E-Briefs, News and Notes: April 2025

By Mark Rifkin 

What keeps me up at night these days is the rapid encroachment of artificial intelligence (AI) in our practice: from the simple fear of missing out on this nascent, transformational technology to the natural fear of its known and unknown risks.

Let’s face it, AI will change the practice of law, and you will incorporate AI into your practice or be left behind by those who do. The integration of AI into the legal field is not just a futuristic concept but a current reality that is reshaping how legal services are delivered. From enhancing efficiency to providing innovative solutions, AI is poised to revolutionize the legal landscape in profound ways.

One significant impact of AI on the practice of law is its ability to streamline legal research and fact gathering. Traditional legal research is often time-consuming and labor-intensive, requiring lawyers to sift through vast amounts of case law, statutes, and legal precedents. AI tools such as Westlaw’s Edge and CoCounsel, LexisNexis, and ROSS Intelligence are revolutionizing the research process by conducting legal research with blazing speed. Over time, they will become even more accurate and reliable. AI also offers breathtaking possibilities in information gathering. Apart from open source AI tools like ChatGPT and Copilot, proprietary platforms such as AlphaSense aggregate and organize astonishing amounts of information – both public and non-public – which become accessible with blazing speed.

AI also can transform the document review process. AI tools such as Kira Systems, Luminance, and LawGeex can scan contracts and other documents, flagging potential issues and suggesting revisions.  Other AI platforms quickly scan and analyze massive volumes of documents and electronic discovery, flagging relevant information and identifying potential issues. This not only accelerates the review process but also minimizes the risk of human error, allowing lawyers to focus their time and attention on higher-value tasks, such as strategy development and client counseling.

AI’s predictive analytics capabilities are another game-changer for the legal profession. By analyzing historical data and identifying patterns, AI can provide valuable insights into the likely outcomes of legal cases. For instance, AI algorithms can assess the strengths and weaknesses of a case, predict the behavior of judges and opposing counsel, and estimate the potential costs and duration of litigation. This enables lawyers to make more informed decisions and develop more effective legal strategies.

While the benefits of AI in the practice of law are substantial, it is essential to consider the ethical and regulatory implications of its use. AI raises important questions about data privacy, bias, and accountability. Legal professionals must ensure that AI tools are used responsibly and transparently, with safeguards in place to protect client confidentiality and prevent discrimination.

Regulators and professional bodies will also need to establish guidelines and standards for the use of AI in the legal field. This includes setting criteria for the validation and certification of AI tools, as well as ensuring that lawyers have the necessary skills and knowledge to effectively integrate AI into their practice.

EDITORS’ NOTE: Mr. Rifkin is a senior managing partner and lead trial attorney at WOLF HALDENSTEIN.  Editor, Betsy Manifold, is also a member of the same firm.

By Lee F. Berger 

Right now, everyone focuses on which AI system will become self-aware first or reach artificial general intelligence, even though nobody can agree on what that means.  But these are all signs of a healthy market: multiple products are available to consumers and all of them are innovating to outdo their competitor and push the frontier of AI.  Due to this competition, many of the errors and flaws of early AI models have either been fixed or reduced, and new innovations are rapidly coming to market.

 What keeps me up at night, though, is one AI company gaining dominance.  This could happen through a company gaining exclusive access to training data or powerful GPUs, tying AI to existing monopoly products, or foreclosing large parts of the market through exclusive contracts.  If the competition in the market dies away, the dominant AI company can force more exclusive contracts and lock down the market, while also having less incentive to innovate.  Finding the right balance of antitrust regulation – enough to prevent monopolization, without stifling efficiency and ingenuity – is key.

EDITORS’ NOTE:  Mr. Berger is a partner in the Washington D.C. office of STEPTOE.  Mr. Berger and his STEPTOE colleagues are frequent contributors to E-Briefs.

On March 18, 2025, President Trump fired two Commissioners of the FTC, Commissioners Rebecca Slaughter and Alvaro Bedoya. These actions follow his earlier firings of Commissioner Wilcox and Commissioner Harris of the NLRB and MSPB, respectively. Through these firings, the President is now claiming the power to fire federal independent agency Commissioners for any reason. Congress created these agencies over the past hundred years, with multi-member Commissions, staggered terms, and requirements that no more than a majority of Commissioners could be from the President’s party. These independent agencies represents one of the signal achievements of the Progressive Era, serving as a key check on corporate wrongdoing and otherwise advancing the protection of the American public. The President’s actions, though, run straight into on-point Supreme Court precedent, Humphrey’s Executor v. United States, 295 U.S. 602 (1935). That decision distinguished the FTC and other independent agencies from the Postmaster that the Supreme Court found could be fired at will in United States v. Myers, 262 U.S. 52 (1926). The Court held that, while an executive such as the Postmaster in Myers could be fired by the President at will, multi-member Commissions like the FTC that did not solely have executive power, but rather also had “quasi-legislative” or “quasi-judicial” powers, and hence could only be fired for cause. More recently, though, in Seila Law LLC v. Consumer Financial Protection Bureau, 591 U.S. 197 (2020), the Supreme Court found that the director of the CFPB could be fired at will by the President because he wielded executive power. In so doing, the Supreme Court appeared to cabin Humphrey’s Executor to only those federal agencies with the precise powers that the FTC had at the time, with two Justices, Thomas and Gorsuch calling outright for the overturning of Humphrey’s Executor.

The constitutional predicate for the President’s assertion of power to dismiss independent agency Commissioners is far from clearcut

For some time now, proponents of the “unitary executive theory” have argued that the Constitution demands that all independent agency Commissioners be removable by the President. They have worked for years to get the Supreme Court to overrule Humphrey’s Executor. Since the Constitution is silent on the extent of the President’s executive power under Article 1 of the Constitution, they point to debates concerning the President’s power to remove officials that the First Congress engaged in during the Summer of 1789, the so-called “Decision of 1789.” However, “originalist” support for the so-called “unitary executive” theory, which is based on the actions of the First Congress, rests on bad and error-riddled and inconclusive evidence by its proponents. Work that Boston University Law Professor Jed Handelsman Shugerman has spearheaded, including his recent unearthing of a key Senator’s diary (proceedings of the First Congress were not transcribed), lead him to make the following conclusion: “In light of new evidence, the First Congress was undecided on any constitutional theory and retreated to ambiguity in order to compromise and move on to other urgent business.”  Shugerman, “The Indecisions of 1789: Inconstant Originalism and Strategic Ambiguity,” 171 U. Penn. L. Rev. 1 (2023). Without solid “originalist” support in the record, this theory crumbles and instead rests on policy arguments. And, left to just policy arguments, the counter-arguments embedded in the statutes Congress wrote creating independent agencies – Congress’ express desire that these agencies gain expertise with multi-member panels and that they be constituted so as to shield them from undue political interference – should take precedence over the contrary arguments. 

However, some – including judges – appear to not want to consider this new historical evidence. In the ongoing litigation over NLRB Chair Wilcox’s summary firing by President Trump, one comment from D.C. Circuit Judge Walker stands out. Walker was part of the original emergency stay panel that reversed the lower court’s order that NLRB Chair Wilcox be reinstated 2-1. Wilcox v. Trump; Harris v. Bessent, Nos. CV- 25-334 and CV 25-412(D.C. Cir. March 28, 2025). That decision was later reversed by the entire D.C. Circuit sitting en banc on April 7^th, 2025 WL 1021435 (D.C. Cir. Apr. 7, 2025), but the matter is now up before the Supreme Court, which has issued an administrative stay while it decides the issue. However, Judge Walker noted that there is now significant new historical research that undermines the “originalist” view – first laid out Chief Justice Taft’s Myers decision, and then expanded in Chief Justice Robert’s decision in Seila — that, in the Decision of 1789, Congress determined that the President should have unfettered power to remove all federal agency Commissioners. Buried in a footnote — footnote 44 of his opinion — he takes on the new historical research. His answer: “To the extent the Decision of 1789 is susceptible to multiple interpretations, I follow the Supreme Court’s [as set forth in Myers and Seila].” This is a frankly disturbing notion: the idea that, once the Supreme Court has decided what the Founding Fathers’ view was, the issue is settled and no more debate or consideration of new historical evidence is allowed. We now have significant new research — including the unearthing of a hitherto unknown source from a key Senator’s diary (the First Congress’ deliberations were not transcribed) by Professor Shugerman of Boston University Law School that casts serious doubt on the Supreme Court’s interpretation of the historical evidence. Rather than a decisive conclusion giving the President unfettered power to remove Commissioners at will, when viewed in its entirety, the full record of the Decision of 1789 shows that the Founding Fathers were just as torn by the question as we are today and instead compromised by not really deciding the issue. The historical record is, at best, a “muddle” as Professor Shugerman concludes. Once we and the Courts have fully viewed all the historical evidence, maybe the Courts will agree with the way the Myers and Seila Supreme Courts interpreted the Decision of 1789. Or maybe they won’t. But isn’t it wrong to suggest that we should sweep new historical evidence under the carpet, when so much is at stake? Are we really ready to throw out over a 100 years of dozens of generally well-functioning federal independent agencies on the basis of a cherry-picked historical record?

The stakes could not be higher as this move could cripple the FTC’s power to protect the American public by hamstringing its adjudicative process

At Commissioner Slaughter’s testimony on the Hill recently about the President’s March 19, 2025 firing of her and Commissioner Bedoya, several Congresspeople made light of the situation, including two who referred to it as simply an “employment status dispute.” House Commerce, Manufacturing, and Trade Subcommittee, “The World Wild Web: Examining Harms Online,” March 25, 2025. It is most certainly not just an employment dispute, and the stakes could not be higher. Characterizing it that way sadly trivializes the huge stakes at issue here. Given this, it is time proponents of the unitary executive theory come clean about what they are really pursuing here. Simply put, the unitary executive theory that forms the basis of the purported justification to fire two FTC Commissioners is an existential threat to the very essence of the FTC as an independent agency empowered by Congress to adjudicate matters in their administrative tribunals. The FTC was created by Congress precisely to adjudicate on a case by case basis, unfair methods of competition as well as deceptive and unfair acts or practices, and has done so capably for 110 years. FTC v. R.F. Keppel & Bro., Inc., 291 U.S. 304, 314 (1934) (“[The Commission] was created with the avowed purpose of lodging the administrative functions committed to it in ‘a body specially competent to deal with them by reason of information, experience, and careful study of the business and economic conditions of the industry affected,’ and it was organized in such a manner, with respect to the length and expiration of the terms of office of its members, as would ‘give to them an opportunity to acquire the expertness in dealing with these special questions concerning industry that comes from experience.’”) (quoting S. REP. NO. 597, 63d Cong., 2d Sess. at 9, 11 (1914)). Moreover, in the review of any agency adjudication decision in federal court, defendants are free to forum shop for the best circuit court to file their petition for review, something they most clearly do. Indeed, Congress specifically rejected the notion of placing the agency in the executive branch and giving the President the power to fire the Commissioners at will precisely because it feared that the agency would make decisions “purely political in character.” Id. at 6. By contrast, as an independent agency, “its decisions, coming from a board of several person, will be more readily accepted as impartial and well considered.” Id. at 11.  

In reality, proponents of the unitary executive theory are not aiming for greater Commissioner accountability. They are aiming to eliminate the FTC as an independent check on corporate concentration. Their trap is straightforward: if Commissioners can be fired by the President for any reason, then there is a strong argument that there is no due process for defendants in this tribunal. This argument will be the follow-on argument for these “unitary executive power theory” proponents if they succeed in their efforts to overturn the Humphrey’s Executor. The problem is that, for an agency like the FTC, Congress has given limited avenues for the agency to file first in federal court. At the FTC, the agency can only file in federal court to seek an injunction under Section 13b of its statute to stop unlawful behavior, not monetary remedies. AMG v. FTC 141 S.Ct. 1341 (2021). Simply put, if the FTC wants to return money to consumers who’ve been harmed, it generally has no pathway to doing so in federal court unless a specific rule is violated.^[1] And the proponents of these theories know this very well. If proponents of the unitary executive theory are able to convince the Supreme Court to overturn Humphrey’s Executor, it is quite possible that courts will further hold that its adjudicatory powers violate due process. If so, the end result will be to severely hamper the FTC’s ability to function effectively and stop bad actors, which is precisely the end result the proponents of these theories really want.

What the proponents of the unitary executive theory would respond with is the claim that the FTC’s adjudicative process already violates due process rights of defendants, because the same Commissioners that vote out the complaint then sit on the matter as judge and further upholds all of the charges all of the time. FTC opponents’ claim that administrative adjudication deprives defendants of due process has been roundly and repeatedly rejected, including by a former Republican Acting Chair. First, the lineup of Commissioners who authorize the complaint frequently differs from the group of Commissioners who adjudicate the matter. In an empirical study of the 145 cases in which the Commission issued a decision in administrative proceedings between January 20, 1977, and July 31, 2016, “in 72 percent of [the] . . . cases, the commissioners who authorized the administrative litigation had either left or no longer formed a majority at the liability-dismissal stage.” Maureen K. Ohlhausen, Administrative Litigation at the FTC: Effective Tool for Developing the Law or Rubber Stamp?, 12(4) J. Competition L. & Econ. 623, 627 (2016). In other words, from 1977 to 2016, “the same commissioners rarely voted out and later decided [the same] . . . matter.” Id. Same with the claim of an unblemished winning streak.  To begin, the claim of an  unblemished winning streak on appeals of ALJ decisions is based on a limited time period from 2007 to 2016 when the Commission brought only twelve administrative cases, which resulted in eleven final decisions. Ohlhausen, supra, at 634-35. Eight of the eleven decisions were appealed to a federal circuit court, and the Commission won every appeal. Id. at 636 n.36. If anything, these courts of appeals victories confirm that the Commission’s decisions were sound and undercut any claim of improper bias. They also point to the fact that, before the Commission files charges in its administrative tribunal, it engages in an intensive fact and law review, weeding out weak cases, and only then files charges. Moreover, this claim fails to take account of those cases the Commission dismissed. If the time period is expanded to the full period of the study, 1977-2016, “the Commission dismissed 22 percent of its . . . [administratively adjudicated] matters (11 cases) during that period,” including five dismissals on the merits. Id. at 632. Moreover, dismissals are not a relic of the past; only months ago, the Commission dismissed an administrative complaint that was issued in 2020, In re Altria Group, Inc. & JUUL Labs, Inc. (June 30, 2023). Even within the 2007–2016 period, this claim fails to account for Commission dismissals of substantial portions of the allegations in complaints. See Benco/Patterson/Schein (2019) (dismissing one of three defendants and one of two counts); McWane, Inc. (2014) (dismissing six of seven counts in complaint); Polypore Int’l, Inc. (2010) (finding no liability in one of the relevant markets alleged in complaint).

The concern about the vitality of the FTC’s adjudicative process is not merely hypothetical: it is already happening.  Commissioners Bedoya and Slaughter were the only active Commissioners eligible to adjudicate the FTC’s case reviewing the practices of PBMs, as both Chairman Ferguson and Commissioner Holyoak were conflicted out of the case. After the Commissioners were purportedly removed, the FTC announced that the case would be stayed. See In the Matter of Caremark Rx, LLC, et al., Federal Trade Commission, 221 0114, F.T.C., 9437 (Apr. 1, 2025) (stay order). Pray tell, in what country that truly follows fundamental notions of due process and the rule of law is an elected leader able to terminate an adjudication simply by firing its only judges? Even an elected leader’s ability to terminate a judge is likely to be enough to strip the proceeding of any notion of due process and rule of law. 

Make no mistake about it, the stakes for the agency as an institution that has served the American public admirably for 110 years are existential in nature. We do the American public a grave disservice by trivializing its impact.

Answers to the argument that the FTC now looks nothing like it looked in 1926

Proponents of the President’s ability to fire FTC Commissioners also claim that today’s FTC no longer fits in the description of its powers from 1926, and, hence, even if the Supreme Court believes its Humphrey’s Executor decision was correct, the agency has amassed too much power to be constitutional.  Look, they argue, while it couldn’t file a matter in federal court, it now has some, albeit limited, ability to do so. It can now seek an injunction under 13b to block a merger. Whereas before the FTC had to go into federal court to enforce a cease-and-desist order, its orders now, if not appealed, become final as a matter of law. If it brings an adjudicative case in its tribunal and wins it, it can seek to go into federal court and obtain monetary remedies. Finally, the argument goes, it now has rulemaking authority. Much of these claimed additional powers, though, it already had or are attendant to ensuring that its adjudicative process function effectively. The agency has always had rulemaking authority, as the D.C. Circuit recognized in Nat’l Petroleum Refiners Ass’n v. FTC, 482 F.2d 672 (D.C. Cir. 1973). The agency’s 13b injunctive authority gives it the ability to freeze the status quo while it adjudicates allegations of a violation of law in its adjudicative tribunal. This ensures that, at the end of the adjudicative matter, there is a remedy that can be crafted to address whatever violation has been determined to exist. Making cease-and-desist orders final if not appealed really is a nothing burger – the only final adjudicative decisions that are not appealed are ones where the defendant – the best positioned entity to challenge it – decides they don’t want to do so – either because they realize they truly violated the order or they can live with it. Finally, its Section 19 authority gives it the ability to get monetary remedies in egregious violations of the law that have already been fully adjudicated in its administrative tribunal – and, given that it requires an entirely second proceeding, the agency has only done this a handful of times.

By contrast, there is clear evidence that the President now has more power over the agency than he had in 1926. In the Reorganization Act of 1949, Congress gave the President power to create plans to restructure federal agencies. See Pub. L. No. 109, 63 Stat. 203. The primary purpose of this statute was “to promote the better execution of the laws” and “the more effective management of the executive branch of the Government and of its agencies.” Id. 63 Stat. at 203. Pursuant to this legislation, the President issued “Reorganization Plan No. 8 of 1950,” which (1) gave the FTC Chair administrative authority over the Commission, and (2) empowered the President to select the Chair from among the Commission’s members. Reorganization Plan No. 8 of 1950, 15 Fed. Reg. 3175 (May 24, 1950). As a result of this 1950 restructuring, today, the President’s chosen Chair presides at Commission meetings and hearings, controls its expenditures, picks management, and is otherwise responsible for all personnel decisions. See 15 U.S.C. § 41; 16 C.F.R. § 0.8. So, the President is today free at any time to change his designation of Chair to any of the other sitting Commissioners – a right he did not have in 1926.   

History teaches that giving Commissioners the ability to resist directives from the President is in the best interest of the American public

The historical record is replete with FTC Commissioners who bucked the sitting President to advance the public interest, and that record is also replete with examples of how the Commissioners who did so truly did advance the public interest. Hence, keeping the Commissioners independent from the President’s ability to fire them matters. There are three Commissioners in the historical record in particular I want to highlight. 

First is Commissioner Elman who served as an FTC Commissioner from 1961 to 1970. In the 1960’s, Commissioner Phil Elman became increasingly critical of then-FTC Chair Paul Rand Dixon’s poor leadership in advancing consumer protection enforcement as well as modernizing antitrust enforcement. Indeed, Elman’s critique of then antitrust enforcement by the FTC is viewed by most as the first harbinger of “Chicago School” antitrust thinking which would later dominate antitrust in the 1980’s and 90’s. Dixon had been a political appointee favored by Southern Democrats and had filled the agency with political cronies who Elman felt poorly served the American public. Exasperated by Elman’s increasingly vocal dissents and criticisms of the FTC Chair, then-President Lyndon Baines Johnson met with Elman, took a firm grasp of his arm, looked him squarely in the eye, and said that the situation was “bad for me, bad for you, bad for the commission.” Federal Trade Commission: Privacy Law and Policy, Chris Hoofnagle (Cambridge University Press, 2016); James M. Graham, “In Washington: Clout, Not Competence,” New York Times, May 23, 1976.

Undaunted, Elman continued to dissent from actions by the Chair that he felt poorly advanced the public interest in effective antitrust enforcement. Today, Commissioner Elman is viewed as one of the most effective and influential Commissioners in the history of the FTC and had a huge impact in modernizing both consumer protection enforcement and antitrust enforcement at the agency. What would we have lost if Commissioner Elman had been instead fired by President Johnson? 

Second is former Republican Chair Joe Simons, who served as Chair from 2018 to 2021. Chair Simons was a straight-shooter who brought enforcement actions when he saw consumers and the public being harmed, without fear or favor. With two great Bureau Directors – Bruce Hoffman and Andrew Smith, the agency under Chair Simons brought significant enforcement actions on both sides of the house that greatly helped the American public. One thing Joe did not do, though, was knuckle under to pressure from then-President Trump, who wanted the agency to investigate allegations that social media was discriminating against conservative voices. Sources: Politico, August 21, 2020, “Trump Pressures Head of Consumer Agency to Bend on Social Media Crackdown,” by Leah Nylan, John Hendel, and Betsy Woodruff Swan; Politico, August 28, 2020, “Trump Aides Interviewing Replacement for Embattled FTC Chair,” by Leah Nylan, Betsy Woodruff Swan, John Hendel, and Daniel Lippman. Chair Simons was clear about the reason why: as he told lawmakers in 2020, he believed the issue of social media censorship was outside the FTC’s jurisdiction, telling lawmakers that “our authority focuses on commercial speech, not political content curation.” He stuck to his guns even though reports surfaced that President Trump was interviewing possible candidates to replace him. And, for that, Chair Simons is my second pick for Profiles in Courage at the FTC.

Third is FTC Commissioner Patricia Bailey. She was a Republican Commissioner, first appointed by President Carter, who served from 1979 to 1988. President Reagan campaigned on a promise to rein in the FTC, which, under President Carter, had been engaging in extensive enforcement activity, particularly on the consumer protection front. When President Reagan first came into office in early 1981, he was poised to name Commissioner Bailey as Acting Chair. However, getting wind that Commissioner Bailey had spoken out against the Reagan administration’s plan to strip the FTC of its antitrust authority, at the last minute the President switched his pick and chose David Clanton, another Republican Commissioner. “David Clanton, Not Pat Bailey, to Lead FTC,” by Merrill Brown, Washington Post, Feb. 28, 1981. Barely, a year later, Commissioner Bailey found herself invited and then suddenly uninvited from a White House event. Although the administration denied that there was any pressure on Bailey, the message was unmistakable: Commissioner Bailey was viewed by the White House as out of step with its deregulatory agenda. “Regrets Only,” by Donnie Radcliffe, Washington Post, Feb. 10, 1982. Undaunted by this clear message, Commissioner Bailey continued to advocate for forceful consumer protection and antitrust enforcement during her time at the agency, and her vote often proved decisive in opposing efforts by Reagan Chair Jim Miller to rein in both the agency’s rulemakings and policies. She opposed Miller’s plan to eliminate the agency’s 10 regional offices, opposition that played a huge role in killing that plan. Without Commissioner Bailey (and Carter Chair Pertshuk who stayed on as a Commissioner until 1984 and similarly dissented from many of Miller’s proposals), Miller would have made much more dramatic reductions in both the agency’s organization and in its enforcement activities. Chris Jay Hoofnagle, Federal Trade Commission Privacy Law and Policy (Cambridge University Press, 2016).

***

In sum, the President’s decision to fire two FTC Commissioners has created an existential threat to the agency and its ability to protect the American public. If the firings were allowed to stand, they would gravely threaten the agency’s ability to adjudicate matters in its administrative tribunal.  For over a hundred years, independent agencies like the FTC have done great work to protect the American public. There is no reason to take a chainsaw to them now. Nothing in the Constitution nor in Supreme Court precedent mandates such a result.  

[1] If it seeks a monetary remedy for conduct that does not violate a Rule of the agency, other statute that the agency enforces (in which case its complaint must first be reviewed by the Department of Justice), or in limited circumstances when a defendant has received a Notice of Penalty Offense under Section 5(l) of the Act, it must first bring an action in its administrative tribunal and only after a successful result may it seek, under Section 19 of its statute, monetary remedies for a limited subset of conduct, that is, “fraudulent or dishonest” practices. It should also be pointed out that defendants are seeking to limit even these circumscribed avenues for the FTC to get into federal court: for example, limiting the ability to obtain an injunction in federal court to only conduct where harm is “imminent” and even the ability of the agency to obtain a monetary remedy in the case of Rule violations.  

By Wesley Sweger

On February 28, 2025, Judge Eumi Lee of the Northern District of California dismissed, with leave to amend, antitrust and UCL claims against Apple for its iCloud practices.

Background

Apple offers a cloud storage platform called iCloud. iCloud permits Apple’s users to store all types of data—including photos, videos, music, device settings, and apps—on remote or ‘cloud’ servers, and then access that data across their devices. Third-party cloud storage providers can store most types of data on Apple mobile devices. But iCloud is the only cloud storage service that can store “restricted files,” which include “app data and device settings” that are “needed to restore a device when it is replaced” or after a factory reset. 2025 WL 660190, *1. Plaintiffs—two individuals seeking to represent a nationwide class of consumers—alleged that this file restriction gives iCloud “an enormous structural advantage” and “prevents rival cloud platforms from offering a full-service cloud solution that can compete effectively against iCloud.” Id.

Plaintiffs brought a tying claim under Section 1, monopolization and attempted monopolization claims under Section 2, and a UCL claim.Apple moved to dismiss arguing the claims were time-barred and failed to state a claim. The court found it unclear if the claims were time-barred but found the claims not plausibly pled.

Statute of Limitations

Apple argued Plaintiffs’ claims are time-barred because Plaintiffs challenge a design decision that Apple implemented in 2011 when iCloud first launched. But the court acknowledged the complaint omitted the date Apple implemented its decision to restrict files from cloud storage rivals. Plaintiffs also alleged that Apple maintains an illegal monopoly through ongoing enforcement of its file restrictions, constituting a continuing violation of the Sherman Act. Accordingly, the Court denied Apple’s motion to dismiss all claims as time-barred.

Section 1 Tying

Plaintiffs alleged Apply unlawfully ties its mobile devices (the tying good) to iCloud (the tied good). Citing cases or pages that do not discuss Section 1 tying claims, the court found Plaintiffs’ Section 1 tying claims failed because “Plaintiffs d[id] not allege concerted conduct, which is a requirement for a Section 1 claim.”

The court additionally found there to be no tying arrangement because Apple device buyers are free to “(1) purchase iCloud, (2) purchase cloud storage from Apple’s rivals, or (3) choose not to purchase cloud storage at all.” Id. at *5.

Plaintiffs argued their case is similar to the seminal tying case, Eastman Kodak Co. v. Image Tech. Serv., Inc., 504 U.S. 451 (1992).The court disagreed, noting that in Kodak,the defendant’s policy involved an expressly conditioned sale. By contrast, there is no conditioned sale of Apple mobile devices to purchase iCloud (a positive tie) or to refrain from purchasing cloud storage from Apple’s rivals (a negative tie). Thus, the court granted Apple’s motion as to the Section 1 claim, with leave to amend.

Monopolization: Market Definition

Plaintiff’s alleged two product markets: (1) a market for cloud platforms that can host all types of files—i.e., a “full-service” market; and (2), in the alternative, a broader market for all cloud storage on Apple mobile devices. Apple challenged only the “full-service” market definition.

The court found Plaintiffs’ “full-service” cloud storage market failed to include economic substitutes—cloud storage services offered by Apple’s rivals—since non-Apple storage offerings work on Apple devices. Plaintiffs argued that iCloud has one feature (storing restricted files) that some subset of Apple device users value. But the court found “the complaint lacked any plausible allegation that Apple device users value this single feature so much that it distinguishes iCloud from all other cloud storage options.” 2025 WL 660190, *7.

Plaintiffs also pointed to a SSNIP test—which examines how consumers respond to a hypothetical or actual small but significant non-transitory increase in price in a product market. According to Plaintiffs, Apple “substantially increased the price of iCloud in the UK and other regions (outside the US).” Id. at *8. The court found this alleged SSNIP test deficient because (1) Plaintiffs did not allege that iCloud’s price increased relative to other products in the market—a necessary condition for a SSNIP test; (2) the price change was imposed in “the UK and other regions,” not the United States; and (3) a SSNIP test requires a profitable price increase, which Plaintiffs did not allege. Accordingly, the court found the “full-service” market definition implausible.

Monopoly Power

Because the court rejected Plaintiffs’ first market definition—“full-service” cloud storage—the court then examined monopoly power only under the alternative market definition: the market for all cloud storage on Apple mobile devices.

Direct Evidence

Direct evidence of monopoly power may be shown through proof of “restricted output and supracompetitive prices.” Proof of both is required. The court found Plaintiffs sufficiently pled supracompetitive pricing but not restricted output.

Plaintiffs asked the court to infer supracompetitive prices from Apple’s high gross margin on iCloud. Apple argued gross margins cannot be the foundation for inferring supracompetitive pricing because a firm’s high margins can be explained by factors other than a lack of competition, such as greater efficiency or low supply and high demand. The court found these conditions were not alleged in the complaint so it could not side with Apple on this point.

As to output, rather than allege Apple restricted the output of its own product, Plaintiffs allege that Apple restricted output of other cloud storage providers. The court found this reasoning “circular and conclusory [because] [t]he main question raised by Plaintiffs’ complaint is whether Apple’s restriction of certain files excludes other cloud storage providers from competing.” Id. at *10. Plaintiffs also argued the high price of iCloud depresses demand, leading to reduced output. The court rejected this argument for several reasons, importantly: (1) this reasoning would render the requirement that both restricted output and supracompetitive prices be shown meaningless because only one would suffice; and (2) this argument falsely equates depressing demand with restricting output because higher iCloud prices does not restrict other cloud storage providers from offering cloud storage. Thus, the court found reduced output not plausibly pled.

Indirect Evidence

Plaintiffs alleged that “iCloud’s share of the market for all cloud storage on Apple mobile devices exceeds 70[%,]” calculated in part by relying on a survey that “33% of all cloud storage users use iCloud.” Id. The court found the math miscalculated, but more importantly, noted that the share of consumers served—those cloud storage users using iCloud—is not the same as the market share because “each consumer may purchase a different amount of cloud storage, and even the consumers that use iCloud may use other cloud storage services as well.” Id.

Regarding barriers to entry, the court agreed with Plaintiffs that the barriers are significant because “building a cloud storage platform ‘requires a substantial outlay of capital to procure sufficient server capacity’ and data security protections.” Id. at *11. However, the court found Plaintiffs did not address barriers to expansion—i.e., the ability of firms already in the market to be able to quickly increase their own output in response to a contraction by the defendant. The court granted Apple’s motion to dismiss with leave to amend.

Attempted Monopolization

The court granted Apple’s motion to dismiss, with leave to amend. The court simply stated Plaintiffs fail to allege a dangerous probability of achieving monopoly power for the same reasons Plaintiffs fail to allege monopoly power above.

UCL

Apple argued that Plaintiffs’ failure to plausibly allege a Sherman Act claim automatically dooms Plaintiffs’ UCL claim. Following the lead of Epic v. Apple, the court noted that a UCL unfair prong claim is precluded only if there is a “categorical legal bar” that shields the conduct from liability. The court noted a firm’s product design decisions are not categorically barred from antitrust liability.

However, invoking the UCL balancing test from Doe v. CVS Pharm., Inc., 982 F.3d 1204 (9th Cir. 2020)—which asks whether the impact on consumers outweighs the reasons, justifications and motives of the alleged wrongdoer—the court found Plaintiffs failed to allege an impact on consumers “because Apple mobile device users are not required to purchase iCloud” and because Plaintiffs do not allege that iCloud is priced higher than other cloud storage options. 2025 WL 660190, at *14. Thus, the court granted Apple’s motion to dismiss with leave to amend.

By Lillian Grinnell

In February, the Fourth Circuit, in an opinion by Judge Wynn, mostly affirmed a ruling by the Eastern District of Virginia that dismissed a putative class action RICO case regarding the sale of the drug Xenazine, which treats symptoms of Huntington’s disease.

Because Xenazine is considered to be a specialty drug, for which there is no generic equivalent, it and others in that category can often be prohibitively expensive for patients to take. Because the price can affect demand for the product, drug manufacturers make donations to certain nonprofits known as Patient Assistance Programs (“PAPs”) which then provide assistance with co-payments to patients who qualify. While PAPs are themselves legal, federal law prohibits drug manufacturers from compensating Medicare patients for purchasing drugs. See 42 U.S.C. § 1320a-7b(b)(2)(B). To that end, the Department of Health and Human Services has issued guidance advising pharmaceutical manufacturers and PAPs to stay truly independent from each other, without the former exercising control as to how the latter reimburses patients. See slip op at 5.

In this case, a now-defunct PAP called CVC helped to subsidize Xenazine’s co-payments for Medicare patients, and in 2016 the Department of Justice began to investigate CVC’s relationship with Xenazine’s manufacturer, Lundbeck. It later entered into a settlement agreement with Lundbeck, wherein it alleged that Lundbeck funneled donation to CVC to drive up Xenazine’s sales – and its price at over 22 times the rate of overall inflation in the US (id. at 6).

Plaintiffs – collection agencies who specialize in recovering Medicare Advantage funds – filed this lawsuit in 2022, alleging that Lundbeck and CVC colluded with the data-analysis firm TheraCom to inflate the price and quantity of Xenazine, with Lundbeck specifically donating money to CVC that was earmarked for Medicare reimbursement of Xenazine. The two used TheraCom to communicate with each other.

Plaintiffs sued under the federal RICO statute as well as various state consumer statutes. The district court noted that the RICO statute closely followed antitrust statutes, and that many courts of appeal adopted a bright-line Illinois Brick-style indirect purchaser rule in RICO cases. The district court noted that it was inclined to agree with this approach, though it did not dismiss on these grounds. Rather, the district court held that the Plaintiffs failed to adequately plead proximate causation, and that “based on the circumstances of this case, Plaintiffs cannot possibly” explain “how an estimated thousands of independent actors, like physicians and pharmacists, played into [their] injuries, or how Defendants’ actions influenced these economic injuries.” Id. at 11, quoting MSP Recovery Claims, Series LLC v. Lundbeck LLC, 664 F. Supp. 3d at 662, 664 (E.D. Va. 2023). After Plaintiffs filed an amended complaint, the district court dismissed again, now stating clearly that the indirect purchaser rule “[did], in fact, bar Plaintiffs’ claims” because their Assignors were “indirect purchasers of Xenazine.” Id. at 12, quoting MSP Recovery Claims, Series LLC v. Lundbeck LLC, No. 3:22-cv-422, 2024 WL 37208, at *4–5 (E.D. Va. Jan. 3, 2024).

The district court did, however, hold that the Plaintiffs had Article III standing on behalf of their Assignors – both the five identified entities, along with innumerable unidentified claimants.

The Fourth Circuit agreed with the district court’s reasoning that the Plaintiffs could not show that Defendants’ actions resulted in the increase in price and volume of prescriptions. “Prescription volumes therefore depend on the intervening decisions of doctors, who owe an independent duty of care to their patients. Plaintiffs do not allege that Defendants caused Xenazine to be improperly or fraudulently prescribed, and there is no practical way to “determine what portion of Xenazine prescriptions are] attributable to [Lundbeck’s donations to CVC], as opposed to other, independent factors.” Id. at 22, citing Slay’s Restoration, 884 F.3d at 494. But it reversed the decisions finding that Plaintiffs had standing on behalf of its unidentified Assignors, given that plaintiffs need to be able to plead specific facts about a valid assignment agreement in order to have standing on behalf of an entity. Here, there were no facts about any agreement on behalf of these unnamed entities.

By David Lerch

In a published opinion issued on February 25, 2025, in Key v. Qualcomm, Ninth Circuit No. 23-3354, the Ninth Circuit affirmed the District Court’s order dismissing plaintiffs’ Cartwright Act claim based on Qualcomm’s policy of refusing to sell modem chips to original equipment manufacturers (OEMs) that did not purchase standard essential patent (SEP) licenses.  The Ninth Circuit’s conclusion rested upon its analysis that the tying product was Qualcomm’s chips and the tied product was Qualcomm’s cellular SEP portfolio, and that OEMs could not have purchased the SEP portfolio elsewhere and Qualcomm had a legitimate monopoly under patent law. 

The Ninth Circuit also affirmed the District Court’s order rejecting an interlocking exclusive dealing claim based upon Qualcomm’s policy of not asserting its patent rights against rival manufacturers if they agreed not to sell chips to unlicensed OEMs.  

The Court further concluded that Plaintiffs failed to demonstrate that Qualcomm’s practices were fraudulent under the UCL (noting that Plaintiffs failed to controvert the District Court’s finding that Qualcomm did not intentionally deceive the standard-setting organizations) and that Plaintiffs’ UCL unfairness claims also failed.  However, the Ninth Circuit concluded that the District Court should have dismissed Plaintiffs’ UCL unfairness claim without prejudice to refiling in state court to the extent it relied on exclusive dealing, because the District Court lacked equitable jurisdiction.

Previous FTC Litigation and the Consolidated Class Action

In an earlier suit, the FTC alleged that Qualcomm violated the Sherman Act through its practices including: (1) Qualcomm’s “no license, no chips” policy, under which Qualcomm refused to sell modem chips to cellular manufacturers that did not take licenses to practice Qualcomm’s patents, and (2) Qualcomm’s alleged exclusive dealing agreements with major device manufacturers Apple and Samsung (Op. at 5).  After a bench trial in the FTC action, the district court ruled for the FTC and enjoined Qualcomm’s challenged practices, but the Ninth Circuit reversed in FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020), concluding that Qualcomm’s licensing policies did not violate the Sherman Act (Op. at 9).

In a subsequent consolidated class action, plaintiffs attacked the business practices challenged by the FTC, including: (1) tying chip sales to standard essential patent licenses, (2) refusing to deal with rival chip manufacturers, and (3) exclusive dealing with Apple and Samsung (Op. at 8). The district court certified a nationwide class, and Qualcomm appealed pursuant to Fed. R. Civ. P. 23(f).  In the Rule 23(f) appeal, the Ninth Circuit vacated the class certification order, concluding that it was improper to apply California’s Cartwright Act to a nationwide class (Op. at 9).   The Ninth Circuit then remanded with instructions to consider whether any of Plaintiffs’ claims were viable in the wake of FTC v. Qualcomm and stated that extraordinary differences would need to exist between FTC v. Qualcomm and the current case for the latter to survive (Op. at 9-10).

On remand, plaintiffs proceeded only with their state law claims under California’s Cartwright Act and Unfair Competition Law (UCL) (Op. at 10). The district court dismissed plaintiffs’ tying claims and granted summary judgment on the claims for exclusive dealing. 

District Court Orders Dismissing in Part and Granting Summary Judgement

The District Court granted Qualcomm’s motion to dismiss Plaintiffs’ amended complaint in part, concluding that Plaintiffs’ allegations about Qualcomm’s unlawful tying of chips and SEPs were “not viable under current California law,”  that Plaintiffs failed to plead harm to the alleged tied market, and that Plaintiffs failed to cite any case finding an antitrust tying violation where a tied product has no rival sellers.  See In re Qualcomm Antitrust Litig., No. 17-md-2773, 2023 WL 121983 (N.D. Cal. Jan. 6, 2023).   The court also dismissed Plaintiffs’ related tying claim under the UCL. Id. at *20–22. The District Court did not dismiss Plaintiffs’ claims for exclusive dealing under the Cartwright Act or the UCL. Id. at *19. 

After considering the evidence at summary judgment, the district court concluded that Plaintiffs had shown no genuine dispute of fact as to whether Qualcomm had an exclusive dealing arrangement with Samsung. Id. at *5–6. As to exclusive dealing with Apple, Plaintiffs failed to show any triable issue of fact about market foreclosure or consumer injury. Id. At *6–7. The court also declined to grant Plaintiffs an injunction because it determined that there was no “current or future threat of anticompetitive harm,” and it denied Plaintiffs equitable restitution because they had an adequate remedy at law under the Cartwright Act. Id. at *8.

Tying Claim under the Cartwright Act

The Ninth Circuit affirmed the District Court’s conclusion that Plaintiffs’ tying claim failed. The Court stated that in considering tying claims under the Cartwright Act, courts must ascertain whether the alleged tying agreements “restrain competition in the tied product market.”  Order at 13, citing SC Manufactured Homes, Inc. v. Liebert, 162 Cal. App. 4th 68, 85 (2008) (citing Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28, 34–38 (2006)).

The Ninth Circuit stated that Plaintiffs’ argument presumed that a tying agreement can be unlawful even with no competition in the tied product’s market (Op. at 13). The Court explained that the tying products were Qualcomm’s chips and the tied product was Qualcomm’s cellular SEP portfolio (Op. at 13).  The Court noted Plaintiffs’ argument that market foreclosure was not a necessary element for a tying claim but reasoned that even if Plaintiffs did not need to plead substantial foreclosure of the tied market, California law still requires a market for the tied product to support a tying claim. The Court noted the California Supreme Court’s statement that where no market exists for the tied product there can be no antitrust injury and that forcing “a consumer to buy something that he or she would not buy elsewhere does not injure competition.”  Op. at 13, quoting Morrison v. Viacom, Inc. (1998) 66 Cal. App. 4th 534, 548. 

The Court further stated that the real injury that Plaintiffs complained about was that Qualcomm had inflated its prices. The Court stated that “[w]hile ‘[t]his practice may implicate’ the effective price of Qualcomm’s products, it is not an anticompetitive tying arrangement and it “could not have foreclosed competition in the tied product market’ since OEMs could ‘not have purchased the tied product elsewhere,’ Op. at 14, citing Morrisson, 66 Cal. App. 4th at 548–49.  The Court further stated that those “patents, by construction, are available only from Qualcomm, which is given a legitimate monopoly over its patents by law” (Op. at 14).

The Ninth Circuit also rejected tying claims based upon the theory the California Supreme Court set forth in In re Cipro Cases I & II (2015) 61 Cal. 4th 116for reverse settlements of patent litigation in which the patent holder makes payments to the alleged infringer (Op. at 15).  The Court noted that In re Cipro Cases I & II laid out a four-part test for reverse settlements under the Cartwright Act but that type of horizontal reverse settlement payment claim is not at issue with the SEP portfolios in this case and that Plaintiffs did not plead essential elements of a Cipro claim, including that the amount of the payment exceeded anticipated future litigation costs. Id. at 153–54.  The Ninth Circuit further stated that Cipro does not address—directly or indirectly—tying claims under the Cartwright Act.  The Court stated that no fair reading of Cipro supports Plaintiffs’ theory of anticompetitive harm or the proposition that the tied product can be defined to include an agreement not to challenge a cellular SEP (Op. at 15).  The Court concluded that Cipro would have to be stretched greatly to be transformed into a tying case and absent a “clear holding from the California Supreme Court,” the Ninth Circuit would not do so, citing Lozano v. AT&T Wireless Servs., 504 F.3d 718, 736 (9th Cir. 2007) (Op. at 16).  The Court stated that because Cipro cannot shoehorn a theory of Cartwright Act liability for the supra-FRAND licensing rates, “the remedy for such a breach [of FRAND commitments] lies in contract and patent law.” FTC v. Qualcomm, 969 F.3d at 1005 (Op. at 16).

Antitrust Injury

The Ninth Circuit concluded that Plaintiffs also failed to raise triable issues about antitrust injury (Op. at 26).   The Court noted that Plaintiffs relied on the expert report of Professor Elhauge to show antitrust injury to consumers. Elhauge stated that Qualcomm’s agreement with Apple would naturally increase Qualcomm’s monopoly power in chipsets, which would increase Qualcomm’s ability to raise chipset prices throughout the market.  The Court stated that according to Elhauge, this would also give Qualcomm greater ability to use its no license, no chips tie to impose above-FRAND rates on SEPs throughout the market.  Elhauge expressly claimed that “the anticompetitive effect” of the alleged exclusive dealing agreements was the exacerbation of Qualcomm’s no license, no chips policy.  The Ninth Circuit concluded that if the no license, no chips policy did not cause antitrust injury, then any alleged exacerbation of that policy could not cause antitrust injury either and that Plaintiffs could not combine two claims that could not success (i.e. the exclusive dealing and tying claim) and “alchemize them into a new form of antitrust liability.”  Op. at 27, citing Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc., 555 U.S. 438, 457 (2009).

UCL Claims Based on Tying and Exclusive Dealing, Fraud and Unfairness 

Next, the Ninth Circuit concluded that the District Court did not err in rejecting Plaintiffs’ claim that Qualcomm’s tying and purported exclusive dealing practices violated California’s Unfair Competition Law. The UCL prohibits unfair competition, which includes any unlawful, unfair, or fraudulent business act or practice and each of these three theories—unlawfulness, unfairness, and fraud— provides a separate variety of unfair competition. Op. at 16, citing Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4^th 163, 180 (1999).

The Court stated that Plaintiffs provided no good reason to disagree with the FTC v. Qualcomm district court, which found no “intentional deception of [standard-setting organizations] on the part of Qualcomm.” FTC v. Qualcomm, 969 F.3d at 996–97, and so Plaintiffs failed to state a cognizable UCL fraud claim (Op. at 18).

The Court also concluded that Plaintiffs’ UCL unfairness claim failed for several reasons. First, regarding tying, Qualcomm’s “no license, no chips” policy does not violate the letter, policy, or spirit of federal or state antitrust law and that Qualcomm’s “no license, no chips” policy is not “unfair” under any theory. Op. at 18, citing Cel-Tech, 20 Cal. 4th at 186–87 (1999); Chavez v. Whirlpool Corp., 93 Cal. App. 4th 363, 375 (2001). As to their exclusive dealing theory, the Court stated that Plaintiffs could not avail themselves of equitable relief—the only relief afforded by the UCL. Hodge v. Superior Ct., 145 Cal. App. 4th 278, 284 (2006); Cel-Tech, 20 Cal. 4th at 179 (Op. at 18).  The Ninth Circuit agreed with the District Court that Qualcomm was unlikely to again enter into similar exclusivity agreements with Apple, Samsung, or other OEMs.  Op. at 19, citing In re Qualcomm Antitrust Litig., 2023 WL 6301063, at *8, and that as a result, the past exclusivity agreements complained of “do not pose any current or future threat of anticompetitive harm.” FTC v. Qualcomm, 969F.3d at 1005. Therefore, the Court concluded that the district court did not abuse its discretion in denying an injunction. Op. at 19, citing Sardi’s Rest. Corp. v. Sardie, 755 F.2d 719, 722 (9th Cir. 1985).

Remand for District Court to Dismiss UCL Claim based on Unfairness and Exclusive Dealing

The Ninth Circuit concluded that Plaintiffs’ failure to prove their Cartwright Act claim does not make that remedy inadequate and because Plaintiffs failed to show that their remedy at law was inadequate, the district court could not exercise its equitable powers.  Op. at 20, citing Guzman v. Polaris Indus., 49 F.4th 1308, 1312 (9th Cir. 2022).   The Court stated that rather than grant summary judgment, the court should have dismissed Plaintiffs’ UCL claim without prejudice to refiling the same claim in state court (Op. at 20).  Therefore, the Court vacated the district court’s grant of summary judgment on Plaintiffs’ UCL claim and remanded with instructions to dismiss this claim—to the extent that it relies on a theory of unfairness and relates to Qualcomm’s purported exclusive dealing agreements seeking restitution—without prejudice for refiling in state court.

Exclusion of a Proposed Supplemental Expert Report

Finally, the Ninth Circuit concluded that the district court did not abuse its discretion in excluding a proposed supplemental expert report.  In opposing summary judgment, the Plaintiffs submitted a proposed supplemental report from proffered expert witness Dr. Flamm, written over four years after the close of expert discovery (Op. at 20).  Plaintiffs argued that the district court had an independent obligation to determine whether the supplementation would be substantially justified or harmless and Plaintiffs argued that, because excluding the supplemental report was tantamount to dismissal, the district court also had to find willfulness, fault, or bad faith by Plaintiffs and consider whether lesser sanctions would be adequate.

The Court stated that Federal Rule of Civil Procedure 26(a)(2) requires parties to disclose the identity of a witness they may call at trial to present evidence,  an expert’s written report, which must contain, among other things, a complete statement of his opinions and their basis, and expert reports must be disclosed at the times and in the sequence that the court orders. Op. at 21-22.  Rule 26(e), in turn, requires that a party must supplement disclosures in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, or as ordered by the court.   The Court stated that Rule 37(c)(1) gives teeth to these requirements by forbidding the use of any information not properly disclosed (Op. at 22).

The Ninth Circuit concluded that the district court did, in fact, find that the late supplementation was neither harmless nor substantially justified given that the opinion was submitted four years after the close of expert discovery.  Order at 23, citing In re Qualcomm Antitrust Litig., 2023 WL 6301063, at *4–5. It concluded that Qualcomm “identif[ied] prejudice because Plaintiffs submitted this belated opinion four years after the close of expert discovery” and the late disclosure was not substantially justified because Plaintiffs “chose to model damages based on a novel theory rather than a traditional, longstanding antitrust theory pled in their complaint.”  Op. at 23.

By Lee Berger, Travis West, and Madi Carr 

Background

In October 2019, the California legislature passed Assembly Bill 824 (“AB 824”) targeting so-called “reverse payments.”  In pharmaceutical litigation, a brand-name drug manufacturer typically sues a generic manufacturer when the generic manufacturer certifies that its product does not infringe the brand’s patents.  The lawsuit triggers a 30-month prohibition on FDA generic approval.  Sometimes brands settle by paying the generic manufacturer or offering favorable terms to delay the generic’s entry—these are “reverse payments.” In FTC v. Actavis, 570 U.S. 136 (2013), the Supreme Court held that these reverse payments may violate antitrust laws in some situations.

Against this backdrop of increasing scrutiny of reverse payments, California enacted AB 824.  California’s stated goal for AB 824 was to ensure that a brand-name company cannot continue to enforce an otherwise weak patent against a generic company through reverse payments. More specifically, the law establishes a presumption that settlement agreements through which brand-name manufacturers compensate generic manufacturers to abandon patent challenges in exchange for an agreement to enter at a later date (but before the expiration of the branded company’s patents) are anticompetitive and unlawful.  The law provides some carveouts, but, in general, if the value of the reverse payment exceeds the reasonable avoided litigation costs, the law presumes the settlement is unlawful. The law levies a civil penalty against any individual who assists in the violation of AB 824 equal to the greater of (1) three times the value received by the individual due to the violation or (2) $20 million.

An association of leading manufacturers, distributors, and suppliers of goods and services in the generic and biosimilar pharmaceutical industry challenged AB 824 for violating the Dormant Commerce Clause, among other constitutional challenges. Its attempt to have the law invalidated on its face failed, but its request for a preliminary injunction succeeded.  The Court later modified the preliminary injunction to allow California to enforce AB 824 against settlement agreements negotiated, completed, or entered into within California’s borders.  After discovery, both parties moved for summary judgment.

Holding

The Court’s analysis centered around the interplay between AB 824 and the Dormant Commerce Clause (“DCC”), which prohibits states from regulating commerce occurring wholly outside of their jurisdiction. The court reasoned that AB 824’s prohibition on reverse payments applied to any settlement agreement, even when none of the parties, the agreement, or pharmaceutical sales were tied to California, in violation of the DCC.  The court rejected the Attorney General’s argument that the law should be read to be limited to California, as the text contained no such limitation. 

Ultimately, the Court converted the current preliminary injunction against AB 824 into a permanent injunction with the same terms, leaving California free to enforce AB 824 for settlements negotiated, completed, or entered into within California.  On March 12, 2025, the California Attorney General filed a notice of appeal. 

Impact

If this decision stands, brand-name and generic drug manufacturers can likely avoid any impact of AB 824 by conducting settlement negotiations and signing settlement agreements outside of California, and avoiding the use of a California choice-of-law clause.  Still, the court did not explain what it means for a contract to be “negotiated” in California and whether any contact with California, even incidental, would trigger the law. 

By Cheryl Johnson

Agreements that Defendant ESI, a large pharmacy benefit manager (“PBM”) made with three smaller PBMs, Prime, Benecard, and Magellan, were challenged as horizontal price-fixing agreements by plaintiff pharmacies.  Under these agreements, the smaller PBMs effectively “rented” and used the much lower pharmacy reimbursement rates that ESI negotiated due to its much greater share of the pharmacy services market. 2025 WL 486195, at *1.

Price-fixing Agreement. The Court concluded that the complaint plausibly alleged a per se horizontal price fixing agreement by the smaller PBMs to share ESI’s market power and match ESI’s rates for pharmacy services that were lower and below the free market rates. Id. at *7. Defendants countered that they were immune from antitrust liability because the PBMs were “effectively purchasing cooperatives.” Id. at *5. But the court rejected the characterization as contrary to the pleadings, which alleged defendants acted independently, there was no integration of services or efficiencies generated by these agreements, and no evidence of benefits passed onto consumers. Id. at *6. Moreover, the Complaint demonstrated that the parties matched their rates after the network rental agreements while providing the very same services to pharmacies. Id. at *7. Finally, the court, having found a per se Sherman Act violation adequately alleged, declined to analyze whether a rule of reason violation was adequately alleged. Id. at *7.

Liability of Parent. Plaintiffs alleged that ESI’s parent Evernorth “actively participate[d] in the unlawful conduct [by] among other things, shaping the company policies at issue and participating in crafting, approving, and implementing the unlawful conduct.” Id. at *7.  This single bare allegation was found insufficient to show that Evernorth  was a direct participant in these agreements but leave to amend as to Evernorth was granted. Id. at *8

By Maria Ramirez  

On February 12, the District of Arizona ruled on two motions to compel arbitration in the case of Osterhaus Pharmacy Inc. v. CVS Health Corp. The court examined the enforceability of arbitration clauses included in provider agreements between dependent pharmacies and CVS Health.

Background and Legal Standard

Plaintiffs, four independent pharmacies, filed a class action suit alleging various statutory and contractual violations by CVS Health and affiliated entities, including claims under federal antitrust and Medicare statutes. In response, Defendants moved to compel arbitration, relying on a clause in the CVS Provider Manual that broadly delegated both substantive disputes and gateway questions of arbitrability to an arbitrator.

Previously, the Court held that the delegation clause, authorizing the arbitrator to determine arbitrability, was unenforceable due to substantive unconscionability. The Court then called for a supplemental briefing to assess whether the arbitration agreement as a whole should also be invalidated.

The Federal Arbitration Act (FAA) requires courts to enforce valid arbitration agreements, subject to generally applicable state law defenses such as fraud, duress, or unconscionability. In Arizona, procedural and substantive unconscionability are independent grounds for invalidating a contract, in contrast to the sliding-scale approach used in California.

The Court’s Prior Order and Defendants’ Motion to Strike

Delegation Clause  Judge Tuchi reaffirmed that the clause assigning to the arbitrator the authority to decide threshold issues of arbitrability was unenforceable. Because the clause was found to be substantively unconscionable, the Court retained jurisdiction to determine whether the remainder of the arbitration agreement was enforceable.

Procedural UnconscionabilityDespite the Court’s express directive to confine supplemental briefing to substantive unconscionability, Plaintiffs revived procedural arguments. Defendants moved to strike the offending section. The Court denied the motion, noting the disfavored status of motions to strike and reasoning that courts can simply disregard improper legal arguments without the need for formal exclusion.

On the merits, the Court found Plaintiffs’ procedural unconscionability arguments unpersuasive. Although the Provider Manual was a contract of adhesion, the Court held that such contracts are not presumptively unconscionable under Arizona law. Disparity in bargaining power and lack of negotiation over terms, without more, does not render an agreement unenforceable. The Court distinguished Arizona precedent from California’s broader approach and found no evidence that CVS’s conduct deprived Plaintiffs of a fair opportunity to understand the arbitration terms.

Discussion

Plaintiffs challenged six provisions of the arbitration agreement: (1) the fee-shifting provision, (2) the unilateral modification provision, (3), the uneven remedies provision, (4) the escrow provision, (5) the confidentiality provision, and (6) the limitations provisions. The court addressed two of these:

• Fee-Shifting Provision: Plaintiffs argued that the clause exposed them to greater financial burden than they would bear in court, particularly regarding statutory claims that do not authorize fee awards for prevailing defendants. While acknowledging the increased risk, the Court found the provision enforceable, noting that Arizona law (A.R.S. § 12-341.01(A)) already permits fee-shifting in most contract-related claims, including five of the seven asserted here.
• Unilateral Modification Clause: The Court expressed concern about a provision allowing CVS to unilaterally modify the arbitration agreement by issuing new provider manuals. However, it declined to rule the clause unconscionable absent a showing that CVS had exercised this power abusively or in bad faith. The “unilateral modification provision” in this case bears almost no resemblance to the provisions in other cases like Heckman and Edwards. The provision here constitutes an offer, where Plaintiffs have the chance of accepting the amendment or not. Unlike in Heckmand and Edwards, the arbitration clause does not indicate that an amendment to the agreement would operate retroactively. Therefore, the unilateral modification provision is not per se unconscionable.
• The Uneven Remedies Provision: Plaintiffs argue that the arbitration agreement’s remedies provisions are substantively unconscionable. They challenge two clauses: one found in all versions of the agreement, which limits categories of damages such as punitive damages and lost profits, and a second, newer clause giving Defendants broad and exclusive remedies for any breach of the arbitration agreement. The court rejects the first argument, noting that such limitations are not asymmetric or unconscionable under Arizona law. However, the second provision, dubbed the “unilateral remedy for breach” clause, is found to be one-sided and unfair because it grants expansive remedies only to Defendants, even allowing them to act against Plaintiffs for breaches by a neutral arbitrator. This clause is deemed substantively unconscionable due to its oppressive and inequitable nature.
• The Escrow Provision: In 2020 and 2022, Defendants added provisions to their arbitration agreement requiring the initiating party to place substantial sums into escrow, at least $50,000 for anticipated defense costs, plus an additional amount tied to projected claims. Applying Arizona’s Rizzio test, the Court finds these provisions substantively unconscionable. Plaintiffs demonstrated with reasonable certainty that arbitration would cost hundreds of thousands of dollars, well beyond their financial means, given their modest annual profits and liabilities. The agreement lacks any mechanism to reduce or waive these costs for financial hardship. Although Defendants waived enforcement of the escrow requirement, the Court viewed the delay as potential gamesmanship, noting that unconscionability cannot be cured by a belated waiver after prolonged litigation. Therefore, the escrow provision was held to be unenforceable due to its oppressive, chilling effect on access to arbitration.
• The Confidentiality Provision: All versions of the arbitration agreement include a confidentiality clause prohibiting disclosure of the existence, content, or outcome of any arbitration, with the 2024 version presuming that any breach would irreparably harm Defendants. Plaintiffs argue this clause is an unconscionable gag order, and the Court agrees, finding it one-sided and oppressive. The Court follows Ninth Circuit precedent, particularly Ting v. AT&T, which held that such clauses unfairly benefit repeat players like large corporations by keeping plaintiffs in the dark about past disputes. Defendants’ attempts to distinguish Ting fail, as the scale and effect of the confidentiality clause are similarly broad, affecting tens of thousands of pharmacies. The Court also rejects Defendants’ argument saying that the clause is harmless due to the lack of similar antitrust cases, noting that Plaintiffs cannot be expected to identify comparable cases while bound by a gag order. Ultimately, the Court finds the confidentiality provision unconscionable, though it states that the scope of this ruling is limited.
• The Limitation Provision: Plaintiffs challenge the arbitration agreement’s limitations provision, which originally required disputes to be initiated within six months, later extended to two years in the 2023 version. However, the Court finds this provision to be enforceable and not unconscionable. Under Arizona law, parties are generally permitted to contractually shorten statutory limitation periods, as long as doing so does not undermine the contract’s core intent. The Court rejects Plaintiffs’ reliance on Ninth Circuit cases, such as Western Filter Corp. and Ingle, as either legally irrelevant due to differing jurisdiction or inapplicable because they concern specific doctrines not at issue here. Since Plaintiffs do not invoke the continuing violation doctrine, and Arizona courts have upheld such shortened periods in commercial contracts, the Court concludes that the limitations provision is valid and not unconscionable.

The Court found three provisions of the arbitration agreement unconscionable: (1) unilateral remedies, (2) an escrow requirement, and (3) confidentiality. However, because the agreement contains a severability clause, the Court held that these problematic terms could be removed without invalidating the entire agreement.

The Court clarified that the harm of the confidentiality clause isn’t just in silencing Plaintiffs but in preventing them from accessing information—such as outcomes of other arbitrations—that Defendants accumulate as repeat players. Severing the clause alone does not fix this imbalance, but the Court did target a related discovery restriction that barred Plaintiffs from accessing data about other arbitrations. That discovery limitation, introduced in 2022, was struck down only to the extent necessary to mitigate the harm caused by the confidentiality provision. The court added that Plaintiffs may now seek discovery into other arbitration outcomes if they meet a specific evidentiary threshold. However, Plaintiffs cannot publicize any such information, they may only use it to support their case.

By David Lerch

On February 26, 2025, Federal Trade Commission Chairman Andrew Ferguson announced a Joint Labor Task Force to investigate and litigate deceptive, unfair, and anticompetitive labor market practices.  The joint labor market task force includes both the Bureau of Competition and Bureau of Consumer Protection as well as the Bureau of Economics and Office of Policy Planning.  The Task Force will be made up of at least three members from each Bureau and one member from the Office of Policy Planning.  It will be co-chaired by one representative from each Bureau. The full Task Force will meet at least monthly to assess the status of all ongoing labor matters and report on the status of those matters to the Chairman on a quarterly basis.

Labor Market Practices that Fall Within the FTC’s Jurisdiction

The FTC stated that its authority included protecting workers, in addition to consumers, and for most workers the ability to command a reasonable wage on the labor market is an individual’s single most valuable commodity.  The FTC noted that examples of conduct that fall under the FTC’s jurisdiction include:

• No-poach, non-solicitation, or no-hire agreements
• Wage-fixing agreements
• Noncompete agreements
• Labor-contract termination penalties
• Labor market monopsonies
• Collusion or unlawful coordination on DEI metrics
• Harming gig economy workers
• Deceptive job advertising
• Deceptive business opportunities
• Misleading franchise offerings
• Harmful occupational licensing requirements
• Job scams

Responsibilities of the Task Force

Chair Ferguson stated that the Joint Labor Task Force will have the following responsibilities:

• Prioritize investigation and prosecution of deceptive, unfair, or anticompetitive labor market conduct in both the Bureau of Competition and Bureau of Consumer Protection;
• Harmonize the Bureaus’ methods and procedures for uncovering and investigating deceptive, unfair, or anticompetitive labor market conduct;
• Create an information-sharing protocol across the Bureaus to exchange best practices for uncovering and investigating deceptive, unfair, or anticompetitive labor market conduct;
• Promote research on deceptive, unfair, or anticompetitive labor market conduct and disseminate those findings throughout the FTC and to the public;
• Identify opportunities for advocacy on legislative or regulatory changes that would remove barriers to labor market participation, mobility, and competition;
• Engage in public outreach informing workers of the state of the law and encourage workers to report deceptive, unfair, or anticompetitive labor market conduct to the FTC; and
• Coordinate, conduct investigations and enforcement actions.

Thursday, April 17, 2025
Office of Public Affairs

Today the Antitrust Division of the Department of Justice prevailed in its second monopolization case against Google. In United States et al. v. Google, the U.S. District Court for the Eastern District of Virginia held that Google violated antitrust law by monopolizing open-web digital advertising markets. According to the Court, Google “harmed Google’s publishing customers, the competitive process, and, ultimately, consumers of information on the open web.”   

“This is a landmark victory in the ongoing fight to stop Google from monopolizing the digital public square,” said Attorney General Pamela Bondi. “This Department of Justice will continue taking bold legal action to protect the American people from encroachments on free speech and free markets by tech companies.”

“The Court’s ruling is clear: Google is a monopolist and has abused its monopoly power,” said Assistant Attorney General Abigail Slater of the Justice Department’s Antitrust Division. “Google’s unlawful dominance allows them to censor and even deplatform American voices. And at the same time, Google destroyed and hid information that exposed its illegal conduct. Today’s opinion confirms Google’s controlling hand over online advertising and, increasingly, the internet itself. I am extraordinarily proud of the dedicated public servants whose tireless efforts led to today’s decision.”

Today’s decision follows a 15-day trial in September 2024 in the U.S. District Court for the Eastern District of Virginia. In January 2023, the Justice Department, along with Attorneys General of several states and the Commonwealth of Virginia, filed a civil antitrust lawsuit against Google for monopolizing key digital advertising technologies, referred to as the “ad tech stack,” that website publishers depend on to buy and sell ads that reach millions of customers. As alleged in the complaint, through a series of acquisitions and anticompetitive auction manipulation, Google subverted competition for over 15 years. As a result of Google’s anticompetitive and exclusionary conduct, its ad tech competitors were neutralized or eliminated.

Monday, April 14, 2025

Office of Public Affairs

A federal jury convicted a Nevada man today for participating in a three-year conspiracy to fix the wages for home healthcare nurses in Las Vegas and for fraudulently failing to disclose the criminal antitrust investigation during the sale of his home healthcare staffing company.  

According to court documents and evidence presented at trial, Eduardo “Eddie” Lopez of Las Vegas, Nevada conspired to artificially cap the wages of home healthcare nurses in the Las Vegas area between March 2016 and May 2019. The three-year conspiracy affected the wages of hundreds of Las Vegas registered nurses and licensed practical nurses who provide care to patients in their homes. During the pendency of the government’s investigation, Lopez then sold his home healthcare staffing company for over $10 million while fraudulently concealing the government’s criminal investigation from the buyer.   

“Wage-fixing agreements are nakedly unlawful attempts at unjustly profiting off American workers,” said Assistant Attorney General Abigail A. Slater of the Justice Department’s Antitrust Division. “Today’s verdict highlights what should be a clear message with antitrust crimes: the agreement is the crime. The Antitrust Division will zealously prosecute those who seek to unjustly profit off their employees. The nurses here deserved better and, under President Trump’s leadership, they will be protected.”

“Hundreds of registered nurses and licensed practical nurses were affected by the defendant’s three-year conspiracy to fix wages,” said U.S. Attorney Sigal Chattah for the District of Nevada. “The U.S. Attorney’s Office is committed to prosecuting executives who seek to line their own pockets.”

“The FBI, along with our partners, will not condone fraud schemes that undermine the wages of dedicated nurses and licensed practical nurses,” said Special Agent in Charge Spencer L. Evans of the FBI Las Vegas Field Office. “This guilty verdict serves as an important reminder that illegal activities will face strict consequences. We will remain committed to diligently pursuing individuals who exploit others for personal gain.”

Lopez was convicted of one count of participating in a wage-fixing conspiracy and five counts of wire fraud. He is scheduled to be sentenced on July 14. A violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals.  A violation of the wire fraud statute carries a maximum penalty of 20 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

April 28, 2025

The Federal Trade Commission issued a proposed order requiring Workado, LLC to stop advertising the accuracy of its artificial intelligence (AI) detection products unless it maintains competent and reliable evidence showing those products are as accurate as claimed. The settlement will be subject to public comment before becoming final.

“Consumers trusted Workado’s AI Content Detector to help them decipher whether AI was behind a piece of writing, but the product did no better than a coin toss,” said Chris Mufarrige, Director of the FTC’s Bureau of Consumer Protection. “Misleading claims about AI undermine competition by making it harder for legitimate providers of AI-related products to reach consumers.”

Workado markets its AI Content Detector to consumers who are seeking to determine whether online content was developed using generative AI technology, like ChatGPT, or if it was written by a human being. The company claimed that AI Content Detector was developed using a wide range of material, including blog posts and Wikipedia entries, to make it more accurate for the average user. The FTC alleges, however, that the AI model powering the AI Content Detector was only trained or fine-tuned to effectively classify academic content.

The order settles allegations that Workado promoted its AI Content Detector as “98 percent” accurate in detecting whether text was written by AI or human. But independent testing showed the accuracy rate on general-purpose content was just 53 percent, according to the FTC’s administrative complaint. The FTC alleges that Workado violated the FTC Act because the “98 percent” claim was false, misleading, or non-substantiated.

The proposed order settling the complaint is designed to ensure Workado does not engage in similar false, misleading, or unsupported advertising in the future. Under the proposed order, Workado:

• Is prohibited from making any representations about the effectiveness of any covered product unless it is not misleading, and the company has competent and reliable evidence to support the claim at the time it is made;
• Is required to retain any evidence it uses to support such efficacy claims;
• Must email eligible consumers about the consent order and settlement with the Commission; and
• Must submit compliance reports to the FTC one year after the order is issued and every year for the following three years.

April 14, 2025

Today, the Federal Trade Commission launched a public inquiry into the impact of federal regulations on competition, with the goal of identifying and reducing anticompetitive regulatory barriers. The FTC launched this inquiry in response to President Trump’s Executive Order on Reducing Anticompetitive Regulatory Barriers.

Per the Executive Order, the Trump-Vance FTC will be on the front lines of advancing the President’s agenda to revitalize the American economy. The FTC seeks to identify unnecessary regulations that exclude new market entrants, protect dominant incumbents, and predetermine economic winners and losers.

“Regulations that reduce competition, entrepreneurship, and innovation can hamper the American economy,” said FTC Chairman Andrew N. Ferguson. “These need to be eliminated or modified to revitalize a competitive market.” 

In a Request for Information, the FTC invites members of the public to comment on how federal regulations can harm competition in the American economy. The RFI seeks to understand what federal regulations have an anticompetitive effect. Members of the public—including consumers, workers, businesses, start-ups, potential market entrants, investors, and academics—are encouraged to comment.

The public will have 40 days to submit comments at Regulations.gov, no later than May 27, 2025. Once submitted, comments will be posted to Regulations.gov.

Friday, April 18, 2025

OAKLAND – California Attorney General Rob Bonta today joined a coalition of 21 attorneys general in supporting two commissioners, Rebecca Slaughter and Alvaro Bedoya of the Federal Trade Commission (FTC), who are challenging the illegal decision by President Trump to terminate them without cause from the Commission. In today’s amicus brief, the attorneys general highlight the importance of the FTC and assert that the two commissioners’ termination was illegal and violated longstanding Supreme Court precedent.

“A strong and independent FTC is not a partisan issue, it is an American imperative,” said Attorney General Bonta. “Not only is the President’s illegal firing of the two Commissioners extremely concerning, but it is also illegal. That’s why my fellow attorneys general and I are filing this amicus brief in support of the Commissioners’ reinstatement and to ensure the agency’s ability to fully operate, free from political influence.” 

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In the amicus brief, the attorneys general argue that the President violated the Federal Trade Commission Act, which prohibits the removal of FTC commissioners except for “inefficiency, neglect of duty, or malfeasance in office.” The Supreme Court has affirmed the constitutionality of the Act’s removal protections in Humphrey’s Executor v. United States. The removal of the two Commissioners dismantle the bipartisan structure of the agency’s leadership, which ruins the FTC’s independence by allowing the commission to become a partisan agency. This would allow the FTC to become an agency subject to the political whims of the president and unable to fully perform its function independently.

Attorney General Bonta joins the attorneys general of Arizona, Colorado, Connecticut, Delaware, the District of Columbia, Hawai’i, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, Oregon, Rhode Island, Vermont, Washington, and Wisconsin, in filing this amicus brief.

EDITORS’ NOTE: A copy of the amicus brief can be found on the CA DOJ website.

Thursday, April 17, 2025

Decision finds Google abused control of its ad technology, in violation of antitrust law 

OAKLAND — California Attorney General Rob Bonta today issued the following statement after a federal judge ruled that Google willfully acquired and maintained an unlawful monopoly of publisher ad servers and ad exchanges in United States et al. v. Google. The court further found that Google unlawfully tied its publisher ad server and its ad exchange together and imposed anticompetitive policies on its customers in order to establish and protect its monopoly power in these two markets. In 2023, Attorney General Bonta joined the U.S. Department of Justice in suing Google, claiming that the company leverages control over the technologies through which web display ads are bought and sold, driving out competition and receiving profits that far exceed what could be sustained in a competitive market.

“Advertising is key to a business’s success, and Google has been playing unfairly in the advertising space. Google’s illegal control over ad tech markets has hurt consumers, small businesses, and website creators, increased prices for advertising products, reduced competition for advertising technologies, and has stifled creativity in a space where innovation is crucial,” said Attorney General Bonta. “As the fifth largest economy in the world, California has an outsized role in protecting competition and a vibrant economy where business can thrive on merits, not on illegal business practices — today, we’ve done just that.”

Following today’s decision, the parties will return to court, where the judge will hear arguments and evidence regarding potential remedies for Google’s conduct. California, the U.S. Department of Justice, and coalition states seek to block Google’s anticompetitive practices and impose a remedy to both deny Google the fruits of its unlawful conduct and to prevent further harm to competition in the future.