Private equity firms can breathe a sigh of relief after a federal judge dismissed claims that threatened to establish a precedent for holding private equity firms liable for certain actions by their portfolio companies.
The Antitrust Lawsuit
On September 21, 2023, the Federal Trade Commission (FTC) filed suit against U.S. Anesthesia Partners (USAP) and Welsh, Carson, Anderson & Stowe (WCAS), a private equity firm that held a minority interest in USAP. The lawsuit centered on alleged antitrust violations based on USAP’s “roll-up” acquisition strategy—acquiring numerous anesthesia services groups across Texas. The FTC alleged that WCAS and USAP were involved in a “multi-year anticompetitive scheme” that would drive up the price of anesthesia services in Texas.
WCAS formed USAP in 2012. It currently holds a 23% stake in the company. Despite the minority ownership, the FTC nevertheless argued that WCAS should be held liable for the ongoing antitrust violations based on its equity ownership in USAP.
Dismissal of Claims Against WCAS
On May 13, 2024, a judge in the U.S. District Court for the Southern District of Texas rejected the FTC’s arguments and dismissed the claims as to WCAS. The court noted an utter lack of support for “the proposition that receiving profits from an entity that may be violating antitrust laws is itself a violation of antitrust laws.” The court further emphasized that the FTC failed to cite any case “in which a minority, noncontrolling investor—however hands-on—is liable . . . because the company it partially owned made anticompetitive acquisitions.”
Implications
State and federal regulators inside and outside of the FTC have recently pushed to expand their authority by advancing novel theories that would allow claims not only against consumer-facing businesses, but also the companies that own or invest in them. The USAP decision is a big victory for private equity firms, as they will be able to use the holding to push back against regulators who attempt to drag them into costly litigation, continue to pursue investments in serial acquirers without fear of direct liability for their actions.
Troutman Pepper State Attorneys General Team
 |
Ashley Taylor – Co-leader and Firm Vice Chair Ashley is co-leader of the firm’s nationally ranked State Attorneys General practice, vice chair of the firm, and a partner in its Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He helps his clients navigate the complexities involved with multistate attorneys general investigations and enforcement actions, federal agency actions, and accompanying litigation. |
 |
Clay Friedman – Co-leader Clayton is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice, multidisciplinary teams with decades of experience crafting effective strategies to help deter or mitigate the risk of enforcement actions and litigation. |
 |
Judy Jagdmann Judy is a partner in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice, based in the Richmond office. She brings experience serving as chair and commissioner of the Virginia State Corporate Commission (VSCC) from 2006 through 2022, which includes regulating the utilities, insurance, banking, and securities industries. She also served as Virginia’s attorney general from 2005-2006. |
 |
Stephen Piepgrass Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on enforcement actions, investigations, and litigation. Stephen primarily represents clients engaging with, or being investigated by, state attorneys general and other state or local governmental enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, with a particular focus on heavily regulated industries. |
 |
Michael Yaghi Michael is a partner in the firm’s State Attorneys General and Regulatory Investigations, Strategy + Enforcement (RISE) Practice Groups, nationwide teams that advise clients on consumer protection enforcement matters and other regulatory issues. |
 |
Samuel E. “Gene” Fishel Gene is a member of the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) practice, based in the Richmond office. He brings extensive regulatory experience, having most recently served as senior assistant attorney general and chief of the Computer Crime Section in the Office of the Attorney General of Virginia, and as special assistant U.S. attorney in the Eastern District of Virginia for 20 years. |
 |
Tim Bado Tim is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, where he represents corporations and individuals facing potential civil and criminal exposure. Tim’s experience in government investigations, enforcement actions, and white-collar litigation spans a number of industries, including financial services, pharmaceutical, health care, and government contracting, among others. |
 |
Chris Carlson Chris Carlson represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general. |
 |
Blake R. Christopher Blake collaborates with clients on matters related to government contracting, investigations, and disputes. His senior-level government experience generates valuable insights and strategies for clients across a variety of industries. |
 |
Natalia Jacobo Natalia is an associate in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice. She focuses her practice on two primary areas: government contracting and state attorney general work. |
 |
Namrata Kang Namrata (Nam) is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. She routinely advises clients on a wide variety of state and federal regulatory matters, with a particular emphasis on state consumer protection laws relating to consumer financial services and marketing and advertising. |
 |
Michael Lafleur Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general. |
 |
Susan Nikdel Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes. |
 |
John Sample John is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He focuses his practice on a wide range of general and complex litigation matters, including shareholder disputes, fraud, products liability, breach of contract, and Biometric Information Privacy Act claims. |
 |
Whitney Shephard Whitney is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation. |
 |
Trey Smith Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice. He focuses his practice on helping financial institutions and consumer facing companies navigate regulatory investigations and resulting litigation. |
 |
Daniel Waltz Daniel is a member of the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and State Attorneys General team. He counsels clients in connection with navigating complex government investigations, regulatory compliance, and transactions, involving state and federal government contracting obligations. Drawing on his broad experience as a former assistant attorney general for the state of Illinois, Daniel is a problem solver both inside and outside the courtroom. |
 |
Stephanie Kozol Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department. |