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The Eighth Circuit Reignites Claims of Continuing Conduct in Propane Tank Conspiracy

A split Eighth Circuit recently reversed a prior panel ruling and reignited antitrust claims against distributors of pre-filled propane tanks. The 5-4 majority cited the 1997 Supreme Court decision Klehr v. A.O. Smith Corp. to rule that for allegations of a price-fixing conspiracy under the Sherman Antitrust Act, each sale at an artificially inflated price restarts the statute of limitations.

In 2009, a class of indirect purchasers – those who bought tanks from retailers – sued several distributors of pre-filled propane tanks for allegedly conspiring to reduce the amount of propane in the tanks while maintaining the price, in violation of the Sherman Antitrust Act, as well as state antitrust and consumer protection laws. The parties ultimately settled; however, five years later, a group of direct purchasers – those who bought tanks from defendants for resale – filed suit, alleging that defendants conspired to reduce the volume of propane in the tanks and charged “supracompetitive prices…throughout the Class Period.”

The district court and a divided panel of the Eighth Circuit dismissed the plaintiffs’ claims as untimely. On rehearing, the Eighth Circuit reversed.

Plaintiffs sought refuge under one exception to the Sherman Act’s statute of limitations – continuing violations. Under this exception, the statute of limitations is restarted for each “overt act” of the defendant, that is, “a new and independent act” that “inflict[s] new and accumulating injury on the plaintiff.” At issue was whether sales at artificially inflated prices were overt acts and whether the complaint pled a continuing violation sufficient to invoke the exception.

Defendants argued that plaintiffs’ reliance on Klehr v. A.O. Smith Corp. was misplaced, for that case pertained to RICO violations and only discussed antitrust continuing violations in dicta. While the Eighth Circuit agreed with defendants that federal courts are not necessarily bound by Supreme Court dicta, the Eighth Circuit did acknowledge that the Supreme Court’s definition of continuing violations comported with precedent, and should thus be afforded deference. Furthermore, the Eighth Circuit noted that “[e]very other court to consider this issue” has held that each sale in a price-fixing conspiracy constitutes an overt act and restarts the statute of limitations.

The Eighth Circuit also confirmed the broad scope of the exception, explaining that the plaintiffs’ knowledge of the alleged illegal conduct was not a factor in the statute of limitations calculation for the continuing violations exception. Thus, plaintiffs can know about the allegedly unlawful conduct much earlier, but wait to file suit as long as there are overt acts.

In order to sufficiently plead the existence of a continuing violation, plaintiffs must allege “(1) “a price-fixing conspiracy;” (2) “that brings about a series of unlawfully high priced sales” during the class period; and (3) “sale[s] to the plaintiff[s]” during the class period.” The Eighth Circuit found that plaintiffs had satisfied this showing.

The dissent found that the majority’s decision misinterpreted Klehr, and explained that the inclusion of the brief dicta on antitrust law was only to “illuminate the discussion of tolling RICO claims.” The dissent concluded that the plaintiffs failed to allege an ongoing conspiracy, and that the dismissal should upheld.

The protections of the Sherman Act’s limitations period have been weakened, and defendants in antitrust cases are now more vulnerable to allegations exceeding the four year statute of limitations.

© 2017 Proskauer Rose LLP.

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About this Author

Law Clerk

Rucha Desai is a law clerk in the Litigation Department and a member of the Commercial Litigation Group.

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