United States District Court, D. Utah, Central Division
MEMORANDUM DECISION AND ORDER
SAM, U.S. DISTRICT COURT SENIOR JUDGE
motion to reconsider, the United States of America asks the
court to readdress whether the Rule of Reason or the Per Se
approach should apply in the present case. In light of
guidance given by the Tenth Circuit, and with the benefit of
full briefing, the court grants this motion and finds that
the Per Se approach should apply in this case.
case began on August 17, 2016 when the United States of
America indicted Kemp & Associates, a Utah Corporation,
and Daniel J. Mannix, Chief Operating Officer of Kemp
(Collectively “Defendants”) on one count of
violating § 1 of the Sherman Act. Indictment,
3. The indictment accused Defendants of seeking to suppress
and eliminate competition by agreeing to allocate customers
of Heir Location Services sold in the United States.
Id. On June 21, 2017, the parties appeared before
Judge Sam to argue several motions, including a motion to
order that the case be subject to the Rule of Reason, and a
motion Dismiss the Indictment. Upon completion of oral
testimony on the matter, Judge Sam ruled from the bench that
the case should be subject to the Rule of Reason and not the
Per Se approach, while the Motion to Dismiss was taken under
advisement. On August 28, 2017, Judge Sam issued a written
order that the Indictment be dismissed as barred by the
statute of limitations. Memorandum Decision and
Order, 2:16CR403 DS (Utah, 2017). Following Judge
Sam's decision, the United States appealed to the Tenth
Circuit Court of Appeals on September 26, 2017. On October
31, 2018, the Tenth Circuit issued a decision reversing the
district court regarding the statute of limitations issue,
and ruling that while it did not have statutory authority to
overturn the district court's decision regarding
application of the Rule of Reason, it would encourage the
court to reconsider its decision with the advantage of more
complete briefing on the matter. United States v. Kemp
& Assocs., Inc., 907 F.3d 1264, 1278 (10th Cir.
2018). On December 14, 2018, the United States filed a Motion
to Reconsider whether the Rule of Reason or the Per Se
approach should apply in the case.
United States asks the court to reconsider whether the Rule
of Reason or the Per Se approach should apply in the present
case. Although the Sherman Act could be read more broadly,
the Supreme Court has consistently ruled that it outlaws only
unreasonable restraints of trade. Leegin
Creative Leather Prods., Inc. v. PSKS, Inc.,
551 U.S. 877, 885 (2007). In determining whether a particular
restraint is unreasonable, courts generally apply the
“Rule of Reason.” Kemp, 907 F.3d at
1272. In applying the Rule of Reason, the factfinder weighs
all attendant circumstances of a case, and then decides
whether the practice imposes an unreasonable restraint on
competition. Continental T.V., Inc. v. GTE Sylvania
Inc., 433 U.S. 36, 49 (1977). Thus, under the Rule of
Reason, a defendant can introduce evidence of the challenged
restraint's positive effects on competition, and if the
good outweighs the bad, a court can find that the practice
does not violate the Sherman Act.
an exception to the Rule of Reason exists for
“agreements or practices which because of their
pernicious effect on competition and lack of any redeeming
virtue are conclusively presumed to be unreasonable and
therefore illegal without elaborate inquiry as to the precise
harm they have caused or the business excuse for their
use.” Northern Pac. Ry. Co. v. United States,
356 U.S. 1, 5 (1958). Under this exception, called the
“Per Se” approach, the government prevails merely
by proving the existence of a prohibited arrangement.
Id. If the government can prove that such an
agreement exists, then the analysis ends without inquiry into
the possible economic benefits the agreement could bring.
In re Cox Enters., Inc., 871 F.3d 1093, 1097 (10th
Cir. 2017). This provides an evidentiary shortcut through the
Rule of Reason's minutiae; in such cases, the Per Se
approach is justified based on efficiency. Arizona v.
Maricopa Cty. Med. Soc'y., 457 U.S. 332, 344 (1982).
the Per Se approach creates such an uphill battle for
defendants, its application is limited solely to agreements
that are “so plainly anticompetitive that no elaborate
study of the industry is needed to establish
illegality.” Texaco Inc. v. Dagher, 547 U.S.
1, 5 (2006). Thus, “[i]t is only after considerable
experience with certain business relationships that
courts classify them as per se violations of the Sherman
Act.” United States v. Topco, Inc., 405 U.S.
596, 607-08 (1972) (emphasis added). This requires that the
court have experience with the particular practice
being challenged, and need not have experience within the
specific industry in which the allegedly unlawful
practice was used. Maricopa Cty. Med. Soc'y, 457
U.S. at 351. The Per Se approach need not be
“justified” for every industry that has not been
subject to significant antitrust litigation. Id.
However, when special circumstances so dictate, the Per Se
approach may be rendered inapplicable where it would
otherwise apply but for those special circumstances. This
order will analyze (1) whether the agreement is one to which
the Per Se approach normally applies, and (2) if so, whether
any special circumstances exist that could render it
inapplicable. See, Nat'l Collegiate Athletic
Ass'n v. Bd. of Regents of Univ. of Oklahoma, 468
U.S. 85, 103 (1984).
Authority over the Motion to Reconsider
Court has authority over the United States' motion for
reconsideration. A motion for reconsideration should be
granted only to correct errors of law, or to present newly
discovered evidence. Phelps v. Hamilton, 122 F.3d
1309, 1324 (10th Cir. 1997). A motion for reconsideration
should not be granted merely to give the moving party a
second bite at the apple. Mantle Ranches, Inc. v. U.S.
Park Service, 950 F.Supp. 299, 300 (D. Colo. 1997).
Furthermore, such motions are granted or denied at the
discretion of the district court judge as every order short
of a final judgement is subject to reopening at their
discretion. Price v. Philpot, 420 F.3d 1158, 1167-68
(10th Cir. 2005). The application of the Rule of Reason or
the Per Se rule is a question of law. In re Sulfuric Acid
Antitrust Litigation, 703 F.3d 1004, 1008 (7th Cir.
motions for reconsideration can be granted to correct errors
of law, and since the application of the Rule of Reason or
the Per Se rule is a question of law, this Court has the
authority to grant the motion now before it.
Whether the “Guidelines” is an Agreement Subject
to the Per Se Approach
court finds that the agreement in question, known as the
“Guidelines, ” is a horizontal customer
allocation agreement, and thus subject to the Per Se
approach. Horizontal customer allocation agreements are
normally subject to the Per Se approach. United States v.
Kemp & Assocs., Inc., 907 F.3d 1264, 1273 (10th Cir.
2018). To prove that such an agreement exists, a plaintiff
must show: (1) An agreement between competitors (2) at the
same level of the market structure (3) to allocate
territories (4) in order to minimize competition. United
States v. Topco Assocs., 405 U.S. 596, 608 (1972).
Allocation of territories includes agreements to allocate or
divide customers between competitors within the same
horizontal market. United States v. Suntar Roofing,
Inc., 897 F.2d 469, 473 (10th Cir. 1990). Such
agreements constitute per se violations of the Sherman Act
except in rare circumstances in which cases their
legality should be determined applying the Rule of Reason.
See, e.g., Nat'l Collegiate Athletic Ass'n v. Bd.
of Regents of Univ. of Oklahoma, 468 U.S. 85, 103
(1984). In determining whether a specific arrangement
qualifies as a customer allocation agreement, it is
immaterial whether the agreement applies to new or existing