Keith Dean Bradt v. T-Mobile US, Inc. ( 2020 )

1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 KEITH DEAN BRADT, et al., Case No. 19-cv-07752-BLF 8 Plaintiffs, ORDER DENYING PLAINTIFFS’ 9 v. MOTION TO ENJOIN MERGER PENDING APPEAL 10 T-MOBILE US, INC., et al., [Re: ECF 69] 11 Defendants. 12 13 I. INTRODUCTION 14 This case concerns the impending merger of T-Mobile US, Inc. (“T-Mobile”) and Sprint 15 Corporation (“Sprint”), two of the four major providers of mobile wireless communications 16 services in the United States. Plaintiffs, twenty-four individual consumers of mobile wireless 17 services, claim that the merger would violate federal antitrust laws. After unsuccessfully applying 18 to this Court for a temporary restraining order (“TRO”) to enjoin the merger, Plaintiffs appealed 19 the denial of the TRO to the United States Court of Appeals for the Ninth Circuit. That appeal is 20 pending. 21 On March 6, 2020, Plaintiffs filed the present motion to enjoin the merger pending appeal. 22 Plaintiffs requested an expedited briefing schedule and shortened time for hearing. The Court 23 granted those requests and heard oral argument on March 12, 2020. For the reasons discussed 24 below, Plaintiffs’ motion to enjoin the merger pending appeal is DENIED. 25 II. LEGAL STANDARD 26 Plaintiffs’ motion is governed by Federal Rule of Civil Procedure 62(d), titled “Injunction 27 Pending an Appeal.” Fed. R. Civ. P. 62(d). That rule provides in relevant part as follows: “While 1 refuses, dissolves, or refuses to dissolve or modify an injunction, the court may suspend, modify, 2 restore, or grant an injunction on terms for bond or other terms that secure the opposing party’s 3 rights.” Id. Motions for relief under Rule 62(d) are evaluated using the traditional four-factor test 4 applicable to motions for stay: “(1) whether the stay applicant has made a strong showing that he 5 is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a 6 stay; (3) whether issuance of the stay will substantially injure the other parties interested in the 7 proceeding; and (4) where the public interest lies.” Hilton v. Braunskill, 481 U.S. 770, 776 8 (1987)1; see also Nken v. Holder, 556 U.S. 418, 434 (2009) (discussing four-factor test). “There is 9 substantial overlap between these and the factors governing preliminary injunctions; not because 10 the two are one and the same, but because similar concerns arise whenever a court order may 11 allow or disallow anticipated action before the legality of that action has been conclusively 12 determined.” Nken, 556 U.S. at 434. 13 The first factor does not require the movant to show that success on the merit is more 14 likely than not. Leiva-Perez v. Holder, 640 F.3d 962, 966 (9th Cir. 2011). A demonstration of “a 15 substantial case on the merits” or the existence of “serious legal questions” may be sufficient 16 depending on the strength of the movant’s showing on the other factors. Id. at 967-68. The 17 burden is heavier with respect to the second factor, as the movant must show that absent a stay, 18 “an irreparable injury is the more probable or likely outcome.” Id. at 968. “Once an applicant 19 satisfies the first two factors, the traditional stay inquiry calls for assessing the harm to the 20 opposing party and weighing the public interest.” Nken, 556 U.S. at 435. Where the movant has 21 made a lesser showing on the first factor – establishing serious legal questions rather than a strong 22 likelihood of success on the merits – the movant must show that the balance of hardships tips 23 sharply in its favor. Leiva-Perez, 640 F.3d at 970. 24 III. DISCUSSION 25 Plaintiffs assert that all four factors are satisfied in this case. With respect to the first 26 factor, likelihood of success on the merits, Plaintiffs argue that they are likely to prevail on their 27 1 appeal because this Court’s order denying the TRO misapplied the relevant legal authorities in 2 evaluating the likelihood that Plaintiffs would succeed on the merits of their Clayton Act § 7 3 claim. With respect to the second factor, irreparable injury, Plaintiffs contend that if the merger 4 goes forward while the appeal is pending there will be irreparable injury to competition – a 5 reduction in the number of competitors in the national market for mobile wireless communications 6 services – before the appeal can be heard. With respect to the remaining factors, potential injury 7 to Defendants and the public interest, Plaintiffs argue that any financial cost to Defendants 8 resulting from delay of the merger is insufficient to outweigh the public interest in maintaining 9 effective competition pending decision on Plaintiffs’ appeal. Defendants argue that Plaintiffs have 10 not satisfied the requirements for obtaining an injunction of the merger pending appeal. 11 A. Likelihood of Success / Serious Questions Going to the Merits 12 In order to obtain an injunction pending appeal, Plaintiffs must establish a likelihood of 13 success on their appeal or at least serious questions going to the merits of the appeal. Plaintiffs 14 assert that this factor is met because the Court misapplied the relevant legal authorities in 15 evaluating the likelihood of Plaintiffs’ success on the merits of their Clayton Act § 7 claim. 16 In its order denying Plaintiffs’ application for a TRO (“Denial Order”), the Court 17 determined that Plaintiffs had not established a likelihood of success or serious questions going to 18 the merits of their Clayton Act § 7 claim. See Denial Order at 5, ECF 52. The Court relied 19 primarily on United States v. Gen. Dynamics Corp., 415 U.S. 486 (1974), and Saint Alphonsus 20 Med. Ctr.-Nampa Inc. v. St. Luke’s Health Sys., Ltd., 778 F.3d 775 (9th Cir. 2015), in setting forth 21 the requirements for proving a claim under the Clayton Act § 7. See id. at 3. Section 7 “bars 22 mergers whose effect ‘may be substantially to lessen competition, or to tend to create a 23 monopoly.’” Saint Alphonsus, 778 F.3d at 783 (quoting 15 U.S.C. § 18). Section 7 claims are 24 assessed under a burden-shifting framework, under which the plaintiff first must establish a prima 25 facie case that a merger is anticompetitive, the defendant then has the burden to rebut the prima 26 facie case, and if the defendant successfully rebuts the prima facie showing, the plaintiff has the 27 ultimate burden of persuasion. Id. 1 that the merger is anticompetitive. See Denial Order at 4. The Court also found that Defendants 2 had rebutted the prima facie case with evidence that the Department of Justice’s Antitrust Division 3 (“DOJ”) and the Federal Communications Commission (“FCC”) investigated the merger and 4 negotiated divestitures to Dish Network Corporation (“DISH”) that will enable DISH to become a 5 major competitor in the nationwide mobile wireless services market and thus preserve the 6 competitive structure of the industry. See id. This Court observed that the United States District 7 Court for the Southern District of New York (“SDNY”) had conducted a two-week bench trial in 8 which Attorneys General of several states sought to enjoin the same merger for the same antitrust 9 violations alleged here. See Denial Order at 4. The SDNY court concluded that the merger does 10 not violate antitrust laws, relying in part on the negotiated divestitures to DISH designed to ensure 11 that DISH becomes an aggressive fourth competitor in the relevant market. See id. 12 This Court took note of evidence culled from the SDNY trial record, and presented by 13 Defendants here, that efficiencies arising from the merger will lead T-Mobile to compete more 14 aggressively to the ultimate benefit of all consumers. Denial Order at 5. The Court cited Saint 15 Alphonsus for the proposition that a prima facie case may be rebutted “with evidence that the 16 proposed merger will create a more efficient combined entity and thus increase competition.” Id. 17 The Court found that Plaintiffs had “failed to offer any evidence to demonstrate that the mitigating 18 requirements imposed by the DOJ and the FCC are insufficient to ameliorate the anticompetitive 19 effects of the proposed merger or that those requirements are unlikely to actually occur.” Id. at 5. 20 For those reasons, the Court concluded that Plaintiffs had failed to show a likelihood of success or 21 serious questions going to the merits. Id. 22 In their current motion, Plaintiffs correctly argue that Defendants’ evidence of post-merger 23 efficiencies is not sufficient, standing alone, to rebut a prima facie case. See Saint Alphonsus, 778 24 F.3d at 790 (“[A] successful efficiencies defense requires proof that a merger is not, despite the 25 existence of a prima facie case, anticompetitive.”). To the extent that its Denial Order suggested 26 otherwise, the Court now clarifies that its ruling on Plaintiffs’ TRO application did not turn solely 27 or even primarily on evidence of post-merger efficiencies. As stated at the February 27, 2020 1 substantial evidence that the measures required by the DOJ and FCC – especially the divestiture to 2 DISH to create a fourth market competitor – would sufficiently ameliorate the anti-competitive 3 effects of the proposed merger. That evidence was sufficient to rebut the prima facie case 4 established by Plaintiffs, and on that basis the Court determined that the burden shifted back to 5 Plaintiffs to demonstrate the likely anticompetitive effects of the merger in its ultimate form, 6 taking into account the DOJ and FCC requirements. Plaintiffs failed to meet that burden and thus 7 failed to show a likelihood of success or serious questions going to the merits of their Clayton Act 8 § 7 claim. 9 Plaintiffs have not presented any new evidence related to the “structure, history and 10 probable future” of the wireless communications market that would support their argument that 11 the T-Mobile-Sprint merger in its current form would have probable anticompetitive effects. See 12 Gen. Dynamics, 415 U.S. at 498. Plaintiffs rely on a 2018 FCC Communications Marketplace 13 Report, Alioto Decl. Exh. A, ECF 69-1; a 2011 complaint filed by Sprint against AT&T, Inc. and 14 others, alleging Clayton Act violations, Alioto Decl. Exh. B, ECF 69-1; and a blog post 15 summarizing a telecommunications consultant’s comments about an unnamed DISH employee’s 16 opinion regarding DISH’s capabilities in obtaining competitive coverage, Alioto Decl. Exh. C, 17 ECF 69-1. The 2018 FCC Communications Marketplace Report and the 2011 complaint prove 18 nothing with respect to the merger in its current form, as modified in accordance with DOJ and 19 FCC requirements, and the blog post proves nothing at all. 20 Accordingly, the Court finds that Plaintiffs have failed to demonstrate a likelihood of 21 success on or serious questions going to the merits of their appeal. That failure is fatal to 22 Plaintiffs’ motion for an injunction pending appeal. See Nken, 556 U.S. at 434 (showing of 23 likelihood of success is “critical”). The Court nonetheless addresses the other factors of the test 24 for the sake of completeness. 25 B. Irreparable Injury 26 Plaintiffs must show that they will suffer irreparable injury absent an injunction of the 27 merger pending disposition of their appeal of the Denial Order. Plaintiffs rely on a four-paragraph 1 Stensrud Decl., ECF 7. Mr. Stensrud states that he is a long-time customer of Sprint and he 2 speculates that if the merger goes forward he will “be harmed in the future by higher prices, fewer 3 plans, fewer choices, less innovation, and reduced service.” Stensrud Decl. ¶ 4. Mr. Stensrud 4 provides no factual basis for these speculations. Moreover, any monetary loss could be fairly 5 compensated with a monetary damages award. 6 Plaintiffs also assert that as part of the merger transaction, “35,000 cell towers will be 7 decommissioned.” Pl.’s Motion for Injunction Pending Appeal at 4, ECF 69. Plaintiffs appear to 8 assume that the reduction of the number of cell towers will reduce service. At the hearing, 9 Plaintiffs further argued that 400 retail locations will close if the merger goes forward. Defendants 10 respond that Plaintiffs’ arguments are not based on the facts. Defendants argue that any reduction 11 in cell towers is geared to eliminating unnecessary duplication and that Sprint’s radios will be 12 transferred to T-Mobile towers. Defendants further explain that the DOJ/FCC settlements provide 13 that DISH has the option to take over all of the decommissioned cell towers and retail locations, 14 thus ameliorating the concerns expressed by Plaintiffs. Defendants’ position is supported by the 15 order of the SDNY court, the DOJ/FCC settlements, and the record in that case. Plaintiffs have 16 not provided any contrary evidence regarding the impact of decommissioning cellular towers or 17 closing retail locations. 18 Plaintiffs further attempt to satisfy this factor by asserting that irreparable injury is 19 established by the merger itself – an argument tantamount to a per se rule whenever a merger is 20 proposed. Plaintiffs’ position is not supported by the cases they cite. Plaintiffs rely on an out of 21 circuit case, Hosp. Corp. of Am. v. F.T.C., 807 F.2d 1381 (7th Cir. 1986), for the proposition that 22 the Supreme Court’s 1960s antitrust jurisprudence establishes the illegality of any nontrivial 23 acquisition of a competitor. Even if it were inclined to follow out-of-circuit precedent that has not 24 been adopted by the Ninth Circuit, which it is not, this Court is unpersuaded by Plaintiffs’ 25 selective reliance on portions of the cited case. The Seventh Circuit’s review in Hosp. Corp. was 26 limited to determining whether the FTC’s decision was supported by substantial evidence. Id. at 27 1385. Moreover, Plaintiffs ignore Judge Posner’s acknowledgement in Hosp. Corp. that later 1 point this Court discussed at the TRO hearing, see TRO Hrg. Tr. 17:11-18, ECF 63. 2 Plaintiffs have failed to demonstrate that they are likely to suffer irreparable injury 3 sufficient to warrant issuance of an injunction pending appeal, particularly in light of their failure 4 to establish any of the other required elements. “A stay is not a matter of right, even if irreparable 5 injury might otherwise result.” Nken, 556 U.S. at 433 (internal quotation marks and citation 6 omitted). “The party requesting a stay bears the burden of showing that the circumstances justify” 7 the requested relief. Id. Plaintiffs have not done so here. 8 C. Injury to Other Parties 9 Plaintiffs must establish that issuance of an injunction pending appeal will not substantially 10 injure other parties interested in the proceeding. This Court previously determined in the context 11 of the TRO application that the issuance of injunctive relief would substantially injure Defendants, 12 and that the balance of equities tips in Defendants’ favor. The Court reaffirms that conclusion 13 here. Defendants have received DOJ and FCC approval based on a modified merger plan with 14 significant divestiture to DISH so that DISH may enter the market as a competitor. Defendants 15 have prevailed in a two-week trial on the merits in the SDNY that was fiercely litigated by 16 numerous attorneys general. And, T-Mobile now faces expiration of its bridge financing on May 17 1, 2020 if the merger does not go forward.2 Delay may significantly imperil this $26 billion 18 merger that has been in the works for almost two years. While Plaintiffs argue conclusorily that 19 Defendants will not be injured if the merger is delayed pending appeal, that argument is not 20 supported by this record. 21 Plaintiffs have failed to show that this factor favors an injunction of the merger pending 22 appeal. 23 D. Public Interest 24 Plaintiffs argue that an injunction of the merger pending appeal is in the public interest, 25 because an injunction would maintain the status quo of existing competition in the nationwide 26 market for mobile wireless communications services. Plaintiffs’ argument ignores the facts that 27 1 the DOJ and FCC both have determined that going forward with the merger is in the public 2 || interest, and that the SDNY has determined that the merger will not impair competition in 3 violation of federal antitrust laws. Plaintiffs present no evidence sufficient to controvert the 4 || determinations of the two agencies and the district court. 5 Meanwhile, the Court cannot ignore that Plaintiffs delayed filing this suit until nineteen 6 || months after the merger announcement. As Plaintiffs’ counsel, Mr. Alioto, candidly discussed 7 with the Court at the TRO hearing, he purposefully delayed filing suit after speaking to the state 8 || attorney general. TRO Hrg. Tr. 54:14-17, ECF 63. Thus, any emergency is one of Plaintiffs’ own 9 making. Had suit been filed one year ago, a trial on the merits could have been completed by now. 10 || Having chosen to sit back and wait, Plaintiffs cannot credibly claim that emergency relief is 11 necessary to protect the public interest. 12 Plaintiffs have failed to show that this factor favors an injunction of the merger pending 5 13 appeal. 14 |) Iv. ORDER 3 15 Plaintiffs’ motion to enjoin the merger pending appeal is DENIED. 16 = 17 Dated: March 13, 2020 18 hom Lh haman BETH LABSON FREEMAN 19 United States District Judge 20 21 22 23 24 25 26 27 28