No Attorney Fees Under the FTC Act

On February 28, 2017, U.S. District Judge Emmet Sullivan ruled that Pennsylvania and the District of Columbia AGs were not entitled to $175,000 in legal fees for their efforts in the Federal Trade Commission’s (“FTC”) challenge to Staples Inc.’s proposed acquisition of Office Depot.

The FTC clearly took the lead and won a preliminary injunction under the more lenient standard under 13(b) of the FTC Act.  After winning the preliminary injunction not a permanent injunction under the Clayton Act, Staples and Office Depot abandoned their merger plans.

Pennsylvania and D.C. argued they were entitled to fees under a provision of the Clayton Act that allows for the reimbursement of legal costs when the plaintiff “substantially prevails.” Staples’ lawyers painted the AGs as mere spectators and argued that they should not be entitled to legal fees for two reasons.  First, they did not win under the Clayton Act and second, the fees were unreasonable.

Judge Sullivan agreed as he held that that the FTC prevailed under the FTC Act, which does not grant legal fees to winning plaintiffs.  “Simply put, moving plaintiffs cannot have it both ways,” Sullivan wrote in a 10-page opinion. “They cannot ride the FTC’s claim to a successful preliminary injunction under the more permissive [FTC Act] standard and then cite that favorable ruling as the sole justification for fee-shifting under the more rigorous Clayton Act standard.”  Judge Sullivan said Pennsylvania and D.C. “effectively ask this court to take an unprecedented step.”  As Judge Sullivan correctly put it, the choice to challenge the deal under the FTC Act was a “strategic one” and “moving plaintiffs cannot bring a petition for fee-shifting under a provision under which they did not prevail.”

Lesson Learned

If you are a state AG and ride along with the FTC in a merger challenge under the FTC Act, do not expect to get attorney fees.  First, the FTC Act does not allow for attorney fees.  Second, as a state AG that is taking a back seat, it is difficult to produce any documentation of actual work that is not duplicative.  Now, on the other hand, if you are a plaintiff that prevails under the more rigorous Clayton Act standard, well maybe, you might be entitled to attorney fees.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com