Digital Music Antitrust Litigation Against Time Warner Dismissed

On July 18, 2011, the U.S. District Court for the Southern District of New York issued a ruling dismissing all claims in a class action complaint against Cravath client Time Warner Inc. in the long-pending multi-district litigation In re Digital Music Antitrust Litigation. A putative nationwide class of digital music purchasers alleged violations of (1) Section 1 of the Sherman Act; (2) the antitrust laws of sixteen states; and (3) the consumer protection laws of eight states. The complaint alleged that defendants conspired to inflate and maintain the price of digital music by fixing a high price for, and restraining the availability of, internet music, which, in turn, buoyed the price of CDs.

Time Warner, along with two other defendants (Sony Corporation of America and Bertelsmann, Inc., collectively referred to by the Court as the “Parent Companies”), filed a motion to dismiss plaintiffs’ third amended complaint for failure to allege any basis for holding the Parent Companies liable for the alleged acts of their current or former music company subsidiaries. The Court agreed that the complaint failed to allege any basis for holding the Parent Companies directly liable for participating in the alleged conspiracy and also failed to allege any basis for piercing the corporate veil between the Parent Companies and their subsidiaries. The Court dismissed all claims against each of the Parent Companies, although it allowed certain claims to proceed against the four music company defendants.

The Cravath team included partners Peter T. Barbur and Rachel Skaistis and associate J. Wesley Earnhardt.