Penguin Group, one of several defendants in a massive antitrust class action brought by purchasers of e-books, has failed to convince a federal judge that the plaintiffs’ claims should be heard in arbitration. Southern District Judge Denise Cote (See Profile) on June 28 denied Penguin’s motion to compel arbitration in the case, in which the plaintiffs claim that Penguin and four other publishers conspired to keep the prices of their e-books artificially high.
Penguin argued that online retailers Amazon.com and Barnes & Noble had mandatory arbitration clauses in their standard purchasing agreements. The purchasers countered that would make it financially impossible for each plaintiff to pursue arbitration claims against Penguin.
In a 12-page opinion, Cote found that the mandatory arbitration clauses were unenforceable. The judge held that the plaintiffs’ rights under federal antitrust law could not be vindicated through individual arbitration, which the plaintiffs had demonstrated would be prohibitively expensive compared to the relatively small amount of damages at issue.
According to Cote’s opinion, each customer would be able to get no more than $540 in trebled damages, yet would have to pay millions of dollars in expert fees alone. “It would be economically irrational for any plaintiff to pursue his or her claims through an individual arbitration,” Cote wrote in In re: Electronic Books Antitrust Litigation, 11 MD 2293, adding, “Penguin has presented no serious argument to the contrary.”