§4.5 D. The Donnelly Act Prohibition Against Duplicate Recovery

• Jurisdiction: New York

D. The Donnelly Act Prohibition Against Duplicate Recovery

The Donnelly Act expressly instructs courts to avoid duplicate liability where both direct and indirect purchasers bring claims based on the same underlying conduct:

[I]n any action in which claims are asserted against a defendant by both direct and indirect purchasers, the court shall take all steps necessary to avoid duplicate liability, including but not limited to the transfer and consolidation of all related actions. In actions where both direct and indirect purchasers are involved, a defendant shall be entitled to prove as a partial or complete defense to a claim for damages that the illegal overcharge has been passed on to others who are themselves entitled to recover so as to avoid duplication of recovery of damages.⁴⁰⁵

No reported state or federal case interprets this provision. It is unclear how a court is to take “all steps necessary” when the direct and indirect purchaser claims are in federal court and indirect purchasers claims are in state court. It is clear, however, that the legislature expressly adopted a pass-on defense to avoid, in state court actions, a windfall or “duplication of recovery.”

The First Department, when faced with indirect purchasers claims after a direct federal action had already...