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Lawyers for Canada’s LePage’s Inc. will have a second chance to defend the $68 million verdict they won in an antitrust suit against office supply giant 3M now that the judges of the 3rd U.S. Circuit Court of Appeals have voted to grant rehearing before a 10-judge en banc panel. In a one-page order handed down Monday, the court vacated an opinion handed down in January that overturned the verdict by a 2-1 vote. Since en banc rehearing requires the vote of the majority of the judges on the court, it is considered a strong indication that the court is poised to reject the views of the original three-judge panel. And when the original panel opinion included a strong dissent, court watchers say, it’s a safe bet that the dissenting judge lobbied behind the scenes to get the case reheard. In the January opinion, 3rd Circuit Judges Morton I. Greenberg and Samuel A. Alito found that St. Paul, Minn.-based 3M did not violate antitrust laws in its competitive efforts in the market for transparent tape because it never priced its products below cost. But in a spirited dissent, 3rd Circuit Judge Dolores K. Sloviter complained that the majority’s ruling would “weaken Section 2 of the Sherman Act to the point of impotence,” and that her colleagues were imposing new hurdles for antitrust plaintiffs that will harm competition. LePage’s lawyers urged the full court to rehear the case, arguing that Sloviter got it right when she said that Greenberg’s ruling effectively overturned a prior 3rd Circuit antitrust case. Attorney Barbara W. Mather of Philadelphia-based Pepper Hamilton argued that Greenberg ignored the binding effect of the 3rd Circuit’s 1978 decision in SmithKline v. Eli Lilly and that the new rules Greenberg announced would impose additional burdens on plaintiffs in antitrust cases that directly conflict with the SmithKline decision. In the suit, LePage’s claims that 3M — the maker of “Scotch” brand tape and Post-It notes — set out to drive LePage’s out of business by offering “bundled” rebates to large retailers that could be earned only by removing LePage’s products from their shelves. As a result, LePage’s said it lost some of its biggest customers, such as the office supply chain Staples, which canceled its contract with LePage’s to manufacture a store-brand tape in order to benefit from 3M’s rebate program. In April 1999, a jury found that 3M abused its monopoly power, but cleared 3M on claims that it had engaged in exclusive dealing or unreasonably restrained trade. Technically, the jury awarded LePage’s $22.8 million in damages, but that figure was automatically trebled for a total verdict of $68.4 million. But Greenberg found that LePage’s never proved 3M had engaged in any illegal conduct. “It is difficult to see how consumers are better off if bundled rebates are illegal regardless of how competition is affected,” Greenberg wrote. Greenberg found that LePage’s evidence was missing its linchpin because it never proved that 3M’s pricing was below cost or that LePage’s itself would have had to price below cost to compete. In her dissent, Sloviter said Greenberg’s reasoning would weaken antitrust laws by allowing admitted monopolists to engage in conduct that, when viewed in its totality, has anti-competitive effects. Mather, in her brief urging the court to grant en banc rehearing, argued that LePage’s claim fell squarely within the theory already endorsed by the 3rd Circuit in SmithKline. In SmithKline, Mather said, the court held that a monopolist’s use of a bundled rebate program — in which the prices of monopoly and non-monopoly pharmaceutical products were linked in order to eliminate fledgling competition — violated � 2 of the Sherman Act. Mather complained that Greenberg’s ruling conflicts with SmithKline by requiring proof that the monopolist’s prices were below cost and by providing a defense that such conduct is legal if it was undertaken for the “rational” purpose of advancing sales. Joining Mather on the brief were Pepper attorney Jeremy Heep; sole practitioner Peter Hearn; attorneys Mark W. Ryan and Robert L. Bronston of Mayer Brown & Platt in Washington, D.C.; and Roy T. Englert Jr. of Robbins, Russell, Englert, Orseck & Untereiner in Washington, D.C. In its brief opposing rehearing, 3M was represented by John G. Harkins Jr. of Harkins Cunningham in Philadelphia and M. Laurence Popofsky, Stephen V. Bomse, Paul Alexander and Marie L. Fiala of Heller Ehrman White & McAuliffe in San Francisco.

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