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Defendants in indirect purchaser price-fixing and market allocation cases in federal court frequently challenge plaintiffs' claims for lack of antitrust standing.
Relying on the U.S. Supreme Court decision in Associated General Contractors of California v. California State Council of Carpenters,[1] defendants assert that such plaintiffs' injuries are too remote from the defendants' unlawful conduct or are not the type of injury the antitrust laws were intended to prevent.
Since we last addressed this topic in a 2012 Law360 guest article,[2] courts have continued to grapple with whether the Associated General Contractors, or AGC, case should be applied to indirect purchaser state law claims and, if applied, how to do so.
This article reviews court decisions that may portend diminished application of AGC to state law and others that make clear that practitioners' grasp of what is required to plead antitrust injury under AGC in indirect purchaser cases remains essential.
Applicability of AGC to State Law Antitrust Claims
AGC directed federal courts to apply a five-factor test to "evaluate the plaintiff's harm, the alleged wrongdoing by the defendants, and the relationship between them to determine whether a plaintiff is a proper party to bring an antitrust claim."[3]
These factors are:
(1) the nature of the plaintiff's alleged injury; that is, whether it was the type the antitrust laws were intended to forestall; (2) the directness of the injury; (3) the speculative measure of the harm; (4) the risk of duplicative recovery; and (5) the complexity in apportioning damages.[4]
Since the Supreme Court decision in Illinois Brick Co. v. Illinois, which limited indirect purchasers' claims for damages under federal antitrust law, indirect purchasers in federal court generally rely on state antitrust and consumer protection statutes, i.e., from states known as Illinois Brick repealers, when asserting damages claims.
While AGC is the product of federal law, antitrust injury or standing under state law is a matter of state law, and "[s]tates are free to expand antitrust standing under their laws beyond what federal law permits."[5] Thus, courts must first determine whether, and to what extent, AGC has any application under the state's antitrust laws.[6]
AGC (still) does not automatically apply to state-law claims in federal court.
We previously reported that the vast majority of courts have (1) questioned the broad application of AGC to indirect purchaser claims under state law, (2) held that the relevant state's rules of antitrust standing should be applied, and (3) held that AGC should not be applied in the absence of a clear directive from those states' legislatures or highest courts.[7]
With few exceptions, courts have continued to follow these guidelines in form or substance.[8] Recently, however, courts have gone further and drawn bright-line rules regarding the inapplicability of AGC to state-law antitrust claims.
An Illinois Brick repealer alone may bar application of AGC or defeat antitrust standing challenges even if AGC is applied.
Courts have recently recognized that, given the Supreme Court's decision in California v. ARC America Corp.,[9] any state legislative or court decision to repeal Illinois Brick fundamentally conflicts with the application of AGC to state-law antitrust claims. These courts have held that AGC should not apply in Illinois Brick repealer states, while others have held that if applied, AGC does not defeat antitrust injury in Illinois Brick repealer states.
The most emphatic statement of this bright-line rule can be found in In re: Broiler Chicken Antitrust Litigation, a sprawling multidistrict litigation involving indirect purchaser classes from numerous states alleging that defendant producers of chicken meat conspired to fix prices.
The indirect purchaser plaintiffs alleged violations of state antitrust laws and defendants moved to dismiss for lack of antitrust standing. In analyzing whether AGC applied to these claims, the court reviewed decisions of the highest courts in four of the Illinois Brick repealer states at issue in the case.
Based on this review, the court held that "any state with an Illinois Brick repealer would reject application of AGC to this case."[10]
The court reasoned that AGC's proximate cause analysis "borrows from Illinois Brick's concern with the unwieldy nature of indirect purchaser damages suits" and that enactment of "Illinois Brick repealers work[s] to save indirect purchaser damages suits, even from application of the AGC factors."[11]
The court called out a statement by the Minnesota Supreme Court that: "[b]y expressly permitting indirect purchaser suits, our legislature has rejected the notion that Minnesota courts are not to be burdened with the complex apportionment inherent in those suits."[12]
The court further reasoned that harmonization statutes passed by some states (i.e., "laws that require a state's courts to interpret the state's antitrust statutes in harmony with federal law") are not a basis to apply the AGC factors because such statutes do "not prevent the courts in those states from recognizing that Illinois Brick repealers work to save the claims of true indirect purchasers, like the Indirect Plaintiffs in this case."[13]
A similar holding can be found in the U.S. District Court for the District of New Jersey matter, In re: Liquid Aluminum Sulfate Antitrust Litigation, in which indirect purchasers of liquid aluminum sulfate, or Alum, sued manufacturers of Alum for price-fixing under 33 states' antitrust and consumer protection laws.[14]
The court, relying on ARC America and without engaging in any state-by-state analysis of whether AGC should be applied, held that the indirect purchaser plaintiffs "have pled facts sufficient to support antitrust standing under each of the state-specific antitrust statutes."[15]
Courts that have applied AGC to state-law antitrust claims have recognized essentially the same bright-line rule, i.e., that application of AGC to state antitrust law should not preclude claims in repealer states.
The U.S. District Court for the Eastern District of Pennsylvania in the In re: Suboxone (Buprenorphine Hydrochloride And Naloxone) Antitrust Litigation rejected the defendants' claim that indirect purchasers of the drug suboxone lacked antitrust standing.
The court reasoned that in Illinois Brick repealer states, AGC's directness of injury factor "must either carry significantly less weight or directness must be analyzed more generously than under federal law," as it "would be inconsistent for a state to allow indirect purchasers to bring antitrust claims, only for the courts to cursorily dismiss those claims on antitrust standing grounds simply because they have been brought by indirect purchasers."[16]
The court held that "even applying the AGC factors, the End Payors have standing to bring antitrust claims under the state laws that have passed Illinois Brick repealer statutes."[17] A similar analysis can be found in the U.S. District Court for the Northern District of California decision In re: Lithium Ion Batteries Antitrust Litigation.[18]
These decisions recognize the incongruity of applying federal antitrust standing rules that focus on the directness of injury to state laws enacted to protect indirect purchasers. While it remains to be seen whether these authorities have started a broader trend, they are positive news for indirect purchaser plaintiffs facing antitrust standing challenges in federal court.
District courts increasingly refuse to apply AGC standards to California antitrust law.
The Northern District of California has frequently addressed whether AGC should be applied to California antitrust law. While an early decision applied AGC to bar indirect purchaser claims under California law,[19] that decision was later rejected by other courts.[20] Since our last report, numerous cases within[21] and without[22] the Northern District of California have held that AGC should not be applied to California law.
In the In re: Capacitors Antitrust Litigation, for example, the Norther District of California refused to apply AGC to California law, rejecting defendants' argument that California's legislature or highest court has "indicated that federal antitrust law should be followed in determining standing."[23]
The court also emphasized recent California Supreme Court pronouncements that federal antitrust law interpretations are instructive at most, and not conclusive, as well as the U.S. Court of Appeals for the Ninth Circuit's recognition that it is no longer the law in California that "the interpretation of California's antitrust statute [is] coextensive with the Sherman Act."[24]
Umbrella damages are neither barred under California law nor too speculative under AGC.
Another recent AGC-related development pertaining to California's antitrust laws is the recognition that so-called umbrella damages are not barred by California's Cartwright Act and that indirect purchasers seeking such damages may have antitrust standing under California law, whether AGC is applied or not.
Umbrella damages may be claimed "when a group of conspirators sets the price of a product at an artificially high level, a price umbrella is created that spreads throughout the market," and "nonconspirator sellers uninvolved in the anticompetitive conduct correspondingly raise prices."[25]
In County of San Mateo v. CSL Limited, the plaintiff alleged that manufacturers of blood plasma products conspired to restrict product supply and caused inflated prices for those products sold both by defendants and by nondefendants not alleged to have participated in the conspiracy.[26]
On the defendants' motion for partial summary judgment, the court ruled that umbrella damages sought by an indirect purchaser several steps down the chain of distribution from the defendants are not too speculative...
