Before plaintiffs could light the pilot on antitrust claims against two propane tank distributors, a split Eighth Circuit panel cut the gas. In doing so, the majority espoused a narrow view of the applicability of the continuing violations theory in antitrust litigation.
In 2014, following an FTC administrative complaint, class plaintiffs brought suit against defendant distributors Ferrellgas and AmeriGas, alleging that in 2008, facing rising costs of propane, the distributors conspired to reduce the fill level of 20-pound propane tanks from 17 pounds to 15 pounds while maintaining the price. Though a separate group of indirect purchasers settled with Defendants regarding similar claims in 2008, Plaintiffs argued that Defendants’ conspiracy continued, and that Defendants continued to sell the propane tanks at higher prices and at lower fill levels long after the settlements.
Allegations relating to conspiratorial behavior in 2008 would normally be barred by the Sherman Act’s four year statute of limitations, but Plaintiffs argued that the statute of limitations was tolled under a continuing violations theory. Under such a theory, a defendant’s last overt act refreshes the statute of limitations. Plaintiffs argued that Defendants’ continued sales at inflated prices and ongoing conspiratorial communications were distinct overt acts that constitute continuing violations and restart the limitations period.
In support of their claim, Plaintiffs relied on dicta from the Supreme Court’s 1997 decision in Klehr v. A.O. Smith Corp., which stated that in the antitrust context “each sale to the plaintiff [injures the plaintiff and] ‘starts the statutory period running again, regardless of the plaintiff’s knowledge of the alleged illegality at much earlier times.’” Therefore, Defendants’ continued sales of propane tanks at price-fixed levels constituted a new injury, regardless of Plaintiffs’ knowledge of the 2008 settlements.
The Eighth Circuit majority, however, declined to interpret Klehr, a RICO case, as “pronouncing a new principle with respect to what constitutes a continuing violation under the Sherman Act.” The language from Klehr, according to the majority, did not establish a general rule that continuing sales constitute continuing violations; rather the Klehr Court used antitrust as an analogy to illustrate that, where RICO plaintiffs have knowledge of prior unlawful conduct, they cannot use later independent overt acts to recover for injuries caused by earlier acts outside of the statute of limitations period.
The Eighth Circuit held that “more than the mere performance or reaffirmation of an unlawful agreement is required to satisfy the overt act requirement of a continuing antitrust violation” and restart the statute of limitations. As alleged by Plaintiffs, Defendants’ decision to lower the fill-level of propane tanks and the attendant price increase occurred in 2008. Plaintiffs did not allege any subsequent overt acts “that were new an independent acts, uncontrolled by the initial agreement.” Continued sales resulting from the 2008 agreement, the Eighth Circuit reasoned, were not overt acts, but instead “reflect mere reaffirmations” of the 2008 agreement.
A crucial underpinning of the majority’s reasoning was Plaintiffs’ failure to allege that Defendants altered or fine-tuned the 2008 agreement after it was initially made, or engaged in subsequent price coordination or increases. Although Plaintiffs alleged that Defendants communicated to ensure that each abided by the agreement, such communications simply reaffirmed the initial agreement. And, unlike cases in which a conspiracy was concealed, the conspiratorial acts were brought to light by the earlier class action settlement.
In his dissent, Judge Duane Benton wrote that the majority overstepped its role in limiting the Supreme Court’s holding in Klehr. The dissent also portrayed the majority’s interpretation of Klehr as at odds with rulings from the Fourth, Ninth, and Eleventh Circuits, which take a broader view of the continuing violations theory.
Antitrust practitioners should keep a close eye on subsequent decisions interpreting the Eighth Circuit’s ruling on the applicability of Klehr, and this may even serve as an opportunity for the Supreme Court to revisit the boundaries of the continuing violations theory. But for now, this decision is favorable for defendants in antitrust cases in which the allegations extend beyond the usual four year limitations period.