Opinion ID: 150495
Heading Depth: 4
Heading Rank: 1

Heading: State Antitrust Statutes

Text: Under the Sherman Act, to establish antitrust liability for horizontal price-fixing, a plaintiff must show that (1) a defendant entered a contract, combination, or conspiracy with at least one other entity; (2) the agreement constitutes an unreasonable restraint of trade; (3) the agreement produced anticompetitive effects in the relevant market; and (4) the plaintiff was injured as a result. Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 442 (3d Cir.1997) (reiterating elements of proof under § 1 of the Sherman Act). A claim for monopolization requires the plaintiff to prove that (1) the defendant possesses monopoly power in the relevant market and (2) the defendant acquired, maintained, or attempted to acquire or maintain that power through means other than growth or development as a consequence of a superior product, business acumen, or historic accident. United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966) (setting forth the elements of proof under § 2 of the Sherman Act). Many states have enacted antitrust statutes that proscribe the same conduct as the Sherman Act. 14 HERBERT HOVENKAMP, ANTITRUST LAW ¶ 2401a, at 314 (2d ed.2006). While state antitrust statutes frequently track the Sherman Act in terms of their substantive elements of proof, they vary significantly with regard to the standing that they extend to indirect purchasers. The variance is mainly a function of whether a state has chosen to follow the Sherman Act principles regarding standing laid down by the Supreme Court in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). In that case, the Court decided that only direct purchasers of a product or service may sue for an antitrust injury. Id. at 734-36, 97 S.Ct. 2061. The Supreme Court's theory for denying standing to indirect purchasers was 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. Id. at 735, 97 S.Ct. 2061. Hence, the Court viewed direct purchaser standing as the most efficient way to ensure that companies or individuals engaging in anticompetitive conduct were called to account for their actions. Id. at 741, 97 S.Ct. 2061. Some states have elected to follow the Supreme Court's lead in Illinois Brick. See, e.g., Wilson v. Gen. Motors Corp., 190 N.J. 336, 921 A.2d 414, 416-17 (2007); Johnson v. Microsoft Corp., 106 Ohio St.3d 278, 834 N.E.2d 791, 798 (2005); Major v. Microsoft Corp., 60 P.3d 511, 513 (Okla. Civ.App.2002). Other states, however, have diverged from Illinois Brick and have enacted statutes known as  Illinois Brick repealers. Those statutes reject the rule that antitrust recovery is limited to parties that dealt directly with the defendant and instead extend antitrust standing to indirect purchasers, including consumers. See, e.g., CAL. BUS. & PROF. CODE § 16750(a); MICH. COMP. LAWS § 445.778(2); N.Y. GEN. BUS. LAW § 340(6). Finally, a third set of jurisdictions allow indirect purchasers to seek antitrust recovery, but only if the state joins the suit in a parens patriae capacity. See IDAHO CODE §§ 48-108(2),-113(1); Siena v. Microsoft Corp., 796 A.2d 461, 464-65 (R.I.2002). Thus, in some states with Illinois Brick repealers, indirect purchasers may personally advance a claim for antitrust recovery against a defendant, such as De Beers, that has fixed prices. In other states, however, they may do so only with the assent of the state attorney general. And in states without a repealer statute, recovery is usually foreclosed entirely. [10] At least twenty-five states and the District of Columbia have implemented Illinois Brick repealers or extended antitrust standing to indirect purchasers through judicial decision; the remaining states have not. [11] In short, this is not a case in which a class of plaintiffs possesses numerous disparate claims but shares an overriding common cause of action under a common body of law. Instead, all parties agree that the claims within the indirect purchaser class implicate the law in every jurisdiction in the nation and that no jurisdiction provides a claim shared by all, or even by a majority, of the class members. These variations in state antitrust law are not trivial. [12] They represent fundamental policy differences among the several states, and they are in consequence as different as it is possible to be, with some states giving substantive antitrust rights to indirect purchasers, other states giving more limited rights, and others denying such rights altogether. For example, an indirect purchaser located in a state that has an Illinois Brick repealer, such as New York, may sue and recover for a price-fixing or monopolization harm, see N.Y. GEN. BUS. LAW § 340(6), but an identical indirect purchaser in a neighboring state without a repealer, such as New Jersey, may not, see Sickles v. Cabot Corp., 379 N.J.Super. 100, 877 A.2d 267, 276 (2005) (refusing to extend antitrust liability under the New Jersey Antitrust Act to indirect purchasers). It is hard to imagine a greater disparity between two class members. Whereas the New York purchaser may recover for an antitrust violation if he can prove the existence of a price-fixing agreement or monopoly market power resulting in higher prices, the New Jersey purchaser has no legal right to recoveror even to bring a lawsuit regardless of whether he can conclusively prove the existence of a restraint and antitrust impact. Thus, while both purchasers may have felt the effects of the same antitrust conduct, the purchasers do not share common legal or factual issues because the antitrust activity gives rise to a right of action for only one purchaser. See Ins. Brokerage, 579 F.3d at 266 (noting that Rule 23 requires that a class possess at least one issue of law or fact that affects all class members' claims). The natural result of those differences is that there can be no certification of a nationwide class of state indirect purchaser plaintiffs because there is no common question of law or material fact. It is improper to certify a nationwide class when the legal right shared by class members purportedly arises under the laws of multiple jurisdictions, but only some of those jurisdictions extend standing to class members to enforce that right. [13] Plaintiffs seek to minimize these legal disparities by characterizing them as little more than impediments to litigation that would make trial management difficult but that may safely be ignored for settlement purposes. That argument places management issues above the more basic question of substantive law. It is akin to suggesting that a really good cook, by means of superior kitchen management, can make a cake out of nothing. The lack of substantive rights cannot be wished away by the promise of easier litigation management. Proponents of class certification for any purpose, including settlement, retain the burden of demonstrating that all class members share common legal or factual issues and that those issues predominate over matters requiring individual proof. In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 799 (3d Cir.1995) (holding that nothing in Rule 23 can be read to authorize separate, liberalized criteria for settlement classes). That test presupposes that everyone in the class at least has a cause of action. The variations in state law identified by the objectors preclude the requisite finding of predominance under Rule 23(b)(3) because indirect purchasers do not have a right to recover in all states, and, therefore, no question of law or fact regarding their legal rights is uniform throughout the class. Cf. Prudential, 148 F.3d at 315 (stating that certification of a nationwide class of state-law claims is appropriate if the plaintiffs possess similar rights under the laws of all states such that the court can readily control for differences among various jurisdictions). The predominance requirement of Rule 23 is not the only statutory provision to stand as an obstacle to certification. As just discussed, the District Court's certification order extends antitrust remedies that, in many instances, have no root in state substantive law. As such, the order contravenes the Rules Enabling Act, which prohibits a court from interpreting procedural rules in a manner that creates new substantive rights. See 28 U.S.C. § 2072(b) (stating that federal courts may not interpret procedural rules in a manner that enlarge[s] ... any substantive right); see also Windham v. Am. Brands, Inc., 565 F.2d 59, 65-66 (4th Cir.1977) (cautioning that each plaintiff in a federal antitrust action must offer individual proof of damages and that the failure to require such proof contravenes the Rules Enabling Act by allowing a plaintiff to recover in the absence of individual harm). By certifying a class, the District Court ran afoul of the Act because its order effectively granted relief to individuals to whom De Beers had no antitrust liability. Nor can these foundational problems be overcome, as plaintiffs suggest, by relying upon De Beers's willingness to stipulate to liability in all fifty states. Plaintiffs argue that [w]hen a settlement is reached, the defendant elects not to contest the allegations of the complaint, and district courts are entitled to rely on those allegations to demonstrate commonality. (Plaintiff-Appellees' Ans. Br. at 46.) That is simply incorrect. Independent of any stipulations, district courts are obligated to consider carefully all relevant evidence and make a definitive determination that the requirements of Rule 23 have been met before certifying a class. Hydrogen Peroxide, 552 F.3d at 320. Were it otherwise, the door would swing wide to collusive settlements. Amchem, 521 U.S. at 620, 117 S.Ct. 2231 (requiring courts to exercise undiluted, even heightened, attention to issues of commonality and predominance in the settlement context because those inquires are designed to protect absentees by blocking unwarranted or overbroad class definitions). Thus, plaintiffs and De Beers cannot salvage an improper certification order by saying that De Beers has stipulated out of existence defects in the commonality and predominance of the class claims. The objections in this case pertain to the predominance of class claims and to the standing of individual class members to bring claims under state law. The District Court had to consider both of those issues, apart from the pleadings and stipulations, when evaluating the motion to certify a class. Hydrogen Peroxide, 552 F.3d at 316. A defendant's decision not to contest the requirements of Rule 23 does not relieve a district court of its independent obligation to ensure that those requirements are satisfied. The District Court did not adequately satisfy that obligation and abused its discretion in finding that common issues of law or fact predominate so as to warrant certification of a nationwide class of state antitrust claims.