Antitrust Attorney Blog

The District Court for the Eastern District of New York certified both a damages class and an injunctive class in the long-running (since 2005) Vitamin C price-fixing case. In re Vitamin C Antitrust Litigation, 2012 WL 251909 (E.D.N.Y. 2012).

The court had deferred ruling on class certification until resolution of an omnibus summary judgment motion based on the defense that the Chinese government had compelled the price-fixing conspiracy. The motion was denied, and class certification was ripe for decision.

The court addressed in sequence the Rule 23 requirements: numerosity, commonality, typicality, and adequacy of representation.

With respect to numerosity, the court noted that there is no absolute requirement of any particular number of parties. The putative class representative need only show that there are sufficient class members that joinder is difficult or inconvenient. It is not necessary to show that joinder is impossible. In the Second Circuit, the general presumption is that joinder is impracticable if the class has more than 40 members. The defendants did not dispute that a class of 139 class members was sufficiently large to satisfy the numerosity test.

In addressing commonality, the court applied the recent decision in Wal-mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011). Commonality is not satisfied by the mere raising of common questions, even if there are many of them. Rather, commonality addresses the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation. The defendants did not dispute commonality.

The disputes over certification were limited to adequacy and typicality.

Adequacy requires that the class representative possess the same interests and suffer the same injuries as the other class members. The court expressed wariness of a defense argument on adequacy that would eliminate any class representative.

As a threshold matter, a class representative is not adequate unless it is a member of the class. If so, then the representative must show that counsel is able to conduct the litigation. There must be no conflict of interest between the class representative and the other class members, and the representative must exhibit the integrity and credibility to diligently perform its fiduciary duties to the class. The last two factors - lack of conflict and sufficient integrity and credibility - were disputed.

One of the putative representatives purchased vitamin C from a subsidiary of a defendant rather than from the defendant itself. The plaintiff sought to invoke the ownership or control exception to Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). The mere fact of the parent-subsidiary relationship was not sufficient. The parent did not control the pricing decisions of the subsidiary, and thus the representative was an indirect purchaser from an alleged conspirator. Because the representative was therefore an indirect purchaser, it lacks standing, is not a member of the class and cannot serve as class representative.

The other putative class representative, named The Ranis Company, had not purchased vitamin C itself, but had purchased the antitrust claims of a direct purchaser. Because antitrust claims are transferable, a class member that purchases its claims is a member of the class and can be the representative.

The court then considered whether Ranis has a conflict of interest. A conflict would not make a representative inadequate unless it is fundamental and concrete. A speculative conflict should be disregarded.

The alleged conflict was that the company that assigned the claim to Ranis was a distributor who would benefit from higher prices, though the rest of the class members were hypothetically (but probably not really) end users who would benefit from lower prices. The court rejected this argument. Even if the assignor would benefit from selling at higher prices, it would nonetheless have an interest in buying from the conspirators at a lower price. Thus its interests were not in conflict with the other class members.

The court noted that had Ranis sought to represent an injunctive class there might have been a conflict. But in a damages-only class, a representative's interest in higher prices that he could mark-up and pass on is not a relevant conflict.

Nor, the court concluded, did counsel representing the class have a conflict of interest. The same counsel represented both the direct purchasers seeking damages and the direct and indirect purchasers seeking injunctive relief. Although the classes seek different forms of relief, their goals do not conflict, and there is no conflict of interest.

The defendants challenged Ranis' credibility and integrity on the basis that the manner in which it acquired its interest - purchasing an assignment of the cause of action from a direct purchaser - was a ruse to conceal wrongdoing by the assignor. Ranis provided a legitimate reason for trying to keep the assignor's identity secret, and the court found no improper conduct of the type that would foreclose representing the class.

Ranis met the typicality requirement because its claims were parallel to the claims of the other plaintiffs. It was sufficiently knowledgeable about the case, although it lacked a full understanding of some procedural issues.

Defendants also argued that the case was lawyer-driven, and that the lawyers had enlisted Ranis as a front man to create litigation that otherwise would not exist. The judge called this naïve. Of course the lawyers instigated the case in hopes of generating fees. That, the court said, is the goal of Rule 23, to allow profit-seeking lawyers to bring cases that individual plaintiffs would not bring themselves, for lack of legal understanding of financial ability. The court contrasted the Private Securities Litigation Reform Act of 1995, which was intended to curtail lawyer-driven securities fraud class actions, with the absence of any such statute curtailing antitrust class actions.

The predominance inquiry was satisfied because in a horizontal price-fixing case the existence and effect of the conspiracy are the prime issues and are common across the class. The individual issues and individual defenses did not destroy predominance because there remained a sufficient constellation of common issues to bind the case together.

The superiority requirement was met because the cost of proceeding would have been disproportionate to the size of the claims.

The court also certified an injunction class. There was antitrust injury even assuming the purchasers could pass on the overcharges and recoup the excess payments. The dual role of counsel in representing both a direct-buying damages class and an indirect injunction class did not bar them. Nor were they barred by the possibility that participation in an injunction class could have barred some class members from bringing other individual claims. The breadth of the class, and the fact that members were at multiple distribution levels, did not make the class unascertainable. The members could still be identified with objective criteria.