Articles Posted in Class Actions

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Authors: Luke Hasskamp & Molly Donovan

In yet another important labor-monopsony case, a federal court in Nevada has declared a win for MMA athletes fighting against their promoter’s alleged misuse of monopsony power in the market for acquiring fighters’ services. Class certification has been granted to MMA fighters accusing their promoter of locking them into exclusive contracts that deterred fighters’ mobility and suppressed their wages for fighting bouts. Cung Le v. Zuffa, LLC, No. 2:15-cv-01045-RFB-BNW, 2023 WL 5085064, 2023 U.S. Dist. LEXIS 138702 (D. Nev. Aug. 9, 2023).

The Facts. MMA is a combat sport—a mix of boxing, wrestling, karate and other forms of martial arts. A bout is a competition between MMA fighters in a timed round where a fighter can win by acquiring the most points or by a knockout or submission (the other fighter gives up due to “extreme pain”).

During the at-issue period (2010-2017), Zuffa (defendant) promoted MMA bouts—under the trade name Ultimate Fighting Championship.

During that time, Zuffa treated fighters as independent contractors and compensated them on a bout-by-bout basis: one payment to “show” (participate in a bout) and then another payment (typically in the same amount) to win. This method of compensation was common across all MMA fighters promoted by Zuffa except for a “very small” number of the best fighters who also may have received additional payments at times (e.g., a percentage of the revenues generated by a particular event). Fighters bore their own expenses for training and skills maintenance.

The contracts between Zuffa and fighters contained “exclusion clauses” that required athletes to fight only for Zuffa. These contracts also imposed additional clauses that gave Zuffa significant control over fighters, including (i) the exclusive ability to extend certain contracts automatically; (ii) the exclusive right to cut fighters; and (iii) the right to match a competing promoter’s offer at the expiration of a contract, essentially requiring the fighter to remain with Zuffa whenever Zuffa matched the competing offer.

The Proposed Bout Class. All persons who competed in live UFC-promoted MMA bouts in the United States from 2010 to 2017.

Predominance. Predominance has become the “main event” in antitrust class certification inquiries—the round where a plaintiff can win it or lose it all. To establish predominance, plaintiffs must show (i) conduct that violates the antitrust laws; (ii) that the conduct was commonly applied to the class; (iii) it led to common injury in the class; and (iv) measurable damages provable with evidence common to the class.

  • Illegal conduct. The class alleges a violation of Section 2 of the Sherman Act, i.e., that Zuffa sought to maintain its monopsony power in the relevant market through exclusionary conduct. In a lengthy analysis, the court held that plaintiffs showed that Zuffa enjoyed monopsony power in a relevant antitrust market—the market for elite professional MMA fighter services. An expert testified that, during the relevant time, Zuffa’s share was between 70 and 90% in the labor-input market. And this market also had significant barriers to entry, including Zuffa’s own “coercive” contracts that “artificially restricted” competitors’ access to fighter talent. As for exclusionary conduct, the court ruled that the required exclusivity and other oppressive contractual provisions (along with related “coercive” conduct by Zuffa) “locked up” fighters, restricting their mobility and suppressing their wages. The court also pointed to Zuffa’s history of horizontal acquisitions as further evidence of a willful intent to maintain market dominance.
  • Common application to the class. The court found that the relevant contractual provisions applied to all class members, as did Zuffa’s coercive conduct used “consistently” “to induce fighters into re-signing contracts or risk punishment.”
  • Common injury. Plaintiffs’ expert submitted a regression analysis to show that class members’ wages were artificially suppressed by Zuffa’s conduct. The court ruled that analysis was sufficiently reliable at the class certification stage to establish common injury—rejecting defendant’s “small” criticisms of specific variables and particular data decisions.
  • Finally, the court held that plaintiff’s expert presented a “coherent methodology for establishing class-wide damages that predominates over any individual damages analysis.”

Total Knockout? No. While the court certified that “bout class,” it declined to certify a separate “identity class” consisting of every fighter whose identity was “expropriated or exploited by the UFC” from 2010 to 2017. The court held that, unlike the bout class, plaintiffs had not presented sufficient expert analysis supporting a connection between the relevant exploitative conduct and suppressed compensation. The court also found it important that the merchandising rights were voluntary and non-exclusive and that fighters in the class varied in notoriety—a difference difficult to capture in an objectively-defined variable. Finally, the court said there was no evidence of an “internal pay structure” for identity rights that was consistently applied across the proposed class.

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Author: Aaron Gott

The most complex, highest stakes litigation in the United States is class action antitrust litigation. And many antitrust cases are litigated as class actions because they involve claims by many consumers of the defendants’ products or services.

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If you are a defendant in a federal class action case, you should know that class certification is an important pivot point in the litigation: once the class is certified, it could be a bet-the-company moment where the risk of a large judgment outweighs any considerations about the merits or your likelihood of successfully defending at trial. The fact that you could appeal class certification after trial, a verdict, and final judgment might be cold comfort. There’s a strong chance you’ll be the only defendant who hasn’t settled by then.

Fortunately, there is good news: the Federal Rules of Civil Procedure allow immediate appeals of class certification orders.

But there is also bad news: the courts of appeals have unfettered discretion to decide your class certification appeal—you must persuade the court why it should consider the case immediately rather than after final judgment, as it usually does.

Here are ten things you should know about immediate appeals of class certification orders under Rule 23(f) if you are a party or counsel involved in a class action in federal district court.

  1. You don’t have much time.

You only have 14 days from the date of the certification order to file a petition for immediate appeal. Fed. R. Civ. P. 23(f). The 14-day time limit is considered jurisdictional. So there are no extensions: you must either file your petition within 14 days or not file it at all. In fact, the U.S. Supreme Court in Nutraceutical v. Lambert recently held that the 14-day deadline cannot be tolled.

That is just two weeks from when you got the news. No extra time for mailing (to the extent you still do that). No extra time for that Memorial Day Weekend, Fourth of July holiday, or Thanksgiving week smack dab in the middle of that 14 days.

Even without intervening holidays, 14 days is not a lot of time to prepare a brief to convince an appellate court to exercise its “unfettered discretion” to hear your appeal.

So, in practice, you should assume the trial court will rule against you on certification and start working on your Rule 23(f) appeal well in advance of the decision. Defendants in most class actions—particularly antitrust class actions like those we focus on at Bona Law—face ruinous joint and several liability that means most defendants prefer not to risk trial regardless of the risk of liability on the merits. It is worth having the insurance of a head start on a 23(f) petition long before the 14-day timer starts ticking.

You should also consider hiring appellate counsel for purposes of the appeal (more on this below).

  1. 23(f) appeals are discretionary and rarely granted.

The U.S. Supreme Court held, back in 1978, that orders denying class certification are not final decisions within the meaning of federal law, and thus are not appealable as a matter of right. After changes from Congress and the Federal Rules of Civil Procedure, Rule 23(f) was created specifically to afford the opportunity for an immediate appeal under at least some circumstances.

But what circumstances qualify for an immediate appeal are up to the judges deciding whether to grant one, as Rule 23(f) appeals are entirely permissive and, in fact, subject to the “unfettered discretion” of the courts of appeals. The committee that drafted Rule 23(f) made sure to highlight this discretion in its notes on the rule.

Thus, a 23(f) petition is a lot like a petition for certiorari to the U.S. Supreme Court. Luckily, a 23(f) petition is much more likely to be granted and a certiorari petition. Though reliable data is hard to come by, the courts of appeal grant around a quarter of all petitions (and they reverse the district court in a little over half the cases in which they grant the petition).

Between a quarter and a third grant about a third of Rule 23(f) petitions, while others appear to exercise their discretion to hear Rule 23(f) appeals much more conservatively.

See below for guidelines on how to convince a court of appeals to take up your 23(f) appeal.

  1. The rules on the form and contents of filing are different than merits appeals

Rule 23(f) petitions vary from typical opening briefs in several respects.

Second, the petition has some specific requirements. You must include the questions presented, the relevant facts, the relief sought, the rule that authorizes the appeal and the reasons why the court should grant it, and a copy of the order. You have only get 20 pages to succinctly state complex facts and make complex legal arguments to convince three judges why they should volunteer to do extra work on top of their already crowded mandatory docket. Use those pages wisely.

Third, while an opposing party may file an answer or cross-petition, you do not automatically have the right to file a reply brief. You can, of course, seek leave to file a sur-reply, but these efforts to get the last word in can sometimes do more harm than good. The best practice is to only do it if it’s necessary to address something new raised by the other side.

Fourth, check the local rules. They might include additional requirements or restrictions relating to 23(f) petitions.

  1. You must convince the court twice over

First, you must convince the court why it should exercise its “unfettered discretion” to take up your appeal.

Then, you often must also convince the court why it should reverse the district court’s order.

Sometimes courts make both decisions in one stroke. If sufficient evidence of error appears on its face, a court of appeals could summarily reverse or affirm the order. See, e.g., CE Design Ltd. v. King Arch. Metals, Inc., 637 F.3d 721 (7th Cir. 2011). Other times, the court will grant the petition and order briefing on the merits.

What this means in practice is that your petition should be compelling in both respects—why the court should grant it and why it should reverse. You should frame the arguments according to the reasons for granting the petition while applying your merits arguments within that framework.

  1. There are several reasons why the court might grant a petition

As explained above, courts of appeals have “unfettered discretion” in deciding whether to grant a petition for review. In practice, however, most courts have set forth a test or series of factors for cases warranting review. Each circuit has developed such a standard or test excerpt the Eight Circuit, which declined to do so.

In the First, Second, and Seventh Circuits, for example, there are two situations warranting review of a class certification order under Rule 23(f):

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Author: Jarod Bona

When you defend antitrust class actions in federal court like we do, you often see a long list of state antitrust claims brought by what are called indirect purchasers. That is because the federal antitrust laws have this strange quirk that usually forbids federal antitrust claims for damages by indirect purchasers.

You can read more about the history of how this doctrine developed here, including Illinois Brick and Hanover Shoe. And you can learn about the most recent Supreme Court developments for indirect purchasers, including the Court’s Apple v. Pepper case, here.

As sometimes happens when the US Supreme Court changes federal antitrust law, politicians melt down and some state governments pass reactive legislation altering their state antitrust statutes. If you are an armchair antitrust litigator, you might recall that after the Supreme Court announced its resale-price-maintenance decision in Leegin, some state governments responded with legislation so these vertical agreements would hold their per-se-violation status, at least under certain state laws.

After the Supreme Court eliminated most indirect-purchaser damage actions (see here for the co-conspirator exception), many states began allowing them under their own antitrust laws. So even though federal law bars these claims, class-action defendants still face them when a separate group of indirect-purchaser class plaintiffs sue in federal court under a hodgepodge of state antitrust laws. And it’s a little messy.

For background, the states that allow indirect purchaser damage actions are called repealer states and those that don’t are called non-repealer states. And the repealer states themselves vary in the scope of what they permit.

So, faced with this mess of conflicting state antitrust laws, class counsel will do what they can to streamline the applicable-law analysis for the presiding judge. Indeed, to achieve class certification, the plaintiff class must show not only that there is commonality among the class members, but also (for most actions) that the common questions predominate over the individual questions. A defendant might defeat class certification by showing that conflicting applicable laws overwhelm common issues of fact and law.

Until recently, it was not uncommon for a plaintiff class to sue a California-based defendant for damages in California federal court, on behalf of indirect purchasers from all the states—repealer and non-repealer alike. Their argument was that under California choice-of-law doctrine, California’s antitrust law—the Cartwright Act—applies to all of the claims because the “bad acts” were done in California, even though many class members experienced the injury outside of California. California, you might have guessed, is a repealer state that allows indirect purchaser damages under its antitrust law.

You can see what a luxurious solution this is for the indirect purchaser class plaintiffs: They can expand their total damages, even to potential class members in non-repealer states and the court need only analyze one jurisdiction’s law, California. And they can avoid writing the tedious briefs canvassing the laws of many different states. I can tell you, first-hand, that this briefing is monotonous for the defense side too—and probably the court.

Choice of Law and Stromberg v. Qualcomm

Of course, this “solution” assumes that it is proper under choice-of-law analysis to apply California law to all of the claims. This issue arose in the Ninth Circuit in 2021, in Stromberg v. Qualcomm, and Judge Ryan D. Nelson, writing for the Court, analyzed it marvelously.

This isn’t an article analyzing this Qualcomm decision, but I’ll tell you about what the court did on choice of law, the implications of that decision, and its broader lesson.

Important Note: Bona Law filed an amicus brief in a different, but potentially related, case in the Ninth Circuit supporting Qualcomm in an antitrust case brought by the FTC. So, based upon that appellate brief, the fact that we represent defendants in antitrust class actions, and that I generally like and respect Qualcomm, which is a San-Diego-based company, you should assume that I am biased. Indeed, if you are a sophisticated reader, you should always try to understand the writer’s perspective and potential biases because they affect the writing, even unintentionally.

Anyway, similar to the scenario above, this was a case in which the plaintiff class convinced the district court to apply California law to indirect purchaser claims from all over the country—both repealer and non-repealer states. In doing so, the court granted class certification, and Qualcomm appealed that grant under Rule 23(f) of the Federal Rules of Civil Procedure.

You can read more here about appealing a class certification order under Rule 23(f).

The Ninth Circuit ultimately condemned the district court’s choice-of-law analysis as faulty. Instead of California law applying to all claims, the laws of each of the other states should have applied to their respective resident plaintiffs.

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antitrust blizzard
Author: Jarod Bona

I am from Minnesota, so I am quite familiar with blizzards. They may be interesting to watch through a window from a room warmed by a fireplace, but you don’t want to get caught in one. The same is true for an antitrust blizzard: They are interesting to watch, but they can destroy you. Like driving a car through a winter blizzard, you have to pay close attention, make sure you do the right thing, and in the end, you could crash.

In case you get hit by one, you should be prepared: Create and follow an antitrust compliance policy. You may even get bonus points from the Department of Justice if you have (and follow) the right antitrust policy.

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Author: Jarod Bona

Antitrust law evolves in such a way that opinions from federal appellate courts are always interesting in how they affect the doctrine. But there are a select few judges who earn even closer attention when they write an antitrust opinion. Judge Diane P. Wood of the United States Court of Appeals for the Seventh Circuit is one of those judges.

Update: Justice Amy Coney Barrett is also part of the Seventh Circuit panel for this decision, along with Judge Michael Stephen Kanne.

In Marion Healthcare, LLC v. Becton Dickinson & Company, the Seventh Circuit, through Judge Wood’s opinion, effectively articulates the co-conspiracy exception to the Illinois Brick rule. The opinion is significant not because it marks a departure in the prevailing law, but because it explains it so well. This is an example of an opinion that courts and attorneys will likely cite in the future when this issue comes up.

So I thought it would be helpful to tell you about it.

Indirect Purchasers and Illinois Brick

You might need a little bit of background first. The indirect-purchaser rule—derived from a Supreme Court decision known as Illinois Brick—prohibits indirect-purchaser plaintiffs from suing for damages under federal antitrust law. This typically arises in a class action, but the doctrine isn’t limited to class cases.

We discuss the indirect-purchaser rule in more detail in a two-part article:

  1. Indirect Purchaser Lawsuits, Illinois Brick and Apple v. Pepper (Part 1): This article describes the background and basics of the indirect-purchaser prohibition.
  2. Apple v. Pepper, Indirect Purchaser Antitrust Class Actions, and the Future of Illinois Brick (Part 2): This article describes the Supreme Court’s recent Apple v. Pepper decision and what it means for the future of Illinois Brick and the indirect-purchaser rule.

If you haven’t already read those two articles, go read them and come back. We will wait for you.

Marion Healthcare, LLC v. Becton Dickinson & Company

Healthcare markets are complicated, distorted, and a little bit confusing. The government plays a major role, which distorts markets. In addition, there are so many layers of entities that participate in every aspect of healthcare that the markets aren’t always easy to unpack. And, of course, insurance companies pay much of the costs, but the decisions on spending are a combination of patients, insurance companies, doctors, governments and healthcare facilities, among others.

In this case, plaintiffs are healthcare companies that purchased medical devises from Becton Dickson & Company. But they don’t purchase them directly from Becton. Instead, they and other purchases rely on a GPO to negotiate prices with Becton (and other manufacturers). Once the GPO and manufacturer reach an agreement, the company that needs the supplies can accept or reject it. If they accept it, they actually purchase the product through a distributor (pursuant to the GPO-negotiated contract), who then enters contracts with both the purchaser (the healthcare provider) and the supplier (in this case, Becton).

You might anticipate at this point that figuring out whether the plaintiff is a direct purchaser could get confusing.

In this case, plaintiffs alleged that Becton (the supplier), the GPOs (that negotiated the deal), and the distributors were all part of the conspiracy, engaging in a variety of anticompetitive conduct, including exclusive dealing.

The district court dismissed the case, holding that the conspiracy rule (more on that below) didn’t apply because the case didn’t involve simple vertical price-fixing.

The Seventh Circuit held that the district court erred.

The Co-Conspirator Exception to Illinois Brick

For the Court to apply Illinois Brick, it must determine which entity is the seller and which entity is the direct purchaser. As you might recall, the Supreme Court grappled with this in Apple v. Pepper.

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Supreme Court amicus brief

Author: Jarod Bona

As an attorney defending an antitrust class action, your job is to get your client out of the case as expeditiously and inexpensively as possible. There are several exit points.

For example, with a little help from the US Supreme Court’s Twombly decision, you might find your way out with a motion to dismiss, asserting (among other potential arguments) that plaintiffs fail to allege sufficient allegations that a conspiracy is plausible. This is usually the first battle.

Next, you could reach a settlement with class-action plaintiffs (and have it approved by the Court). This could happen at any point in the case. Oftentimes, case events that change expectations will prompt a settlement—i.e. a Department of Justice decision to drop an investigation or an indictment.

Third, you might prevail on summary judgment (or at least partial summary judgment). One means to winning on summary judgment is to disqualify plaintiff’s expert with a Daubert motion.

Fourth, you can win at trial.

Fifth, if you lose at trial, it is time to find an appellate lawyer.

So far, these methods to get out of court look just like any other antitrust case (or commercial litigation matter). An attorney defending an antitrust class action, however, has extra way to get its client out of the case: Defeating Class Certification. (like the defendants did in the Lithium Ion Batteries case, which we wrote about here).

Defense attorneys are increasingly turning to class certification as a primary battle point to get their clients out of federal antitrust class actions.

An antitrust class action usually alleges some form conduct that is a per se antitrust violation in which the damages are a small amount for each class member. For example, an antitrust class action plaintiff might allege a price-fixing or market-allocation conspiracy among the major manufacturers in a particular industry. Plaintiffs may allege that the damage is just a few dollars or cents per plaintiff, but collectively the damages are in the millions or tens or hundreds of millions (or more).

Thus, if the Court denies plaintiffs’ motion to certify a class (barring appeal under Rule 23(f)), each individual plaintiff must sue. And since each only has damages of a few dollars or less, litigation just doesn’t make sense. That, in fact, is the point of Federal Rule 23 and class actions generally—to allow relief when the aggregate harm is great but the individual harm is tiny.

[See this article that I co-authored with Carl Hittinger on the private-attorney general purpose of class actions.]

A defendant that can defeat class certification effectively wins the case.

The US Supreme Court made this task easier for attorneys defending antitrust class actions in the 2013 classic antitrust case of Comcast Corporation v. Behrend, written by the late Justice Antonin Scalia.

Back in my DLA Piper days, I wrote about the Comcast case for the Daily Journal shortly after the Supreme Court published it.

This case involved a class action against Comcast that alleged that Comcast’s policy of “clustering” violated Section 1 of the Sherman Act. Clustering is a strategy of concentrating operations within a particular region. Plaintiffs alleged that Comcast would trade cable systems outside of their targeted region for competitor systems within their region. This would limit competition for both parties, by concentrating the market for each region with fewer cable providers.

But that wasn’t the issue the Supreme Court addressed. The Supreme Court in Comcast v. Behrend instead sought to determine whether the district court properly certified the class action under Federal Rule of Civil Procedure, Rule 23(b)(3), which is known as the predominance requirement.

You can read our article about a California antitrust decision rejecting class certification here.

If you want to learn more about how Bona Law approaches the defense of antitrust class action cases, read here.

And if you want to know more about how class-action settlements work as described in the context of the In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, read here.

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Author: Jarod Bona

This is part two of an article about the Supreme Court’s 2019 decision in Apple v. Pepper, the classic antitrust cases of Illinois Brick and Hanover Shoe, indirect purchaser lawsuits, and state antitrust claims. If you haven’t read that article, you should because it provides the background for this article.

If you read it, but it has been awhile because we published it a long time ago—yes, we’ve been busy opening offices and hiring new attorneys (and attorneys and attorneys)—here is where we left off:

We described how the US Supreme Court decided to deal with the issue of both direct purchasers and indirect purchasers wanting damages for alleged antitrust violations. The Supreme Court first prohibited defendants from raising the defense that direct purchasers “passed-on” any damages to indirect purchasers (Hanover Shoe).

Later, the Supreme Court prohibited indirect purchasers from seeking damages for federal antitrust claims (Illinois Brick).

When the indirect purchasers—represented by a resourceful bunch—then ran to the states and brought actions under state antitrust law, the Supreme Court reviewed whether those claims should be preempted by federal law. They (perhaps surprisingly), let the claims continue to go forward (California v. ARC America Corp.).

So the Supreme Court left a bit of a mess in the antitrust class action world. Defendants can’t argue that direct purchasers passed on any damages, indirect purchasers can only bring injunctive actions under federal antitrust law, and indirect purchasers bring damage actions under state antitrust laws (but only some state antitrust laws because not all of them allow indirect purchaser damage claims). Antitrust class actions are certainly complex.

By the way, before we dig into the issues, just a reminder that we at Bona Law are biased in favor of antitrust class action defendants because we defend class action lawsuits. We don’t represent plaintiff classes in class actions (despite many requests to do so).

The Supreme Court and Apple v. Pepper

The US Supreme Court took up Apple v. Pepper and had to determine whether certain plaintiffs were direct or were indirect purchasers in this antitrust class action. Phrased that way, the case doesn’t look that interesting. But before the decision came out, there was some speculation about whether the Supreme Court would gut the entire indirect/direct purchaser structure. The present structure doesn’t make much sense and isn’t based upon statute anyway (like much of federal antitrust law, I suppose).

Apple v. Pepper involves an antitrust class action lawsuit by consumers purchasing Apps from Apple and App developers (indeed—the actual source of their purchase is part of the controversy). They contend that Apple “has monopolized the retail market for the sale of apps and has unlawfully used its monopolistic power to charge consumers higher-than-competitive prices.” (slip p. 1).

For those of you that recently arrived from 1985, here is how the Apple App Store works: If you own an IPhone and want to add an app to your phone, you have no choice but to purchase it through the Apple App Store, which—according to the US Supreme Court—contains about 2 million apps available for download.

You might think to yourself, “Wow, Apple has been busy; it must be a lot of work to create 2 million separate apps.” But, no, Apple isn’t doing that themselves and they aren’t even hiring out to do it. Instead, independent app developers create the apps and, through contract, the apps are sold in the app store to consumers (my use of passive voice here is purposeful—as telling you who is selling them takes a position in this case; sort of, anyway).

The app developers pay Apple a $99 membership fee and get to pick the price for their app, so long as it ends in $0.99—an old marketers trick. No matter what the sales price, Apple keeps 30 percent of the revenue for each sale.

Apple asserted that the consumers can’t sue for damages under federal antitrust law because they are indirect purchasers under Illinois Brick, and the App developers are the direct purchasers from Apple. Plaintiffs, by contrast, allege that they are—literally—direct purchasers because they purchase Apps from Apple in the Apple App Store.

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Author: Jarod Bona

Thanks to a 1977 US Supreme Court case called Illinois Brick v. Illinois, class-action-antitrust plaintiff claims may look strange.

You might expect to see named plaintiffs for a class of allegedly injured parties suing defendants (and it is usually multiple defendants) under the federal antitrust laws for damages. And you do see that—those are usually called the “direct purchasers.”

But what is unexpected is that you also often see another separate group of putative class members suing for the same alleged anticompetitive conduct in the same federal court, except they are suing under state antitrust laws—but only some state antitrust laws—for damages. These are usually called the “indirect purchasers.” And they can sue for antitrust damages under the state antitrust laws of what are called the “Illinois Brick repealer states.”

(The indirect purchasers also often sue for injunctive relief under federal antitrust law.).

This doesn’t seem to make much sense. What is going on here?

Good question.

I’ll do my best to explain.

But first, I want to remind you that even though Bona Law represents both plaintiffs and defendants in antitrust litigation, we do not typically represent class action plaintiffs in antitrust cases, and in fact, represent defendants in antitrust class actions. Indeed, this has been a large part of my career, going back to my time at Gibson, Dunn and DLA Piper. So—for that reason—I may be biased on these plaintiff antitrust class action v. defendant issues. That bias could seep into my description and explanations below.

Let’s use an antitrust price-fixing case to illustrate how this works (as many large antitrust class action cases involve price-fixing anyway):

So let’s say that the world figures out that the Antitrust Division of the Department of Justice is investigating three companies, making up an industry, for price-fixing. How did the world figure that out? Well, maybe DOJ obtained criminal indictments or a public company had to make note of it in its SEC filing?

You will then often see a blizzard of antitrust filings in federal courts throughout the country by an industry of antitrust class action plaintiff lawyers. As described above, some of these will be for direct purchasers and some for indirect purchasers.

Simply stated, a direct purchaser is someone that purchased a product directly from a defendant. An indirect purchaser is someone that purchased the product that came from a defendant, but not directly—instead, through some intermediary like a retailer or distributor.

If both direct purchasers and indirect purchasers are part of the same lawsuit or suing a single group of defendants under the same claim, there is this sticky question of, even conceding that there was price-fixing, who was damaged and by how much? That is, the price-fixing may have increased the prices that the direct purchasers literally paid compared to the but-for world without price-fixing, but what if the direct purchasers were retailers or distributors that merely passed along all or some of that overcharge to people that purchased from them (i.e. indirect purchasers)? Then the direct purchasers weren’t really injured or their damages were less than the amount of the overcharge from defendants’ price fixing.

What do you do with that?

Well, in 1968, the Supreme Court in Hanover Shoe, Inc. v. United Shoe Machinery Corp. said you had to ignore that problem. That is, the Supreme Court forbid antitrust defendants from raising as a defense that the direct purchasers had passed on any overcharge.

Okay, well, sometimes if you ignore a problem, it will go away.

But then indirect purchasers began suing under the federal antitrust laws and defendants were thus potentially subject to paying damages twice: Once to direct purchasers that had passed on overcharges (they couldn’t use that as a defense) and a second time to indirect purchasers who had received the overcharge from direct purchasers.

This hardly seemed fair, so the United States Supreme Court in the classic case of Illinois Brick v. Illinois decided in 1977 to put a stop to it: Henceforth, indirect purchasers could no longer sue for damages under the federal antitrust laws. So—again—the Supreme Court essentially said that we were just going to ignore the problem of pass-through from direct purchasers to indirect purchasers.

The Illinois Brick Court actually described three primary reasons for refusing to allow indirect purchaser suits for damages under the federal antitrust laws. First, doing so would allow for more effective enforcement of the antitrust laws (as splitting rewards for the overcharge among two different classes might dilute incentives of one or the other to file federal antitrust claims). Second, prohibiting indirect purchaser federal antitrust claims would avoid complicated damages calculations. And finally, allowing both direct and indirect purchaser federal antitrust claims would create the potential for duplicative damages against defendants.

Maybe now the problem would go away?

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Author: Jarod Bona

Even if you aren’t an antitrust lawyer, you have certainly seen notices of class actions, perhaps with a solicitation from an attorney stating in legalese that you may be entitled to money or something to that effect. You probably ignored them—and for good reason—perhaps the amount you could receive was small, or the subject didn’t really have anything to do with you or your business or you just didn’t want to suffer through the poor lawyer-drafted prose.

Did it surprise you to learn that while you were just minding your own business you were apparently a part of what looks like pretty major litigation?

In this article, I’ll offer some background about how antitrust class action settlements work and do it by describing a big one: In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. This is the antitrust litigation against Visa, MasterCard, and their member banks.

As of early May 2019, this case is between second settlement (more about that below) and final approval. The settlement amount will range from $5.54 billion to $6.24 billion. The class members are merchants that have accepted Visa and/or MasterCard between January 1, 2004 and January 25, 2019.

Is that you or your company?

But before we begin, a disclaimer: Bona Law doesn’t typically represent classes in antitrust class action cases. We do represent defendants. But there is one exception: We will represent members of an existing class or opt-out plaintiff members, typically businesses. This, of course, follows our practice—which is common among large international firms as well, to represent both plaintiff and defendant companies in antitrust litigation (but not plaintiff-side classes).

If you are a defendant facing a class action, you might want to read our articles on an antitrust blizzard and defending an antitrust MDL.

Here is the disclaimer: In the Interchange Fee litigation, Bona Law (along with Cahen Law P.A.) represents multiple merchant members of the class that are seeking relief from either the existing settlement (if approved) or as an opt-out.

And here is a good life lesson: Whenever someone has an interest (including attorneys representing clients with an interest), consider their bias, which may be unintentional but present. So assume that we are biased here in favor of the merchants that are seeking relief from the evil antitrust violations.

With that out of the way, let’s jump into the substance.

How Do Class Action Settlements Work?

I won’t go too deeply into the basics of class actions or how class certification works. We’ve written about it elsewhere. You can read our blog post about defending against class certification here. You can read about the requirements of class certification here. And if you want to appeal a class certification decision, read this article.

Here is the gist of class actions: There are some cases in which many people are damaged only a little bit—maybe even just a few dollars. It doesn’t make sense for those people to hire an attorney and file a lawsuit to recover a few dollars. So—absent another method of relief—there won’t be lawsuits if a legal violation results in widespread but minimal harm to each. Some people may say “good” to that. But our legal system has adopted a private-attorney general model in antitrust and elsewhere that places some of the enforcement of law in the hands of private individuals and companies that have been harmed, and their attorneys.

If you want to learn more about the private attorney general model, you can read a law review article that I wrote many years ago with Carl Hittinger.

Even if each individual has sufficient incentive to file a lawsuit (i.e. enough money is at stake), the law has determined that there may be overall efficiencies for the individuals to handle their claims as part of a class if, for example, the common issues in the case predominate over any individual issues.

The class action approach, codified under federal law into Federal Rules of Civil Procedure, Rule 23, allows courts to hear and decide actions on behalf of an entire class of people that have been injured. Class actions, not surprisingly, happen a lot in antitrust, especially when plaintiffs allege that price-fixing, bid rigging, or market allocation, for example, led to an overcharge of some minimal amount, resulting in widespread, but often minimal individual damages.

There is a certification requirement, but other than that much of the litigation is just like any other case, except settlement.

If you want to settle with a class, it is a big to-do. That is because the class action can, in fact, eliminate the right to seek relief by people that may have no idea about the litigation. In addition, the attorneys that brought the action on behalf of the class typically receive their fees (which are usually contingency) out of the settlement proceeds (or judgment proceeds if the case gets that far).

So, to deal with all of these issues, a class-action settlement requires a preliminary approval by the court, a notice to the class, an opportunity for class members to opt-out or challenge the settlement, and, eventually, a final approval. And the court’s final approval is subject to appeal by class members that may disagree with the settlement. Then, if the settlement survives all of that, there is a process for paying the class members from the settlement funds through a claims administrator.

The paragraph above listed a lot of steps, each with its own nuances and details. So please just take that as the “gist” of it.

It will be easier to understand with a concrete example.

In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation

If we are going to talk about a particular class-action settlement, I can’t think of a better current one to discuss than the In re Payment Card Interchange and Merchant Discount Antitrust Litigation, which some people just call the “Visa-MasterCard case.” The settlement is valued at between $5.54 billion and $6.24 billion. That’s a lot of money, even for a big antitrust case.

Continue reading →

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Vitamin-C-antitrust-class-action-supreme-court-300x200

Author: Jarod Bona

In an antitrust case deciding a non-antitrust-specific issue, the US Supreme Court held in Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. (the Vitamin C Antitrust Litigation) that to determine foreign law in federal courts, judges are not strictly bound by that foreign government’s statements.

The judge should “accord respectful consideration to a foreign government’s submission,” but it is his or her call in making the ultimate decision.

The Supreme Court in this case is interpreting Federal Rule of Civil Procedure 44.1, which states that when deciding foreign law—sometimes that is necessary in federal court—a judge may “consider any relevant material or source . . . whether or not submitted by a party.”

This decision arose out of the Vitamin C Antitrust Litigation, which is an antitrust class-action lawsuit against four Chinese corporations that manufacturer and export, you guessed it, Vitamin C. Purchasers of the vitamin sued Chinese vitamin C sellers, alleging that they agreed to fix the price and quantity of Vitamin C exported to the United States from China. Price fixing, of course, is a per se antitrust violation.

(Read here if you want to learn more about defending an antitrust class action case.)

The Chinese vitamin C sellers argued that they are shielded from US antitrust law liability by the act-of-state doctrine.

But what is the act-of-state doctrine?

Good question.

US courts under the act-of-state doctrine should not judge the validity of an official act of a foreign government committed within that foreign government’s borders. This is a doctrine that extends beyond antitrust law.

In Animal Science Products, the defendants argued that China law required them to fix prices as part of a “regulatory pricing regime.”

The parties, however, disputed whether China law actually mandated the fixed prices. To help resolve that question, the Ministry of Commerce of the People’s Republic of China filed an amicus curiae brief supporting the Chinese vitamin C sellers’ argument that China law required defendants to fix prices.

(You can read our article here on the many reasons to file amicus briefs).

So the trial court had to figure out whether China law mandated price fixing. And to assist it, China’s Ministry of Commerce weighed in via amicus brief.

What would you do?

Would you just agree with whatever China says about its own law? Or would you do an independent examination and decide?

Continue reading →

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