Indirect Purchaser Settlements

Indirect purchaser cases, like other cases, are most likely to be
resolved short of trial. Cases might be dismissed (for example, for
lack of antitrust standing), or class certification might be denied
(reducing the likelihood that the case will be pursued). Indirect
purchaser cases that are not resolved by motion often settle. Both
plaintiffs and defendants alike recognize that indirect purchaser cases
are notoriously complex and expensive to litigate. With potentially
significant damages exposure in these types of cases,1 defendants are
reluctant to take their chances with a jury,2 and plaintiffs likewise
consider both the cost and risk of going to trial. In the past ten years,
there have been dozens of settlements involving indirect purchasers
in courts around the country. This Chapter does not purport to catalog
all of them;3 rather, it aims to describe the standards by which such
1. See William H. Page, The Limits of State Indir ect Pur chaser Suits:
Class Cer tification in the Shadow of the Illinois Brick, 67 ANTITRUST
L.J. 1, 2 (1999). Indirect purchaser cases can represent increased
exposure to the defendant of as much as 4.5 times the amount of the
overcharge, in addition to the risk of treble damages for civil liability
to any direct purchasers or harmed competitors and criminal fines
amounting to twice the overcharge. See 2 PHILLIP AREEDA, ROGER
ed. 2004).
2. See generally Ronald Dav is, Indirect Pur chaser Litigation: ARC
America’s Chickens Come Home to Roost on the Illinois Brick Wall,
65 ANTITRUST L.J. 375 (1997); Charles Casper, The Class Action
Fairness A ct’s Impact on Settlements, ANTITRUST, Fall 2005, at 26,
(“The potential liability can be so large that a defendant has a
powerful incentive to settle even weak claims to avoid the ruinous
effect of an adverse judgment. Judge Richard Posner made this point
ten years ago in a mass tort class action, but it applies as much or
more to large antitrust class actions: The defendants ‘might,
therefore, easily be facin g $25 billion in potential liability
(conceivably more), and with it bankruptcy. They may not wish to
roll these dice. That is putting it mildly. The y will be under intense
pressure to settle.’” (quoting In re Rhone-Poulenc Rorer, Inc., 51
F.3d 1293, 1298 (7th Cir. 1995)).
3. Settlements with private plaintiffs are likely to be subject to
confidentiality provisions, so the information available will be
limited. The American Antitrust Institute has compiled data on
indirect purchaser class settlements, which can be downloaded from
their website. See Patrick Cafferty, AAI Working Paper 10-03:
Indirect Purcha ser Settlement Da tabase Up dated (Am. Antitrust
278 Indirect P urchaser Litigation Ha ndbook
settlementsthe majority of which require judicial approvalare
evaluated. This chapter also describes provisions of the Class Action
Fairness Act of 2005 (CAFA)4 that now affect indirect purchaser
A. General Principles for Indirect Purchaser Settlements
In one sense, the settlement of an indirect purchaser case is like
any other settlement. Both sides consider the same general liability
and damages issues considered in other types of litigation. For
example, parties to any litigation usually consider the probability of
proving or disproving liability, including the existence of a
conviction, guilty plea, consent decree, or prior judgment; whether
there are “bad” documents and testimony; the probable range of
damages; the ability of the defendant or a third party to satisfy any
judgment; whether other parties in the matter have already settled;
and the stage of the proceedings.
There are some variants on these issues that are unique to indirect
purchaser cases. For example, the difficulties of proving the amount
of damages that were passed on through one or more distribution
levels is often at issue in indirect purchaser cases.5 Ultimately, in
deciding whether or not to settle, the parties weigh the strengths and
uncertainties of the case against the costs of further proceedings.
The parties also consider settlement amounts in other indirect
purchaser cases, which are generally reflected as either a percentage
of sales or as a percentage of any direct purchaser settlement. If
seeking a global settlement of cases pending in several states, the
parties evaluate the challenge and cost of coordinating the settlement,
as well as the risks associated with proceeding on multiple litigation
tracks.6 If the settlement negotiations are conducted in conjunction
Inst., Working Paper 10-03, 2010), availa ble a t http://
4. Pub. L. No. 109-2, 119 Stat. 4 (2005). For a more complete
discussion of CAFA, see Chapter IV.A.4.
5. AREEDA, BLAIR & HOVENKAMP, supra note 1, ¶ 395(f).
6. See Antitrust Modernization Comm’n, Civil Remedies Indirect
Purchaser Discussion Memorandum, at 7-8 (May 4, 2006), a vailab le
at _
DiscMemo060504-fin.pdf (summarizing concerns regarding potential
effects of duplicative litigation on settlement efforts).

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