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Antitrust case targets taverns for cutting drink specials

The case has been stayed for at least a few months while the parties brief an insurer’s motion for summary judgment, but Eichenseer, et al. vs. Madison-Dane County Tavern League, Inc., et al., has already had 15 minutes of fame.

The lawsuit, filed in March, alleges that more than 20 downtown Madison taverns conspired to eliminate Friday and Saturday evening drink specials — and it attracted the attention of the cable network Comedy Central’s comedic news program, “The Daily Show.”

One of the show’s correspondents, Ed Helms, came to Madison last spring to prepare a segment that aired about the suit.

“They tried interviewing parties to the action, but neither the plaintiffs nor the defendants would speak, on advice of counsel,” said Madison Alderperson Mike Verveer, who appeared in the clip, and whose district encompasses much of the State Street area where many of the defendant establishments are located. “So they were stuck with me and some UW students.”

Verveer now also prefers not to comment on the litigation, as his testimony is sought in the case. His “national TV debut” occurred prior to the arrival of the subpoena, he said.

Notwithstanding the material comedians and even local media pundits apparently see in the action — and although an attorney who co-represents one of the defendants said that other lawyers “snicker” when he tells them about the case — the complaint is decidedly not lighthearted.

The complaint alleges that the defendant establishments and the Madison-Dane County Tavern League agreed to implement a “voluntary ban on drink specials” that constituted a per se price-fixing conspiracy. The plaintiffs demand relief under state antitrust statutes.

In a notice of claim against entities that are not currently named in the suit, the plaintiffs’ attorneys wrote that while the precise dollar amount of damages can only be fixed after further discovery, “the Class has initially concluded that the total amount of the claim of all Class members is reasonably estimated to be in excess of $10 million.”

In recent months, the Wisconsin Law Journal talked to lawyers from the law firm representing the plaintiffs, Lommen, Nelson, Cole & Stageberg, P.A., which has offices in Hudson and Minneapolis, and to attorneys from firms representing various defendants about the case and the events preceding it.

“Political Maneuver”

Kendall W. Harrison of LaFollette, Godfrey & Kahn, which represents many of the defendants, says that a joint effort by the City of Madison and the University of Wisconsin to curb over-consumption of alcohol by downtown patrons — and especially by students — had gained momentum in the summer of 2002 and nearly resulted in the enactment of a complete ban on drink specials after about 8:00 every night. The proposed ban “wasn’t very well received” by area bar owners, he says.
Some of the bar owners started talking to representatives on the Madison Alcohol License Review Committee and the city’s common council, Harrison says, and they received messages in response that they needed to take action or the ban likely would be enacted.

In an attempt to prevent a seven-day-a-week ban, some of the bar owners ran an idea past members of city government, he says, pursuant to which drink specials would not be offered on Friday and Saturday nights after 8:00 p.m.

Documents attached to an affidavit filed by one of the plaintiffs’ attorneys in the case purport to show that a group of taverns identifying itself as the Down-town Tavern Working Group issued a press release announcing in September 2002 that late-night drink specials would not be offered on Friday and Saturday nights after Sept. 20, 2002, and continuing for “at least the next year.”

According to Harrison, the move “met the city’s regulatory demands,” stalling the drive to enact a seven-day-a-week ban on evening drink specials.

“And so as a political maneuver, which is I think what this was, it succeeded fantastically,” he said.

Moreover, the end result of the proposal was pro-competitive, Harrison says.

“They forestalled a seven-day-a-week ban,” he says.

Harrison says that the announcement is not proof of a price-fixing agreement.

“This was an announcement that was made without anybody having to sign some sort of blood pact, or any pact whatsoever,” he said. “People were free to do [what] they wanted to.”

“Competition is Good”

The plaintiffs assert in the complaint that the alleged cartel took action to ensure that participants did not “cheat” on the alleged agreement.

And although some in the media have made light of the suit, the plaintiffs’ attorneys insist that the case is moored in fundamental antitrust principles.

“Competition is good. That is the policy of the antitrust laws,” said Steven Uhr, who is of counsel to Lommen, Nelson, Cole & Stageberg, P.A., and who received his undergraduate degree from the University of Wisconsin in Madison. “You can’t just have a group of competitors agree to override that policy.”

“Obviously, we are not advocating through this lawsuit abuse of alcohol or binge drinking, but there are lawful ways to address that,” Uhr added.

If the city’s goal is truly to curb excessive alcohol consumption, it may attempt to declare an alcohol-free zone, or the state could enact measures to address the perceived problem, he said. The tavern owners could then assert any challenges they saw fit, he added.

But Harrison se
es it differently.

“Well, it’s easy for them to say that now,” he said. “But when you’re dealing with the political machinations of the ALRC in Madison and trying to read the tea leaves as to what’s going to happen, and people in city government are telling you that you need to do something or else this is going to happen, it’s always easier to try to do what you think will satisfy the city’s regulatory concerns first, and see if that works.”

City’s Role at Issue

In addition to extensive affirmative allegations detailing their view of the events preceding the lawsuit, the answer of the defendants represented by the LaFollette firm raises several affirmative defenses, including defenses alleging that the Implied Repeal doctrine, the Noerr-Pennington doctrine, the federal Local Government Antitrust Act of 1984, and the industry self-regulation doctrine bar the plaintiffs’ claims.

“Our defenses are a series of several different antitrust defenses, all of which are premised along the same line, that this was the bar owners basically complying with the city’s regulatory desires,” Harrison said. “And the defenses and the doctrines are all slightly different, but I think they come back to that same basic point — that the city was regulating, and it was the city that was pushing it.”

The affirmative defenses are fairly standard, according to the attorneys for the plaintiffs.

“We’re not surprised to see those defenses,” said James M. Lockhart of Lommen, Nelson, Cole & Stageberg, P.A. “Do we think they have applicability? No.”

Harrison said he is confident that there is support for the defenses asserted. There is a decent possibility that the defendants he represents may bring a motion for summary judgment, although it’s not yet decided, he said.

However, Daniel J. LaRocque of Davis & Kuelthau SC, who represents defendant The Angelic Brewing Company LLC, said that it is likely that a motion for summary judgment will be filed on behalf of his client.

His client did not offer drink specials on Friday or Saturday nights before the alleged voluntary ban, was not a party to the communications that are alleged as support for the alleged cartel, and did not participate in any alleged agreement, he said.

“I think it’s remarkable that my client, and others, were named as defendants in this case,” he said. “I don’t think the plaintiffs can make a case of the alleged cartel pricing behavior of this sort when the bar owner never demonstrated any interest in offering the drink specials even prior to the alleged agreement.”

Likewise, David L. Mandell, of the Mandell & Ginsberg Law Office, who represents defendants Wisconsin Ventures, Inc., d/b/a Club Amazon and The Church Key, d/b/a Mad Dog’s Pub & Pizzeria, says his clients never participated in any alleged cartel or agreement. One of his clients did not offer drink specials before the alleged ban, and the other continued to offer drink specials after the alleged ban, but their names were put on the September 2002 press release without their knowledge or consent, he said.

“A few years later, we’re being sued for everything we’ve got,” he said.

Class Certification Disputed

Harrison also says that the plaintiffs’ attorneys have “considerable hurdles to cross” in order to persuade the court to certify a class so that the case can go forward as a class action, because each plaintiff’s damage proof will be “totally different.”

The “cash and consume” basis of the businesses makes the case unlike other consumer class actions in which there is documentation of the plaintiffs’ claims, LaRocque said.

Nic Eichenseer, one of the named plaintiffs in the suit, said that he cannot speak for other plaintiffs, but he personally has credit card receipts from some of the tabs he has opened at bars. For other purchases, he says he can have people who were with him attest to the number of drinks he had on particular nights.

Now a second-year law student at the University of Wisconsin, Eichenseer says bringing the claims alleged in the suit is a matter of principle.

“This is a business where the product is beer, the product is alcohol, but it’s a product nonetheless, and people are entitled to a competitively priced product,” he said.

Notice of Claim Filed

The plaintiffs also filed a notice of claim in March against the University of Wisconsin-Madison, alleging that it was “knowingly involved in the formation and operation” of the alleged price-fixing cartel and that the university is a competitor of the bars that benefited financially “from the cartel in the form of increased profits on the sale of beer on campus.”

The university is not currently a party to the lawsuit, and an attorney co-representing the university in the matter said he had no comment on the litigation.

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