Chapter IV. Jurisdictional and Choice of Law Issues in the Indirect Purchaser Action

• Pages: 69-102

69

CHAPTER IV

JURISDICTIONAL AND

CHOICE OF LAW ISSUES IN THE INDIRECT

PURCHASER ACTION

Illinois Brick spurred state legislatures around the country to create

explicit indirect purchaser causes of action under state law. It also

generated an extensive body of case law in which both state and federal

courts examined state antitrust and consumer protection statutes for the

existence of an indirect purchaser remedy. The result, as described

throughout this Handbook, is a patchwork of substantive rights, laws,

and procedures that the antitrust litigator must learn to navigate.

Because the indirect purchaser claim arises under state law (no

federal question jurisdiction) and because these claims tend to be

relatively small (an insufficient amount in controversy and no diversity

jurisdiction), indirect purchaser damages actions historically have been

litigated primarily (though not exclusively, as will be explored later) in

state courts.254 Passage of the Class Action Fairness Act of 2005

(CAFA) likely will change this because under CAFA’s expansion of

diversity jurisdiction, many indirect purchasers will now be subject to

federal jurisdiction and will find their way into federal court.255 CAFA,

however, is not retroactive and does not apply to actions commenced

before the act’s passage.256 Moreover, the full effect of CAFA on state

254. Illinois Brick’s bar on indirect purchaser claims applies to compensatory

damages actions, not to claims for injunctive relief. Thus, indirect

purchasers generally may pursue claims for injunctive relief under § 16 of

the Clayton Act. See, e.g., Cargill, Inc. v. Monfort of Colorado, Inc., 479

U.S. 104, 111 n. 6 (1986) (stating that standing Clayton Act § 16, unlike

§ 4, raises no threat of multiple lawsuits or duplicative recoveries).

255. As described more fully in § D, infra, under CAFA, federal jurisdiction

may exist over any class action in which (1) any plaintiff is diverse from

any defendant; (2) the putative class contains at least 100 members; and

(3) the amount in controversy by the entire class action is at least $5

million. See 28 U.S.C. §§ 1332(d)(2), (d)(5), (d)(6).

256. Class Action Fairness Act of 2005 (CAFA), Pub. L. No. 109-2, 119 Stat.

4, § 9 (2005) (CAFA applies “to any civil action commenced on or after

the date of enactment [February 18, 2005]”); see also Exxon Mobil Corp.

v. Allapattah Servs., 545 U.S. 546, 571 (2005); Braud v. Transp. Serv.

Co., 445 F.3d 801, 804 (5th Cir. 2006) (CAFA not retroactive, but

addition of defendant constitutes “commencement”).

70 Indirect Purchaser Litigation Handbook

indirect purchaser litigation is not yet clear. Accordingly, indirect

purchaser actions commenced prior to CAFA’s passage, as well as those

actions that do not meet the act’s requirements (or fall under one of its

exceptions), are likely to be litigated in state court. The absence of any

state equivalent of the federal Multidistrict Litigation (MDL)

procedure257 can, and often does, mean that defendants must litigate what

in essence is the same indirect purchaser case in the courts of multiple

states.258 Although the claims may be brought by a different named

plaintiff and seek redress under different state statutes, they generally

involve the same defendants and arise from the same underlying set of

allegations.

To analyze the unique jurisdictional and choice-of-law issues that

arise in the context of indirect purchaser litigation, this Chapter will

proceed in four principal parts. Part A will provide an overview of the

key jurisdictional and choice-of-law issues presented in indirect

purchaser litigation. Part B will discuss basic jurisdictional prerequisites,

such as personal and subject- matter jurisdiction, and the availability of a

federal forum for indirect purchaser claims. Part C will then examine

two scenarios: (1) the indirect purchaser complaint that seeks to certify a

multistate class on the basis on a single state’s law; and (2) the indirect

purchaser complaint brought on the basis of multiple states’ laws.259 Part

D will highlight the impact that CAFA is expected to have on

jurisdictional issues in indirect purchaser litigation going forward.

257. Under 28 U.S.C. § 1407, civil actions involving one or more common

questions of fact that are pending in different federal judicial districts

may be transferred by the Judicial Panel on Multidistrict Litigation to a

single district for coordinated or consolidated pretrial proceedings. There

is no formal procedure for consolidating related state cases in different

state jurisdictions. For further discussion of multidistrict litigation, see

Chapter VIII.

258. In addition to the indirect purchaser cases, the same defendants usually

must defend in federal court the direct purchaser actions that arise from

the same core allegations of wrongdoing.

259. Each of these scenarios creates its own set of risks and difficulties. While

much depends on the specific law of the state where the complaint is

filed, there is little doubt that the multistate indirect purchaser complaint

brought on the basis of a single state’s law will face serious, if not

insurmountable, constitutional challenges. Moreover, the indirect

purchaser complaint brought on the basis of multiple states’ laws is likely

to have serious difficulty meeting fundamental class certification

requirements.

Jurisdiction and Choice of Law 71

A. Overview of Key Jurisdictional and Choice-of-Law Issues in

Indirect Purchaser Claims

Litigating the same alleged conduct potentially dozens of times in

different state courts can result in great inefficiencies for both the parties

and the courts, not to mention the risk of inconsistent, if not outright

contradictory, rulings. For example, courts in various states have

reached very different conclusions regareding class certification, even

though the certification standards from state to state often appear to be

similar. As a result, both plaintiffs and defendants jockey to push actions

forward in those states where they believe the law is more favorable,

while delaying actions in the less hospitable forums. This type of forum

shopping, or more accurately, forum pushing, adds another layer of

procedural complexity.

But what are the alternatives where there is no state equivalent of the

federal MDL process? The parties themselves can agree to coordinate

similar actions across different states by agreeing to manageable and

nonoverlapping briefing schedules and to limit duplicative discovery.

Another possibility is that state court judges can take the initiative on

their own (or upon request by the parties) to coordinate their respective

cases with actions pending in other states, not in a formal MDL sense,

but by agreeing to similar scheduling orders and other pretrial

procedures.

With no formal procedural mechanism to transfer, consolidate, or

coordinate similar state court suits, plaintiffs sometimes have brought

actions that seek certification of a multistate or even nationwide indirect

purchaser class in a single state court. These actions, which have

become increasingly common in recent years, generally come in two

varieties. Plaintiffs may file a complaint seeking to certify a multistate

class under the law of a single state, such as the law of the forum state.

Or plaintiffs may file a single state complaint seeking to certify a

multistate class under the laws of multiple states.

Regardless of the relative merits of these two views, several

important constitutional and public policy considerations arise from

proposed multistate indirect purchaser actions.

Due Process Rights of Defendants: Are the due process rights of

defendants violated if they are forced to litigate claims that have no

connection or nexus to the forum in which they have been sued?

Federalism and the Commerce Clause: To what extent do

Constitutional provisions limiting the extraterritorial application of state

law and basic principles of constitutional federalism limit the ability of a