Title: Clayworth v. Pfizer
Citation: 49 Cal. 4th 758
Docket Number: S166435
State: California
Issuer: California Supreme Court
Date: July 12, 2010

1 
Filed 7/12/10 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
JAMES CLAYWORTH et al., 
) 
 
 
) 
 
Plaintiffs and Appellants, 
) 
 
 
) 
S166435 
 
v. 
) 
 
 
) 
Ct.App. 1/2 A116798 
PFIZER, INC., et al., 
) 
 
) 
Alameda County 
 
Defendants and Respondents. ) 
Super. Ct. No. RG04172428 
 
____________________________________) 
 
When a group of companies conspires to fix prices at higher than a 
competitive level, the resulting overcharge is paid in the first instance by the direct 
purchaser of the cartel‟s goods.  In markets where the direct purchaser is not also 
the ultimate purchaser, but an intermediary between the cartel and the consumer 
(the indirect purchaser), several questions arise:  First, who should be permitted to 
sue for price fixing, the direct purchaser, the indirect purchaser, or both?  Second, 
how should damages be allocated?  Should an antitrust conspirator be permitted to 
raise as a defense that the direct purchaser passed on some or all of the overcharge 
to indirect purchasers downstream in the chain of distribution? 
Under federal antitrust law, the answer to these questions is settled.  In 
Hanover Shoe v. United Shoe Mach. (1968) 392 U.S. 481 (Hanover Shoe), the 
United States Supreme Court held antitrust violators ordinarily could not assert as 
a defense that any illegal overcharges had been passed on by a plaintiff direct 
purchaser to indirect purchasers.  Instead, the full measure of the overcharge is 
2 
recoverable by the direct purchaser.  In a related decision nine years later, the 
Supreme Court concluded only direct purchasers, not indirect purchasers, could 
sue for price fixing.  (Illinois Brick Co. v. Illinois (1977) 431 U.S. 720 (Illinois 
Brick).) 
Under state antitrust law, only the first question—who may sue—is settled.  
In 1978, in direct response to Illinois Brick, the Legislature amended the state‟s 
Cartwright Act (Bus. & Prof. Code, § 16700 et seq.)1 to provide that unlike federal 
law, state law permits indirect purchasers as well as direct purchasers to sue 
(§ 16750, subd. (a)).  This left open the further question how damages should be 
allocated.  Does the Cartwright Act permit a pass-on defense, or in this respect are 
state and federal law the same? 
We conclude that under the Cartwright Act, as under federal law, generally 
no pass-on defense is permitted.  While the text of the Cartwright Act does not 
answer the question, the Legislature‟s actions in response to Illinois Brick and 
related federal statutory amendments reveal a clear legislative preference for the 
Hanover Shoe rule.  As well, that rule is the one most closely in accord with the 
Legislature‟s overarching goals of maximizing effective deterrence of antitrust 
violations, enforcing the state‟s antitrust laws against those violations that do 
occur, and ensuring disgorgement of any ill-gotten proceeds.  Accordingly, we 
reverse the Court of Appeal, which held that a pass-on defense was available and 
that it entitled the alleged price-fixing defendants here to summary judgment. 
                                              
1  
All further unlabeled statutory references are to the Business and 
Professions Code. 
3 
FACTUAL AND PROCEDURAL BACKGROUND 
On appeal from a grant of summary judgment, we review and recite the 
evidence in the light most favorable to the nonmoving party (here, plaintiffs).  
(Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) 
Plaintiffs (hereafter Pharmacies) are retail pharmacies located in 
California.2  Defendants (hereafter Manufacturers) are, with two exceptions, 
companies that manufacture, market, and/or distribute brand-name pharmaceutical 
products throughout the United States.3  Manufacturers also manufacture, market, 
and/or distribute similar brand-name pharmaceutical products in Canada where, 
unlike in the United States, the products are subject to government pricing 
restrictions. 
                                              
2  
Plaintiffs are James Clayworth, R.Ph., an individual, dba Clayworth 
Pharmacy and Clayworth Healthcare; Marin Apothecaries, Inc., dba Ross Valley 
Pharmacy; Golden Gate Pharmacy Services, Inc., dba Golden Gate Pharmacy; 
Pediatric Care Pharmacy, Inc.; Chimes Pharmacy, Inc.; Mark Horne, R.Ph., an 
individual, dba Burton‟s Pharmacy; Meyers Pharmacy, Inc.; Benson Toy, R.Ph., 
an individual, dba Marin Medical Pharmacy; Seventeen Fifty Medical Center 
Pharmacy, Inc.; Tony Mavrantonis, R.Ph., an individual, dba Jack‟s Drug; Julian 
Potashnick, R.Ph., an individual, dba Leo‟s Pharmacies; Jerry Shapiro, R.Ph., an 
individual, dba Uptown Drug, Co.; Tilley Apothecaries, Inc., dba Zweber‟s 
Apothecary; RP Healthcare, Inc.; Rohnert Park Drugs, Inc.; and JGS Pharmacies, 
Inc., dba Dollar Drugs. 
3 
Defendants are Abbott Laboratories; AstraZeneca LP; Novartis 
Pharmaceuticals Corp.; Allergan, Inc.; Boehringer Ingelheim Pharmaceuticals, 
Inc.; Eli Lilly & Company; Johnson & Johnson; Janssen Pharmaceutical, Inc.; 
Ortho McNeil Pharmaceutical, Inc.; Ortho Biotech, Inc.; GlaxoSmithKline; Pfizer, 
Inc.; Hoffman-LaRoche; Aventis Pharmaceuticals, Inc.; Amgen, Inc.; Purdue 
Pharma L.P.; Merck & Co., Inc.; Bristol-Myers-Squibb Company; Wyeth; 
Johnson & Johnson Health Care Systems Inc., which apparently does not 
manufacture, market, or distribute pharmaceutical products; and Pharmaceutical 
Research and Manufacturers of America, a United States-based nonprofit trade 
association. 
4 
Pharmacies filed suit under section 1 of the Cartwright Act (Stats. 1907, 
ch. 530, § 1, pp. 984-985, as amended; §§ 16720, 16726) and the unfair 
competition law (UCL) (§ 17200 et seq.), alleging Manufacturers had unlawfully 
conspired to fix the prices of their brand-name pharmaceuticals in the United 
States market, including in California.  The complaint alleged Manufacturers had 
agreed to set artificially high prices for their products, and had acted in concert to 
restrain reimportation of their lower-priced foreign drugs into the United States 
and to restrict price competition from generics.  As a result, the complaint alleged, 
Manufacturers were able to maintain prices for their drugs in California, as 
elsewhere in the United States, at levels 50 to 400 percent higher than for the same 
drugs sold outside the United States.  Pharmacies alleged they consequently had 
been forced to pay an overcharge, the differential between the conspiracy-inflated 
prices set by Manufacturers and the prices Pharmacies would have paid in a 
competitive market.  They sought treble damages, restitution, and injunctive relief. 
Each Manufacturer answered, denying Pharmacies‟ allegations and 
asserting as an affirmative defense that Pharmacies‟ claims were barred on the 
ground Pharmacies passed on any alleged overcharge to third parties and therefore 
did not suffer a compensable injury. 
Pharmacies filed a motion for summary adjudication of Manufacturers‟ 
pass-on defense, arguing that the defense was unavailable under the Cartwright 
Act in light of Hanover Shoe, supra, 392 U.S. 481, the subsequent legislative 
history of the Cartwright Act, and public policy.  Manufacturers responded with a 
cross-motion for summary judgment, arguing that under the plain language of the 
5 
Cartwright Act, a pass-on defense was available and defeated both the Cartwright 
Act and UCL claims.4 
Evidence presented in connection with the cross-motions established the 
following essentially undisputed facts.  Manufacturers sell their drugs to 
wholesalers at a price referred to as the wholesale acquisition cost.  In turn, 
various independent entities use the wholesale acquisition cost to calculate and 
publish benchmark drug prices, termed the average wholesale price, for use in the 
industry.  Wholesalers resell the drugs to Pharmacies at prices based on a 
percentage of the average wholesale price.  Because the published average 
wholesale price is a fixed percentage above the price charged by Manufacturers to 
wholesalers, any price increases by Manufacturers will increase the average 
wholesale price proportionally.  As a result, when Manufacturers increase their 
prices, the costs of drugs to Pharmacies increase by the same percentage amount. 
In turn, Pharmacies sell the drugs to two groups of consumers:  (1) those 
with third party insurance or a drug benefit plan offered by either a private entity 
or the government, which in turn pays customers‟ claims on their behalf, and 
(2) uninsured (or cash-paying) consumers.  For the first group, those covered by 
third party payers, Pharmacies are reimbursed at a contractually or statutorily fixed 
amount, predetermined as a percentage of the average wholesale price, plus a 
dispensing fee; this reimbursement is greater than Pharmacies‟ acquisition costs.  
For the second group, the cash-paying consumers, Pharmacies establish the retail 
prices unilaterally.  Though not required to be, these prices traditionally have been 
                                              
4  
This motion assumed arguendo that Manufacturers had engaged in price 
fixing.  For purposes of this appeal, we do likewise. 
6 
based on a set percentage of the average wholesale price as well, plus in some 
instances an additional dispensing fee. 
Currently, consumers covered by third party payers comprise the bulk of 
Pharmacies‟ customers.  It appears the percentage of cash-paying consumers has 
declined over time, with the consequence that the degree of price-setting discretion 
Pharmacies have has fallen as well. 
In light of this evidence, the trial court granted Manufacturers‟ summary 
judgment cross-motion and denied as moot Pharmacies‟ summary adjudication 
motion.  It held a pass-on defense was available under the Cartwright Act:  A 
defendant could reduce or eliminate its liability upon proof that the plaintiff had 
passed on the alleged price overcharge and thereby limited its damages or suffered 
no injury.  The trial court interpreted the evidence before it as showing that 
Pharmacies had passed on all of Manufacturers‟ overcharges to consumers and 
had thus sustained no damages under the Cartwright Act.  The pass-on defense 
similarly defeated Pharmacies‟ UCL claim; the trial court concluded Pharmacies 
lacked standing to pursue the claim because, having recouped the overcharge, they 
had not “lost money or property,” as required under section 17204. 
The Court of Appeal affirmed.  It rejected the argument that the Legislature 
had approved application to the Cartwright Act of Hanover Shoe, supra, 392 U.S. 
481, and its bar against pass-on defenses.  Relying instead on its reading of the 
plain meaning of the Cartwright Act‟s damages provision (§ 16750, subd. (a)), the 
Court of Appeal concluded a pass-on defense was available and was fatal to 
Pharmacies‟ claims because they could show no “damages sustained” (ibid.).  It 
likewise rejected Pharmacies‟ UCL claims on the grounds that Pharmacies were 
not entitled to restitution and lacked standing to challenge Manufacturers‟ alleged 
unfair business practices. 
7 
We granted review to address a significant issue of first impression:  
whether under the Cartwright Act an antitrust defendant can defeat liability by 
asserting a pass-on defense.  (See Global Minerals & Metals Corp. v. Superior 
Court (2003) 113 Cal.App.4th 836, 852, fn. 10 [“[T]his issue of the availability of 
a „pass-on defense‟ in antitrust law still remains an open question in California 
. . . .”]; J. P. Morgan & Co., Inc. v. Superior Court (2003) 113 Cal.App.4th 195, 
213, fn. 10 [same]; B.W.I. Custom Kitchen v. Owens-Illinois, Inc. (1987) 191 
Cal.App.3d 1341, 1353 [same].) 
DISCUSSION 
I.  Hanover Shoe and Its Antecedents 
In Hanover Shoe, supra, 392 U.S. 481, the United States Supreme Court 
considered whether the pass-on defense should be available to defendants found to 
have charged excess prices under federal antitrust law.  The United States had 
obtained a judgment against United Shoe Machinery Corporation (United Shoe) 
under section 4 of the Sherman Act (15 U.S.C. § 4) for monopolizing the market 
for shoe manufacturing machinery.  Relying on this judgment, shoe manufacturer 
Hanover Shoe, Inc. (Hanover Shoe) sought to recover the “damages by him 
sustained” under section 4 of the Clayton Act (15 U.S.C. § 15); United Shoe 
argued in response that Hanover Shoe had likely incorporated any overcharge it 
paid United Shoe into the prices it charged its customers for shoes, and 
accordingly had sustained no damage. 
In a seven-to-one decision authored by Justice White, the United States 
Supreme Court rejected United Shoe‟s assertion of a pass-on defense.5  It held that 
                                              
5  
Justice Stewart dissented on the threshold question whether United Shoe 
had been shown to violate the antitrust laws and accordingly did not reach the 
issue of how to determine damages.  (See Hanover Shoe, supra, 392 U.S. at p. 513 
 
(footnote continued on next page) 
8 
“when a buyer shows that the price paid by him for materials purchased for use in 
his business is illegally high and also shows the amount of the overcharge, he has 
made out a prima facie case of injury and damage within the meaning of § 4” of 
the Clayton Act (15 U.S.C. § 15).  (Hanover Shoe, supra, 392 U.S. at p. 489.) 
Explaining this conclusion, the Supreme Court pointed out that however a 
buyer responds to illegal overcharges, he inevitably will be damaged.  First, if the 
buyer does nothing and absorbs the loss, he suffers lost profits because, while 
revenue is static, his costs have been increased by the amount of the overcharge.  
(Hanover Shoe, supra, 392 U.S. at p. 489.)  Second, “if the buyer, responding to 
the illegal price, maintains his own price but takes steps to increase his volume or 
to decrease other costs, his right to damages is not destroyed.  Though he may 
manage to maintain his profit level, he would have made more if his purchases 
from the defendant had cost him less.”  (Ibid.)  Third, “the buyer is equally entitled 
to damages if he raises the price for his own product.”  (Ibid.)  In this last scenario, 
to the extent the higher price costs the buyer sales, he is injured by his loss of 
sales; to the extent it does not cost him sales, because demand for his product is 
inelastic, his marginal profit would have been higher had his costs, illegally 
enhanced, been lower.  In sum:  “As long as the seller continues to charge the 
illegal price, he takes from the buyer more than the law allows.  At whatever price 
the buyer sells, the price he pays the seller remains illegally high, and his profits 
would be greater were his costs lower.”  (Ibid.)   
The Supreme Court offered two additional reasons why acceptance of the 
pass-on defense would be problematic.  First, it would require a fact finder to 
                                                                                                                                                              
(footnote continued from previous page) 
(dis. opn. of Stewart, J.).)  The seven members of the Supreme Court to consider 
the pass-on defense thus were unanimous in rejecting it. 
9 
decide a host of imponderables:  whether in the absence of the illegal overcharge 
the plaintiff would have priced his product differently, what impact such a 
different price would have had on total sales “in the real economic world rather 
than an economist‟s hypothetical model” (Hanover Shoe, supra, 392 U.S. at 
p. 493), and whether the price change might have been pursued anyway even in 
the absence of the initial overcharge.  “Since establishing the applicability of the 
passing-on defense would require a convincing showing of each of these virtually 
unascertainable figures, the task would normally prove insurmountable.”  (Ibid.)  
Proof of such factors would depend on massive and complex showings and 
rebuttals, potentially sidetracking every antitrust trial in a host of issues collateral 
to the central claim—whether the defendant had engaged in illegal anticompetitive 
conduct.  (Ibid.) 
Second, broad acceptance of the defense would create a risk that no one 
would be left with a sufficiently significant injury to be motivated to seek relief; 
individual end consumers, each harmed to the tune of a few pennies or dollars 
only, might have insufficient motivation even to pursue a class action.  
Consequently, “those who violate the antitrust laws by price fixing or 
monopolizing would retain the fruits of their illegality because no one was 
available who would bring suit against them” (Hanover Shoe, supra, 392 U.S. at 
p. 494), and enforcement of the antitrust laws would be compromised.   
Hanover Shoe‟s view of how properly to measure damages was not novel; 
as Justice White pointed out, a long line of Holmes and Brandeis opinions had 
adopted the same understanding.  (See Hanover Shoe, supra, 392 U.S. at pp. 489-
490.)  Writing for the court in Chattanooga Foundry v. Atlanta (1906) 203 U.S. 
390, Justice Holmes explained why a pass-on defense was inconsistent with the 
law‟s general take on damages:  “A man is injured in his property when his 
property is diminished. . . .  [W]hen a man is made poorer by an extravagant bill 
10 
we do not regard his wealth as a unity, or the tort, if there is one, as directed 
against that unity as an object.  We do not go behind the person of the sufferer.  
We say that he has been defrauded or subjected to duress, or whatever it may be, 
and stop there.”  (Id. at p. 399.)  Several years later, he explained again why a 
pass-on defense should not stand as a bar to allegations of excessive rate charges 
under federal transportation law:  “The only question before us is . . . whether the 
fact that the plaintiffs were able to pass on the damage . . . prevents their 
recovering the overpayment . . . .  The answer is not difficult.  The general 
tendency of the law, in regard to damages at least, is not to go beyond the first 
step. . . .  The plaintiffs suffered losses . . . when they paid.  Their claim accrued at 
once in the theory of the law and it does not inquire into later events.”  (Southern 
Pac. Co. v. Darnell-Taenzer Co. (1918) 245 U.S. 531, 533-534.)  To similar effect 
in rejecting a pass-on defense in the context of an illegal overcharge by railroad 
yards, Justice Brandeis wrote for the court:  “Neither the fact of subsequent 
reimbursement . . . , nor the disposition which may hereafter be made of the 
damages recovered, is of any concern to the wrongdoers.”  (Adams v. Mills (1932) 
286 U.S. 397, 407.)  To allow a pass-on defense would undermine the 
enforcement of the statutory scheme (there, the Interstate Commerce Act (49 
U.S.C. former § 8)):  “[T]he purpose of that section would be defeated if the 
tortfeasors were permitted to escape reparation by a plea that the ultimate 
incidence of the injury was not upon those who were compelled in the first 
instance to pay the unlawful charge.”  (Adams v. Mills, at p. 408.) 
This rejection of using overcharge pass-ons as a defense occurs not because 
the law is blind to their existence, but rather because its eyes are open to their 
ubiquity.  Justice Holmes, again:  The disregard of pass-ons is in part a recognition 
of “the endlessness and futility of the effort to follow every transaction to its 
ultimate result.  [Citation.]  Probably in the end the public pays the damages in 
11 
most cases of compensated torts.”  (Southern Pac. Co. v. Darnell-Taenzer Co., 
supra, 245 U.S. at p. 534.)  The Hanover Shoe court certainly acknowledged that a 
buyer faced with an overcharge might seek to pass on that overcharge.  (Hanover 
Shoe, supra, 392 U.S. at pp. 489, 493.)  What the court also recognized, however, 
was how much deeper down the rabbit hole one could go.  Price fixing has 
primary consequences:  the overcharge to direct purchasers.  It may have 
secondary consequences:  the pass-on to indirect purchasers.  It may have tertiary 
consequences:  the price increase may result in lost sales or profits, or lost market 
share for a buyer forced to compete with sellers not subject to the overcharge.  (Id. 
at pp. 489-493.)6  To trace every consequence of a monopoly or a price-fixing 
conspiracy is to encounter Holmes‟s “futility of the effort to follow every 
transaction to its ultimate result.”  (Southern Pac. Co., at p. 534.)  Hanover Shoe 
recognized fully the difficulties inherent in tracing an antitrust violation to its 
ultimate consequences.  (See Hanover Shoe, at p. 493.)  The rule it adopted, which 
accounts only for the primary consequence (the overcharge), recognizes that to 
stop after consideration of primary and secondary consequences (the overcharge 
and any pass-on) would fail to properly account for a host of tertiary consequences 
and thus underestimate the impact of the overcharge, but that attempting to 
actually account for those tertiary consequences would often be both impractical, 
given the difficulties of proving “in the real economic world” (ibid.) the ultimate 
impacts of a price change, and a severe impairment to deterrence (id. at p. 494). 
                                              
6  
One can imagine still more remote consequences as well, such as changes 
in the value of a business as a going concern, or changes in buying patterns by 
consumers who substitute purchases of other products, with consequent positive 
and negative effects on the various distributors in the market.  And so on, and so 
on. 
12 
With this background, we turn to the issue in this case.  Does the rule of 
Hanover Shoe, that a defensive pass-on theory may not be used to defeat an 
antitrust damages claim, apply under the Cartwright Act? 
II.  The Cartwright Act and the Pass-on Defense 
 
A.  The Cartwright Act’s Text and Early History 
We begin with the language of the statute.  If the text is sufficiently clear to 
offer conclusive evidence of the statute‟s meaning, we need look no further.  
(Microsoft Corp. v. Franchise Tax Bd. (2006) 39 Cal.4th 750, 758.)  If it is 
susceptible of multiple interpretations, however, we will divine the statute‟s 
meaning by turning to a variety of extrinsic sources, including the legislative 
history (e.g., Lexin v. Superior Court (2010) 47 Cal.4th 1050, 1080-1081), the 
nature of the overall statutory scheme (e.g., Tonya M. v. Superior Court (2007) 42 
Cal.4th 836, 844-845), and consideration of the sorts of problems the Legislature 
was attempting to solve when it enacted the statute (e.g., Burris v. Superior Court 
(2005) 34 Cal.4th 1012, 1018). 
Section 16750, subdivision (a) authorizes anyone “injured in his or her 
business or property” by actions forbidden under the Cartwright Act (§ 16700 et 
seq.) to recover three times the “damages sustained.”  Aside from an increase in 
the multiplier, to treble damages from the original double damages, this language 
has been carried forward essentially without change from the original version of 
the act.7 
                                              
7  
As originally enacted, the Cartwright Act‟s private damages provision read:  
“In addition to the criminal and civil penalties herein provided, any person who 
shall be injured in his business or property by any other person or corporation or 
association or partnership, by reason of anything forbidden or declared to be 
unlawful by this act, may sue therefor . . . to recover twofold the damages by him 
sustained, and the costs of suit.”  (Stats. 1907, ch. 530, § 11, p. 987.) 
13 
We reject at the outset Manufacturers‟ contention that the choice of the 
words “damages sustained” (§ 16750, subd. (a)) or “damages by him sustained” 
(Stats. 1907, ch. 530, § 11, p. 987) establishes a particular legislative intent on the 
question whether a pass-on defense should be available.  The express text says 
only that a party must have been “injured” by a Cartwright Act violation and may 
recover the resulting “damages sustained”;  it says nothing about how the injury or 
damages are to be quantified.  In the antitrust context, one might measure the 
damages from a violation any number of ways:  e.g., the excess amount a party 
paid the violator (the overcharge) (see Hanover Shoe, supra, 392 U.S. at pp. 487-
490); the sales a party lost as a result of the overcharge (lost sales) (see Hanover 
Shoe, at p. 493; Kansas v. UtiliCorp United Inc. (1990) 497 U.S. 199, 224 (dis. 
opn. of White, J.); B.W.I. Custom Kitchen v. Owens-Illinois, Inc., supra, 191 
Cal.App.3d at p. 1353); the lost profit opportunity a party suffered due to 
increased costs (lost profits) (see Hanover Shoe, at p. 493 & fn. 9); or the impact 
on the value of a business as a going concern due to lost market share (see B.W.I. 
Custom Kitchen, at p. 1353).  Put another way, one could in theory measure injury 
by considering only the primary consequences of a price conspiracy (the 
overcharge), as Hanover Shoe did; by considering only the primary and secondary 
consequences (the overcharge and pass-on), as Manufacturers argue; or by 
considering the primary, secondary, and tertiary consequences (as, for instance, 
B.W.I. Custom Kitchen, at p. 1353, theorized one might have to).  The words of the 
statute themselves dictate no particular choice among these options, nor any 
particular conclusion as to whether a pass-on defense should be available. 
That the text of the Cartwright Act is ambiguous on this point is further 
illustrated by the fact the United States Supreme Court, interpreting the essentially 
identical language of the federal Clayton Act (15 U.S.C. § 12 et seq.), reached a 
conclusion diametrically opposite to that of the Court of Appeal in this case.  
14 
Construing the Clayton Act‟s damages provision (“damages by him sustained”),8 
the Supreme Court concluded defensive use of a pass-on theory was prohibited 
(Hanover Shoe, supra, 392 U.S. at pp. 489-494); construing the Cartwright Act‟s 
damages provision (“damages sustained”),9 the Court of Appeal here concluded 
such use of a pass-on theory was permitted, indeed compelled.  Nor is Hanover 
Shoe an anomaly; addressing a federal damages provision mirroring that of the 
Cartwright Act, the Supreme Court in Adams v. Mills, supra, 286 U.S. at pages 
406-408, likewise rejected the defendants‟ pass-on theory.10  This divergence 
illustrates not that either conclusion must be wrong, only that reasonable jurists 
may—from a text as opaque as “damages sustained”—arrive at widely differing 
conclusions, and that that text is thus susceptible of being read as supporting more 
than one rule for measuring damages.11  The question we face is how to measure 
                                              
8  
Title 15 United States Code section 15(a). 
9  
Section 16750, subdivision (a). 
10  
At issue was a claim under section 8 of the Interstate Commerce Act (49 
U.S.C. former § 8), which created liability for “the full amount of damages 
sustained” because of overcharges and other violations. 
11  
Manufacturers argue that Hanover Shoe, supra, 392 U.S. 481, is not 
evidence of textual ambiguity because it was not a statutory interpretation case.  
We disagree.  The United States Supreme Court itself has indicated Hanover Shoe 
resolved “a question of statutory interpretation,” namely, the “proper construction 
of § 4 of the Clayton Act [15 U.S.C. § 15].”  (California v. ARC America Corp. 
(1989) 490 U.S. 93, 103.)  More fundamentally, while it is true Hanover Shoe did 
not discuss how best to interpret the phrase “damages by him sustained,” that 
omission implicitly acknowledges that an exegesis of those few words would have 
yielded no answers.  Tasked with interpreting a statute, courts resort to all manner 
of tools to divine intent.  Where in one case the text or legislative history may 
produce a clear answer, in another it may lead only to a dead end.  Courts do not 
often catalogue every blind alley; that Hanover Shoe did not address the statutory 
text‟s opacity is of no significance.  That the Supreme Court relied on nontextual 
tools to construe the Clayton Act is significant; it demonstrates the court‟s 
 
(footnote continued on next page) 
15 
“damages sustained,” and nothing in the Cartwright Act‟s language, as enacted in 
1907 or thereafter amended, resolves that question.  Insofar as the text of the 
Cartwright Act is concerned, the question is an open one. 
We reject as well a second interpretive argument pressed by Manufacturers 
and adopted by the Court of Appeal:  that at the beginning of the 20th century 
there was an existing, generally understood meaning for “damages by him 
sustained,” and we therefore should presume the Legislature intended that 
meaning when it used the phrase in the Cartwright Act. 
The general principle that we should assume the Legislature uses words in 
accordance with their commonly understood meaning is sound.  In State of 
California ex rel. Van de Kamp v. Texaco, Inc. (1988) 46 Cal.3d 1147, for 
example, we interpreted ambiguous provisions of the Cartwright Act by 
considering whether extant law established an accepted meaning for the chosen 
terms.  Because our research disclosed an accepted understanding that a 
prohibition against a “combination” did not extend to mergers, we concluded the 
Legislature surely knew of and adopted that understanding when it passed the 
Cartwright Act.  (State of California ex rel. Van de Kamp v. Texaco, Inc., at 
pp. 1160-1163.) 
That principle has no similar application here.  We can discern no 
contemporaneous consensus with respect to the phrase “damages by him 
sustained.”  The Cartwright Act was passed in 1907 as part of a wave of turn-of-
the-century state and federal legislation intended to stem the power of monopolies 
and cartels.  (Landry & Hornbeck, One Hundred Years in the Making: The 
                                                                                                                                                              
(footnote continued from previous page) 
conclusion that the text itself was not restrictive enough to specify a unique 
measure of damages—that it was, in short, ambiguous. 
16 
Cartwright Act in Broad Outline (2008) 17, No. 2, J. of Antitrust and Unfair 
Competition Section of State Bar 7, 7-8; State of California ex rel. Van de Kamp v. 
Texaco, Inc., supra, 46 Cal.3d at pp. 1154-1156; see generally Limbaugh, Historic 
Origins of Anti-trust Legislation (1953) 18 Mo. L.Rev. 215.)  It was based in part 
on other recently enacted state laws aimed at the same problems.  (State of 
California ex rel. Van de Kamp v. Texaco, Inc., at pp. 1160-1162 & fn. 14; Hibner 
& Cooper, The Cartwright Act at 100—A History of Complementary Antitrust 
Enforcement—A Celebration (2008) 17, No. 2, J. of Antitrust and Unfair 
Competition Section of State Bar 81, 91-92.)  The phrase “damages sustained” or 
“damages by him sustained” was routinely employed in the remedial provisions of 
the antitrust statutes of the time.12  However, our review of out-of-state and federal 
decisions in the years preceding the Cartwright Act‟s 1907 adoption discloses 
nothing (never mind a consensus) speaking to how the “damages by him 
sustained” should be measured or allocated between direct and indirect purchasers 
who seek to sue for antitrust loss. 
Certainly the California cases relied on by Manufacturers and the Court of 
Appeal do not establish any consensus as to how damages were to be measured.  
In De Costa v. Massachusetts Mining Company (1861) 17 Cal. 613, 617, a 
nuisance case, we explained that the damages for creating an unwanted ditch on 
                                              
12  
E.g., Sherman Antitrust Act of 1890 (Act of July 2, 1890, ch. 647, § 7, 
26 Stat. 209, 210) (“damages by him sustained”); 1899 Michigan Public Acts, 
No. 255, section 11, page 412 (“damages by him sustained”); 1907 Missouri 
Laws, page 380 (former Mo. Rev. Stat., § 8972) (“damages by him sustained”); 
1905 Nebraska Laws, chapter 162, section 18, page 644 (“damages by him 
sustained”); 1898 Ohio Laws, section 11, page 146 (former Ohio Gen. Code, 
§ 6397) (“damages by him sustained”); 1893 Oklahoma Revised Statutes, chapter 
83, section 4, page 1163 (“damages sustained”); 1898 Utah Revised Statutes, title 
54, section 1761, page 424 (“damages sustained”). 
17 
another‟s property were confined to the injury sustained, the diminution in the 
value of the property in its present condition, rather than the full cost of 
remediation (filling in the ditch).  In Utter v. Chapman (1869) 38 Cal. 659, 664-
666, a breach of contract case, we explained that the plaintiff steamship operator 
could not automatically recover the full contract price for shipping grain the 
defendant failed to provide.  The plaintiff had a duty to mitigate by finding 
substitute employment for his steamer, such as transporting grain for other parties, 
and, to the extent he was able to do so, his damages were thereby diminished.  In 
Hicks v. Drew (1897) 117 Cal. 305, 314-315, a tort action for injury to real 
property, we indicated damages should be measured based on the net impact of the 
defendant‟s actions, offsetting any benefit to the plaintiff against any loss. 
These contract and tort cases are unhelpful on the question of how to 
measure the “damages sustained” in an antitrust case.  They express in a variety of 
contexts the truism that damages are to compensate for actual loss, but this, again, 
begs the question before us:  how to measure actual loss in the context of an 
intermediary purchaser antitrust action for price fixing. 
Notably as well, in 1907 an antitrust claim for civil money damages was a 
wholly new kind of claim, part of the “dramatically enhanced sanctions imposed 
by the [Cartwright] Act.”  (State of California ex rel. Van de Kamp v. Texaco, Inc., 
supra, 46 Cal.3d at p. 1167.)  At common law, no such private claim existed; 
remedies for illegal agreements and restraints on trade were confined to 
proceedings to hold the agreements void and unenforceable and to revoke 
corporate privileges.  (Ibid.)  Thus, no reason exists to assume the Legislature 
intended to incorporate any particular existing method of measuring damages 
18 
derived from statutory or common law precedent, including the common law 
contract and tort damage measures on which Manufacturers rely.13 
More generally, we consider it implausible that the Legislature had any 
specific intent on the question we face.  Certainly nothing in what minimal 
legislative history has survived from the Cartwright Act‟s 1907 enactment sheds 
any direct light on the question.  The economic theories that underlie an antitrust 
claim are sufficiently complex that we may safely surmise the fine points of 
whether enforcement by direct and indirect purchasers should be permitted or 
preferred, and what precise proof of passed-on costs, lost sales, and lost profits 
should become the grist of an antitrust trial, were not at the forefront of the 
Legislature‟s mind when enacting what was then a pioneering law.  Certainly by 
its choice of the generic phrases “damages by him sustained” and “injured in his 
business or property,” the Legislature did not presume to resolve these complex 
questions. 
Two early Court of Appeal Cartwright Act cases relied on by 
Manufacturers do not lead us to a different conclusion.  Krigbaum v. Sbarbaro 
(1913) 23 Cal.App. 427 is a case about antitrust causation, i.e., the notion that to 
have an antitrust claim one must establish a causal nexus between one‟s injury and 
the alleged unlawful restraint of trade.  (See Associated General Contractors v. 
Carpenters (1983) 459 U.S. 519, 540-542; Vinci v. Waste Management, Inc. 
(1995) 36 Cal.App.4th 1811, 1814.)  In Krigbaum, the plaintiff alleged the 
defendants had conspired to monopolize the market for vineyard-quality land, but 
                                              
13  
Nor do generic contract and tort damage cases address the significant 
antitrust-only policy concerns that have motivated the United States Supreme 
Court in its reading of the Sherman and Clayton Acts (15 U.S.C. § 1 et seq.; id., 
§ 12 et seq.) and that must influence our reading of the Cartwright Act. 
19 
his injury arose not from any restraints on trade accomplished by the alleged trust; 
rather, it arose from specific actions the defendants took to interfere with a 
particular real estate transaction he had brokered.  (Krigbaum, at pp. 433-434.)  
Because the plaintiff had not alleged causation, a demurrer to his Cartwright Act 
claim was properly sustained.  (Ibid.)  Krigbaum has nothing to say on the general 
topic that concerns us:  when (as here) causation has been properly alleged, how 
are antitrust damages to be measured? 
Equally unilluminating is Overland P. Co. v. Union L. Co. (1922) 57 
Cal.App. 366, another antitrust causation case.  The plaintiff, a printing and 
publishing company, alleged the defendant printing trade association had agreed to 
limit bidding for certain printing jobs, thereby driving up prices.  As the Court of 
Appeal there correctly explained, nothing about this arrangement caused the 
plaintiff injury; instead, the decision of the plaintiff‟s competitors not to bid for 
work reduced the competition for the plaintiff and likely benefited it.  (Id. at 
pp. 374-375.)  Here, in contrast, Pharmacies are not Manufacturers‟ competitors 
but their indirect customers, and they have properly alleged that Manufacturers‟ 
price-fixing conspiracy caused them injury in the form of higher prices.  As with 
Krigbaum v. Sbarbaro, supra, 23 Cal.App. 427, nothing in the Overland P. court‟s 
discussion speaks to how we should measure the damages of those plaintiffs who 
have alleged causation. 
In the absence of textual guidance, we must turn elsewhere.  We thus look 
to the Legislature‟s subsequent amendments to related parts of the Cartwright Act, 
and we consider as well “the object which [the Cartwright Act] seeks to achieve 
and the evil which it seeks to prevent . . . .”  (Judson Steel Corp. v. Workers’ 
Comp. Appeals Bd. (1978) 22 Cal.3d 658, 669; see also Burris v. Superior Court, 
supra, 34 Cal.4th at p. 1018 [“we must consider the human problems the 
Legislature sought to address in adopting [the statute]”].) 
20 
Consideration of these sources leads us to conclude the federal Hanover 
Shoe rule (Hanover Shoe, supra, 392 U.S. at p. 494) is most consistent with 
legislative intent and applies equally to state claims under the Cartwright Act.  
Every indication available from the Legislature demonstrates that, given a choice, 
it would prefer an enforcement regime in which Hanover Shoe is the law.  In 
particular, the Legislature‟s actions at two closely related points in time are telling:  
(1) in 1977, following Congress‟s passage of the Hart-Scott-Rodino amendments 
to the federal Clayton Act (15 U.S.C. § 12 et seq.); and (2) in 1978, in the 
immediate aftermath of the United States Supreme Court‟s decision in Illinois 
Brick, supra, 431 U.S. 720. 
 
B.  The Cartwright Act’s Amendment History 
 
 
1.  Cartwright Act amendment in response to federal 
legislation 
 
 
 
a.  The Hart-Scott-Rodino Act 
In 1976, Congress amended the Clayton Act (15 U.S.C. § 12 et seq.) by 
passing the Hart-Scott-Rodino Antitrust Improvements Act (the Hart-Scott-Rodino 
Act).  The Hart-Scott-Rodino Act authorized state attorneys general to file parens 
patriae suits14 on behalf of injured consumers for violations of the Sherman Act 
(15 U.S.C. § 1 et seq.).  (15 U.S.C. § 15c(a)(1).)  Congress created the remedy out 
of concern that consumers, the indirect purchasers who typically bear the brunt of 
antitrust violations in the form of higher prices, had no existing effective redress 
                                              
14  
“ „ “Parens patriae,” literally “parent of the country,” refers traditionally to 
[the] role of [the] state as sovereign and guardian of persons under legal disability 
[¶] . . .  [¶] State attorney generals [sic] have parens patriae authority to bring 
actions on behalf of state residents for anti-trust offenses and to recover on their 
behalf.‟ ”  (Pacific Gas & Electric Co. v. County of Stanislaus (1997) 16 Cal.4th 
1143, 1148, fn. 6.) 
21 
because the small amounts of their injuries made individual suits impracticable, 
and consumer class actions had proven a disappointing vehicle for antitrust 
enforcement.  (H.R.Rep. No. 94-499, 2d Sess. (1976), reprinted in 1976 U.S. Code 
Cong. & Admin. News, pp. 2573-2577.)  The Hart-Scott-Rodino Act was designed 
to fill the remedial gap that “sometimes result[ed] in the unjust enrichment of 
antitrust violators and undermine[d] the deterrent effect of the treble damage 
action.”  (Id. at pp. 2573-2574.)  The remedial provisions of the Hart-Scott-Rodino 
Act focused on achieving full disgorgement of all illegal antitrust profits, using 
fluid recovery and the cy près doctrine if necessary, because “[t]he only 
alternative—retention of the profits by the adjudicated wrongdoer—is 
unconscionable and unacceptable.”  (Id. at pp. 2585-2586; see also id. at p. 2585 
[“[T]he premise of § 4D [codified at 15 U.S.C. § 15d] is that defendants should be 
made to disgorge all measurable profits from an antitrust violation . . . .”].)  
Notably, the Hart-Scott-Rodino Act originally contained no language to 
address the possibility that indirect purchasers might recover damages (through 
their respective attorneys general) when in some instances those same damages 
might already have been recovered by direct purchasers under the Hanover Shoe 
rule prohibiting a pass-on defense (see Hanover Shoe, supra, 392 U.S. at p. 494).  
The problem of potential double recovery under Hanover Shoe was solved by a 
Senate amendment excluding from parens patriae damage awards any amount that 
“duplicates amounts which have been awarded for the same injury.”  (15 U.S.C. 
§ 15c(a)(1); see Sen.Rep. No. 94-803, 2d Sess., p. 44 (1976).)  As the Senate 
Report accompanying the amendment explained, the proviso was inserted to 
“assure that defendants are not subjected to duplicative liability, particularly in a 
chain-of-distribution situation where it is claimed that middlemen absorbed all or 
part of the illegal overcharge,” and to thereby eliminate any perceived tension 
between authorizing indirect purchaser suits and following Hanover Shoe.  
22 
(Sen.Rep. No. 94-803, supra, at p. 44.)15  Specifically, the amendment was 
intended to codify In re Western Liquid Asphalt Cases (9th Cir. 1973) 487 F.2d 
191, a case that relied on the sufficiency of consolidation, interpleader, 
compulsory joinder, and the like, rather than a bar on indirect purchaser suits, to 
eliminate double recovery problems.  (Id. at p. 201.)  “Where the choice is 
between a windfall to intermediaries or letting guilty defendants go free, liability 
is imposed.”  (Sen.Rep. No. 94-803, supra, at p. 44, citing Hanover Shoe, supra, 
392 U.S. at p. 494.)  
The Hart-Scott-Rodino Act was thus of a piece with Hanover Shoe.  First, 
consistent with the policies spelled out by the United States Supreme Court, it 
reflected Congress‟s belief that it was better to overdeter antitrust violations than 
to underdeter them, as well as Congress‟s desire to create a remedial framework 
that maximized the likelihood violators would be required to fully disgorge price-
fixing profits.  (See H.R.Rep. No. 94-499, supra, reprinted in 1976 U.S. Code 
Cong. & Admin. News, pp. 2573-2586.)  Second, the Hart-Scott-Rodino Act 
expressly contemplated that antitrust violators might be sued by both direct and 
indirect purchasers, and that rather than limiting direct purchaser recoveries—by 
repudiating Hanover Shoe—or limiting indirect purchaser suits, the problem of 
duplicative recoveries could be addressed by allowing damages already paid to be 
offset against subsequent damages claims.  (See 15 U.S.C. § 15c(a)(1).) 
                                              
15  
Bill author Representative Peter Rodino made the same point, explaining 
on the House floor that the Hart-Scott-Rodino Act had been specifically tailored, 
through Senate amendments to the bill that became new section 4C(a)(1) of the 
Clayton Act (15 U.S.C. § 15c(a)(1)), to allow the Hanover Shoe no pass-on 
defense rule to coexist hand-in-hand with the bill‟s new parens patriae suits on 
behalf of indirect purchasers.  (Remarks of Rep. Rodino, Debate on H.R. No. 
8532, 94th Cong., 2d Sess., 122 Cong. Rec. H30878-30879 (daily ed. Sept. 16, 
1976).) 
23 
b.  The legislative response to the Hart-Scott-Rodino 
Act 
The Legislature moved quickly to incorporate the remedial framework of 
the Hart-Scott-Rodino Act into the Cartwright Act, enacting a statute that precisely 
tracked the federal act and authorized the Attorney General to sue for Cartwright 
Act violations on behalf of consumers.  (§ 16760, added by Stats. 1977, ch. 543, 
§ 1, p. 1747.)16  Notably for our purposes, the Legislature adopted as well the 
Hart-Scott-Rodino Act‟s damages provision.  (Compare § 16760, subd. (a)(1) [any 
award must exclude damages “which duplicate[] amounts which have been 
awarded for the same injury”] with 15 U.S.C. § 15c(a)(1) [same].)  As we have 
discussed, that provision was specifically designed to account for duplicative 
damage awards resulting from allowing indirect purchasers to recover damages 
when, under the Hanover Shoe no pass-on defense rule (Hanover Shoe, supra, 392 
U.S. at p. 494), direct purchasers might already have been awarded those same 
damages.  Section 16760, subdivision (a)(1), in parallel with the corresponding 
provision in the Hart-Scott-Rodino Act, thus took as its premise that under the 
Cartwright Act direct purchasers could themselves recover overcharges that might 
in theory have been passed on to indirect purchasers, that is, the Hanover Shoe 
                                              
16  
See Assembly Office of Research, third reading analysis of Assembly Bill 
No. 1162 (1977-1978 Reg. Sess.) as amended May 17, 1977, page 1 (“The bill is 
modeled directly on federal law”); Senate Committee on Judiciary, Analysis of 
Assembly Bill No. 1162 (1977-1978 Reg. Sess.) as amended May 17, 1977, page 
2 (“This bill would enact into California law essentially the same provisions which 
were enacted last year by Congress and put into Federal law”).  Notably, the text 
of section 16760 shows the Legislature shared Congress‟s preference for 
maximizing deterrence and ensuring full disgorgement of profits generated by 
antitrust violations:  section 16760 expressly authorizes the use of cy près and 
fluid recovery to maximize distribution to those harmed, with any excess to go to 
the Attorney General as costs or to the state as unclaimed property, rather than 
reverting to the wrongdoer.  (§ 16760, subd. (e)(1)-(3).) 
24 
rule.  Evidently, then, the Legislature presumed that such a rule would apply to the 
Cartwright Act as well. 
Two additional factors suggest the Legislature took as a given the 
application of Hanover Shoe‟s no pass-on defense rule to the Cartwright Act.  
First, we may presume that when the Legislature borrows a federal statute and 
enacts it into state law, it has considered and is aware of the legislative history 
behind that enactment.  (People v. Butler (1996) 43 Cal.App.4th 1224, 1244; see 
also American Civil Liberties Union Foundation v. Deukmejian (1982) 32 Cal.3d 
440, 447 [the legislative history of a federal statute may be used to interpret a state 
statute based on it].)  Second, Assembly Bill No. 1162‟s legislative history 
indicates members of the Legislature were in fact aware of the legislative history 
behind, and the import of, the various portions of the Hart-Scott-Rodino Act they 
incorporated into state law.  The Assembly Judiciary Committee‟s materials for 
Assembly Bill No. 1162 include by way of explanation for the bill and its purpose 
excerpts from the Hart-Scott-Rodino Act‟s legislative history, including remarks 
from Representative Rodino describing at length how the no-duplicative-recovery 
provision of title 15 United States Code section 15c(a)(1) was adopted to 
accommodate the effects of applying the Hanover Shoe rule.  (See Assem. Com. 
on Judiciary, Worksheet on Assem. Bill No. 1162 (1977-1978 Reg. Sess.) as 
introduced Mar. 29, 1977 [attachments excerpting Sept. 16, 1976 remarks of Rep. 
Rodino].) 
Manufacturers argue it would be absurd to conclude the Legislature that 
passed Assembly Bill No. 1162 (1977-1978 Reg. Sess.), strengthening consumer 
antitrust protections, also approved the Hanover Shoe rule, which might in a 
hypothetical case impair consumer recoveries.  Manufacturers posit a scenario in 
which an intermediary purchaser (such as Pharmacies here) sues first, recovers the 
full measure of any overcharge under Hanover Shoe, and leaves nothing for the 
25 
ultimate consumers (because § 16760‟s duplicative-liability language would 
exclude the previous recovery from an antitrust defendant‟s future liability). 
We have no difficulty reconciling Assembly Bill No. 1162‟s consumer-
protecting provisions with tacit approval of the Hanover Shoe rule.  In the abstract, 
both rules are intended to achieve the same goal:  maximum deterrence and 
disgorgement.  If the Hanover Shoe rule enhances enforcement and deters to some 
degree future antitrust violations, consumers benefit.  As for the specific 
hypothetical, it posits a scenario in which an antitrust suit is filed, a full award is 
made against the defendants, and the case becomes final, all before the four-year 
statute of limitations expires and before the Attorney General has any opportunity 
to file suit.  The Legislature could easily have assumed that this would be a rare 
scenario indeed, and that the short statute of limitations (at least in comparison 
with the time it takes to resolve an antitrust case), combined with the availability 
of devices such as joinder, interpleader, and case consolidation, would make such 
a scenario the exception rather than the rule.  (See Union Carbide Corp. v. 
Superior Court (1984) 36 Cal.3d 15, 24 [noting that where suits are pending at the 
same time, consolidation can be employed, and the practical likelihood of 
sequential suits is “ „remote‟ ” because “ „[t]he extended nature of antitrust 
actions, often involving years of discovery, combines with the short four-year 
statute of limitations to make it impractical for potential plaintiffs to sit on their 
rights until after entry of judgment in the earlier suit‟ ”].)17 
                                              
17  
This case is perhaps far more typical.  Pharmacies, intermediary purchasers, 
filed suit in 2004; had any consumers sought recovery of the same amounts 
Pharmacies seek (i.e., recovery for the years 2000-2004), they would have had to 
file suit long before now, and their actions could have been consolidated or 
coordinated without any risk of an award in this case impairing relief in any such 
hypothetical other case. 
26 
In short, the Legislature decided to include in its new parens patriae statute 
a protection against the occasional potential for double recovery that arises when 
indirect purchasers can sue but direct purchasers are not subject to a pass-on 
defense, a provision created under the specific belief that Hanover Shoe would 
apply.  From this, we may infer the Legislature approved application of Hanover 
Shoe to the Cartwright Act. 
 
 
2.  Cartwright Act amendment in response to Illinois Brick 
 
 
 
a.  The sequel to Hanover Shoe:  Illinois Brick 
Nine years after Hanover Shoe, supra, 392 U.S. 481, the United States 
Supreme Court was pressed to decide whether the bar on defensive use of a pass-
on theory (the claim a direct purchaser could not sue because it had passed on any 
overcharge) should be extended to the offensive use of a pass-on theory (the claim 
by an indirect purchaser that it, too, had suffered antitrust injury because 
overcharges had been passed on to it by the direct purchaser and perhaps 
additional intermediary indirect purchasers).  In Illinois Brick, supra, 431 U.S. 
720, a sharply divided court concluded that just as defendants could not raise a 
pass-on theory as a defense, so indirect purchasers could not use a pass-on theory 
to sue for overcharges arising from antitrust violations. 
Plaintiff the State of Illinois sued concrete block manufacturers for price 
fixing in violation of the Sherman Act (15 U.S.C. § 1 et seq.), alleging that the 
manufacturers had illegally increased prices and those increases were passed on to 
masonry contractors, who passed them on to general contractors, who charged 
more in their bids to build buildings for the State of Illinois and other government 
entities.  (Illinois Brick, supra, 431 U.S. at pp. 726-727.)  Again writing for the 
majority, Justice White explained that the availability of a pass-on defense should 
be symmetric.  First, allowing offensive but not defensive pass-on claims would 
27 
create a risk of double recovery in those cases where both direct and indirect 
purchasers sued, with a defendant paying the entirety of any overcharge to the 
direct purchaser and some additional amount to the indirect purchaser.  (Id. at pp. 
730-731.)  Second, the uncertainties involved in tracing overcharges and the risk 
of overcomplicating antitrust trials extended equally to offensive pass-on cases as 
to defensive pass-on cases.  (Id. at pp. 731-732.)  Third, Hanover Shoe “rest[ed] 
on the judgment that the antitrust laws will be more effectively enforced by 
concentrating the full recovery for the overcharge in the direct purchasers rather 
than by allowing every plaintiff potentially affected by the overcharge to sue only 
for the amount it could show was absorbed by it.”  (Illinois Brick, at p. 735.)  
Because no exception applied that would have allowed defensive use of a pass-on 
theory—and because Hanover Shoe was still sound law and should not be 
overruled—Illinois could not use a pass-on theory offensively and, as an indirect 
purchaser, could recover nothing. 
The dissenters agreed fully that Hanover Shoe was good law, but concluded 
the same considerations that animated it dictated a rule allowing indirect purchaser 
suits.  (See Illinois Brick, supra, 431 U.S. at pp. 749-750 (dis. opn. of Brennan, 
J.).)  In Hanover Shoe, the court had chosen to run the risk of overcompensating a 
plaintiff rather than underdeterring antitrust violations and allowing antitrust 
violators to retain their ill-gotten gains.  In an offensive pass-on case, there was no 
danger that recognizing pass-on charges would allow a defendant to escape 
liability; rather, allowing a pass-on claim would advance the goal of preventing 
wrongdoers from escaping punishment.  (Illinois Brick, at pp. 752-753.)  The 
dissenters asserted that “ „[t]he attempt to transform a rejection of a defense 
because it unduly hampers antitrust enforcement into a reason for a complete 
refusal to entertain the claims of a certain class of plaintiffs seems an ingenious 
attempt to turn the decision [in Hanover Shoe] and its underlying rationale on its 
28 
head.‟ ”  (Id. at pp. 753-754.)  The majority‟s concerns about double recovery, the 
dissenters argued, could be addressed fully through procedural devices (joinder, 
interpleader, and the like) in instances where double recovery was a risk, without 
resort to the majority‟s blanket ban on indirect purchaser suits.  (Id. at pp. 761-
764.) 
b.  The legislative response to Illinois Brick 
Illinois Brick, supra, 431 U.S. 720, evoked an immediate legislative 
response.  Within months of the decision, Assembly Bill No. 3222 (1977-1978 
Reg. Sess.) was introduced to prevent Illinois Brick from having any effect on 
judicial interpretation of the Cartwright Act.18  This “Illinois Brick repealer” bill 
passed both houses unanimously and wrote into the Cartwright Act a repudiation 
of Illinois Brick‟s ban on indirect purchaser suits, allowing suit by any injured 
person “regardless of whether such injured person dealt directly or indirectly with 
the defendant.”  (§ 16750, subd. (a), added by Stats. 1978, ch. 536, § 1, p. 1693; 
see Union Carbide Corp. v. Superior Court, supra, 36 Cal.3d at pp. 19-20 
[explaining that § 16750 was amended to repudiate the Illinois Brick bar against 
                                              
18  
At the time, federal antitrust cases were treated as “applicable” (Chicago 
Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 315) and 
“authoritative” (Shasta Douglas Oil Co. v. Work (1963) 212 Cal.App.2d 618, 625) 
on Cartwright Act questions.  Consequently, the Legislature feared Illinois Brick‟s 
rule would be applied equally to the Cartwright Act.  (Sen. Com. on Judiciary, 
Analysis of Assem. Bill No. 3222 (1977-1978 Reg. Sess.) as introduced Mar. 27, 
1978, p. 1 [bill introduced to “prevent a federal case interpretation of the Sherman 
Act precluding an indirect purchaser‟s standing to sue in antitrust actions [i.e., 
Illinois Brick] being applied to actions under the Cartwright Act”]; id. at p. 2 
[explaining the bill was needed because federal antitrust decisions like Illinois 
Brick were “considered „persuasive‟ in interpreting the provisions of the 
Cartwright Act”].) 
29 
indirect purchaser recovery].)19  Reviewing the legislative history behind this 
enactment, we find indications the Legislature fully embraced the Illinois Brick 
dissent, including—critically for our purposes—its view that Hanover Shoe, 
supra, 392 U.S. 481, was a sound rule of law. 
Passage of the Illinois Brick repealer statute was driven by the fear that 
indirect purchasers might be stripped of their standing to sue under the Cartwright 
Act because, under the reasoning of the Illinois Brick majority, application of the 
Hanover Shoe rule under the Cartwright Act could be interpreted as dictating that 
outcome.  Rejecting that reasoning, the Assembly Judiciary Committee‟s summary 
of Assembly Bill No. 3222 cited with approval Illinois Brick‟s “vigorous dissent.”  
(Assem. Com. on Judiciary, Analysis of Assem. Bill No. 3222 (1977-1978 Reg. 
Sess.) as introduced Mar. 27, 1978, p. 1.)  It spelled out the dissent‟s critique of 
the majority‟s bar on indirect purchaser suits and indicated that as the “dissent 
noted . . . the implementation problems cited by the majority[20] could be 
addressed by the application of existing procedural requirements, e.g., mandatory 
joinder of the direct purchaser, interpleader, parens patriae.”  (Assem. Com. on 
Judiciary, Analysis of Assem. Bill No. 3222 (1977-1978 Reg. Sess.) as introduced 
                                              
19  
California was not alone in this.  To date, 25 states and the District of 
Columbia have passed Illinois Brick repealer statutes; numerous others have 
interpreted existing state law to allow indirect purchaser suits.  (Karon, “Your 
Honor, Tear Down that Illinois Brick Wall!”  The National Movement Toward 
Indirect Purchaser Antitrust Standing and Consumer Justice (2004) 30 Wm. 
Mitchell L.Rev. 1351, 1361-1362.)  The Cartwright Act amendment and other like 
Illinois Brick repealer statutes have subsequently been upheld against preemption 
challenges.  (California v. ARC America Corp., supra, 490 U.S. at pp. 105-106.) 
20  
These implementation problems were those that would arise if indirect 
purchaser suits were permitted at the same time that Hanover Shoe‟s bar on a pass-
on defense remained in place.  (See Illinois Brick, supra, 431 U.S. at pp. 737-747 
(maj. opn.); id. at pp. 761-764 (dis. opn.).) 
30 
Mar. 27, 1978, pp. 1-2.)  The Judiciary Committee‟s analysis thus accepted that 
allowing indirect purchaser suits would require courts to reconcile the existence of 
such suits with the Hanover Shoe no pass-on defense rule, and cited with approval 
the Illinois Brick dissent‟s proposed methods for reconciliation. 
Nowhere in this or any other committee report did the Legislature suggest 
reconciliation could or should instead occur by repudiating Hanover Shoe under 
the Cartwright Act.  Rather, the existence of the Hanover Shoe rule was taken as a 
given; the relevant debate was whether indirect purchaser suits could be 
accommodated in a world where Hanover Shoe was the law.  The Legislature, like 
the Illinois Brick dissent, apparently preferred procedural devices to a blanket ban 
on indirect purchaser suits and passed Assembly Bill No. 3222 to clarify that that 
preference was part of existing Cartwright Act law.  (See Assem. Com. on 
Judiciary, Analysis of Assem. Bill No. 3222 (1977-1978 Reg. Sess.) as introduced 
Mar. 27, 1978, p. 2 [measure is “declarative of existing law”].)  As with the 
passage of Assembly Bill No. 1162 (1977-1978 Reg. Sess.) the previous year, the 
Legislature‟s adoption of this amendment indicates acceptance of Hanover Shoe, 
supra, 392 U.S. 481.  
 
C.  Broader Legislative Policy Considerations 
In divining the Legislature‟s intent, we consider as well overarching 
legislative goals evident from the Legislature‟s adoption and amendment of the 
Cartwright Act over the years. 
From its inception, the Cartwright Act has always been focused on the 
punishment of violators for the larger purpose of promoting free competition.  
(See Stats. 1907, ch. 530, p. 984 [the Cartwright Act is “An act to define trust and 
to provide for criminal penalties and civil damages, and punishment of [entities 
connected with trusts], and to promote free competition in commerce and all 
classes of business in this state”].)  It is, like antitrust laws generally, about 
31 
“ „ “ „the protection of competition, not competitors.‟ ” ‟ ”  (Cel-Tech 
Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 
163, 186.)  Private damage awards are just a tool by which these procompetitive 
purposes are carried out:  “ „The main purpose of the anti-trust laws is to protect 
the public from monopolies and restraints of trade, and the individual right of 
action for treble damages is incidental and subordinate to that main purpose.‟ ”  
(Milton v. Hudson Sales Corp. (1957) 152 Cal.App.2d 418, 443; see also Bruce’s 
Juices v. Amer. Can Co. (1947) 330 U.S. 743, 751 [private damage remedies 
provide “a strong and reliable motive for enforcement”]; Cianci v. Superior Court 
(1985) 40 Cal.3d 903, 913 [private treble damages are designed “ „to serve as well 
the high purpose of enforcing the antitrust laws‟ ”].) 
As the Cartwright Act‟s primary concern is with the elimination of 
restraints of trade and impairments of the free market, we can and should select 
the damages rule most consistent with that focus.  The goal of deterring antitrust 
violations and concerns that a given private party may receive a windfall are not of 
equal weight.  The Legislature‟s adoption of a double damages remedy (Stats. 
1907, ch. 530, § 11, p. 987), later amended to treble damages (§ 16750, subd. (a)), 
demonstrates as much:  double and treble damages may overcompensate injured 
plaintiffs, but they do so in order to maximize deterrence. 
These relative priorities offer useful guidance.  In cases where no 
consumers have come forward and the choice is between allowing an antitrust 
violator to retain the full measure of profits from its violation or requiring their 
disgorgement to an innocent direct or intermediary purchaser who paid those 
monies and was forced to cope with the violation, the Legislature surely would 
prefer the latter, thereby maximizing deterrence and the probability of full 
32 
disgorgement.21  To allow defendants universally to assert a pass-on defense, even 
in cases such as this that present no risk of duplicative recovery, would hamper 
enforcement by reducing incentives to sue and police antitrust violations. 
As Hanover Shoe itself recognized, a universal pass-on defense would 
hamper enforcement in a second way.  Allowing a pass-on defense would plunge 
parties and courts into minitrials attempting to trace every penny of an initial 
overcharge, as well as seeking to measure the further ramifications that an 
overcharge might have in the form of lost sales and other tertiary consequences.  
(Hanover Shoe, supra, 392 U.S. at pp. 492-493.)  “ „[T]he task of disentangling 
overlapping damages claims is not lightly to be imposed upon potential antitrust 
litigants, or upon the judicial system.‟ ”  (Kansas v. UtiliCorp United Inc., supra, 
497 U.S. at p. 211.)  While the Legislature when it enacted the Illinois Brick 
repealer statute imposed that task for the small universe of cases in which multiple 
levels of purchasers might sue, rejection of the Hanover Shoe rule would extend 
that burden to nearly every case.  Accepting the rule, in contrast, streamlines 
antitrust trials, renders the process of proving antitrust damages less daunting, and 
ultimately enhances enforcement. 
Manufacturers raise one overarching policy concern of their own.  They 
object that Pharmacies simply were not damaged by the alleged price-fixing 
                                              
21  
In a closely related vein, we previously have approved the use of fluid 
recovery funds under the Cartwright Act precisely because they might be the only 
way to “ensure that the policies of disgorgement or deterrence are realized” and 
because Cartwright Act defendants should not be “permitted to retain ill gotten 
gains simply because their conduct harmed large numbers of people in small 
amounts instead of small numbers of people in large amounts.”  (State of 
California v. Levi Strauss & Co. (1986) 41 Cal.3d 460, 472.)  The same 
considerations are in play here, where rejection of the Hanover Shoe rule would 
allow alleged antitrust violators to escape without sanction. 
33 
conspiracy and the law should not countenance a rule that permits a windfall to 
undamaged plaintiffs. 
This objection misconceives both the nature of the Hanover Shoe rule in 
general and its potential application here.  The Hanover Shoe court recognized that 
a purchaser forced by a monopoly or price-fixing cartel to pay higher prices might 
well be injured by that antitrust violation even in instances where it appeared the 
purchaser could pass on some or all of that overcharge downstream to others.  
(Hanover Shoe, supra, 392 U.S. at p. 493, fn. 9 [“The mere fact that a price rise 
followed an unlawful cost increase does not show that the sufferer of the cost 
increase was undamaged.”]; see also Kansas v. UtiliCorp United Inc., supra, 497 
U.S. at pp. 208-211.)  A purchaser might lose profits or sales, and perhaps market 
share as well, vis-à-vis another purchaser/distributor not subject to the same 
overcharge.  Recognizing the difficulty of proving the precise amount of other 
forms of injury, the Hanover Shoe court selected the amount of the initial 
overcharge as the measure of damages, not because the initial overpayment was 
the only injury, but because it was the most readily measured, and because 
measuring damages in this way would, in the long run, best serve the various goals 
of antitrust law.  (See Hanover Shoe, at pp. 492-494; cf. 2A Areeda et al., 
Antitrust Law (3d ed. 2007) ¶ 395, p. 377 [“[T]he most commonly used measure 
of damages, viz., the overcharge, is an ambiguous proxy for the actual damages 
suffered.”].) 
Some or all of the injuries identified in Hanover Shoe, supra, 392 U.S. 481, 
and Kansas v. UtiliCorp United Inc., supra, 497 U.S. 199, are in play here.  
Evidence in the record indicates Pharmacies‟ contracts with third party payers 
were sometimes negotiable, and rates changed over time.  Given an opportunity to 
do so, Pharmacies might have been able to prove lost profits on third party payer 
sales, that is, that in the absence of overcharges they could have negotiated 
34 
reimbursement rates that would have increased the gap between their acquisition 
costs and reimbursement rates.  Evidence in the record also indicated Pharmacies 
had seen fewer and fewer cash-paying customers over time and thus had unilateral 
pricing discretion for a smaller percentage of their sales.  Given an opportunity to 
do so, Pharmacies might have been able to prove lost profits (because they could 
have maintained the same retail prices for cash-paying customers, while obtaining 
their drugs from wholesalers at a lower acquisition cost (see Kansas v. UtiliCorp 
United Inc., at p. 209; Hanover Shoe, at p. 493, fn. 9)) or lost sales (due to cash-
paying customers, who are sensitive to higher prices, filling fewer prescriptions 
than they would have if both acquisition costs and corresponding retail prices were 
lower).22  Finally, Pharmacies alleged the value of their businesses as going 
concerns had declined due to lost sales, lost profits, and competition from foreign 
distributors not subject to Manufacturers‟ overcharges.  As the cross-motions 
below focused on the pass-on defense, Pharmacies were not called on to bring 
forward evidence in support of this allegation.  Of course, the rule of Hanover 
Shoe obviates the need for the parties and the trial court to develop and consider 
proof of these other forms of injury, not because they do not exist, but because, as 
noted, enforcement of the antitrust laws works better if the initial amount of the 
overcharge is chosen as a default measure of all the injuries a price-fixing 
conspiracy may engender for a given purchaser.23 
                                              
22  
Indeed, the possibility that in this latter scenario Pharmacies did not lose 
sales as a result of the alleged price-fixing conspiracy rests on the rather unlikely 
proposition that cash-paying customers‟ demand for drugs is wholly inelastic to 
price. 
23  
Manufacturers argue, and the Court of Appeal agreed, that Pharmacies 
waived these other forms of injury.  The record does not support this claim.  
Pharmacies expressly did not concede that they had suffered no other injuries as a 
result of the alleged price-fixing conspiracy.  Rather, they waived any attempt to 
 
(footnote continued on next page) 
35 
At its core, Manufacturers‟ argument is that the Cartwright Act should be 
read to go beyond the primary consequence of the price conspiracy (the 
overcharge) to consider the secondary consequence of the conspiracy (the pass-
on), but that it should blind itself to the tertiary consequences (lost sales, lost 
profits, and so on).  The Court of Appeal as well implicitly accepted Hanover 
Shoe‟s focus on overcharges as the measure of damages and its corresponding 
disregard for tertiary consequences, but rejected that case insofar as it disregarded 
secondary consequences (the pass-on).  But these two aspects of Hanover Shoe go 
hand-in-hand:  Hanover Shoe found it acceptable to ignore tertiary consequences 
only because it also disregarded secondary consequences.  Put differently, 
Hanover Shoe is not a case about what constitutes injury, but about how to 
measure damages.  That a purchaser passes on an overcharge does not mean it 
lacks for injury or damages.  The Hanover Shoe court disregarded all tertiary 
damages for measurement purposes because, and only because, it also disregarded 
the secondary pass-on for measurement purposes.  Conversely, one cannot 
rationally admit evidence of a pass-on, under a theory of mitigation, while also 
excluding evidence that the pass-on in fact failed to mitigate fully the loss 
occasioned by the original overcharge.  (See Hanover Shoe, supra, 392 U.S. at 
pp. 491-494; B.W.I. Custom Kitchen v. Owens-Illinois, Inc., supra, 191 
                                                                                                                                                              
(footnote continued from previous page) 
prove other injuries because those injuries‟ existence and measure were legally 
irrelevant under Hanover Shoe, the rule Pharmacies contended applied under the 
Cartwright Act.  As we agree that Hanover Shoe applies, we need not consider 
whether, had we concluded it did not, Pharmacies should have been permitted to 
prove injuries other than the overcharge in this case.  (Cf. B.W.I. Custom Kitchen 
v. Owens-Illinois, Inc., supra, 191 Cal.App.3d at p. 1353 [if the pass-on defense 
applies, plaintiffs should have the opportunity to prove other injuries].) 
36 
Cal.App.3d at p. 1353.)24  Instead, the choice in measuring damages is between a 
rule that for policy reasons considers only the overcharge (the Hanover Shoe rule) 
and one that considers all the consequences of the overcharge. 
 
D.  Conclusion 
The inferences we draw from the Legislature‟s actions and responses to 
developments in federal antitrust law, as well as its actions in enacting and 
amending the Cartwright Act over the years, all point in the same direction:  For 
state antitrust purposes, the Hanover Shoe rule should apply even as indirect 
purchasers are allowed to sue.  We therefore conclude, under the Cartwright Act 
as under federal law, that a pass-on defense generally may not be asserted.  
                                              
24  
We are aware of no statute or case that adopts such an in-between rule, and 
Manufacturers have cited none.  The irrationality of such a rule is inferable as well 
from the United States Supreme Court‟s own precedents.  To prevail on a pass-on 
defense in those rare instances where it has been permitted under federal law, a 
defendant must show the plaintiff could not have raised rates otherwise (Kansas v. 
UtiliCorp United Inc., supra, 497 U.S. at p. 209; Hanover Shoe, supra, 392 U.S. at 
p. 493, fn. 9) and did not lose sales, because the quantity to be purchased was 
controlled by a preexisting “cost-plus” contract (Kansas v. UtiliCorp United Inc., 
at p. 218; Illinois Brick, supra, 431 U.S. at p. 736; Hanover Shoe, at p. 494; see 
also Hovenkamp, The Indirect Purchaser Rule and Cost-plus Sales (1990) 103 
Harv. L.Rev. 1717, 1720 [cost-plus contracts involve both a fixed markup and a 
fixed quantity to be delivered]).  In essence, Supreme Court precedent recognizes 
that a pass-on defense (based on evidence of secondary consequences) is only 
presentable in circumstances that foreclose the possibility of tertiary consequences 
(lost sales and profits).  Only then can one fairly say in defense that the plaintiff 
has suffered no injury as the result of an illegal overcharge. 
 
In contrast, in stable markup cases such as this one, where a purchaser‟s 
resale price is fixed as a direct function of its acquisition price so as to pass on any 
overcharge, the resale market‟s response to that overcharge-inflated resale price is 
not fixed and may be different than it would have been in the absence of the 
overcharge—and that different response (e.g., lower sales) may injure the plaintiff. 
37 
Instead, in an antitrust price-fixing case, the presumptive measure of damages is 
the amount of the overcharge paid by the plaintiff. 
While a pass-on defense is generally precluded, a few instances remain in 
which it will still be available.  First, Hanover Shoe recognized an exception for 
“cost-plus” contracts (Hanover Shoe, supra, 392 U.S. at p. 494) and, given the 
Legislature‟s endorsement of Hanover Shoe, that exception would apply to the 
Cartwright Act as well.  Second, in light of the Illinois Brick repealer statute 
(§ 16750, subd. (a)), cases may arise where application of the Hanover Shoe rule 
raises the prospect of duplicative recovery.  In instances where multiple levels of 
purchasers have sued, or where a risk remains they may sue, trial courts and 
parties have at their disposal and may employ joinder, interpleader, consolidation, 
and like procedural devices to bring all claimants before the court.  In such cases, 
if damages must be allocated among the various levels of injured purchasers, the 
bar on consideration of pass-on evidence must necessarily be lifted; defendants 
may assert a pass-on defense as needed to avoid duplication in the recovery of 
damages. 
We need not address in detail the scope of these two exceptions, for neither 
applies here.  Manufacturers have not sought to establish that any cost-plus 
contract exception would apply.  Nor does it appear any wholesaler, consumer, or 
parens patriae suits have been filed that might pose a risk of duplicative recovery, 
and the statute of limitations for the period at issue has long since expired.  
Accordingly, the trial court erred in granting summary judgment for 
Manufacturers on the basis of a pass-on defense. 
III.  The Unfair Competition Law 
In a claim closely related to their Cartwright Act claims, Pharmacies also 
alleged they had been injured by Manufacturers‟ unfair business practices and 
were entitled to relief under the UCL (§ 17200 et seq.).  The Court of Appeal 
38 
affirmed the trial court‟s grant of summary judgment to Manufacturers on the 
UCL claims, concluding Pharmacies lacked standing and, additionally, were 
ineligible for any relief.  We consider each ground in turn. 
 
A.  Standing 
“The purpose of a standing requirement is to ensure that the courts will 
decide only actual controversies between parties with a sufficient interest in the 
subject matter of the dispute to press their case with vigor.”  (Common Cause v. 
Board of Supervisors (1989) 49 Cal.3d 432, 439.)  In 2004, the electorate 
substantially revised the UCL‟s standing requirement; where once private suits 
could be brought by “any person acting for the interests of itself, its members or 
the general public” (former § 17204, as amended by Stats. 1993, ch. 926, § 2, 
p. 5198), now private standing is limited to any “person who has suffered injury in 
fact and has lost money or property” as a result of unfair competition (§ 17204, as 
amended by Prop. 64, approved by voters, Gen. Elec. (Nov. 2, 2004) § 3; see 
Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 227-
228.)  The intent of this change was to confine standing to those actually injured 
by a defendant‟s business practices and to curtail the prior practice of filing suits 
on behalf of “ „clients who have not used the defendant‟s product or service, 
viewed the defendant‟s advertising, or had any other business dealing with the 
defendant . . . .‟ ”  (Californians for Disability Rights, at p. 228, quoting Prop. 64, 
§ 1, subd. (b)(3).) 
While the voters clearly intended to restrict UCL standing, they just as 
plainly preserved standing for those who had had business dealings with a 
defendant and had lost money or property as a result of the defendant‟s unfair 
business practices.  (Prop. 64, § 1, subds. (b), (d); see § 17204.)  Under that 
standard, Pharmacies have established standing.  To distribute their 
pharmaceuticals, Manufacturers depend on a network of wholesalers and retailers.  
39 
Pharmacies acted as retailers for Manufacturers‟ drugs and thus had indirect 
business dealings with Manufacturers.  (See Shersher v. Superior Court (2007) 
154 Cal.App.4th 1491, 1499-1500 [indirect purchases may support UCL 
standing].)  They lost money:  the overcharges they paid.  (See Hall v. Time Inc. 
(2008) 158 Cal.App.4th 847, 854 [§ 17204 standard is satisfied when the plaintiff 
has “expended money due to the defendant‟s acts of unfair competition”].)  
Finally, that loss was the result of an unfair business practice:  Pharmacies paid 
more than they otherwise would have because of a price-fixing conspiracy in 
violation of state law.  The voters‟ intent that under Proposition 64 suits be limited 
to those who suffer injury in fact is satisfied here.  (See Chattanooga Foundry v. 
Atlanta, supra, 203 U.S. at p. 396 [“A person whose property is diminished by a 
payment of money wrongfully induced is injured in his property.”].) 
While Manufacturers argue that ultimately Pharmacies suffered no 
compensable loss because they were able to mitigate fully any injury by passing 
on the overcharges, this argument conflates the issue of standing with the issue of 
the remedies to which a party may be entitled.  That a party may ultimately be 
unable to prove a right to damages (or, here, restitution) does not demonstrate that 
it lacks standing to argue for its entitlement to them.  (See Southern Pac. Co. v. 
Darnell-Taenzer Co., supra, 245 U.S. at p. 534 [“The plaintiffs suffered losses . . . 
when they [over]paid.  Their claim accrued at once in the theory of the law and it 
does not inquire into later events.”]; Adams v. Mills, supra, 286 U.S. at p. 407 [“In 
contemplation of law the claim for damages arose at the time the extra charge was 
paid,” notwithstanding any subsequent reimbursement].)  The doctrine of 
mitigation, where it applies, is a limitation on liability for damages, not a basis for 
extinguishing standing.  (See Pool v. City of Oakland (1986) 42 Cal.3d 1051, 1066 
[“ „The rule of [mitigation of damages] comes into play after a legal wrong has 
occurred, but while some damages may still be averted‟ ” (quoting Prosser & 
40 
Keeton, Torts (5th ed. 1984) § 65, p. 458)].)  This is so because mitigation, while 
it might diminish a party‟s recovery, does not diminish the party‟s interest in 
proving it is entitled to recovery. 
Nothing in the text of section 17204 or Proposition 64 suggests the voters 
intended to provide otherwise when they remade the UCL‟s standing 
requirements.  Rather, section 17204 requires only that a party have “lost money 
or property,” and Pharmacies indisputably lost money when they paid an allegedly 
illegal overcharge.  We decline Manufacturers‟ invitation to turn this facially 
simple threshold condition into a requirement that plaintiffs prove compensable 
loss at the outset.25 
 
B.  Remedies 
The Court of Appeal affirmed summary judgment on a second, overlapping 
ground:  Pharmacies were not entitled to any remedy.  Pharmacies‟ complaint 
seeks two forms of relief:  restitution and an injunction.  We need consider only 
the latter.  If a party has standing under section 17204 (as Pharmacies do here), it 
may seek injunctive relief under section 17203.  (See § 17204 [authorizing without 
limitation “[a]ctions for relief pursuant to this chapter” to be brought by parties 
who satisfy the provision‟s standing requirement].)  Manufacturers‟ papers 
identify no obstacle that would preclude Pharmacies from obtaining injunctive 
relief if they establish Manufacturers were engaged in an unfair business 
practice.26 
                                              
25  
Doing so would render the UCL‟s standing requirement substantially more 
stringent than other state unfair competition statutes such as the Cartwright Act, 
under which Pharmacies‟ standing is undisputed.  Again, we see nothing in the 
text or history of Proposition 64 that suggests the voters intended such a result. 
26  
In this court, Manufacturers argue that Pharmacies have waived reliance on 
their complaint‟s request for injunctive relief to defeat summary adjudication.  
 
(footnote continued on next page) 
41 
The Court of Appeal held Pharmacies were barred from seeking injunctive 
relief because, it concluded, they had suffered no monetary loss.  To the extent this 
holding rests on the conclusion Pharmacies lacked standing under section 17204, it 
is erroneous; as discussed ante, Pharmacies have standing.  To the extent the 
holding rests on the conclusion that even if Pharmacies had standing, they could 
not seek injunctive relief unless they could also seek restitution, it similarly is 
erroneous.  Section 17203 makes injunctive relief “the primary form of relief 
available under the UCL,” while restitution is merely “ancillary.”  (In re Tobacco 
II Cases (2009) 46 Cal.4th 298, 319.)  Nothing in the statute‟s language conditions 
a court‟s authority to order injunctive relief on the need in a given case to also 
order restitution.  Accordingly, the right to seek injunctive relief under section 
17203 is not dependent on the right to seek restitution; the two are wholly 
independent remedies.  (See ABC Internat. Traders, Inc. v. Matsushita Electric 
Corp. (1997) 14 Cal.4th 1247, 1268 [§ 17203 “contains . . . no language of 
condition linking injunctive and restitutionary relief”]; Prata v. Superior Court 
(2001) 91 Cal.App.4th 1128, 1139 [plaintiff could pursue injunctive relief even 
though restitution was unavailable].) 
                                                                                                                                                              
(footnote continued from previous page) 
This argument misplaces the relevant burden.  If Manufacturers sought summary 
judgment on the ground Pharmacies could obtain no relief on their UCL claim, it 
was incumbent on Manufacturers, as the moving party, to show that each form of 
relief sought by Pharmacies was unavailable.  While Manufacturers attempted that 
showing with respect to the request for restitution, their moving papers simply 
ignored Pharmacies‟ request for injunctive relief. 
 
In any event, the issue whether the availability of injunctive relief bars 
summary adjudication was decided by the Court of Appeal and fully briefed 
before us by the parties.  It involves a pure issue of law, reviewable de novo.  We 
may exercise our discretion to consider it.  (See People v. Superior Court (Laff) 
(2001) 25 Cal.4th 703, 712, fn. 3.) 
42 
As the claim for injunctive relief is sufficient to preclude summary 
judgment, we need not decide, and express no opinion on, the further question 
whether Pharmacies may eventually be entitled to restitution. 
DISPOSITION 
For the foregoing reasons, we reverse the Court of Appeal‟s judgment and 
remand for further proceedings not inconsistent with this opinion. 
 
 
 
 
 
 
WERDEGAR, J. 
WE CONCUR: 
GEORGE, C. J. 
BAXTER, J. 
MORENO, J. 
RUVOLO, J.* 
ROBIE, J.** 
MILLER, J.*** 
 
 
 
 
 
 
 
 
 
 
 
 
 
______________________ 
* 
Presiding Justice of the Court of Appeal, First Appellate District, Division 
Four, assigned by the Chief Justice pursuant to article VI, section 6 of the 
California Constitution. 
** 
Associate Justice of the Court of Appeal, Third Appellate District, assigned 
by the Chief Justice pursuant to article VI, section 6 of the California Constitution. 
*** 
Associate Justice of the Court of Appeal, Fourth Appellate District, 
Division Two, assigned by the Chief Justice pursuant to article VI, section 6 of the 
California Constitution.
 
 
See last page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Clayworth v. Pfizer, Inc. 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 165 Cal.App.4th 209 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S166435 
Date Filed: July 12, 2010 
__________________________________________________________________________________ 
 
Court: Superior 
County: Alameda 
Judge: Ronald M. Sabraw and Harry R. Sheppard 
 
__________________________________________________________________________________ 
 
Attorneys for Appellant: 
 
Alioto Law Firm, Joseph M. Alioto, Joseph M. Alioto, Jr., Theresa D. Moore, Angelina Alioto-Grace, 
Thomas P. Pier; Law Offices of John H. Boone, John H. Boone; Foreman & Brasso, Russell F. Brasso; 
Law Offices of James M. Dombroski, James M. Dombroski; Law Offices of Jeffery K. Perkins, Jeffrey K. 
Perkins; Gary D. McCallister & Associates, Gary D. McCallister, Thomas A. Kelliher, Eric I. Unrein and 
Jaime Goldstein for Plaintiffs and Appellants. 
 
Coughlin Stoia Geller Rudman & Robbins, Pamela M. Parker; Schubert Jonckheer Kolbe & Kralowec and 
Kimberly A. Kralowec for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiffs and 
Appellants. 
 
Zelle Hofmann Voelbel & Mason, Craig C. Corbitt and Henry A. Cirillo for Pharmacists Planning Services, 
Inc., as Amicus Curiae on behalf of Plaintiffs and Appellants. 
 
__________________________________________________________________________________ 
 
Attorneys for Respondent: 
 
Filice Brown Eassa & McLeod, Peter A. Strotz, Paul R. Johnson, William E. Steimle; Davis Polk & 
Wardwell, Ameila Starr, Arthur F. Golden, William J. Fenrich and Daniel J. Schwartz for Defendant and 
Respondent AstraZeneca LP. 
 
Winston & Strawn, Tyler M. Paetkau, Nicole P. Dogwill, James F. Hurst, Susan A. Pipal, Matthew J. 
Sullivan; Eimer Stahl Klevorn & Solberg, David M. Stahl, J. Cunyon Gordon and Adam Oyenbanji for 
Defendant and Respondent Abbott Laboratories. 
 
Gibson, Dunn & Crutcher, Jeffrey T. Thomas and James N. Knight for Defendant and Respondent 
Allergan, Inc. 
 
 
 
 
 
 
 
 
 
Page 2 – S166435 – counsel continued 
 
Attorneys for Respondent: 
 
Mayer, Brown, Rowe & Maw, Mayer Brown, Donald M. Falk, John Nadolenco, Mack Anderson; Sheppard 
Mullin Richter & Hampton, Steven O. Kramer, John P. Stigi III; Hogan & Hartson and Joseph H. Young 
for Defendant and Respondent Amgen, Inc. 
 
Covington & Burling, Elizabeth Abigail Brown, Anita F. Stork, Theodore Voorhees, Jr., and Thomas J. 
Cosgrove for Defendant and Respondent Boehringer Ingelheim Pharmaceuticals, Inc. 
 
Sedgwick, Detert, Moran & Arnold, Paul J. Riehle, Matthew A. Fischer; Cravath, Swaine & Moore, Evan 
R. Chesler, Elizabeth L. Grayer, Jessica Buturla and Jeffrey B. Korn for Defendant and Respondent Bristol-
Myers Squibb Company. 
 
Reed Smith, Michael Diane Floyd, Kirsten J. Handelman; Oppenheimer Wolff & Donnelly, Gary Hansen, 
David Graham and Aaron Mills Scott for Defendant and Respondent Eli Lilly & Company. 
 
Irell & Manella, Alexander F. Wiles, John C. Keith; Cleary Gottlieb Steen & Hamilton, George S. Cary, 
Sara D. Schotland and David I. Gelfand for Defendant and Respondent GlaxoSmithKline PLC. 
 
Drinker Biddle & Reath, H. Christian L‟Orange, Paul H. Saint-Antoine, Mary E. Kohart, David J. Antczak 
and Joanne C. Lewers for Defendant and Respondent Hoffmann-La Roche Inc. 
 
Folger Levin & Kahn, Crowell & Moring, Beatrice Bich-Dao Nguyen, Samuel Ray Miller, Tracy E. 
Reichmuth, Cecilia C. Ogbu, Steven E. Wilson; Patterson Belknap Webb & Tyler, William Cavanaugh, Jr., 
and Cecilia B. Loving for Defendants and Respondents Janssen Pharmaceutica Inc., Johnson & Johnson 
Health Care Systems, Inc., Ortho Biotech, Inc., and Ortho-McNeil Pharmaceutical, Inc. 
 
Hughes Hubbard & Reed, Rita M. Haeusler, John M. Townsend, Scott H. Christensen, James A. Graffam; 
Orrick, Herrington & Sutcliffe, Robert P. Reznick and David Goldstein for Defendant and Respondent 
Merck Sharp & Dohme Corp. formerly known as Merck & Co., Inc. 
 
Kaye Scholer, Aton Arbisser, Bryant S. Delgadillo, Saul P. Morgenstern, Karin E. Garvey; Faegre & 
Benson, James A. O‟Neal and Kim J. Walker for Defendant and Respondent Novartis Pharmaceuticals 
Corporation. 
 
Nossaman, Gunther, Knox & Elliott, Nossaman, Scott DeVries, Katrina June Lee; Dickstein Shapiro, Peter 
J. Kadzik, Bernard Nash, Maria Colsey Heard, Milton Marquis and Andres Colin for Defendant and 
Respondent Pfizer Inc. 
 
Latham & Watkins, Charles H. Samel, Jennifer A. Carmassi, Margaret M. Zwisler, Steven H. Schulman 
and Belinda S. Lee for Defendant and Respondent Pharmaceutical Research and Manufacturers of 
America. 
 
Arnold & Porter, Ronald C. Redcay, Douglas L. Wald, Mark R. Merley, Daniel R. Waldman, Anne P. 
Davis and Ryan Z. Watts for Defendant and Respondent Wyeth. 
 
 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Joseph M. Alioto, Jr. 
Alioto Law Firm 
555 California Street, Thirty-First Floor 
San Francisco, CA  94104 
(415) 434-8900 
 
William J. Fenrich 
Davis Polk & Wardwell 
450 Lexington Avenue 
New York, NY  10017 
(212) 450-4000