Meritor v. Eaton

Hours before a damages trial was scheduled to start on June 23, truck parts manufacturer Eaton Corp. agreed to pay rival Meritor Inc. $500 million to settle allegations that it squeezed them out of the market for truck transmissions. According to Meritor, the deal is one of the largest private antitrust settlement awards in a decade.

In 2009 Meritor convinced a jury in federal district court in Wilmington that Eaton was liable for anticompetitive behavior when it signed anticompetitive supply agreements with its truck transmission customers. A follow-up jury trial on damages was set to begin before U.S. District Judge Sue Robinson. Meritor had planned to seek $800 million—$2.4 billion after automatic trebling.

Meritor has long been represented in the case by antitrust litigators Jay Fastow, R. Bruce Holcomb and Jennifer Hackett. The trio worked together at Dickstein Shapiro, but Fastow left for Ballard Spahr in February, and Holcomb now runs the Washington-based boutique Adams Holcomb. Hackett remains at Dickstein Shapiro. Joseph Schoell of Drinker Biddle & Reath was Meritor’s local counsel in Wilmington.

Meritor sued Eaton in 2006, alleging that its joint venture with German company ZF Friedrichshafen AG was driven out of business by Eaton’s allegedly anticompetitive practices. After winning the liability verdict in 2009, Meritor suffered a major setback two years later when Robinson ruled that it wasn’t entitled to any damages. The U.S. Court of Appeals for the Third Circuit reversed Robinson’s damages verdict and affirmed the underlying liability verdict. Theodore Olson of Gibson Dunn & Crutcher represented Eaton at the Third Circuit and filed an unsuccessful cert petition at the U.S. Supreme Court.

In addition to Gibson Dunn, Eaton has long been represented by Robert Ruyak and Joseph Ostoyich, formerly of Howrey. When Howrey folded, Ruyak headed to Winston & Strawn, and Ostoyich joined Baker Botts. After landing at Winston & Strawn, Ruyak brought Winston chairman Dan Webb onto the case. Eaton also hired Al Pfeiffer Jr. of Latham & Watkins for the damages phase and the anticipated trial.—Jan Wolfe

Macy’s v. J.C. Penney

In a scathing decision released on June 16, New York Supreme Court Justice Jeffrey Oing in Manhattan found J.C. Penney Co. Inc. liable for interfering with a merchandising deal between Macy’s Inc. and Martha Stewart’s namesake company, Martha Stewart Living Omnimedia Inc. But Oing found J.C. Penney not liable for punitive damages. At press time he had not yet set the damage award. (Penney appealed the ruling July 1, and Macy’s said it would appeal the denial of punitive damages.)

In 2007 Macy’s signed a deal with MSLO to sell a line of Stewart’s home goods. The companies agreed that after five years, Macy’s would have the option of renewing the contract. Unbeknownst to Macy’s, J.C. Penney’s then-CEO, Ron Johnson, met with Stewart in 2011 and persuaded her to sell her products, which had become a top seller for Macy’s, at J.C. Penney as well. J.C. Penney would later argue that such an arrangement was permitted by MSLO’s contract with Macy’s. But the CEO’s emails at the time, featured at trial, suggested that he saw the Macy’s partnership as a major obstacle.

Instead of letting its partnership with Stewart lapse, Macy’s renewed it and sued MSLO for breach of contract on a theory that MSLO tried to undermine the renewal right. Macy’s also sued J.C. Penney for tortious interference with contract.

Oing consolidated the suits and held a bench trial last year. Stewart took the witness stand, as did Johnson. Macy’s tapped Jones Day partner Theodore Grossman, who examined all the major witnesses, with assistance from Jones Day partners Robert Faxon, Michael Platt and Louis Chaiten. Mark Epstein of Munger, Tolles & Olson was lead counsel for J.C. Penney.

MSLO, which tapped Eric Seiler of Friedman Kaplan Seiler & Adelman, settled on terms favorable to Macy’s after the trial, so it is not affected by the ruling. —J.W.

Grocery Manufacturers Association v. Sorrell

Food industry trade groups have tapped Hogan Lovells to challenge a first-of-its-kind state law requiring the labeling of genetically engineered food. In a complaint filed June 12 in U.S. district court in Burlington, Vt., the trade groups argue that Vermont’s government exceeded its constitutional authority by enacting the groundbreaking labeling law on May 8. They argue that the law, which goes into effect in 2016, violates the First Amendment as well as the Commerce Clause.

Four groups—the Grocery Manufacturers Association, the Snack Food Association, the International Dairy Foods Association and the National Association of Manufacturers—sued four Vermont officials, including Attorney General William Sorrell and Gov. Peter Shumlin. The groups have tapped Catherine Stetson, who codirects Hogan’s appellate practice, and E. Desmond Hogan, as well as Matthew Byrne, a former partner at Kirkland & Ellis who is now a managing shareholder of the Burlington-based firm Gravel & Shea, as local counsel. Vermont Attorney General William Sorrell said his office would be defending the law.

Proponents of the law argue that GMOs may not be as safe as the U.S. Food and Drug Administration has asserted, and that consumers should be able to know what they’re eating. But Hogan Lovells contends that Vermont’s legislature has exempted dairy products and restaurant food from the bill to protect the state’s tourism and dairy farming industries. The firm also maintains that to comply with the July 2016 deadline, some companies will have to change their labels throughout the entire United States. On July 7, Sorrell said the state had negotiated a $1.5 million contract with Robbins, Russell, Englert, Orseck, Untereiner & Sauber to represent it. The state’s response is due on Aug. 8.—J.W.

Vergara v. State of California

On June 10 a state trial judge in Los Angeles struck down five California statutes governing how the state’s public school teachers are fired, laid off or granted tenure. The order came in a case brought by Gibson, Dunn & Crutcher’s Theodore Boutrous Jr., Theodore Olson and Marcellus McRae on behalf of nine public school children who claim that the state laws have protected thousands of “grossly ineffective” teachers across the state, thereby depriving the plaintiffs of equal access to a public education under the California Constitution. The suit, filed in 2012, alleged the statutes disproportionately hurt low-income and minority students.

Los Angeles County Superior Court Judge Rolf Treu found that all five statutes were unconstitutional. The evidence that the statutes harmed children was “compelling,” he wrote, and “shocks the conscience.” Treu stayed his decision pending an anticipated appeal.

The case had some heavy lifters on both sides. In addition to Boutrous, one of the lawyers who brought the case challenging the constitutionality of California’s ban on same-sex marriage, the case had the financial backing of Silicon Valley entrepreneur David Welch’s nonprofit, Students Matter.

On the other side were California’s largest teacher unions, the California Teachers Association and the California Federation of Teachers, which had intervened to defend the laws at issue.

The decision was stayed pending a near-certain appeal by union attorney James Finberg of Altshuler Berzon. California Attorney General Kamala Harris, representing officials named as defendants, was reviewing the tentative ruling at press time.

Treu ruled that a statute requiring administrators to make tenure decisions within two years or less didn’t allow enough time to adequately assess a teacher’s performance. Statutes governing the dismissal of ineffective teachers were “complex, time-consuming and expensive,” he added. Treu also struck down another statute that protects senior teachers from getting laid off.

At trial, the defendants had blamed ineffective teachers on poor management at the districts. They insisted that the statutes provided adequate means for administrators to evaluate or dismiss teachers.

Treu, in his ruling, acknowledged the political ramifications of the case. “That this court’s decision will and should result in political discourse is beyond question,” he wrote.—Amanda Bronstad

Catholic Healthcare West v. 
U.S. Foods

After fending off a last-ditch U.S. Supreme Court appeal last month, plaintiffs in a rare class action under the Racketeer Influenced and Corrupt Organizations Act have inked a $297 million settlement with U.S. Foods Inc. and its former parent, the Dutch retail conglomerate Royal Ahold N.V. The deal resolves allegations that USF executives hatched a scheme to overbill about 75,000 institutional customers nationwide between 1998 and 2005.

Hunton & Williams’ Richard Wyatt Jr. led the customers’ case with assistance from Akin, Gump, Strauss, Hauer & Feld’s R. Laurence Macon and Whatley Kallas’ Joe Whatley Jr. According to Hunton, the settlement is one of the biggest ever in a class action asserting RICO claims.

In December, Sysco Corporation agreed to buy USF for $3.5 billion from a private equity group that acquired the company from Ahold in 2007; that merger was still under antitrust review at press time. Sysco and USF are the country’s first- and second-largest food distributors, respectively.

White & Case partners Glenn Kurtz and Douglas Baumstein have been defending USF since the first case was filed by Waterbury Hospital in 2006. In multiple complaints, later consolidated, customers claimed that USF used dummy companies and fake invoices to inflate food costs that it used to set prices under customer contracts.USF suffered a series of defeats in U.S. district court in Connecticut, including a 2011 ruling certifying the consolidated case as a class action under RICO. After the U.S. Court of Appeals for the Second Circuit upheld the class certification ruling in August 2013, USF brought in an all-star team from Quinn Emanuel Urquhart & Sullivan led by Peter Calamari and Stephen Neuwirth, with Kathleen Sullivan assisting on a Supreme Court petition for cert in January.

Sullivan asserted that the Second Circuit created a split with other appeals courts when it refused to decertify the class last year. She argued that contract expectation damages aren’t available in civil RICO cases based on fraud, and that the case shouldn’t have been certified as a class action without proof that individual class members relied on USF’s alleged misconduct. Wyatt led in opposing USF’s cert bid.

USF entered settlement talks with the plaintiffs after the Supreme Court denied cert on April 28. At press time the settlement still required approval from U.S. District Judge Alvin Thompson in Hartford.