Burtch v. Milberg Factors, Inc., No. 10-2818 (3d Cir. 2011)Annotate this Case
Factors purchase accounts receivable to assume garment manufacturers' risk with respect to amounts owed by retailer. A manufacturer typically cannot make sales to retailers for which factors decline to assume the risk. Factors determine the terms and conditions, including the discount rate at which they purchase receivables, payment terms required of retailers, and whether purchases by particular retailers will be financed. Plaintiff, a major discount clothing retailer had sub-par performance and declining sales for two years. Factors declined to extend credit, which caused increased costs and decreased profitability until plaintiff filed for bankruptcy. The trustee filed suit under the Sherman Act, 15 U.S.C. 1, and New York law, alleging that factors engaged in "cartel-like behavior," unlawfully exchanged information, and entered into illegal agreements in secretive weekly meetings and telephone conversations to minimize their risks and cost of doing business, maintain and stabilize pricing structures for factoring services; and stabilize their respective market shares. The district court dismissed. The Third Circuit affirmed, finding no direct evidence of agreement between the factors or of parallel behavior.