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Monday, February 7, 2011

Indirect Purchaser Class Action Settlements

Posted by D. Daniel Sokol

Patrick E. Cafferty, Cafferty Faucher LLP has written on Indirect Purchaser Class Action Settlements.

ABSTRACT: Consumers and business entities at the bottom of a chain of distribution - i.e., those who cannot “pass on” overcharges - often bear the full financial brunt of antitcompetitive activity. Unless they purchased goods or services directly from the alleged antitrust violators, however, they are “indirect purchasers” who lack standing to bring suit for damages under the federal antitrust laws. Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). In California v. ARC America Corp., 490 U.S. 93 (1989), the Supreme Court held that Illinois Brick interpreted federal antitrust law only and states could allow indirect purchasers to seek damages under state law. Several states and the District of Columbia reaffirmed an indirect purchaser’s right to recover damages by passing “Illinois Brick repealer” statutes that expressly allow for indirect purchaser actions. Even where no “repealer” statute has been enacted, some state courts have interpreted their state’s antitrust laws to allow for indirect purchaser standing. See, e.g., Comes v. Microsoft Corp., 646 N.W.2d 440 (Iowa 2002); Bunker's Glass Co. v. Pilkington PLC, 75 P.3d 99 (Ariz. 2003). State law indirect purchaser actions are an important component of antitrust enforcement, especially in cases where direct purchasers’ continuing business relationship with the antitrust violators blunts any incentive to bring suit. Moreover, utilizing class action procedures, indirect purchaser class actions can provide redress to the targeted victims of unlawful conduct.

The purpose of this paper is to compile a comprehensive list of indirect purchaser class action settlements, including the amount of money (or other consideration) recovered for classes. This project began in 2005 at the request of counsel for the Antitrust Modernization Commission and was intended to respond to the contentions made by corporate interests that indirect purchaser antitrust actions benefited only plaintiffs’ attorneys and resulted in, at best, cy pres recoveries for the indirect benefit of the class members. Accordingly, this listing attempts to include both the method of distribution of settlement proceeds and the amount of attorneys’ fees awarded. While cy pres distributions are sometimes necessary, many cases (especially in the area of pharmaceuticals) provide for cash distributions to class members. The settlements listed below have recovered an aggregate value $4,363,237,265 since the mid-1990s. This total consists of $2,069,252,500 in cash, $163,464,000 worth of product (i.e., infant formula and prescription drugs) and $2,130,520,765 in Microsoft vouchers.

One development since 2005 is worthy of comment: the Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4 (2005), which became effective February 18, 2005, greatly expanded federal jurisdiction over state law class actions. As class actions are the primary avenue for assertion of indirect purchaser antitrust claims, opportunities for state courts to interpret their own states’ antitrust statutes will likely be few and far between. This development may impede - or at least freeze in place - judicial development of indirect purchaser antitrust law.

This list was compiled with assistance from attorneys Bernard Persky (Labaton Sucharow LLP) and Daniel Gustafson (Gustafson and Gluek PLLC) and includes: (1) cases in which one or more of our firms appeared as counsel; (2) cases that we have discerned from public sources (such as the Internet and legal research databases); and (3) information received from other practitioners. Where possible, we have sorted state court cases according to common underlying facts. While the information on the list is accurate to the best of our knowledge, information and belief, we are certain that we have not captured many cases, especially in California which has a long-standing history of indirect purchaser antitrust class actions. See, e.g., B.W.I. Custom Kitchen v. Owens-Illinois, Inc., 191 Cal. App. 3d 1341 (Cal. Ct. App. 1987).

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