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Third Circuit Provides Clarity to “Inextricably Intertwined” Basis of Antitrust Injury in Partially Reinstating Claims Against ShopRite

On November 12, 2015, the Third Circuit Court of Appeals issued an opinion partially reversing the dismissal of the plaintiff’s claims in Hanover 3201 Realty, LLC v. Village Supermarkets, Inc., finding that plaintiff Hanover Realty had successfully pleaded antitrust standing with regard to certain of its claims. The Third Circuit clarified—and potentially expanded the scope of—its prior interpretations of the Supreme Court’s seminal standing decision in Blue Shield of Va. v. McCready, 457 U.S. 465 (1982), which held that a plaintiff did not necessarily need to be a consumer or a competitor of a defendant to establish antitrust injury, if it could show that its injury was “inextricably intertwined” with the injury to intended victims of an antitrust conspiracy.

The plaintiff in Hanover Realty is a real estate developer who had contracted with the Wegman’s supermarket chain to build a new supermarket. As part of the parties’ agreement, Hanover Realty was required to secure all the necessary permits for construction. As alleged in the complaint, after defendant ShopRite (who already had a local supermarket) learned of Wegman’s plans, it worked with a subsidiary to file a number of challenges to Hanover Realty’s permit applications, which succeeded in substantially delaying the construction of the Wegman’s supermarket. After several years of litigation related to the permits, Hanover Realty sued the defendants for violations of Section 2 of the Sherman Act in connection with alleged attempts to monopolize the local market for full-service supermarkets and the local market for supermarket rental space. The defendants successfully moved to dismiss the complaint based on a failure to plead antitrust injury, arguing that Hanover Realty, as a real estate developer, was not a consumer or a competitor of defendants in the relevant market.

The Third Circuit acknowledged that under the Clayton Act typically only consumers or competitors of antitrust defendants could establish that they were injured by violations of the antitrust laws—and that antitrust injury was a “necessary but insufficient condition of antitrust standing.” With regard to its first claim (related to the market for full-service supermarkets), Hanover Realty conceded it was neither a consumer nor a competitor, but argued that its injuries were “inextricably intertwined” with the conduct of the defendants, and thus they could establish injury under McCready. In McCready, the Supreme Court found that an insurance plan beneficiary who was attempting to recover payments for visits to psychologists could establish standing to pursue an antitrust claim against the defendants, who had allegedly conspired to exclude psychologists from reimbursement. Although psychologists were the targets of the conspiracy, the Supreme Court found that the injury to the plaintiff was bound up with the injury to the psychologists. The Third Circuit agreed that McCready applied to Hanover Realty—although the goal of ShopRite’s conduct was to injure Wegman’s, the party bearing the brunt of ShopRite’s conspiracy was the plaintiff. The Third Circuit reasoned that if Wegman’s had purchased the property and attempted to apply for the permits itself, it would have been able to mount its own antitrust challenge, and that “[i]t should make no difference that the parties’ lease shifted these costs to Hanover Realty.” The Third Circuit rejected defendants’ argument that its prior case law had confined the “inextricably intertwined” test to plaintiffs selling goods in the same market as defendants , though it noted that “at least one” of its prior decisions contained language that “potentially overstated” the limits to the test. The Third Circuit also found no possibility of duplicative damages, as the damages to Hanover Realty—the attorneys’ fees and costs involved in responding to ShopRite’s legal challenges—were never borne by Wegman’s.

The Third Circuit, however, affirmed the dismissal of Hanover Realty’s claims related to the market for supermarket rentals. There, Hanover Realty argued that it could establish antitrust injury because it was a competitor of the ShopRite subsidiary that participated in the conspiracy. The Third Circuit rejected the idea that Hanover Realty and ShopRite’s subsidiary were realistic competitors, finding that the subsidiary is controlled by ShopRite and there was no real likelihood that Hanover Realty would ever be able to rent space to ShopRite.

Judge Ambro, in dissent, rejected the idea that Hanover Realty had standing, finding that although Hanover Realty might have valid tort claims against the defendants, it did not participate in the market for full-service supermarkets, and thus could not show it was a proper antitrust plaintiff.

By reinstating Hanover Realty’s claims under the “inextricably intertwined” test, the Third Circuit has potentially widened the opening for additional classes of plaintiffs to assert claims for antitrust injury, assuming they can show that they suffer some sort of injury as the direct result of a conspiracy. Further cases may provide additional clarity as to how frequently this basis of antitrust standing will be found to apply.