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Watch those market definitions in antitrust claims after Second Circuit decision, attorney advises

By Karen Kidd | May 23, 2016

NEW YORK (Legal Newsline) – Plaintiffs in antitrust lawsuits need to be even more mindful than ever of their case's geographic market after a U.S. Court of Appeals for the Second Circuit decision dismissed a Sherman Act complaint, an antitrust attorney said in a recent interview.

The decision handed down March 18 by the Second Circuit in Concord Associates, L.P., et al. v. Entertainment Properties Trust, hinged on the definition of a geographic market. The Second Circuit affirmed a district court decision that plaintiffs' claims under the Sherman Antitrust Act failed to produce a plausible geographic market.

That decision will be felt in antitrust lawsuits to come, Deirdre McEvoy, counsel with Patterson Belknap Webb & Tyler in New York City, said in an email interview with Legal Newsline.

"Defining a product’s geographic market is a fact-intensive inquiry, so the Second Circuit’s decision to engage with plaintiffs’ proposed market definition at the motion to dismiss stage is notable," McEvoy said.

"This decision signals to district court judges that an antitrust claim can be dismissed before proceeding to discovery if the market definition is implausible on its face."

McEvoy recently blogged about the Second Circuit decision with her colleague at Patterson Belknap Webb & Tyler, Jake Walter-Warner.

In its decision in the case, the Second Circuit upheld the decision of the U.S. District Court for the Southern District of New York to dismiss the complaint. Plaintiffs in the case wanted to develop racing and casino gambling facilities, a “racino,” in adjoining properties that include 140 acres at the former Concord Resort Hotel in the Catskill Mountains, according to court filings in the case.

There, the plaintiffs planned a casino-resort complete with a luxury hotel and championship golf, in addition to harness racing and casino gambling.

The plaintiffs later transferred the property to defendant Entertainment Properties Trust while retaining the right to exclusive use and exploitation, including development of the racino.

The plaintiffs also agreed to a contract with Empire Resorts Inc., which has owned and operated the Monticello Raceway, also in the Catskills, since 1993. In 2004, Monticello Raceway began to offer casino gaming, making it the only race track or casino in the Catskills.

In November 2009, another defendant, Kien Huat Realty, who with other defendants operates one of the largest gaming conglomerates in the world, acquired majority interest in Empire Resorts. Shortly after that, Empire Resorts stopped cooperating with Concord and, with other defendants in the case, opened a rival racino at Aqueduct Race Track, approximately 100 miles away.

Plaintiffs in the case claimed Empire Resorts and other defendants effectively formed an anti-competitive trust to undermine the Concord development project.

The district court granted the defendants' motions to dismiss. The court also dismissed Concord's state law claims and later denied the plaintiffs motion for reconsideration. In that denial, the district court maintained the plaintiffs failed to allege a plausible relevant geographic market and didn't prove the defendants were involved in a conspiracy.

Traditionally, a market definition or the actual defining of a given market, is highly important in antitrust cases. A company may or may not be a monopoly, or a merger may or may not happen beyond a certain market share. Beyond that market share, the company or merger may not win its day in court.

Appealing to the Second Circuit, plaintiffs in the Concord case maintained the district court was wrong to deny their amended complaint on that basis.

"The plaintiffs also claim the district court erred in denying them leave to amend the Amended Complaint," the Second Circuit decision said. "Because we agree with the district court that the plaintiffs' proposed market definition is inherently implausible, we find that the plaintiffs failed to allege adequate facts to state a violation of the Sherman Act. Therefore, we affirm the judgment of the district court dismissing the complaint."

It was that lack of a plausible defined market that lost the plaintiffs their case before the Second Circuit.

"The plaintiffs’ defined market was not plausible because it failed to take into consideration interchangeability and cross-elasticity," she said. "The court felt that the geographic market was gerrymandered to exclude legitimate competition."

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Organizations in this Story

U.S. Second Circuit Court of Appeals Patterson Belknap Webb & Tyler U.S. District Court for the Southern District of New York New York Division

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