Damages and Remedies

• Pages: 149-191

149

CHAPTER VI

DAMAGES AND REMEDIES

One of the most active areas under state antitrust law is private

antitrust actions for damages. Over half of the states have passed

legislation authorizing “indirect purchaser actions” for damages,

which are not permitted under federal law after Illinois Brick Co v.

Illinois (“Illinois Brick”).1 The statutes themselves come in a variety

of forms, some of which are more permissive than others. Kansas’s

repealer statute allows “any person who may be damaged” by a

violation of the state’s antitrust statute, “r egardless of whether such

injured person dealt directly or indirectly with the defendant,” to “sue

for and recover treble the damages sustained,” without regard to

potential duplicative recovery from the defendant.2 Nebraska’s

statute similarly allows any purchaser, direct or indirect, to collect

damages without heed of other suits brought against the defendant,

but it limits recovery t o “actual damages . . . and the costs of the

suit,” not treble damages.3 In stark contrast to those statutes,

Maryland only allows indirect purchaser actions if they are brought

by the state attorney general, and then only if the defendant sold “any

drug, medicine, cosmetic, food, food additive, or commercial feed . .

. or medical device.”4 The statute also permits the defendant to make

use of the pass-on defense “to avoid duplicative liability.”5 Some

state courts have affirmed indirect purchaser remedies for damages.

Most jurisdictions permitting indirect purchaser actions provide for

treble damages.

Indirect purchasers typically allege t hat the defendants’ conduct

violates state antitrust, consumer protection, and unjust enrichment

laws. Courts in a few states have found that indirect purchasers can

sue only under consumer protection statutes,6 whereas in a number of

other states, indirect purchasers may bring claims under both antitrust

and consumer protection statutes.

The nature and extent of remedies available in indirect purchaser

actions varies from state to state. For example, some state statutes

explicitly either require trial courts to prevent recovery of d uplicative

damages (that is, damages already recovered by other purchasers) or

1. 431 U.S. 720 (1977).

2. KAN. STAT. ANN. § 50-161(b)–(c).

3. R.R.S. NEB. § 59–821.

4. MD. CODE ANN. HEALTH-GEN. § 21–1114.

5. Id.

6. See, e.g., Ciardi v. F. Hoffmann-LaRoche, Ltd., 762 N.E.2d 303

(Mass. 2002).

150 Indirect P urchaser Litigation Ha ndbook

at least allow the trial court to consider ways in which to avoid such

duplication. Other state statutes provide no such remedies or

guidance. Likewise, states vary on whether recovery should be

denied because the plaintiffs passed on to their own purchasers any

overcharge that plaintiffs may have paid. Discerning the law of

indirect purchaser damages is made more difficult because indirect

purchaser actions only rarely proceed to judgment, and thus appellate

courts have had little occasion to expound the law. The reported

cases generally address damages issues in the context of decisions

relating to class certification or motions for summary disposition.

Despite the paucity of reported cases, some general propositions

about the law of indirect purchaser damages can be stated.

Under Shady Grove Orthopedic Associates PA v. Allstate

Insurance Co.,7 federal courts can hear certain state law claims as

class actions, even if class action treatment would be prohibited

under state law. There, a medical provider and an insurance company

disputed New York’s statutory penalty for the late payment of

medical claims.8 The provider sued the insurance company for a

penalty amount on the allegedly late-paid medical claims and also

sued on behalf of a class of all other persons who were owed a

statutory penalty from the insurance company.9 The district court

dismissed the complaint on the grounds that a separate New York

statute, N.Y. Civ. Prac. Law Ann. § 901(b), expressly prohibited

claims for statutory penalties from proceeding as class actions.10 The

Second Circuit affirmed, finding that § 901(b)’s class action block

represented a “substantive” rule of state law that must be applied by a

district court sitting in diversity.11 The Court, by a plurality decision,

held that § 901(b)’s class action block conflicted with the class action

requirements of Federal Rules of Civil Procedure 23.12 Rule 23

provides a “one-size-fits-all formula for deciding the class action

question in federal court.”13

A. Types of Recovery Available in Indirect Purchaser Actions

The most common form of damages sought by indirect purchaser

plaintiffs is the amount of the unlawful overcharge that was passed

on to them—specifically, the difference between the price actually

paid and the price that would have been paid in the absence of the

7. 449 U.S. 393 (2010).

8. Id. at 397.

9. Id.

10. Id.

11. See 549 F.3d 137 (2d Cir. 2008).

12. 559 U.S. at 399.

13. Id.

Damages a nd Remedies 151

antitrust violation. For example, in a conspiracy case, the plaintiffs

“must demonstrate that the prices they paid were higher than the

prices would have been absent the conspiracy.”14 As the Michigan

Court of Appeals noted:

[A] plaintiff must first prove that the prices the defendant charged

the direct purchasers were consistently higher tha n the prices it

would have charged in a competitive environment. We label this an

“overcharge” requirement. Second, the plaintiff must prove the

overcharge, or some portion thereof, passed through the chain of

distribution to indirect purchasers. We label this a “pass-on”

requirement. We agree . . . that proving overcharge and pass-on are

essential to succeeding in an indirect purchaser suit . . . .15

As discussed in sections B and C of this chapter, calculating and

proving the overcharge damages suffered by indirect purchaser

plaintiffs is often a complex, multilayered process.

Plaintiffs have an affirmative obligation to establish that at least

some portion of the overcharge was passed on to them through the

upstream purchasers.16 Courts and legislatures have taken different

14. William H. Page, The Limits of State Indirect Purchaser Suits: Class

Certification in the Shadow of Illinois Brick, 67 ANTITRUST L.J. 1, 12

(1999).

15. A&M Suppl y Co. v. Microsoft Corp., 654 N.W.2d 572, 584 (Mich.

Ct. App. 2002) (reversing class certification decision on the grounds

that the plaintiff did not set forth a viable method for proving actual

damages on a class-wide basis as required by the Michigan Antitrust

Reform Act, MICH. COMP. LAWS § 445.771 et seq.); see also In r e

Florida Cement & Concrete Antitrust Litig., 278 F.R.D. 674, 682

(S.D. Fla. 2012) (noting “double burden” of proving initial

overcharge and pass-through of the overcharge in indirect purchaser

action).

16. See, e.g., In re New Motor Vehicle Can. Exp. Antitrust Litig., 522

F.3d 6, 28 (1st Cir. 2008) (“plaintiffs’ theory . . . must include so me

means of determining that each member of the class was in fact

injured”); In r e TFT-LCD (Flat Panel) Antitrust Litig., 267 F.R.D.

583, 601 (N.D. Cal. 2010) (quoting In re Methionine Antitrust Litig.,

204 F.R.D. 161, 164 (N.D. Cal. 2001)) (observing that plaintiffs have

the burden of demonstrating that “there is a reasonable method for

determining on a class-wide basis whether and to what extent that

overcharge was passed on to each of the [indirect purchasers] at all

levels of the distribution c hain”); So mers v. Apple, Inc., 258 F.R.D.

354, 358 (N.D. Cal. 2009) (quoting In re Graphics Processing Units

Antitrust Litig., 253 F.R.D. 478, 507 ( N.D. Cal. 2008)) (indirect

purchasers must offer “‘a reliable method for proving common

impact on all purc hasers of [the] defendant’s products throughout the

chain of distribution’”); In re Static Random Access Memory