Opposition Brief — PSKS, Inc. v. Leegin Creative Leather Products, Inc.

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No. 10-653 CCE OF trie Gy,

ect

IN THE

Supreme Court of the Anited States

PSKS., INC. D/B/A KAY’S KLOSET...KAY’S SHOES.

Petitioner,

y

LEEGIN CREATIVE LEATHER PRODUCTS, INC.,

Respondent

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Fifth Circuit

BRIEF IN OPPOSITION

ROHIT K. SINGLA JEFFREY 1. WEINBERGER

MUNGER, TOLLES & Counsel of Record

OLSON LLP JEFFREY Y. WU

560 Mission Street MUNGER, TOLLES &

27th Floor OLSON LLP

San Francisco, CA 94105 355 South Grand Avenue

(415) 512-4000 35th Floor

Los Angeles, CA 90071

(213) 683-9100

jeffrey.weinberger@mto.con

’ " ;

Counsel for Respondent

January 18, 201]

VILSON-EPES PRINTING CO. IN (202) 789-009 WASHINGTON. D.C. 20002

RULE 29.6 STATEMENT

Respondent Leegin Creative Leather Products,

Inc., now known as Brighton Collectibles, Inc., is

wholly owned by Jerry Kohl and Terri Kohl as

Trustees of the Jerry and Terri Kohl Living Trust,

dated October 18, 2006. Respondent has no parent

corporation. No publicly held company owns more

than 10% of Respondent’s stock.

(1)

TABLE OF CONTENTS

RULE 29.6 STATEMENT

TABLE OF AUTHORITIES

BRIEF IN OPPOSITION

INTRODUCTION ............

STATEMENT OF THEE CASE

REASONS FOR DENYING THE PETITION .

Il

THERE IS NO CONELICT REGARD-

ING THE POTENTIAL FOR A

MARKET DEFINED BY A’) SINGLE

PRUE TATED oes saksdvcesesnssacvensacenie are uae

THE ISSUERS REGARDING WHOLE

SALE MARKETS DO NOT WARRANT

REVIEW.......... usd dcsicused ee .

A. The Wholesale Market Issues Are

Not Clearly Presented .......

B. The Supposed Conflict Regarding

Wholesale Markets Is Illusory.......... ,

THE ISSUES REGARDING MARKET

POWER DO NOT WARRANT REVIEW...

A. Petitioner Has Waived Its Argument

Against the Market Power Require

IE assess vvicvna acon cpusenuedeiiec eee

B. There Ils No Conflict Regarding the

Fifth Circuit’s Market Power Re

GUNOMNGN. ... 5.x ica

C. There Is No Conflict Regarding

“Direct” Proof of Market Power ....

(111)

Pape

1\

TABLE OF CONTENTS—Continued

Drape

}). The Market Power Issues Are Not

Ripe For Review »

IV. PETITIONERS NEW HORIZONTAL

CLAIMS DO NOT WARRANT REVIEW

A. There Is No Inter-Circuit Conflict

Regarding the Mandate Rule 24

B. The Dismissal of Petitioner’s Hor

zontal Theories Does Not Warrant

Review 7 a

|. Petitioner’s Reliance on Dual

Distribution 27

2. Petitioner’s Failure to Plead a

Retailer Cartel 29

CONCLUSION 2

¥y

TABLE OF AUTHORITIES

CASES Page

Ad-Vantage Tel. Directory Consultants, Inc.

v. GTE Directories Corp., 849 F.2d 1336

CSRs a. Fe accede ea 16

Allen-Myland, Inc. v. Intl Bus. Machs.

Corp., 33 F.3d 194 (3d. Cir. 1994)............ 22

Ashcroft v. Iqbal, U.S. _, 129 S. Ct.

Se (Oe iii Gicssnat aenseent 2, 11, 29, 30

Ball Memorial Hosp., Inc. v. Mutual Hosp.

Ins., Inc., 784 F.2d 1325 (7th Cir. 1986) .. 21-22

Bell Atlantic Corp. v. Twombly, 550 U.S.

OG AE Boks knncinconursinsseaesees eprenecetee ee passim

Brown Shoe Co. v. United States, 370 U.S.

Bre CT ncicsesteece toe eee 10

Catalano, Inc. v. Target Sales, Inc., 446

Coco, Ge CR inno kctenec eee eas 30

City of Cleveland v. Cleveland Elec. Illumi

nating Co., 734 F.2d 1157 (6th Cir.

3 | RO pees Pe et ed le Eien BP ey ee 14

Continental T.V., Inc. v. GTE Sylvania

Frac. , BBO Ue. SO CIE Gin os cvnccccccncesescc, 19, 22. 25

Continental T.V., Inc. v. GTE Sylvania

Inc., 694 F.2d 1132 (9th Cir. 1982) .......... 20

Crocker v. Piedmont Aviation, Inc., 49 F.3d

Tae CAs Sr CE cccveans cecaacene 25, 26

Curtis Publ’g Co. v. Butts, 388 U.S. 130

CREE Biicrckehccieteie ee eee 26

Dimmit Agri Indus., Inc. v. CPC Int'l, Inc.,

G78 F.24 516 (1962) «22.02.0050: Pieters. 21

Donald B. Rice Tire Co. vo Michelin Tire

Corp., 638 F.2d 15 (4th Cir. 1981)............ 28

EKastern States Retail Lumber Dealers’

Ass'n vu. United States, 234 U.S. 600

bg 2 et ts Be LOND AA. 9 baat 30

Vl

TABLE OF AUTHORITIES— Continued

Page

Eastman Kodak Co. v. Image Technical

Serus., Inc., 504 U.S. 451 (1992)............... 10

Edward J. Sweeney & Sons, Inc. v. Texaco,

Inc., 637 F.2d 105 (3d Cir. 1980) ENERO 9,12

Flegel v. Christian Hosp., Northeast

Northwest, 4 F.3d 682 (8th Cir. 1993)...... Y

FTC v. H.d. Heinz Co., 246 F.3d 708 (D.C.

er acs eran kes cara ae aie a ne 14-15

FTC v. Indiana Fed’n of Dentists, 476 U.S.

a Set: | SERRA GR Ne eee eer Ree ann Ret 16, 17, 18

FTC v. Staples, Inc., 970 F. Supp. 1066

a ry, EE ocd ienn esau ectavsbunesncciewsetieenssens 9

FTC v. Whole Foods Market, Inc., 548 F.3d

ee i i I oo aviv k vaccine cacesimenvaes 9

Hampton Audio Elecs., Ine. v. Conte

Cellular, Inc., 1992 WL 131169 (4th Cir.

a I asec ee sg rs 28

Illinois Tool Works Inc. v. Independent

Fre. tne. . SOT TFS. SEA ZIOS) oocccnecevasesses ses. 12

In re Brand Name Prescription Drugs Anti

trust Litig., 186 F.3d 781 (7th Cir. 1999). 10, 21

INS v. Lopez-Mendoza, 468 U.S. 1032

De he oa ae een 24

Intl Boxing Club of New York Inc. v.

United States, 358 U.S. 242 (1959) .......... 10-11

Interstate Circuit, Inc. v. United States

TR GF re ee Cine on encvndntcccavackesnssesecees 30

Jacobs v. Tempur-Pedic Int, Ras 626

Dk LAST CE IGI CAE, DOI iovcncceceesacevesnssaes 11, 20

JBL Enters., Inc. v. Jhirmack Enters., Inc.,

698 F.2d 1011 (9th Cir. 1983).....0.000.0.0..... 14

Jones v. Cain, 600 F.3d 527 (5th Cir. 2010) 16

Vil

TABLE OF AUTHORITIES—Continued

Page

K.M.B. Warehouse Distributors, Inc. v.

Walker Mfg. Co., 61 F.3d 123 (2d Cir.

| SEER ar aR E REE ea Janabik aaabadeeneian 3. Zs

Kentucky Speedway v. NASCAR, 588 F.3d

EN Gt, I en cccneicasadcscsunpoaveesscccvacsess 9

Krehl v. Baskin-Robbins Ice Cream Co.,

664 F.2d 1348 (9th Cir. 1982)...........0.00.... =

Leegin Creative Leather Products, Inc. v.

Fone, inc., 651 US. 877 (2007)............ passim

Loudermill v. Cleveland Bd. of Educ., 844

F.2d 304 (Gth Cir. 1968)............................ 26

Midwestern Waffles, Inc. v. Waffle House,

Inc., 734 F.2d 705 (11th Cir. 1984) .......... 28

Natl Collegiate Athletic Ass’n v. Board of

Regents of Univ. of Okla., 468 U.S. 85

Neovo cay avec dueeavsnsinecscesducunnerperaeeawaneaeaen: 10

Ntakirutimana v. Reno, 184 F.3d 419 (5th

AE, ERO eRe pe P np PpedsenTon Pos Pi 16

Oltz v. St. Peter’s Cmty. Hosp., 861 F.2d

Cie Oe L. | ne a neeeN es 19

Omni Outdoor Adver., Inc. v. Columbia

Outdoor Adver., Inc., 974 F.2d 502 (4th

Ro Ns sees pcske sacs tus eae 25,27

Paschall v. Kansas City Star Co., 727 F.2d

ie IN ck cnce scence 15

PSKS, Inc. v. Leegin Creative Leather Pro

ducts, Inc., 615 F.3d 412 (5th Cir. 2010)... passim

PSKS, Inc. v. Leegin Creative Leather Pro

ducts, Inc., No. 2:03-CV-107-TJW, 2009

WL 938561 (E.D. Tex. Apr. 6, 2009) ....... passim

Re/Max Int'l, Inc. v. Realty One, Inc., 173

F.3a 995 (Gth Cir. 1906).........<...c<.sc0...05....: 21

Viil

TABLE OF AUTHORITIES—Continued

Page

Red Diamond Supply, Inc. v. Liquid

Carbonic Corp., 637 F.2d 1001 (5th Cir.

Me antes yan takt Ue ee a eee ae 28

Ryko Mfg. Co. v. Eden Servs., 823 F.2d

ALD Lh ae bY 2 ae 19, 23, 27, 28

Queen City Pizza, Inc. v. Domino's Pizza,

Inc., 124 F.3d 430 (3d Cir. 1997).............. 9, 10

Schuylkill Energy Res., Inc. v. Pa. Power &

Light, 113 F.3d 405 (3d Cir. 1997)........... 15

Tanaka v. Univ. of S. Cal., 252 F.3d 1059

| De: 0 SERN oes Once ae nee 11, 20

Tarrant Serv. Agency, Inc. v. American

Standard, Inc., 12 F.3d 609 (6th Cir.

EE coun src casa buve coves saedonies Lie Rb A ee ee 9

Telecor Commins, Inc. v. Southwestern Bell

Tel. Co., 305 F.3d 1124 (10th Cir. 2002).. 14

Texas Democratic Party v. Benkiser, 45%

otk Soe CEM CAP, BOG)... ccecsciccceessssesenss: 16

Todd v. Exxon Corp., 275 F.3d 191 (2d Cir.

, it) | re ASR eh RAMEN DT aaa IES On eT ERO 21

Toys “R” Us, Ine. v. FTC, 221 F.3d 928 (7th

SS RE RRIR RE S ee eee Ser oom ee 21, 30

United States v. Atehortva, 69 F.3d 679 (2d

ae tari eceucculawecce 24

United States v. Baker Hughes, Inc., 908

ee Ok CED... Cie, TOBY icvicccsecscveasccscesess 21

United States v. Broughton-Jones, 71 F.3d

CT 25

United States v. ET. du Pont de Nemours

& Co. (Cellophane), 351 U.S. 377 (1956).. passim

United States v. General Motors Corp., 384

et Oe OI vacccanennsvacyascuseanccancesasvenesavace 30

1X

TABLE OF AUTHORITIES—Continued

United States v. Ponce, 51 F.3d 820 (9th

Roe I oc ucane eta e canta eto eoaaeac eee 25

United States v. Quintiert, 306 F.3d 1217

eB le Re, _.) SAD Lees raed RES Tse ea 24

United States v. Socony-Vacuum Oil Co.,

OU EPs BU CR iaiicictnakccaveseapanecsesessaresas 26

United States v. Ticchiarelli, 171 F.3d 24

(lst Cir. 1999) ........... ASAE Ree eee 24

United States v. Whren, 111 F.3d 956 (D.C.

eer co oe ee 24

Will v. Comprehensive Acct. Cerp., 776

P’.20 GES CIE Cir, TGS). oaccccccccccccccscocesceses iZ

RULES

ee aki cree cdciswas sich nghsncaercnciees 13

le PN Be vv venasesncscsnrsntcisinainavicervcas 13

POM, Fe, CAV. B. GEMS? csccvensscesescriccesssees ee 26

TE, We, Gi SOD oe cinesicvencecrncnsccsensxasscets 6

en ae, aus roses cuseesusiessscancs iets ee ee

OTHER AUTHORITIES

§ Charles Alan Wright & Arthur R. Miller,

Federal Practice and Procedure § 1282

COUN UNIS INES hci capdadareiadonsaavesrcectime ssa 26

18B Charles Alan Wright et al., Federal

Practice & Procedure § 4478.3 (2d ed.

Sor eee ee te tt 24

IN THE

Supreme Court of the United States

No. 10-653

PSKS, Inc. D/B/A KAY’S KLOSET...KAY’S SHOES,

Petitioner,

Vv.

LEEGIN CREATIVE LEATHER PRODUCTS, INC.,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Fifth Circuit

BRIEF IN OPPOSITION

INTRODUCTION

In Leegin Creative Leather Products, Inc. v. PSKS,

Inc., 551 U.S. 877 (2007), the Court held that

antitrust challenges to resale price maintenance

(RPM) programs must be adjudged under the rule of

reason, like other vertical restraints. Jd. at 881-882.

The Court reasoned that RPM, by restricting

intrabrand competition, tended to encourage retailers

to make investments that invigorate competition

between brands to the benefit of consumers. 7d. at

889-92. This is procompetitive and beneficial because

“the antitrust laws are designed primarily to protect

interbrand competition.” Jd. at 895. That RPM could

raise retail prices for Respondent’s own Brighton-

9

brand products is no cause for suspicion, because

the idea behind RPM is to use higher prices to fund

greater investment by retailers in marketing, dis-

plays, and customer service. /d. at 895-97. The

Court also refused to entertain Petitioner’s argument

that Respondent’s RPM program constituted a hori-

zontal restraint, because Petitioner never raised it

below. Jd. at 907-08. The Court vacated the

judgment entered below and remanded for further

proceedings.

On remand, the district court and the Fifth Circuit

faithfully followed the Court’s mandate and applied

the same rule of reason standard that have for

decades been applied to other vertical restraints.

This meant that Petitioner had to allege sufficient

facts to identify a plausible relevant product market,

to plausibly allege that Respondent had power in that

market, and to plausibly allege that Respondent’s

RPM program harmed interbrand competition. Peti-

tioner did none of that. Its newly amended complaint

was consequently dismissed on the pleadings, and

that dismissal was affirmed by the Fifth Circuit.

Now Petitioner argues that the Fifth Circuit’s

decision contains no less than seven conflicts with the

decisions of its sister circuits and of this Court. But

no such conflicts exist. The Fifth Circuit applied

well-established principles of antitrust law over

which there is uniform agreement.

Nor do the remand proceedings present any federal

question of general importance. Applying Leegin as

well as the pleading standards set forth in Bell

Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and

Ashcroft v. Iqbal, __ U.S. __, 129 S. Ct. 1937 (2009),

the Fifth Circuit determined that Petitioner failed to

plausibly plead sufficient facts to state a claim.

3

Whether Petitioner's allegations are sufficient in the

unique circumstances of this case is not any more

worthy of review than the thousands of other dismis-

sals entered by the lower courts each year.

Petitioner argues that the Fifth Circuit imposed a

rule of per se legality for RPM. Pet. 34. The Fifth

Circuit did no such thing. Rather the Fifth Circuit

applied the rule of reason to the specific facts before

it, and (correctly) concluded that Petitioner had not

alleged any facts showing that RPM was being used

to anticompetitive effect. It is indisputable that

Respondent is a small company in one of the most

competitive sectors of the economy: women’s fashion

accessories. It is difficult to imagine markets more

fragmented and competitive than the markets for

handbags, jewelry, belts, and other accessories.

Countless styles and brands straddling every poten-

tial price range are available to consumers in retail

outlets ranging from “big box” stores to department

stores to small boutiques to online shops. It is thus

not surprising that Petitioner could not plausibly

allege any harm to interbrand competition.

Petitioner’s complaint was conspicuously silent as

to Respondent’s market share in any market.

Instead, Petitioner premised its claims on conclusory

and legally untenable allegations such as_ that

Brighton handbags do not compete with other brands

of handbags. The only harm to competition alleged

was that the price of Respondent’s own products were

higher than they would have been absent ,RPM—

which Leegin explained is not evidence of anything

anticompetitive. 551 U.S. at 895-97. Petitioner’s

complaint was dismissed not because there is some-

thing wrong with the rule of reason, but because

Petitioner could not plausibly allege an antitrust

4

market, market power on Respondent’s part, or harm

to interbrand competition in the particular circums-

tances of this case.

It is also premature to revisit the standards gov-

erning RPM just three years after Leegin. The Court

then stated that the lower courts could further refine

the rule of reason as applied to RPM as they “gain

experience considering the effects of these re-

straints.” 551 U.S. at 898. Insufficient time has

passed for the lower courts to do so. Tellingly,

Petitioner cites not a single other appellate decision

applying Leegin, let alone one that conflicts with the

Fifth Circuit.

The Petition should be denied.

STATEMENT OF THE CASE

1. On remand from Leegin, Petitioner filed a

second amended complaint (“SAC”) attempting to

allege that Respondent's RPM program harmed

competition under the rule of reason, and alterna-

tively that Respondent’s RPM program constituted a

per se unlawful horizontal restraint.

a. Petitioner alleged two alternative relevant

product markets: (1) the “retail market for Brighton’s

women’s accessories,” and (2) the “wholesale sale

of brand-name women’s accessories to independent

retailers.” SAC 4] 24; Pet. App. 41a. Petitioner did

not allege Respondent’s share of either of the alleged

markets.

To support the Bmghton-only retail market,

Petitioner alleged that Brighton products are “unique,

“distinct,” “differentiated,” and “characterized by an

inelasticity in demand,” because the products “coor-

dinate from head to toe.” SAC 49 16, 25, 26; Pet.

»”»

5

App. 38a, 4la. Petitioner aileged no other facts to

show inelasticity of demand or why consumers could

not substitute accessories from any of the hundreds

of purveyors of fashion accessories.

With regard to the alleged wholesale market,

Petitioner alleged Respondent has “market power

because it occupies a dominant position as supplier to

independent women’s specialty stores.” SAC J 18;

Pet. App. 38a. Petitioner alleged no facts regarding

the demand inelasticity of “brand-name” accessories

sold to “independent retailers.”

Petitioner further alleged that “brand-name women’s

accessories can be characterized by the wide-spread

adoption of practices” that limit interbrand competi-

tion. SAC J 32; Pet. App. 43a. Petitioner did not

allege what those practices are, whether RPM is one

of the practices, or whether the supposed practices

were adopted by Respondent or anyone else.

b. As an alternative to its rule of reason theory,

Petitioner claimed that Respondent’s RPM program

constituted a horizontal price-fixing agreement sub-

ject to per se condemnation. Petitioner alleged that

Respondent “formed” a RPM program, known as the

“Heart Store” program, in 1998. Petitioner alleged

that Respondent then “solicited agreements” from

retailers to not discount, “invited” retailers to par-

ticipate in the Heart Store program, “provided incen-

tives” for them to do so, “required” retailers to

execute RPM agreements, and “fixed suggested retail

prices.” SAC {| 9-10; Pet. App. 36a.

After forming the Heart Store program, Respon-

dent allegedly “began to enforce the [RPM] Policy

with greater regularity” and “made changes” to the

RPM Policy” “at the insistence of many of its most

6

faithful dealers.” SAC 4 13; Pet. App. 37a. But the

only supposed change identified is the allegation that

Respondent “invited” some unidentified retailers to a

meeting in Hawaii in 2003, where a “consensus of the

retailers was reached” and led to a policy whereby

Brighton products could be discounted on a cus-

tomer’s birthday. SAC J 14; Pet. App. 37a.

2. The district court dismissed the second amended

complaint for failure to state a claim under Fed.

R. Civ. P. 12(b)(6). PSKS, Inc. v. Leegin Creative

Leather Products, Inc., No. 2:03-CV-107-TJW, 2009

WL 938561 (E.D. Tex. Apr. 6, 2009); Pet. App. 17a-

32a. Petitioner did not request leave to amend. The

lhifth Circuit then affirmed. PSKS, Inc. v. Leegin

Creative Leather Products, Inc., 615 F.3d 412 (5th

Cir. 2010); Pet. App. la-15a.

a. The Fifth Circuit held that each of Petitioner’s

alleged product markets excluded products that are

reasonably interchangeable with Brighton-brand

accessories and henceforth failed the market defini-

tion test established in United States v. El. du Pont

de Nemours & Co. (Cellophane), 351 U.S. 377 (1956).

First, while acknowledging that “[i]n rare circum-

stances[} a single brand of a product” could constitute

a relevant market, the Fifth Circuit held that Peti-

tioners’ allegations failed to satisfy the conditions for

recognizing such a market. 615 F3d at 418; Pet. App.

9a. Second, the Fifth Circuit rejected the alleged

wholesale market on four independently sufficient

bases, holding that Petitioner: (1) improperly limited

the market to the wholesale level when the complaint

concerned retail pricing and competition; (2) failed to

allege non-conclusory facts that Brighton products

are not reasonably interchangeable with non-“brand-

name” products; (3) failed to allege non-conclusory

7

facts showing that independent retailers do not com-

pete with other retailers; and (4) improperly alleged

an overly broad and overly vague market that

included all “women’s accessories” even though dif-

ferent categories of accessories (e.g., handbags and

jewelry) are not interchangeable for the same use.

615 F.3d at 418; Pet. App. 9a-10a; see also Pet. App.

22a-25a.

Following Leegin’s reasoning that abuse of RPM

may not be a concern unless the entity has market

power, the Fifth Circuit further determined that

Petitioner was required to plead market power. 615

F.3d at 418; Pet. App. 10a. Unless a defendant had

market power, interbrand competition would prevent

it from sustaining artificially high prices above the

competitive level. 615 F.3d at 419; Pet. App. lla.

Consumers would simply switch to competing prod-

ucts in response to an anti-competitive price increase.

Petitioner failed to provide any non-conclusory alle-

gation that Respondent exercised such market power,

or that Respondent’s RPM program actually harmed

interbrand competition. 615 F.3d at 419; Pet. App.

1 la-12a.

Petitioner’s allegations of anticompetitive harm,

the Fifth Circuit determined, were likewise irade-

quate. Petitioner’s allegation of higher prices for

Bnghton products did not by itself plausibly plead

any anticompetitive effect, because interbrand com-

petition would still prevent Respondent from keeping

its prices artificially high vis-a-vis its competitors.

615 F.3d at 419; Pet. App. lla. Nor did Petitioner

allege any of the scenarios identified in Leegin

whereby RPM could be used for anticompetitive ends.

Cf. Leegin, 551 U.S. at 892-94. In particular, the

Fifth Circuit determined that Petitioner failed to

8

allege that a retailer cartel or a dominant retailer

was the source of Respondent’s RPM program. 615

F.3d at 419; Pet. App. 12a.

b. Turning to Petitioner’s horizontal allegations,

the Fifth Circuit determined at the threshold that

they were never raised before the appeal to this

Court and were therefore barred by the mandate

rule. 615 F.3d at 420 & n.6; Pet. App. I38a. In the

alternative, the Fifth Circuit also ruled that Peti-

tioner failed to sufficiently allege an_ horizontal

agreement under the Twombly standard. First, as

noted above, Petitioner failed to allege facts showing

that “retailers were the source of the price restraint”

or that “retailers agreed to RPM among themselves.”

615 F.3d at 420; Pet. App. 18a. Second, the mere

fact that Respondent operated some of its own retail

stores did not transmute its otherwise vertical RPM

arrangements with retailers into per se unlawful

horizontal agreements. 615 F.3d at 420-21; Pet. App.

14a-15a.

Petitioner did not request rehearing from the Fifth

Circuit, either by the panel or en banc.

REASONS FOR DENYING THE PETITION

I. THERE IS NO CONFLICT REGARDING

THE POTENTIAL FOR A MARKET

DEFINED BY A SINGLE BRAND

Petitioner pled a relevant market defined solely by

the “Bnghton” brand, which the Fifth Circuit re-

jected. Petitioner claims that decision conflicts with

other circuit court decisions as well as the decisions

of this Court. Pet. 6-10. In fact, there is no conflict.

First, none of the circuit decisions cited by Peti-

tioner approved a product market defined by a single

9

brand. Most of them in fact affirmatively rejected

single-brand markets, just as the Fifth Circuit did,

for the common-sense reason that almost every

branded product is interchangeable with competing

products from other brands and therefore belong in

the same market with them. See Edward J. Sweeney

& Sons, Inc. v. Texaco, Inc., 637 F.2d 105, 117 (3d

Cir. 1980) (“The evidence mandates the conclusion

that the [relevant market] .. . includes all brands of

gasoline . . . .”); Tarrant Serv. Agency, Inc. v.

American Standard, Inc., 12 F.3d 609, 614 (6th Cir.

1993) (“This case does not represent one of those

circumstances where a single product constitutes a

relevant market.”); Queen City Pizza, Inc. v. Domino’s

Pizza, Inc., 124 F.3d 430, 437-41 (3d Cir. 1997)

(rejecting market of Domino’s-approved ingredients

for excluding other brands of pizza _ ingredients);

Flegel v. Christian Hosp., Northeast-Northwest, 4

F.3d 682, 690 (8th Cir. 1993) (similar); Kentucky

Speedway v. NASCAR, 588 F.3d 908, 917-18 (6th Cir.

2009) (similar).

In other cases cited by Petitioner, the court

accepted a functional product market that happened

to be dominated by two merging companies, not

markets defined by a single brand or trademark. In

FTC v. Whole Foods Market, Inc., 548 F.3d 1028,

1032, 1037-41 (D.C. Cir. 2008), for example, the court

found the relevant market for merger analysis to

be “premium, natural, and organic supermarkets,”

including Whole Foods, Wild Oats, and other com-

petitors. The court did not in any way find a market

that consisted of “Whole Foods brand super-

markets”—the analogue to the market of Brighton

products that Petitioner aileged. See also FTC v.

Staples, Inc., 970 F. Supp. 1066, 1080 (D.D.C. 1997)

(market of “sale of consumable office supplies through

10

office supply superstores” included Staples, Office

Depot, and others). In the remaining circuit case

Petitioner cites, the court did not even reach the

question of whether a single brand market was

possible. See In re Brand Name Prescription Drugs

Antitrust Litig., 186 F.3d 781, 784 (7th Cir. 1999)

(market definition not relevant because “only per se

violations are charged in this case”).

Second, there is no conflict either between the Fifth

Circuit and this Court’s precedents. It is long settled

that a viable product market must include all “com-

modities reasonably interchangeable by consumers

for the same purpose.” du Pont, 351 U.S. at 395; see

also Brown Shoe Co. v. United States, 370 U.S. 294,

325 (1962). Petitioner relies heavily on Kastman

Kodak Co. v. Image Technical Servs., Inc., 504 U.S.

451, 482 (1992), but that case involved after-market

repair parts and services for consumers who bought

Kodak-brand copiers and physically could not use

parts from other copier brands for their Kodak

copiers. See id. at 457 (observing that “Kodak parts

are not compatible with other manufacturers’ equip-

ment, and vice versa.”). A single-brand market

remains untenable as a matter of law under Kodak if

it excludes products interchangeable for the same

use, Queen City Pizza, 124 F.3d at 439-40, which is

precisely the situation here.

Petitioner fares no better with its reliance on Nat?

Collegiate Athletic Ass'n v. Board of Regents of Univ.

of Okla., 468 U.S. 85 (1984). That case did not

approve a market defined by a brand or a trademark;

rather, consistent with du Pent, it defined a market

based on a functional product (“intercollegiate foot-

ball telecasts”) that facts showed to be not inter-

changeable with others. /d. at 111-12; see also Intl

1]

Boxing Club of New York, Inc. v. United States, 358

U.S. 242, 250 (1959) (market of championship boxing

contests).

Third, the Fifth Circuit acknowledged expressly

that “in rare circumstances[] a single brand of a

product” could constitute a relevant market, but con-

cluded that Petitioner had not plausibly alleged such

a market. 615 F.3d at 418; Pet. App. 9a. Thus, the

Fifth Circuit did not reject the notion that a single-

brand market is sometimes possible. The Petitioner

may disagree with the Fifth Circuit’s application of

the law to the allegations here, but that does justify

review by this Court. See Sup. Ct. R. 10 (“certiorari

is rarely granted when the asserted error consists of

. the misapplication of a properly stated rule of

law.”).

In any event, it is indisputable that the fashion

accessories industry is among the most competitive

imaginable, with countless styles and brands from

which consumers can choose. Brighton handbags,

belts, and sunglasses are plainly “interchangeable by

consumers for the same purpose” with the handbags,

belts, and sunglasses made by competing manu-

facturers. Cf. du Pont, 351 U.S. at 395. Petitioner's

bare allegations that Brighton’s products are “distinc-

tive” and “unique” are insufficient, under settled case

law, to plead a single-brand market. See Iqbal, 129

S. Ct. at 1949 (“naked assertions’ devoid of ‘further

factual enhancement” do not state a claim) (citation

omitted); Tanaka v. Univ. of S. Cal., 252 F.3d 1059,

1063 (9th Cir. 2001) (“[Clonclusory assertion that

[product] is ‘unique’ and hence ‘not interchangeable

with any other program .. .’ is insufficient.”); Jacobs

v. Tempur-Pedic Int'l, Inc., 626 F.3d 1327, 1338 (11th

Cir. 2010) (proposed market implausible where com-

12

plaint merely alleges that product is “distinct” and

has “unique attributes”).

The same assertions of product distinctiveness

could, after all, be made of many brands from Burger

King to Ann Taylor to Mercedes. If that were

enough, as one of Petitioner’s own authorities

observed, then “every manufacturer of a trademarked

product has monopoly power over that product. No

legal precept stands for this proposition.” Edward J.

Sweeney & Sons, 637 F.2d at 118 (citing du Pont, 351

U.S. at 393); see also Illinois Tool Works Inc. v.

Independent Ink, Inc., 547 U.S. 28, 43 (2005) (mono-

poly power cannot be presumed even for patented

products). Treating every brand as a monopoly would

impose the specter of treble damages on any business

that attempts to differentiate its products through

trademarks and brand-building. “Sellers may strive

to differentiate their products from others in order to

compete for the custom of patrons with slightly

different needs or tastes. It would be perverse to turn

this ordinary attribute of the competitive struggle

into a source of illegality.” Will v. Comprehensive

Acct. Corp., 776 F.2d 665, 673 n.4 (7th Cir. 1985).

ll. THE ISSUES REGARDING WHOLESALE

MARKETS DO NOT WARRANT REVIEW

A. The Wholesale Market Issues Are Not

Clearly Presented

This case 1s an inappropriate vehicle for review of

Petitioner’s arguments regarding defining the market

at the wholesale level. Because Petitioner does not

seek to challenge all the grounds the Fifth Circuit

relied on for its decision, the judgment would stand

regardless of Petitioner's arguments. The Fifth

Circuit rejected the alleged market of “wholesale sale

13

of brand-name women’s accessories to independent

retailers” not only because it was improper to allege

a wholesale market to challenge a retail pricing

restraint, but also on three additional, independently

sufficient grounds. As the Fifth Circuit held, Peti-

tioner failed to make any non-conclusory factual

allegations to establish that the market should (1) be

limited to “brand-name” products, (2) include only

“independent retailers,” and (3) encompass all kinds

of “women’s accessories” that are not interchangeable

with each other for the same use, like picture frames

and jewelry and handbags. 615 F.3d at 418; Pet.

App. 9a-10a; see also Pet. App. 22a-25a.

To reach Petitioner’s challenge, the Court would

first need to consider each of these independently

sufficient grounds for rejecting Petitioner’s proposed

market. Petitioner mentions the brand-name issue

only in passing in a footnote. Pet. 14 n.2. With

respect to independent retailers, Petitioner argues

only that the Fifth Circuit did not consider its

assertion that Respondent prefers to sell through

independent retailers.’ Pet. 14. That fails to ade-

quately allege that independent retailers are a

market onto themselves, and is in any event the kind

of case-specific determination that is inappropriate

for review by this Court. Most importantly, Peti-

tioner does not challenge at all the Fifth Circuit’s

conclusion that the category of “women’s accessories’

is too broad and vague a definition to constitute a

market.” 615 F.3d at 418; Pet. App. 10a. That

affirmed the district court’s determination that the

'To the extent Petition claims that the Fifth Circuit neg-

lected to consider any allegation, Petitioner should have peti

tioned for rehearing. Cf. Fed. R. App. P. 35, 40. Petitioner did

not do so

14

market definition failed “because it groups together

products that are not interchangeable with each

other” such as picture frames and handbags (Pet.

App. 24a), and is alone sufficient to dispose of these

allegations of a proposed wholesale market.”

B. The Supposed Conflict Regarding

Wholesale Markets Is Illusory

Review is not warranted for the further reason that

Petitioner’s supposed circuit split simply does not

exist. Petitioner’s proposed wholesale market is in-

appropriate because the restraint at issue here is

resale price maintenance, i.e., Respondent’s supposed

agreements regarding retail prices. The alleged RPM

program is not alleged to have affected wholesale

prices. Of the cases cited by Petitioner for the sup-

posed “conflict,” only two approved wholesale mar-

kets, and neither involved restraints that operated

only at the retail level. JBL Enters., Inc. v. Jhirmack

Enters., Inc., 698 F.2d 1011 (9th Cir. 1983) (restraints

on wholesale of cosmetic products to retail outlets);

Telecor Comm’ns, Inc. v. Southwestern Bell Tel. Co.,

305 F.3d 1124 (10th Cir. 2002) (restraint on dealings

between service provider and retailer).

The other cases cited by Petitioner in fact rejected

the proposed wholesale markeis at issue. City of

Cleveland v. Cleveland Elec. Illuminating Co., 734

F.2d 1157, 1166 (6th Cir. 1984) (“[T]he only relevant

product market in this case is the retail electrical

power market.”); FTC v. H.J. Heinz Co., 246 F.3d

“ Indeed, Petitioner did not address the “independent retailer”

and “women’s accessories” issues even 1n its Fifth Circuit brief-

ing, in spite of the fact that the district court had expressly

based its rejection of Petitioner’s wholesale market on those

factors, Pet. App. 22a-25a

15

708, 719 n.17 (D.C. Cir. 2001) (“the wholesale market

cannot be separated out for analysis”); Ad-Vantage

Tel. Directory Consultants, Inc. v. GTE Directories

Corp., 849 F.2d 1336, 1345 (11th Cir. 1987) (similar).

Petitioner’s remaining authorities did not even pre-

sent any analysis of market definition. Paschall

v. Kansas City Star Co., 727 F.2d 692, 696 (8th

Cir. 1984) (no detailed market definition analysis);

Schuylkill Energy Res., Inc. v. Pa. Power & Light, 113

F.3d 405 (3d Cir. 1997) (dismissal on antitrust injury

grounds with no analysis of market definition).

Petitioner now argues about whether retailers

could switch to other wholesale suppliers if a “whole-

sale monopolist” raised its prices (Pet. 15), but there

is no allegation here that Respondent’s RPM program

affected wholesale prices. Petitioner cites no author-

ity from any circuit for the proposition that a

restraint on retail prices should be analyzed at the

wholesale level.

lil. THE ISSUES REGARDING MARKET

POWER DO NOT WARRANT REVIEW

A. Petitioner Has Waived Its Argument

Against the Market Power Require-

ment

Petitioner now argues that “direct” demonstration

of anticompetitive effects obviates any need to show

power in a relevant market (Pet. 19), but this argu-

ment was not properly raised below and has therefore

been waived. In the district court and in its opening

brief in the Fifth Circuit, Petitioner argued only that

pleading “the existence of the agreement and the

scope of its operation,” without more, sufficed to state

a rule of reason violation. E.g., 615 F.3d at 417; Pet.

App. 7a (noting Petitioner's argument). It was not

16

until its reply brief in the Fifth Circuit that Peti-

tioner urged, for the first time, a “quick look” rule of

reason standard, under which a direct demonstration

of anticompetitive effects sufficed to establish a

restraint’s unreasonableness without detailed analy-

sis of market definition and market power. See Reply

Brief of Appellant at 11, PSKS, Inc. v. Leegin Crea

tive Leather Products, Inc., 615 F.3d 412 (5th Cir

2010) (No. 09-40506), 2009 WL 6479733.

That was not enough to preserve the argument,

because it was improper to raise an argument not

made in the district court or to raise it for the first

time on reply. Cf. Ntakirutimana v. Reno, 184 F.3d

419, 429 n.19 (5th Cir. 1999) (arguments not raised

in the district court deemed waived); Jones v. Cain,

600 F.3d 527, 541 (5th Cir. 2010) (“Arguments raised

for the first time in a reply brief are generally

waived.”); see also Appellee’s Answering Brief at 20

21, PSKS, Inc. v. Leegin Creative Leather Products

Inc., 615 F.3d 412 (5th Cir. 2010) (No. 09-40506),

2009 WL 6479732 (arguing waiver).”

B. There Is No Conflict Regarding the

Fifth Circuit’s Market Power Require-

ment

Petitioner’s challenge to the market power require

ment does not warrant review for the further reason

that the conflicts asserted by Petitioner do not

exist. There is no conflict between the Fifth Circuit's

decision and FTC v. Indiana Fed’n of Dentists, 476

U.S. 447 (1986). Nor is there a circuit split over

‘An amicus curiae tried to advance the “quick look” argu

ment in the Fifth Circuit, but amicus could not preserve an

argument waived by the party it supports. Texas Democratv

Party v. Benkiser, 459 F.3d 582, 595 (5th Cir. 2006)

17

whether Indiana Federation applies to vertical re-

straints generally, let alone to RPM specifically.

First, the Fifth Circuit’s decision is perfectly consis-

tent with Indiana Federation, which held in the

context of a horizontal restraint that detailed analy-

sis of market definition and market power may be

obviated by proof of “actual detrimental effects, such

as a reduction of output,” 476 U.S. at 460-61. Here,

the Fifth Circuit did analyze at length Petitioner's

allegations of anticompetitive effects, and rejected

them because they were not adequately pled. 615

F.3d at 419-21; Pet. App. lla-1l2a Thus, even

assuming that Jndiana Federation applies to vertical

restraints, there is no conflict because Petitione:

simply failed to plausibly allege anticompetitive

harm Petitioner's disagreement with the Fifth

Circuit's fact-bound analysis of its allegations doe

not warrant review by this Court

Just as importantly, the Fifth Circuit’s analysis

was sound Petitioner alleged higher prices for

Brnghton products and reduced price competition

among Brighton dealers. SAC J 27; Pet. App. 41la

The Fifth Circuit found that inadequate to plead

anticompetitive harm (615 F.3d at 419; Pet. App. lla

for the same reason that Leegin rejected Respon-

dent’s reliance on alleged increases in intrabrand

prices: “[Petitioner] is mistaken in relying on the

pricing effects absent a further showing of anticom-

petitive conduct.” Leegin, 551 U.S. at 895. Leegin

explained that the entire point of RPM is to reduce

price competition among a brand's retailers to en-

courage retailers to invest in “fine showrooms,”*

‘ Petitioner lost its Status a featured “Heart Store” for

the Brighton brand because its showroom was “unattractive

Leegin, 551 U.S. at 884

18

“a reputation for selling high-quality merchandise,”

and other forms of non-price competition. /d. at 891.

Thus, higher intrabrand prices caused by RPM are no

more suspicious than higher prices caused by “better

inputs that improve product quality” or by the use of

“an advertising agency to promote awareness” of the

product. Jd. at 896. Certainly, Petitioner has not

cited any case from any circuit suggesting that a

vertical restraint violates the rule of reason merely

because it led to higher prices for the defendant’s own

products.

3ecause “the antitrust laws are designed primarily

to protect interbrand competition,” Leegin, 551 U.S

at 895, Petitioner would need to plausibly allege that

Brighton’s RPM policies led to reduced interbrand

competition and higher interbrand prices to plead a

direct anticompetitive effect. But as the Fifth Circuit

correctly held, “nothing in [the] complaint plausibly

alleges harm to interbrand competition.” 615 F.3d at

419; Pet. App. 12a. Petitioner made only a throw

away, conclusory allegation regarding interbrand

competition among manufacturers, alleging that

women’s accessonmes “can be characterized by the

wide-spread adoption of practices that have the effect

of limiting price competition among competing brands.”

SAC J 32; Pet. App. 43a. Petitioner identified neither

what those practices were, nor which manufacturers

adopted them, nor how they limited interbrand price

competition—much less how Respondent’s RPM poli-

cies had anything to do with those unidentified

practices. See Twombly, 550 U.S. at 555 (“labels

and conclusions” not sufficient to state an antitrust

violation).

Second, no intercircuit conflict exists regarding the

application of Indiana Federation to vertical re-

19

straints, because even the cases Petitioner cites (Pet.

20) required a showing of market power, just as the

Fifth Circuit did. See K.M.B. Warehouse Distribu-

tors, Inc. v. Walker Mfg. Co., 61 F.3d 123, 129 (2d Cir.

1995) (plaintiff must “establish that the defendants

possess the requisite market power and thus the

capacity to inhibit competition market-wide”) (cita-

tion omitted); Ryko Mfg. Co. v. Eden Servs., 823 F.2d

1215, 1231 (8th Cir. 1987) (plaintiff must “prove the

defendant’s substantial market power in a relevant

market”) (citation omitted). The third case Petitioner

cites, Oltz v. St. Peter’s Cmty. Hosp., 861 F.2d 1440

(9th Cir. 1988), did not even involve a vertical re-

straint; it concerned a horizontal boycott.”

Third, the Fifth Circuit was correct to require a

showing of market power in the context of this case.

The Court recognized long ago that interbrand com-

petition “provides a significant check” on a manu-

facturer’s ability to use vertical restraints in an anti-

competitive manner. Continental T.V., Inc. v. GTE

Sylvania Inc., 433 U.S. 36, 52 n.19 (1977). Consum-

ers dissatisfied with a defendant’s offering have “the

ability ... to substitute a different brand of the same

product,” ibid., for example by buying one of the

countless other brands of belts available rather than

a Brighton belt. Thus, even Petitioner’s own author-

ity recognized that market power is an “essential”

requirement in a vertical case, because “[f]irms lack-

ing market power... cannot adopt restraints that

have anticompetitive effects ... .” Ryko Mfg., 823

F.2d at 1231. Indeed, Leegin equated the rule of

reason with “an inquiry into market power and

’ In any event, in Oltz the Ninth Circuit found that the defen-

dants did have power in the relevant market. 861 F.2d at 1446

47 (defendants had “overwhelming majority of the market”)

20

market structure designed to assess [a restraint’s]

actual effect,” 551 U.S. at 885-86, reasoning that

anticompetitive use of RPM “may not be a serious

concern unless the relevant entity has market pow-

er,” id. at 898.

C. There Is No Conflict Regarding

“Direct” Proof of Market Power

Petitioner also asserts an inter-circuit conflict as to

whether conclusory allegations of “product dif-

ferentiation, demand inelasticity for its brand, and

low cross-elasticity for other brands” suffice to plead

market power. Pet. 15-18. However, not a single one

of the authorities cited by Petitioner found market

power sufficiently pled by a sheer allegation of

“product differentiation” or “demand inelasticity.” To

state an allegation of “inelasticity” is nothing more

than reciting the conclusion of the du Pont inter-

changeability test. Cf. du Pont, 351 U.S. at 395.

Petitioner’s assertions are nothing more than “labels

and conclusions” that do not suffice to plead a

plausible antitrust violation. Twombly, 550 U.S. at

555; see also Tanaka, 252 F.3d at 1063; Jacobs, 626

F.3d at 1338.

Petitioner's argument is just a repackaging of its

single-brand market theory, u.e., that other brands of

handbags, belts, picture frames, and jewelry are not

interchangeable with Brighton products. See supra

at 11. The mere fact that Brighton products are

“differentiated” in appearance and _ styling is not

enough to plead market power. Every trademarked

product is differentiated from other trademarked

products. That is the entire point of branding. If

Petitioner has its way, then every producer of a

trademarked good would be considered a monopolist.

21

But as the Court recognized long ago, the power that

“automobile or soft-drink manufacturers have over

their trademarked products is not the power that

makes an illegal monopoly. Illegal power must be

appraised in terms of the competitive market for the

product.” du Pont, 351 U.S. at 393. Petitioner did

not plead sufficient facts to show Respondent’s power

over any interbrand market, and the Fifth Circuit

was right to find a failure to plead market power.

Petitioner also appears to argue that a defendant’s

‘control over prices” suffices to plead market power.

Pet. 17. There is no circuit split on whether such

allegations suffice to plead market power in the con-

text of a vertical restraint. The Court has expressly

“rejected the approach of reliance on rules governing

horizontal restraints when defining rules applicable

to vertical ones.” Leegin, 551 U.S. at 888. None of

the supposedly conflicting authorities cited by Peti-

tioner addressed vertical restraints. Petitioner's

cases instead addressed horizontal restraints or unila-

teral conduct. See Dimmit Agri Indus., Inc. v. CPC

Intl, Inc., 679 F.2d 516 (1982) (monopolization claim

based on unilateral price-setting aimed at horizontal

competitors); Re/Max Int'l, Inc. v. Realty One, Inc.,

173 F.3d 995 (6th Cir. 1999) (horizontal boycott and

monopolization); Jn re Brand Name _ Prescription

Drugs, 186 F.3d at 783-784 (horizontal price-fixing);

Toys “R” Us, Inc. v. FTC, 221 F.3d 928, 936 (7th Cir.

2000) (facially vertical restraint deemed horizontal

group boycott); Todd v. Exxon Corp., 275 F.3d 191

(2d Cir. 2001) (horizontal information exchange and

price coordination). Three other cited cases assessed

market power by analyzing barriers to entry, a factor

not alleged here. United States v. Baker Hughes, Inc.,

908 F.2d 981, 984-989 (D.C. Cir. 1990) (no market

power due to low barriers to entry); Ball Memorial

22

Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 ¥.2d 1325,

1334-36 (7th Cir. 1986) (similar); Allen-Myland, Inc.

v. Intl Bus. Machs. Corp., 33 F.3d 194, 209-11 (3d.

Cir. 1994) (analyzing entry barriers and technological

progress).

The fundamental differences between the antitrust

analysis of horizontal and vertical cannot be ignored.

As noted above, Leegin emphasized that anticompeti-

tive use of RPM may not be a serious concern unless

the defendant has market power. 551 U.S. at 898.

Control over prices of a defendant’s own products, of

course, is the very essence of RPM, because such

control can invigorate interbrand competition. Id. at

890-892. Vertical restraints are perfectly consistent

with vigorous interbrand competition; that 1s why

they are judged under the rule of reason. GTE

Sylvania, 433 U.S. at 52 n.19 (“The degree of intra-

brand competition is wholly independent of the level

of interbrand competition confronting the manufac-

turer.”). ‘he Court’s vertical restraint jurisprudence

thus forecloses Petitioner’s argument that vertical

restrictions over intrabrand prices constitutes in-

dependent evidence of market power. °

D. The Market Power Issues Are Not

Ripe For Review

Even if there are questions regarding how the

market power requirement applies to RPM cases,

review at this juncture is premature given the

paucity of cases applying Leegin to RPM practices.

® Petitioner also claims that the Fifth Circuit “conflicts” with

several scholarly articles that purportedly suggest alternatives

to market definition analysis in evaluating a defendant's market

power. Pet. 18. “Conflict” with an academic publication does

not satisfy the Court’s established standards for exercise of its

certiorari jurisdiction. Cf. Sup. Ct. R. 10

23

Allowing more time for RPM jurisprudence to per-

colate in the lower courts would produce a more

fulsome body of cases and analyses for the Court to

draw on if the need arises to clarify the law. As

Petitioner’s own authorities demonstrate, the lower

courts, applying the same market power requirement

to vertical non-price restraints, have produced a con-

siderable body of decisions informed by more supple

records than Petitioner’s bare-bones complaint. See,

e.g., Ryko Mfg., 823 F.2d 1215; K.M.B. Warehouse,

61 F.3d 123. Time should be allowed for similar

jurisprudential development before the Court sets out

more detailed standards for RPM.

IV. PETITIONER’S NEW HORIZONTAL

CLAIMS DO NOT WARRANT REVIEW

The Fifth Circuit provided two independent grounds

for dismissing Petitioner’s new allegations of horizon-

tal conduct. First, the Fifth Circuit held that these

claims, never raised in prior proceedings before

Leegin, were barred by the mandate rule and deemed

waived. Second, the Fifth Circuit held that the

claims failed of their own accord because Respon-

dent’s dual distribution arrangement did not convert

its RPM program from a vertical to a horizontal

restraint, and because Petitioner failed to satisfy the

Twombly standard for pleading horizontal agree-

ment. 615 F.3d at 420-21; Pet. App. 13a-15a.

Petitioner claims the Fifth Circuit’s decision con-

flicts with its sister circuits on each issue. That is

incorrect. Regardless, the Fifth Circuit’s fact-bound

analysis of these issues do not raise any significant

questions that warrant review. Moreover, this case

is a poor vehicle for reviewing any of these issues

because, to affect the outcome, the Court would need

24

to grant review on both the waiver issue and the

merits of Petitioner’s horizontal theories.

A. There Is No Inter-Circuit Conflict

Regarding the Mandate Rule

Petitioner never asserted an horizontal agreement

until its briefing before this Court in Leegin. The

Court expressly declined to consider that claim be-

cause it had not been raised below. 551 U.S. at 907-

08. On remand, the district court and the Fifth

Circuit found the issue waived under the mandate

rule, which “precludes litigation of waived issues on

remand because they were never raised in the district

court” before appeal. 615 F.3d at 420; Pet. App. 13a;

Pet. App. 26a-27a.

Petitioner has cited no authority, much less dem-

onstrated any intercircuit conflict, to support its

proposition that a civil plaintiff may assert upon

remand new claims it could have presented, but did

not previously present, in the district court. Peti-

tioner relies on a series of criminal sentencing

decisions: United States v. Quintieri, 306 F.3d 1217

(2d Cir. 1995); United States v. Atehortva, 69 F.3d

679 (2d Cir. 2002); United States v. Ticchiarelli, 171

F.3d 24 (1st Cir. 1999); and United States v. Whren,

111 F.3d 956 (D.C. Cir. 1997). These cases suggest

that a criminal defendant may sometimes raise new

arguments in re-sentencing proceedings upon remand

if there was no incentive to raise them prior to the

appeal. But these cases involve concerns unique to

criminal re-sentencing proceedings. Cf, e.g., INS uv.

Lopez-Mendoza, 468 U.S. 1032, 1038 (1984) (“various

protections that apply in the context of a criminal

trial do not apply in a (civil proceeding]”); 18B

Charles Alan Wright et al., Federal Practice &

Procedure § 4478.3 (2d ed. 2002) (“Criminal sentenc-

29

ing appeals have . . . a specialized set of mandate

issues.”). They present an analytically distinct issue

from whether a new civil claim can be raised for the

first time after appeal.

Indeed, in civil antitrust cases, the lower courts

have consistently barred new claims and theories

on remand from this Court. In the seminal GTE

Sylvania case, after the Court held that vertical non-

price restraints were subject to the rule of reason, the

plaintiff attempted to replead its claim as horizontal

in the hope of resurrecting the per se standard this

Court rejected. The Ninth Circuit barred the new

horizontal claims as waived. Continental T.V., Inc. v.

1TE Sylvania Inc., 694 F.2d 1132, 1136 n.6 (9th Cir.

1982). Likewise, when the plaintiff tried something

similar after reversal by this Court in Omni Outdoor

Advertising, the Fourth Circuit held that the plaintiff

“cannot turn back the clock and resuscitate the

monopolization . . . theories that it earlier chose not

to pursue.”, Omni Outdoor Adver., Inc. v. Columbia

Outdoor Adver., Inc., 974 F.2d 502, 505-06 (4th Cir.

1992). Notably, the Ninth and Fourth Circuits gener-

ally permit new arguments on remand in resentenc-

ing proceedings, which further demonstrates that

Petitioner’s sentencing cases are distinguishable and

irrelevant for the issue here. United States v. Ponce,

51 F.3d 820, 826 (9th Cir. 1995) (permitting resen-

tencing de novo); United States v. Broughton-Jones,

71 F.3d 1143, 1149 n.4 (1995) (similar).

The civil cases Petitioner does cite are notably off

point, because they addressed either issues that were

preserved or could not have been advanced in a

prior proceeding. Crocker v. Piedmont Aviation, Inc.,

49 F.3d 735 (D.C. Cir. 1995), considered whether a

defendant could raise on appeal an issue that it

26

preserved in the district court but did not raise in

a prior appeal. ZId. at 738-41. In Loudermill v.

Cleveland Bd. of Educ., 844 F.2d 304 (6th Cir. 1988),

the issue was whether a defendant could raise a

defense that it could not have presented in a prior

proceeding. Jd. at 309-10.’ Likewise, Curtis Publ’g

Co. v. Butts, 388 U.S. 130 (1967), declined to find

waiver where the defense at issue had not been

available during the pendency of trial court proceed-

ings. Id. at 142-44. The other authorities cited

alongside Butts apply similar standards and are

inapposite for the same reason. See Pet. 25 n.8.

Petitioner does not, and cannot, contend that it had

been previously unable to allege per se illegal hori-

zontal agreements before the Leegin decision. The’

per se standard for horizontal agreements has been

the law since at least United States v. Socony-

Vacuum Oil Co., 310 U.S. 150, 216-17 (1940). The

Federal Rules of Civil Procedure expressly allow

pleading of alternative and even inconsistent theories

in order to facilitate “a full presentation of all rele-

vant facts and legal theories at trial and the final

settlement of disputes on their merits.” 5 Charles

Alan Wright & Arthur R. Miller, Federal Practice and

Procedure § 1282 (3d ed. 2004); Fed. R. Civ. P. 8(d)(3).

Petitioner chose not to do so, and must live with the

consequences. Cf. Leegin, 551 U.S. at 907-08. Other-

wise plaintiffs would be able to assert and try alter-

native claims seriatim. “Trying cases one claim at a

time is both unfair to the opposing party and ineffi-

’ The block quote from Loudermill Petitioner featured (Pet.

27) actually addressed the applicability of collateral estoppel

and res judicata, which is irrelevant here. Loudermull, 844 F.2d

at 309.

27

cient for the judicial system.” Omni Outdoor Adver.,

974 F.2d at 505-06.

In any case, as noted above, granting review on the

waiver issue would not affect the outcome of the case

unless the Court also reviewed the sufficiency of Peti-

tioner’s horizontal allegations. As discussed below,

review is not warranted on that question either.

B. The Dismissal of Petitioner’s Horizon-

tal Theories Does Not Warrant Review

1. Petitioner’s Reliance on Dual Distri-

bution

Petitioner alleges that Respondent’s RPM program

constitutes a per se unlawful horizontal agreement,

because Respondent is a “dual distribution” manufac-

turer that maintains some of its own retail stores.

But there is no more of an intercircuit conflict

regarding dual distribution than there is for any

other issue Petitioner raises.

As the Fifth Circuit pointed out, its sister circuits

have uniformly applied the rule of reason to vertical

restraints implemented by a dual distribution manu-

facturer. 615 F.3d at 421 n.8; Pet. App. 15a. Peti-

tioner fails to cite a single case that applied the per se

rule merely because the defendant practiced dual

distribution. Each and every case that Petitioner

claims to conflict with the Fifth Circuit actually

treated the challenged restraint as vertical and

judged it under the rule of reason, just as the Fifth

Circuit did. See Krehl v. Baskin-Robbins Ice Cream

Co., 664 F.2d 1348, 1357 (9th Cir. 1982) (“dual distri-

bution systems must be evaluated under the tradi-

tional rule of reason standard”); Ryko Mfg., 823 F.2d

at 1231 (holding that “the rule of reason applies” in

28

dual distribution context); Donald B. Rice Tire Co. v.

Michelin Tire Corp., 638 F.2d 15, 16 (4th Cir. 1981)

(similar); Hampton Audio Elecs., Inc. v. Contel Cellu-

lar, Inc., 1992 WL 131169, at *3 (4th Cir. Aug. 6,

1992) (similar); Midwestern Waffles, Inc. v. Waffle

House, Inc., 734 F.2d 705, 711 (11th Cir. 1984) (simi-

lar). Ryko, Hampton, and Waffle House even expressly

followed Fifth Circuit precedents. Ryko, 822 F.3d at

1231 (citing Red Diamond Supply, Inc. v. Liquid

Carbonic Corp., 637 F.2d 1001 (5th Cir. 1981));

Hampton, 1992 WL 131169, at *3; Waffle House, 734

F.3d at 711.

In an effort to manufacture a conflict out of thin

air, Petitioner claims that the Fifth Circuit “categori-

cally” declared all dual distribution arrangements to

be subject to the rule of reason. Pet. 29. Not so. In

the Fifth Circuit, “[clonspiracies between a manu-

facturer and its distributors are only treated as

horizontal ... when the source of the conspiracy is a

combination of the distributors.” Red Diamond, 637

F.2d at 1004 (citations and quotation marks omitted).

But if the restraint is imposed by the manufacturer,

it is vertical and the rule of reason applies, just like

in the other circuits. 7bid. Here, Petitioner “failed to

allege that retailers were the source of the price

restraint,” and the rule of reason therefore governed.

615 F.3d at 420; Pet. App. 13a. Tellingly, none of the

decisions cited by Petitioner acknowledges any

supposed conflict, because there is no conflict.*

* None of the other decisions cited by Petitioner adopted

a supposed ironclad, categorical rule either. Pet. 29 (citing

authorities from the Second, Third, Sixth, Seventh, and Tenth

Circuits). Those decisions recognized that the rule of reason

generally applies to restraints imposed in the context of dual

distribution, and applied in the specific circumstances of their

29

The lower courts have uniformly applied the rule of

reason for good reasons. A dual distribution manufac-

turer has the same incentive as any other manufac-

turer to minimize retailer profit margins, since lower

distribution costs reduce consumer prices and tend to

lead to increased sales. Cf. Leegin, 551 U.S. at 779.

Petitioner theorizes that dual distribution diminishes

that incentive, but if a dual distribution manufac-

turer truly wanted to increase its own margins

without regard for services or marketing by distribu-

tors, it could simply raise its wholesale prices. 615

F.3d at 421; Pet. App. 14a-15a. And if a dual distri-

bution manufacturer truly wanted to insulate its own

stores from intrabrand competition, it could raise its

wholesale prices to third-party distributors or stop

selling to them altogether. When a dual distribution

manufacturer uses RPM, it is likely doing so to en-

courage retailer investments which it hopes will lead

to greater consumer demand for its products. See

Leegin, 551 U.S. at 897. The rule of reason, not per se

illegality, is the correct standard.

2. Petitioner’s Failure to Plead a

Retailer Cartel

Even if the mandate rule did not bar Petitioner’s

new claims, whether the Fifth Circuit correctly

applied Twombly and Iqbal to Petitioner’s horizontal

cartel allegations does not implicate any issue of

special significance. Every day federal courts apply

the pleading standards set forth in those precedents,

and merely claiming that the Fifth Circuit erred

(though Petitioner does not even do that) in applying

them to one complaint does not warrant review.

cases, but none held that a per se rule could not apply if the

source of the restraint is a horizontal cartel.

30

To allege an horizontal agreement, Petitioner had

to plead facts showing “a preceding agreement, not

merely parallel conduct that could just as well be

independent action,” including who made the agree-

ment as well as “when and where” the agreement

took place. Twombly, 550 U.S. at 557, 565 n.10. The

complaint must plead facts establishing “more than a

sheer possibility” of illegality, and is insufficient if it

“pleads facts that are ‘merely consistent with’ the

defendant’s liability.” Jgbal, 129 S. Ct. at 1949

(citation omitted). The Fifth Circuit correctly applied

Twombly and Iqbal in determining that Petitioner

failed to allege sufficient facts to show that “retailers

agreed to RPM among themselves.” 615 F.3d at 420;

Pet. App. 14a.

None of the cases Petitioner cites conflicts with the

Fifth Circuit’s holding, because none addressed what

factual allegations would suffice to plead an horizon-

tal agreement in these circumstances and because

all predate Twombly. See United States v. General

Motors Corp., 384 U.S. 127 (1966) (appeal from

judgment entered after trial); Jnterstate Circuit, Inc.

v. United States, 306 U.S. 208 (1939) (similar); Toys

“R” Us, 221 F.3d at 935 (similar); Hastern States

Retail Lumber Dealers’ Ass’n v. United States, 234

U.S. 600 (1914) (similar). The only case decided on

the pleadings, Catalano, Inc. v. Target Sales, Inc.,

446 U.S. 643 (1980), addressed not whether an agree

ment was adequately alleged, but what the liability

standard was for the restraint at issue. Leegin

likewise did not address the standard for pleading a

horizontal cartel.

Regardless, Petitioner's own complaint plainly

demonstrates its failure to meet those standards.

The SAC alleged that it was Respondent that

3]

“solicitted] agreement” from retailers, “formed” the

RPM program, “fixed suggested retail prices,” “invited”

select retailers to participate, offered “incentives”

such as payment terms, “required” participants to

execute agreements, and “invited” some retailers to

Hawaii in 2003. SAC JJ 9-10; Pet. App. 36a. Thus

according to the SAC itself, it was Respondent, not

a retailer cartel, that initiated the RPM program

and set the prices. Nothing in the SAC “tend(s] to

exclude the possibility” that retailers independently

agreed with Respondent to resale price maintenance,

Twombly, 550 U.S. at 554, rather than agreeing

among themselves to act in concert.

The first and only alleged communication among

retailers took place in 2003, at least five years after

the RPM program began in 1998, and even then ad-

dressed not retail prices but just a birthday promo-

tion for customers. That allegation does not show

any “preceding agreement” among retailers as the

impetus for the RPM program. Twombly, 550 U.S. at

557. Nor does Petitioner allege “which” retailers,

“much less which of their employees,” agreed to the

supposed horizontal restraints. Jd. at 565 n.10.

There is no allegation that the retailers attending the

2003 meeting competed with one another; obviously,

a store selling Brighton products in Florida does

not complete with a store in California. Cf. Leegin,

551 U.S. at 886 (defining horizontal price-fixing as

“horizontal agreements among competitors to fix

prices”) (emphasis added). Petitioner has not even

alleged that the birthday promotion had anything to

do with its termination or any harm it suffered.

What Petitioner has alleged is, at most, a plain

vanilla RPM program established by a manufacturer,

which as Leegin held must be adjudged under the

rule of reason.

32

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted,

ROHIT K. SINGLA JEFFREY 1. WEINBERGER

MUNGER, TOLLES & Counsel of Record

OLSON LLP JEFFREY Y. WU

560 Mission Street MUNGER, TOLLES &

27th Floor OLSON LLP

San Francisco, CA 94105 355 South Grand Avenue

(415) 512-4000 35th Floor

Los Angeles, CA 90071

(213) 683-9100

jeffrey.weinberger@mto.com

Counsel for Respondent

January 18, 201]