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United States v. Blavatnik

United States District Court, District of Columbia

February 12, 2016

UNITED STATES OF AMERICA, Plaintiff,
v.
LEN BLAVATNIK, Defendant.

MEMORANDUM OPINION AND ORDER

RANDOLPH D. MOSS United States District Judge.

This matter is before the Court on the Government’s Motion for Entry of Final Judgment. Dkt. 1-4. The United States and Defendant Len Blavatnik have stipulated to entry of a Final Judgment providing for the payment of a civil penalty of $656, 000 by Defendant pursuant to Section 7A(g)(1) of the Clayton Act, 15 U.S.C. § 18a(g)(1), the premerger notification provision of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”). Dkts. 1-2, 1-3. In its motion, the Government asserts that the procedures for reviewing proposed consent judgments under the Antitrust Procedures and Penalties Act of 1974 (“APPA”), also known as the Tunney Act, 15 U.S.C. § 16(b)-(h), do not apply to this case because the proposed consent judgment seeks only monetary penalties, rather than injunctive relief. Dkt. 1-4 at 3. On October 19, 2015, the Court ordered supplemental briefing regarding whether the Tunney Act is indeed inapplicable, Dkt. 2, as the Government’s motion included only a single paragraph on the matter, Dkt. 1-4 at 3, and no case law addresses the issue in any depth. In light of the apparent agreement of the Government and Defendant that the Tunney Act is inapplicable, the Court’s October 19, 2015 Order invited interested amici, if any, to file briefs addressing the matter. Dkt. 2 at 3. The Government filed a supplemental brief further elucidating its position on November 20, 2015, Dkt. 3, with which Defendant Blavatnik summarily concurred, Dkt. 4. No amicus briefs were filed. The Court heard oral argument on the issue on February 3, 2016.

Although the Court recognizes that the Justice Department’s reading of the Act is supported by 40 years of consistent practice, the Court cannot reconcile that practice or the Government’s position in this case with the plain language of the Tunney Act, which applies to “any proposal for a consent judgment submitted by the United States” and not merely to proposed injunctive decrees. 15 U.S.C. § 16(b) (emphasis added). The Court is also unconvinced that either the legislative history of the Tunney Act or any subsequent congressional action provides a basis to depart from-or to assign a unique meaning to-that plain language. Because the Tunney Act procedures, accordingly, must be followed in this case, and because the Government has yet to comply with those procedures, the Court DENIES the Government’s Motion for Entry of Final Judgment (Dkt. 1-4) without prejudice.

I. BACKGROUND

Congress enacted the Tunney Act against the backdrop of a long history of concern about the Justice Department’s process for settling antitrust cases. In 1959, the Antitrust Subcommittee of the House Committee on the Judiciary issued a report on the settlement of antitrust enforcement matters. See Antitrust Subcomm., H.R. Comm. on the Judiciary, 86th Cong., 1st Sess., Rep. on the Consent Decree Program of the Dep’t of Justice (Comm. Print 1959) (“1959 Report”).[1] The report explained that the Subcommittee had received complaints “that consent decrees . . . eliminated the judiciary from enforcement of the antitrust laws;” that they deprived private litigants of the ability to benefit from the Government’s prosecution of antitrust litigation in the form of follow-on actions for treble damages; that they were negotiated in secret, without input from competitors who “might be adversely affected;” and that they “often deprived the Government of relief it could have obtained if it had litigated its case.” Id. at x. The Subcommittee assembled case studies of prominent antitrust “consent decrees” and concluded that the Justice Department had been too solicitous of the defendants’ interests and had “abdicate[d] [its] duty” to ensure that settlements served the public interest, id. at 293; see also Id. at 296-97, that decrees improperly left monopolies intact, id. at 290, that the Department demonstrated a “lack of candor” by not sharing information about settlements with the Subcommittee and the public, id. at 292; see also Id. at 304, and that the Department had failed to require compliance with consent decrees, id. at 294, 302.

The Subcommittee, as a result, recommended that the Department of Justice revise its antitrust settlement procedures. Id. at 304. In particular, the Subcommittee urged the Department to “devise procedures which would assure competitors of the defendants a greater participation in the preparation of the terms of a consent decree than is now provided by the sporadic discussions which the Department of Justice on occasion initiates.” Id. Under those procedures, as contemplated by the Subcommittee, the Department would “provide notice to the public of the terms of the consent decree, and establish a waiting period” during which “private parties, who may be affected by the terms of the decree, should be given an opportunity to intervene in the Government’s case in order to present their objections to the court for its consideration.” Id. Moreover, “[w]hen the Department of Justice presents a consent decree to the court for its approval, it should be accompanied by a statement that sets forth the facts involved, the defendant’s position, the meaning of the provisions used in the decree, and the reasons that form the basis for the Department’s acceptance of the particular compromise.” Id.

The Subcommittee resolved to give the Attorney General the opportunity to “accomplish this revision through changes in the rules that govern the administration of his Department, ” but cautioned that, should he decline to act “or if the changes he institutes are inadequate, Congress should, by legislation, establish mandatory procedures and standards of conduct for this area.” Id.

The Justice Department responded in July 1961, when then-Attorney General Robert Kennedy issued an administrative order entitled “Consent Judgment Policy.” 28 C.F.R. § 50.1 (1970). That order established a “policy” that the Department would “consent to a proposed judgment in an action to prevent or restrain violations of the antitrust laws only after or on condition that an opportunity is afforded persons (natural or corporate) who may be affected by such judgment and who are not named as parties to the action to state comments, views or relevant allegations prior to entry of such proposed judgment by the court.” Id. § 50.1(a). “Pursuant to this policy, ” the order further provided that proposed antitrust consent judgments would “be filed in court or otherwise made available upon request to interested persons . . . at least 30 days prior to entry by the court, ” and that the Department would “receive and consider any written comments, views or relevant allegations relating to the proposed judgment” before entry of the judgment. Id. § 50.1(b). The Department reserved discretion to decide whether to disclose comments and “reserve[d] the right” (1) to disavow the proposed consent judgment if new facts or considerations came to light in the comment process and (2) “to object to intervention by any party not named as a party by the Government.” Id. The Department also adopted other reforms through less formal means, but abandoned them shortly thereafter. See Note, The ITT Dividend: Reform of Department of Justice Consent Decree Procedures, 73 Colum. L. Rev. 594, 607-609 (1973) (discussing the use of settlement clauses providing that the settlement would have prima facie effect in a treble damages action and pre-filing negotiation practices).

The Department’s antitrust settlement authority was once again subject to scrutiny when “the details of the [International Telephone & Telegraph Corporation (“ITT”)] antitrust settlement bec[a]me public in [the] Spring [of] 1972.” Id. at 603. The Justice Department’s settlement with ITT permitted “the nation’s ninth largest corporation” to merge with Hartford Fire Insurance “in exchange for divesting itself of several smaller subsidiaries.” Id. at 603-04. Senate confirmation hearings for Attorney General Richard G. Kleindienst probed the ITT settlement and suggested a connection between ITT’s contributions to the 1972 Republican National Convention and the Nixon administration’s willingness to settle on terms unduly favorable to ITT, but Kleindienst denied any White House involvement in the matter. Id. at 604; 120 Cong. Rec. 29, 269-70 (1974). The Watergate tapes revealed, however, that President Nixon had indeed told then-Deputy Attorney General Kleindienst that he did not want an ITT prosecution. See Ciara Torres-Spelliscy, Brennan Ctr. for Justice, The I.T.T. Affair and Why Public Financing Matters for Political Conventions (Mar. 19, 2014).[2] As a result, President Nixon’s “unlawful activities . . . relating to the confirmation of Richard Kleindienst as Attorney General of the United States” were included in the Articles of Impeachment adopted by the House Judiciary Committee. 120 Cong. Rec. at 29, 268 (1974). Attorney General Kleindienst also ultimately pleaded guilty in 1974 to a charge of failing to testify “accurately and fully” at his confirmation hearings about White House involvement in the ITT case. See Torres-Spelliscy, supra.

The ITT scandal was a major impetus for the passage of the Tunney Act. See 120 Cong. Rec. 38, 585 (1974) (statement of Sen. Tunney); see also 120 Cong. Rec. 36, 342 (1974) (statement of Rep. Holtzman); The ITT Dividend, supra, at 626-34. The Act applies to “[a]ny proposal for a consent judgment submitted by the United States for entry in any civil proceeding brought by or on behalf of the United States under the antitrust laws.” 18 U.S.C. § 16(b). First, the Act provides for disclosure of certain information pertaining to the settlement and for an opportunity for public comment. It requires that the Government file a proposed “consent judgment” with “the district court . . . and publish[] [it] . . . in the Federal Register at least 60 days prior to the effective date of such judgment;” that any written comments and responses to them also be filed and published within 60 days; that materials “considered determinative in formulating” the proposed judgment be made publicly available; that the Government, “unless otherwise instructed by the court, ” file with the court and publish in the Federal Register a competitive impact statement reciting various information about the proposal, id.; and that a summary of the proposal and the competitive impact statement be published in specified newspapers, id. § 16(c). The Act also requires the defendant to disclose to the court any lobbying contacts with the government-that is, “any and all written or oral communications by or on behalf of such defendant . . . with any officer or employee of the United States concerning or relevant to such proposal.” Id. § 16(g). In addition, it requires that the Attorney General “receive and consider any written comments” and, at the close of the 60-day period, publish a response to them. Id. § 16(d). Finally, the court must ultimately “determine that the entry of such judgment is in the public interest” before entering the proposed consent judgment, and the Act provides procedures for making that determination. Id. § 16(e)-(f).

Just two years after enacting the Tunney Act, Congress enacted the Hart-Scott-Rodino Act. As relevant here, the HSR Act requires notification to the Department of Justice and the Federal Trade Commission (“FTC”) and observation of a waiting period before a person completes certain acquisitions of voting securities or assets. 15 U.S.C. § 18a(a). The Act also exempts an array of transactions, including the acquisition of voting securities “solely for the purpose of investment.” Id. at § 18a(c)(9). This premerger notification requirement facilitates the agencies’ ability to detect and prevent antitrust violations before they occur. See, e.g., id. § 18a(f) (providing procedures for obtaining a preliminary injunction against consummation of a proposed acquisition that would violate the Clayton Act, the Federal Trade Commission Act, or the Sherman Act). Violations of the HSR Act are punishable by a civil penalty of not more than $16, 000 per day. Id. § 18a(g)(1); Debt Collection Improvement Act of 1996, Pub. L. No. 104-134, § 31001(s), 110 Stat. 1321, 1321-373 (amending the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461 note); 16 C.F.R. § 1.98(a). Violations of the notification requirement are also subject to “such other equitable relief as the court in its discretion determines necessary or appropriate.” 15 U.S.C. § 18a(g)(2)(C).

II. ANALYSIS

The Government and Defendant Blavatnik assert that the proposed consent judgment in this case is not subject to Tunney Act procedures because an HSR Act settlement solely for a civil penalty is not a “proposed consent judgment” within the meaning of the Tunney Act. See Dkts. 3-4. According to the Government, the Tunney Act applies to settlements seeking equitable relief and not to those seeking only monetary penalties. Dkt. 3 at 2. Thus, under the Government’s theory, HSR Act settlements for injunctive relief are subject to the Tunney Act, while HSR Act settlements for monetary penalties are not. Id. at 13 n.4. In the Government’s view, “[a]pplication of Tunney Act procedures to settlements for exclusively legal relief such as monetary penalties is inconsistent ...


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