March 2, 2017
A recent NLJ story by C. Ryan Barber, “Judge Refuses Fee Award to State AGs in Antitrust Case,” reports that nearly a year after striking down Staples Inc.’s proposed takeover of Office Depot, a federal judge in Washington refused to award $175,000 in legal fees to the Pennsylvania and District of Columbia attorneys general for their role in challenging the office supply chains’ $6.3 billion deal.
The two offices teamed up with the Federal Trade Commission (FTC) in a suit that alleged the proposed deal would hurt competition in the market for office supplies sold in bulk to large corporate clients. In May, U.S. District Judge Emmet Sullivan sided with regulators and granted a preliminary injunction. Staples and Office Depot abandoned their merger plans.
Pennsylvania and D.C. argued they were entitled to fees under a provision of the Clayton Act that allows for the reimbursement of legal costs when the plaintiff “substantially prevails.” Sullivan said there was one problem: Regulators prevailed not under the Clayton Act but the FTC Act, which does not grant legal fees to winning plaintiffs.
"Simply put, moving plaintiffs cannot have it both ways,” Sullivan wrote in a 10-page opinion. “They cannot ride the FTC’s claim to a successful preliminary injunction under the more permissive [FTC Act] standard and then cite that favorable ruling as the sole justification for fee-shifting under the more rigorous Clayton Act standard."
Pennsylvania and District of Columbia offices had argued that the preliminary injunction directly broke up the merger, allowing them to recoup costs under the so-called “catalyst rule.” But Sullivan was not persuaded.
As Staples and Office Depot pointed out, Sullivan wrote, “the catalyst rule as a mechanism for obtaining attorneys’ fees in certain circumstances was rejected by the Supreme Court in 2001,” in the case of Buckhannon Board and Care Home, Inc. v. West Virginia Department of Health and Human Resources.
The FTC had taken the lead in the antitrust challenge—a fact Staples and Office Depot raised to belittle the two offices’ role in the case. The two companies described the work from Pennsylvania and D.C. as duplicative of the FTC’s, poorly documented and “largely spent on non-determinative issues (to the extent it is possible to determine what they worked on with any specificity at all).”
The Pennsylvania attorney general’s office requested $142,548, the District of Columbia $33,547—amounts that, if granted, would have represented an “unprecedented windfall,” Staples and Office Depot argued. Weil, Gotshal & Manges represented Staples, and Simpson, Thacher & Bartlett represented Office Depot.
Sullivan said Pennsylvania and D.C. “effectively ask this court to take an unprecedented step.” The choice to challenge the deal under the FTC Act was a “strategic one,” Sullivan wrote. “Nonetheless, moving plaintiffs cannot bring a petition for fee-shifting under a provision under which they did not prevail,” he wrote.