Antitrust, UCL and Privacy

Competition: Fall 2014, Vol. 23, No. 2

JOINT TRIAL OF DIRECT AND INDIRECT PURCHASER CLAIMS

By Robert E. Freitas, Jason S. Angell, and Jessica N. Leal*

As a result of the Class Action Fairness Act ("CAFA"), and the regular use of multidistrict litigation procedures, class actions presenting direct purchaser claims under federal law are now commonly litigated in proceedings in a single district court with indirect purchaser claims under state law. CAFA is not the only occasion for direct and indirect purchaser claims to be grouped together in the same court. Corporate plaintiffs who choose to opt out of class actions sometimes plead both federal claims based on direct purchases of price-fixed goods and state law claims based on indirect purchases of the same goods or of finished products containing price-fixed components. Opt-out plaintiffs asserting only direct purchaser or only indirect purchaser claims are also commonly parties in the same MDL court. In addition to actual direct purchase claims, some opt-out plaintiffs rely on indirect purchases they seek to bring within the "owned or controlled" or "co-conspirator" exceptions to Illinois Brick.1 This, too, can result in potential trial contexts including both "direct" purchaser federal law claims and state law indirect purchaser claims.

Under Illinois Brick, indirect purchasers lack standing to seek price-fixing damages under federal law, and Hanover Shoe2 prevents Sherman Act defendants from defending against direct purchaser claims with evidence that overcharges paid by direct purchaser plaintiffs were passed on to their customers. In the wake of Illinois Brick, various states have amended their antitrust laws to allow indirect purchaser claims. Under these so-called Illinois Brick "repealer" statutes, the plaintiffs’ claims depend on proof of "upstream" pass on of overcharges,3 sometimes by the direct purchaser plaintiffs suing the same defendants in cases pending in the same court. State indirect purchaser laws also commonly allow pass on as a defense.

With common factual and evidentiary issues typically presented by direct purchaser and indirect purchaser claims arising out of the same price fixing conspiracy, a compelling demonstration of significant judicial economy and tremendous cost savings for private parties from joint trials can usually be made. With common liability evidence, the potential for significant overlap in damages evidence and damages theories, and many common legal and evidentiary issues likely to be presented despite the differences between federal and state law, it is no surprise that defendants typically request joint trials.

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