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September 8, 2016

Eighth Circuit Antitrust Limitations Decision Reveals Circuit Split

On August 25, 2016, in a 2-1 decision, the Eighth Circuit ruled that the statute of limitations required dismissal of a price-fixing suit, rejecting plaintiffs’ argument that the statutory period started running again each time the defendants undertook a sale pursuant to their price-fixing conspiracy.  In re: Pre-Filled Propane Tank Antitrust Litigation, No. 15-2789 (8th Cir. August 25, 2016)(Propane). While the majority and dissenting opinions purported to interpret the case law on continuing antitrust violations differently, their differing views also reflect a split in the circuits that may ultimately require Supreme Court resolution.

Plaintiffs in Propane were direct and indirect purchasers of propane tanks used for outdoor grills and heaters. Defendants Ferrellgas (which markets under the Blue Rhino label) and AmeriGas were the largest US distributors of those tanks. Before 2008, defendants filled tanks with 17 pounds of propane. Facing rising propane costs, in 2008 defendants began filling tanks within only 15 pounds while maintaining the same price per tank. Shortly thereafter, a group of plaintiffs filed a class action against the distributors, alleging that their actions of reducing fill levels while maintaining prices were undertaken in concert, and thus amounted to an unlawful price-fixing conspiracy in violation of Section 1 of the Sherman Act, 15 U.S.C. §1. That lawsuit resulted in October 2010 settlement agreements which included payments by defendants and their agreement to cease colluding.

In 2014, a second group of plaintiffs, also direct and indirect purchasers of tanks from defendants, filed another antitrust suit, alleging that, in spite of the settlement agreements, defendants continued to conspire to maintain their illegally agreed-upon fill levels, again violating Section 1 of the Sherman Act. The district court dismissed the complaint on the ground that it was barred under the 4-year statute of limitations applicable to antitrust claims, 15 U.S.C. §15b, inasmuch as the alleged conspiracy took place in 2008. On appeal, the plaintiffs argued that the lower court erred in failing to find that the continuing nature of defendants’ violations caused the statutory period to start anew with every sale of a propane tank.

Central to the issue on appeal was the meaning of the Supreme Court’s statement in Klehr v. A.O. Smith Corp. (Klehr)521 U.S. 179, 189 (1997) that, “in the case of a ‘continuing violation’ [of the antitrust laws], say, a price-fixing conspiracy, each overt act that is part of the violation and that injures the plaintiff, e.g., each sale to the plaintiff, starts the statutory period running again, regardless of the plaintiff’s knowledge of the alleged illegality at much earlier times.”

While plaintiffs argued that this statement should be taken at face value, compelling the conclusion that defendants’ continued sales of 15-pound tanks amounted to a continuing violation of the Sherman Act, the Eighth Circuit disagreed. It held that the Supreme Court in Klehr did not intend to alter existing law under which something more than mere performance or reaffirmation of an unlawful agreement is necessary to invoke a continuing violation claim: “…Plaintiffs’ claims must be premised on ‘some injurious act actually occurring during the limitations period, not merely the abatable but unabated inertial consequences of some pre-limitations action.’” Propane, slip op. 5 (italics in original; citations omitted).

In support of its narrow interpretation of Klehr, the court explained that Klehr was a Racketeer and Corrupt Organizations Act (RICO) case, in which the Supreme Court was focused on the Third Circuit’s “last predicate act” rule, under which a RICO action accrued when the plaintiff knew or reasonably should have known of the last predicate act that was a part of the alleged pattern of racketeering activity. Noting that the statute of limitations in RICO derives from the antitrust laws, the Supreme Court analyzed the last predicate act rule under RICO by comparing it to the overt-act requirement under a price-fixing conspiracy. According to the Eighth Circuit, the Supreme Court’s purpose in stating that “each overt act that is part of the violation and that injures the plaintiff… starts the statutory period running again” was not to loosen the standard for establishing a continuing violation, but rather to clarify that, unlike the Third Circuit’s last predicate rule (which the Supreme Court overruled), the commission of a new overt act starts the limitations period running again but “generally does not permit the plaintiff to recover for the injury caused by old overt acts outside the limitations period.” Propane, slip op. 4, quoting from Klehr, 521 U.S. at 189. “Thus, the language regarding overt acts in a price-fixing conspiracy merely illustrated where the Third Circuit’s last predicate rule had gone too far.” Id., quoting from Klehr, 521 U.S. at 190.

The Eighth Circuit then cited a series of cases from the Fifth,[1] Sixth,[2] Eighth[3] and Ninth[4]Circuit cases that have required “new and independent overt acts that were more than the mere inertial consequences” of the initial unlawful conspiracy to invoke the continuing violations rule. Plaintiffs failed to satisfy this requirement, the Eighth Circuit held, because the continuing sales of 15-pound tanks were “the mere, unabated consequences of the original agreement between Defendants to lower the fill level of the propane tanks while maintaining the same price.” Propane, slip op. 4. The fact that defendants allegedly engaged in “conspiratorial communications regarding prices and fill levels” within the limitations period also did not avail plaintiffs, as those communications “merely affirm and monitor the existing conspiracy but do not constitute overt acts sufficient to restart the statute of limitations.” Ibid.

In contrast, the dissent argued that the court was bound by the Supreme Court’s statement in Klehr that each sale that is part of the violation and that injures the plaintiff starts the statutory limitations period running again. Id., slip op. 5. “Federal courts,” the dissent stated, “are bound by the Supreme Court’s considered dicta almost as firmly as by the Court’s outright holdings, particularly when the dicta is of recent vintage and not enfeebled by any later statement.” Id., slip op. at 5-6, quoting from McDonough v. Anoka County, 799 F.3d 931, 942 (8th Cir. 2015).

The dissent found the majority’s reliance on Eighth Circuit cases unpersuasive, as those cases were either distinguishable or, if read carefully, contradicted the majority’s position. Id., slip op. 6, citing Varner v. Peterson Farms, 371 F. 3d  1011 (8th Cir. 2004) and Midwestern Mach. Co. v. Northwest Airlines, Inc., 392 F.3d 265 (8th Cir. 2004).  The former was distinguishable in that it involved not a price-fixing conspiracy that brought about a series of unlawfully high priced sales over several years, but rather a tying arrangement. Ibid. The latter decision, the dissent noted, included a statement that “to apply the continuing violation theory to non-conspiratorial conduct, new overt acts must be more than the unabated inertial consequences of the initial violation.” Ibid. (italics added in dissenting opinion).  That statement supported plaintiffs’ continuing violation theory, the dissent contended, because the underlying violation was a price-fixing conspiracy.

Equally important, the dissent cited decisions from the 4th, 9th  and 11th  circuits echoing the Supreme Court’s statement that each sale of a price-fixed product restarts the limitations clock.  In re Cotton Yarn Antitrust Litigation, 505 F. 3d 275, 290-91 (4th Cir. 2007)(complaint would be timely “so long as plaintiffs made a purchase from the Defendants within [the limitations period]); Oliver v. SD-3C LLC, 751 F.3d 1081, 1086 (9th Cir. 2014)(“[T]he Supreme Court and federal appellate courts have recognized that each time a defendant sells its price-fixed product, the sale constitutes a new overt act…and the statute of limitations runs from the date of the act”); Morton’s Market, Inc. v. Gustafson’s Dairy, Inc., 198 F.3d 823, 828 (11th Cir. 1999)(“[E]ven if there were no price-fixing conversations after 1987…if plaintiffs purchase milk at a fixed price after that date, the purchase would constitute an overt act that injured it….and a new statutory period would begin to run”).

The dissent also dismissed the concern that its application of the continuing violation rule would discourage timely-filed suits, since the re-starting of the limitations period upon the occurrence of post-conspiracy price-fixed sales would not allow plaintiffs to recover for injuries that took place before the new limitations period. Propane, slip op. 7.

The majority and dissenting opinions clearly take different lessons from earlier Eighth Circuit decisions as to the nature of the continuing overt acts a plaintiff must show to survive a motion to dismiss antitrust claims on statute of limitations grounds. The majority found support in those cases for the proposition that mere sales of  fixed-price products that are not new and independent of the original conspiracy do not re-start the limitations period, while the minority found support for its contrary interpretation.  While differing interpretations of Eighth Circuit precedents by an Eighth Circuit panel merit limited attention in other circuits, the split decision in Propane also illuminated a split in other circuits’ application of the continuing violations theory for antitrust claims that may elevate its significance. Resolution of the split may have to await Supreme Court review.

[1] Al George, Inc. v. Envirotech Corp., 939 F.2d 1271, 1274 (5th Cir. 1991); Imperial Point Colonnades Condo., Inc. v. Mangurian, 549 F.2d 1029 (5th  Cir. 1977).

[2] Z Techs. Corp. v. Lubrizol Corp., 753 F.3d 594 (6th Cir. 2014).

[3] In re Wholesale Grocery Prods. Antitrust Litigation, 752 F.3d 728 (8th Cir. 2014), cert. denied, 135 S. Ct. 2805 (2015); Midwestern Mach. Co. v. Northwest Airlines, Inc., 392 F.3d 265 (8th Cir. 2004); Varner v. Peterson Farms, 371 F. 3d  1011 (8th Cir. 2004); Concord Boat Corpv. Brunswick Corp., 207 F.3d 1039 (8th Cir. 2000).

[4] Aurora Enters., Inc. v. NBC, 688 F.2d 689 (9th Cir. 1982).


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