In the past several months, two state courts in the District of Columbia and California decided motions to dismiss in cases alleging that the use of certain revenue management software violated state antitrust laws in the residential property rental management and health insurance industries.  In both industries, parallel class actions are pending in federal court alleging that the same software products facilitate per se illegal hub-and-spoke price-fixing conspiracies under Section 1 of the Sherman Act.  These two state court decisions may preview how federal courts handle similar questions in the federal cases.

First, in May 2024, the Superior Court for the District of Columbia resolved motions to dismiss brought by three different residential rental property management companies who used revenue management software provided by defendant RealPage.  In District of Columbia v. RealPage, No. 2023-CAB-006762, the District alleged that 14 rental property management companies violated the D.C. Antitrust Act by allegedly entering into agreements to share their proprietary rental price data through RealPage’s software and then accept RealPage’s pricing recommendations generated from that data, which allegedly increased rental rates. 

The D.C. court dismissed the complaint as to one defendant, AvalonBay, because that defendant’s contract with RealPage “specifically prohibits the kind of proprietary data sharing upon which the District premises its theory of liability,” i.e., using AvalonBay’s (or others’) proprietary data to generate pricing recommendations.  Even though AvalonBay frequently accepted RealPage’s pricing recommendations, the limitations in AvalonBay’s contract with RealPage precluded an inference that AvalonBay participated in an “exchange of confidential data” which, the D.C. court reasoned, had “most of the explanatory power” in the District’s hub-and-spoke price-fixing theory. 

By contrast, the D.C. court found that the District adequately alleged two other defendants, JBG and Highmark, had shared proprietary data through RealPage.  In allowing the case against those defendants to proceed past their motions to dismiss, the court denied (for now) JBG’s argument that it did not accept RealPage’s pricing recommendations all the time, and denied Highmark’s argument that its compliance with rent-stabilization laws negated its alleged motive or ability to conspire.

Second, in August 2024, a Superior Court for California in San Francisco dismissed allegations that software company MultiPlan violated the Cartwright Act (California’s antitrust law) by recommending reimbursement rates that its insurance-company customers might use in claims payment negotiations with providers of healthcare services.  In VHS Liquidating Trust v. MultiPlan Corp., No. CGC-21-594966, the trustee of a California hospital network alleged that defendant MultiPlan entered into hub-and-spoke agreements with multiple insurance companies that pooled their proprietary reimbursement data to generate suggested reimbursement rates that supposedly “fixed” insurance reimbursement payments for certain healthcare services.

The California court, however, explained that the hospital plaintiff had not alleged that the MultiPlan defendants had “fixed” a “price” for any particular product.  The court noted that the complaint did not allege that MultiPlan fixed the “price” for healthcare services—those prices were set unilaterally by providers.  Instead, the court concluded that the negotiated reimbursement rates allegedly informed by MultiPlan’s recommendations were “part and parcel of a health insurance policy,” not “a standalone product or service” with its own “price that can be fixed or tampered with under the Cartwright Act.”  Accordingly, the court dismissed the complaint without leave to amend.

As noted above, parallel cases remain pending in federal courts concerning RealPage’s rental revenue management software and MultiPlan’s health insurance reimbursement-related services.  Additionally, the U.S. Department of Justice and Federal Trade Commission have begun an enforcement action and investigations and filed statements of interest concerning such revenue management software in these and other industries.  These D.C. and California state court decisions, as well as other early federal court decisions, may inform developments in the pending federal cases and private class actions.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Brandon Gould Brandon Gould

Brandon Gould is special counsel in the firm’s Washington DC office. He is an antitrust and class action litigator who represents clients across multiple industries with extensive experience in the banking, financial services, and technology industries. Brandon is knowledgeable about quantitative economic analysis…

Brandon Gould is special counsel in the firm’s Washington DC office. He is an antitrust and class action litigator who represents clients across multiple industries with extensive experience in the banking, financial services, and technology industries. Brandon is knowledgeable about quantitative economic analysis and experienced with working with economists and other experts in litigation and investigation settings. He also maintains an active pro bono immigration practice that includes both direct representation of asylum seekers and data-driven immigration policy litigation.

Photo of August Gweon August Gweon

August Gweon counsels national and multinational companies on data privacy, cybersecurity, antitrust, and technology policy issues, including issues related to artificial intelligence and other emerging technologies. August leverages his experiences in AI and technology policy to help clients understand complex technology developments, risks…

August Gweon counsels national and multinational companies on data privacy, cybersecurity, antitrust, and technology policy issues, including issues related to artificial intelligence and other emerging technologies. August leverages his experiences in AI and technology policy to help clients understand complex technology developments, risks, and policy trends.

August regularly provides advice to clients on privacy and competition frameworks and AI regulations, with an increasing focus on U.S. state AI legislative developments and trends related to synthetic content, automated decision-making, and generative AI. He also assists clients in assessing federal and state privacy regulations like the California Privacy Rights Act, responding to government inquiries and investigations, and engaging in public policy discussions and rulemaking processes.