On March 22, 2023, Sidley scored a complete appellate victory for fashion retailer Fashion Nova, Inc. against antitrust and tortious-interference claims brought by its competitor Honey Bum. A three-judge appellate panel affirmed U.S. District Judge R. Gary Klausner’s summary judgment order in favor of Fashion Nova.
In December 2020, Honey Bum sued Fashion Nova under the Sherman Act for allegedly inducing certain clothing suppliers to “boycott” it. Honey Bum challenged the alleged boycott only under antitrust’s rule of per se condemnation, typically reserved for blatantly anticompetitive conspiracies such as price-fixing. To invoke the per se rule, Honey Bum alleged that Fashion Nova had orchestrated a “hub-and-spoke” group boycott among the suppliers, and it argued that such boycotts are per se unlawful under Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 212–13 (1959). Honey Bum also raised state law claims of tortious interference with contract and prospective economic relations. In January 2022, Sidley prevailed on summary judgment shortly before the case was scheduled to go to trial.
Honey Bum appealed to the Ninth Circuit, which affirmed in a written opinion. The Ninth Circuit held that intervening Supreme Court precedent, NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998), limited the per se rule of Klor’s to cases involving horizontal conspiracies among mutual competitors. Here, the court found, Honey Bum had shown no horizontal agreement among the allegedly boycotting suppliers. At most, it had shown parallel vertical agreements between individual suppliers and Fashion Nova, and such arrangements are subject only to antitrust’s rule of reason. The court thus rejected Honey Bum’s Sherman Act claims because they relied entirely on a theory of per se liability – Honey Bum had forgone any rule-of-reason claim and had not tried to define relevant markets or prove competitive harm. The court also upheld summary judgment on Honey Bum’s state law claims.
The case has been widely covered in the trade press and reaffirms the longstanding trend in Sherman Act, Section 1 cases to narrow the scope of the per se rule and rely instead on the rule of reason as the primary mode of antitrust analysis. The Ninth Circuit’s decision provides clear guidelines as to what must be shown in order to prove a per se group boycott violation under Section 1 of the Sherman Act.
The Sidley team was led by partners Chad S. Hummel and Jonathan E. Nuechterlein, and included a multi-state team of Sidley litigators and trial lawyers with experience in business disputes and antitrust litigation, including partners David R. Carpenter and C. Frederick Beckner III, senior counsel Timothy J. Muris, senior managing associate Anna Tutundjian, and associate Alexandra T. Mushka.