Joint Trial of Direct and Indirect Purchaser Claims
| Publication year | 2014 |
| Author | By Robert E. Freitas, Jason S. Angell, and Jessica N. Leal |
By Robert E. Freitas, Jason S. Angell, and Jessica N. Leal*
As a result of the Class Action Fairness Act ("CAFA"), and the regular use of multidistrict litigation procedures, class actions presenting direct purchaser claims under federal law are now commonly litigated in proceedings in a single district court with indirect purchaser claims under state law. CAFA is not the only occasion for direct and indirect purchaser claims to be grouped together in the same court. Corporate plaintiffs who choose to opt out of class actions sometimes plead both federal claims based on direct purchases of price-fixed goods and state law claims based on indirect purchases of the same goods or of finished products containing price-fixed components. Opt-out plaintiffs asserting only direct purchaser or only indirect purchaser claims are also commonly parties in the same MDL court. In addition to actual direct purchase claims, some opt-out plaintiffs rely on indirect purchases they seek to bring within the "owned or controlled" or "co-conspirator" exceptions to Illinois Brick.1 This, too, can result in potential trial contexts including both "direct" purchaser federal law claims and state law indirect purchaser claims.
Under Illinois Brick, indirect purchasers lack standing to seek price-fixing damages under federal law, and Hanover Shoe2 prevents Sherman Act defendants from defending against direct purchaser claims with evidence that overcharges paid by direct purchaser plaintiffs were passed on to their customers. In the wake of Illinois Brick, various states have amended their antitrust laws to allow indirect purchaser claims. Under these so-called Illinois Brick "repealer" statutes, the plaintiffs' claims depend on proof of "upstream" pass on of overcharges,3 sometimes by the direct purchaser plaintiffs suing the same defendants in cases pending in the same court. State indirect purchaser laws also commonly allow pass on as a defense.
With common factual and evidentiary issues typically presented by direct purchaser and indirect purchaser claims arising out of the same price fixing conspiracy, a compelling demonstration of significant judicial economy and tremendous cost savings for private parties from joint trials can usually be made. With common liability evidence, the potential for significant overlap in damages evidence and damages theories, and many common legal and evidentiary issues likely to be presented despite the differences between federal and state law, it is no surprise that defendants typically request joint trials.
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It is also typical for plaintiffs to resist the call for joint trials. A focal point for the plaintiffs' position is the potential for prejudice resulting from the different treatment of pass on under federal and state law. Direct purchaser plaintiffs contend that a joint trial with indirect purchasers will likely prejudice them as a result of the jury hearing expert testimony and other evidence of pass on in connection with the indirect purchaser claims. Indirect purchasers fear that they will be prejudiced because jurors will hesitate to return verdicts that seem duplicative or otherwise unfair.
Given the federal law prohibition of evidence of downstream pass on, and the necessity under state law of proof that overcharges to direct purchasers were passed on to indirect purchasers, there is a clear and obvious potential for multiple or inconsistent recovery by direct and indirect purchasers. Defendants argue that state law or due process considerations forbid multiple recovery, and they argue that a joint trial structure involving all, or as many as possible, direct and indirect claimants is the only way to protect their rights. Defendants also argue that duplicative recovery can result in excessive punitive damages inconsistent with Campbell,4 especially when the mandatory trebling of damages required by federal law and some state laws is considered.
The due process questions are beyond the scope of what we address in this article. If due process forbids all duplicative recovery, or if multiple antitrust recovery results in punitive damages that are excessive under Campbell, some of the important questions are easily answered. We discuss below the issues that are presented if it is assumed that recovery that can fairly be portrayed as duplicative is not absolutely forbidden as a matter of due process.
Our consideration of these issues begins with reflection on our experience representing a defendant in a trial against Best Buy Co. and affiliates in which both federal law "direct" purchaser claims and Minnesota law indirect purchaser claims were tried together.5 While the single plaintiff context does not capture all of the issues likely to be presented when the claims of multiple individual plaintiffs or direct and indirect purchaser classes are tried together, the potential for conflict and pass-on related prejudice was present in a joint trial of multi-hundred million dollar direct and indirect purchaser claims.
Our experience convinces us that the properly-defined rights and expectations of all plaintiffs and all defendants are best served in the joint trial of direct and indirect purchaser claims.
Inevitably, trial lawyers and their clients forced into joint trials with other parties will find a reason to complain. The addition of other lawyers or parties will often mean the injection of different trial perspectives or strategies, some of which may not be compatible. In many situations, compromise or accommodation among the plaintiffs or defendants grouped together is necessary, and departure from a shared path can mean disaster for the ostensibly aligned parties. In a price-fixing case with strong evidence of collusion, the overall defense effort would not be well served by an attempt by one defendant to deny the existence of a conspiracy. Significant variations on damages issues might also hurt some or all of the plaintiff or defendant parties, by making the group position seem incredible.
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One result of the inevitable differences in trial position or trial strategy is that a joint effort may not truly reflect the views of any single member of a plaintiff or defense group. This fact alone may provide a strong motivation for a party to request a separate trial, even where there are no conspicuous legal or factual differences in the position of the party as compared to others on the same side of a case. But complaints of this nature are rarely likely to merit a separate trial. The interests of the judicial system are such that most courts will require that parties find a way to harmonize their positions, rather than conduct multiple lengthy and expensive trials simply to avoid strategic conflicts.
For the same reasons, general complaints by federal or state claimants that their interests are different from those of the other claimants are not likely to justify separate trials, and should not automatically do so. Direct and indirect purchaser plaintiffs try to overcome the typical unwillingness of courts to allow the burdens of separate trials by claiming that the different treatment of pass on under federal and state law requires extraordinary steps to avoid unique prejudice, and by insisting that the potential for duplicative recovery does not require a joint trial of direct and indirect purchaser claims.
The principal question to be answered is therefore whether there are unique factors associated with the trial of direct and indirect purchaser price fixing claims that stand out in a manner that prevents them from being tried together. Given the substantial judicial economy associated with joint trials, the plaintiffs who seek to make the case for separate trials face a heavy burden.
We think the issue of whether direct and indirect purchaser claims can be tried together requires consideration of the following questions.
Are there substantial benefits likely to result from a joint trial?A. Benefits Of Joint Trials 1. Efficiency
Does the governing law require or encourage a joint trial?
Can the benefits of a joint trial be achieved in a manner that does not result in unfair prejudice to the parties or burdens on the court that outweigh the benefits?
Are there alternatives to a joint trial that reduce the prejudice or burden associated with a fair trial in a manner that does not unreasonably surrender the benefits of a joint trial or ignore the requirements of the relevant law?
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Most price fixing cases have an overwhelming commonality of evidence between direct and indirect purchaser claims. Multiple trials of different claims arising out of the same conspiracy lead to "inefficiency in the court system and potential prejudice to the parties."6 Separate trials "multipl[y] the determinations of liability and damages involving the same set of facts against the same defendants."7 "The multiplication of trials . . . lengthens the resolution of antitrust cases, increases costs on litigants and courts, raises the specter of inconsistent rulings . . . and significantly increases the risk that duplicative damages may be awarded if antitrust plaintiffs push towards trial in lieu of settling."8 Resolving the issues presented by the common evidence in a single trial is more efficient than trying the same or similar issues twice. Common defendants, common fact witnesses, common expert witnesses (or common expert witness subject matter), common exhibits, common damages theories, and damages cases with common elements all present the possibility of very significant duplication in the case of multiple trials.
There are also tremendous costs to the judicial system associated with multiple trials. A given courtroom is unavailable for an extended period of time in which other cases may not be tried, and the ability of a busy district judge to address other important...
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