Tempur Sealy, a mattress company, sues to block FTC case over contract (1)

Tempur Sealy International Inc. sued the Federal Trade Commission in an attempt to block an internal case against the proposed purchase Mattress companymaking her another target for the agency arguing that the proceedings are unconstitutional.

In a Friday lawsuit filed in the U.S. District Court for the Southern District of Texas, Tempur Sealy and Mattress Firm argued that the FTC’s administrative actions violated private companies’ constitutional rights.

In July, the FTC sued to stop Tempur Sealy’s proposed $4 billion takeover of Mattress Firm. The agency asked a federal court in Texas to issue an injunction to temporarily halt the transaction as the internal investigation progresses.

“The Constitution demands more,” Tempur Sealy and Mattress Firm argued in a Friday lawsuit citing a recent ruling SEC v. Jarkesy Supreme Court decision. “This requires the FTC to file a merger complaint in court under s. III”.

The companies are seeking an injunction blocking the FTC’s administrative case.

The FTC declined to comment.

FTC becomes target

Tempura Sealy’s complaint is at least the fourth in the past year alleging that the FTC’s actions are unconstitutional. Kroger Co. in August, it filed a similar lawsuit after the FTC questioned its acquisition of a rival grocery store Albertsons Company.

Cigna Group Express scripts i Meta Platforms Inc. they also sued the agency on the grounds that protecting five FTC commissioners from removal is unconstitutional. Legal experts say such arguments have been raised by the Supreme Court, which is gradually limiting the powers of federal regulators.

In June, the court restricted the Securities and Exchange Commission’s ability to bring complaints to internal judges. This case, Tempur Sealy and Mattress Firm argue, supports the claim that federal courts are the only forum for resolving disputes over private rights such as “life, liberty and property.”

“Generally speaking, if the merits of a claim do not have an uninterrupted historical pedigree and have been litigated outside traditional courts — such as in immigration or patent cases — the case presumptively must be resolved by an Article III court,” the complaint said, citing a concurring opinion from conservative Justice Neil M. Gorsuch.

The companies also argued that the FTC’s ability to choose between an internal court and a federal court violated the nondelegation doctrine.

The Tempur Sealy-Mattress Firm transaction will combine the world’s largest mattress manufacturer with the largest U.S. specialty retailer.

The FTC says such a merger would stifle competition and raise prices. Tempur Sealy argues that this will lead to more innovation and a validated “customer shopping experience”.

“We intend to vigorously defend our transaction at the upcoming trial in federal court, which is the appropriate forum to resolve this issue,” Tempur President and CEO Sealy Scott Thompson said in a statement.

Hearings on the FTC’s motion for a preliminary injunction are scheduled to begin Nov. 12 in the Southern District of Texas and are expected to last two weeks. Tempur Sealy said in a press release Friday that its purchase of the mattress company could close in early 2025 if it overcomes the FTC challenge.

This case is among a number of recent merger challenges brought by the FTC. The agency is also awaiting a ruling on its proposal to block the Kroger-Albertsons transaction and the proposed merger of Tapestry Inc. and Capri Holdings Ltd in the fashion sectors.

Tempur Sealy and Mattress Firm are represented by firms including Simpson Thacher & Bartlett LLP, Cleary Gottlieb LLP and Beck Redden LLP.

The case is Tempur Sealy Int’l, Inc. v. FTC, SD Tex., 4:24-cv-03764, 4/10/24.