming reasons, we find that the Third
Circuit’s holding was not a determination on the merits but instead a finding that
the Commonwealth had shown a likelihood of success. Thus, the
Commonwealth’s Motion for Attorney’s Fees shall be denied.
The initial paragraph of the Third Circuit’s opinion in Hershey explains that
the Commonwealth sought a preliminary injunction pending the outcome of the
FTC’s adjudication on the merits. Hershey, 838 F.3d at 333 (emphasis added).
As an example of “that rare situation where a merits-based determination is made at the
injunction stage” the Third Circuit points to its decision in People Against Police Violence v.
City of Pittsburgh, 520 F.3d 226 (3d Cir. 2008). Singer, 650 F.3d at 229-30. In PAPV, the
district court considered whether to grant a TRO. It concluded that not only was the city
ordinance in question “facially unconstitutional” but that even if the city voluntarily elected not
to enforce the ordinance against plaintiffs, “a permit regime devoid of any prescribed process
would also be unconstitutional.” PAPV, 520 F.3d at 229. Only then did the district court grant
the plaintiffs’ requested TRO. Id.
Another such example can be found in ADT, described above. There, the district court
for the Northern District of Illinois awarded attorney’s fees under Section 1988 as well as the
Clayton Act following a grant of “partial summary judgment . . . on the question of whether [the
Defendant] exceeded its authority under the Illinois Act and, finding that it did, issued a
preliminary injunction against [defendant] barring it from enforcing its ordinance.” ADT, 86
F.Supp.3d at 861.
Similarly, the opening paragraph of the court’s analysis notes that “[i]n order to
prevent the parties from merging until the FTC can conduct an administrative
hearing on the merits to determine whether the merger violates Section 7, the
Government seeks a preliminary injunction . . . .” Id. at 337. More tellingly, the
Third Circuit stresses that “[a]t this stage, ‘[t]he FTC is not required to establish
that the proposed merger would in fact violate Section 7 of the Clayton Act.’
Accordingly, ‘[a] certainty, even a high probability, need not be shown ,. . . .’”
Hershey, 838 F.3d at 337 (internal citations omitted). This recitation of the
standard indicates to us that the Third Circuit approached its analysis with a focus
on Plaintiffs’ likelihood of success, rather than a full blown determination on the
More importantly, throughout its analysis of whether Plaintiffs presented
evidence showing they were likely to succeed on the merits, at no point did the
court make the leap to state that Plaintiffs had achieved success on the merits. In
finding that the first prong of the Section 13(b) standard was in Plaintiffs’ favor,
the Third Circuit repeatedly observed that Plaintiffs had only demonstrated a
“likelihood” of success and not actual success. In fact, it implicitly or explicitly
reinforced this view as many as four times on just a single page. Hershey, 838
F.3d at 352 (“We therefore conclude that the Hospitals have not rebutted the
Government’s prima facie case . . . . Accordingly, we hold that the Government
has carried its burden to demonstrate that it is likely to succeed on the merits”
(emphasis added)); id. (“Although the Government’s showing of likelihood of
success creates a presumption in favor of preliminary injunctive relief . . . .”
(emphasis added) (internal quotations omitted)); id. (“[A]lthough we may consider
private equities . . . wherever the Government ‘demonstrates a likelihood of
ultimate success . . . .’” (emphasis added)); id. (“The purpose of Section 13(b) is to
preserve the status quo and allow the FTC to adjudicate the anticompetitive effects
of the proposed merger in the first instance.”). 10
Based on our close read of the Third Circuit’s opinion in Hershey, we do not
find that the court granted Plaintiffs a determination on the merits of their
arguments. Rather, we find that the Commonwealth succeeded only in establishing
a likelihood of success on the merits at a later stage in litigation – during the
upcoming FTC adjudication. Accordingly, we find that the Commonwealth did
not “substantially prevail” under Section 16 of the Clayton Act.
Standing alone, this language is compelling. However, we further observe that at no
point did the Third Circuit grant summary judgment in favor of the Commonwealth as the
district court in ADT had done in conjunction with its issuance of a preliminary injunction; nor
did it making sweeping statements of the kind the district court made in PAPV. In short, not only
did the Third Circuit observe, many times, that it was making a determination that the
Commonwealth had achieved a likelihood of success, but further, we find nothing in Hershey to
contravene or undermine the court’s statements.
For the reasons discussed above, we find that the Commonwealth is not
entitled to attorney’s fees under Section 16 of the Clayton Act. Accordingly, the
Commonwealth’s Motion shall be denied. A separate order shall issue in
accordance with this ruling.
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