Antitrust Law Daily Wrap Up, ANTITRUST—NDCal: LCD Plaintiffs Could Not Seek Damages Based on Purchases from Unnamed Co-Conspirators or Under Umbrella Theory; Defendants Allowed to Raise Pass-On Defense, (Dec 28, 2012)

By E. Darius Sturmer, J.D.

In the expansive multidistrict antitrust litigation brought against manufacturers of thin-film transistor liquid crystal display (TFT-LCD) panels for allegedly participating in a price fixing conspiracy, some of the defendants were entitled to summary judgment as to certain—but not all—purchases of panels made by supposed conspirators not named in the complaints, the federal district court in San Francisco has held (In re: TFT-LCD (Flat Panel) Antitrust Litigation, December 26, 2012, Illston, S.). In addition, the court rejected the indirect purchaser plaintiffs’ pursuit of damages under an “umbrella theory.” In a separate opinion filed the same day, the court concluded that the defendants were permitted to present a pass-on defense to claims asserted under California, New York, Michigan, Illinois, and Minnesota law. However, the court noted, there remained disputed issues of fact regarding the existence and extent of the plaintiffs’ downstream pass-on rates. The defending panel manufacturers’ motions for summary judgment were each, therefore, granted in part and denied in part.

In calculating indirect purchaser damages in the case, the experts for the plaintiffs—retailers, electronics distributors, and telecommunications equipment sellers and resellers—had taken the total combined market share of the supposed participants in the conspiracy, and multiplied that against each plaintiff’s total indirect purchases. As an alternative to this “market share approach,” the expert for one of the complaining retailers had also calculated damages based on an “umbrella theory,” which hypothesized that a successful price fixing conspiracy among certain firms created a price umbrella that allowed non-conspiring competitor firms to raise their prices without fear of losing market share. In making the umbrella theory damages calculations, the expert included all of the plaintiffs’ purchases of TFT-LCD products, including purchases from non-conspirators.

Unnamed Co-Conspirators

The court found that the relevant inquiry as to damages was not whether the plaintiffs had named all co-conspirators in their complaints, but whether they had provided adequate notice of the claimed co-conspirators either in their complaints or through discovery such that the defendants were not prejudiced. Based upon a review of the plaintiff’s discovery responses, the court found that the plaintiffs had identified only some of the entities as purported co-conspirators.

Umbrella Theory

In addition, the court disallowed indirect purchaser claims under the laws of California, Illinois, Michigan, Minnesota, and New York based upon the umbrella theory of damages. “Although some federal courts had allowed antitrust claims to proceed under the umbrella theory, most federal courts recently have rejected these claims,” the court noted. Though arguing that the five states had expressly determined not to follow the Illinois Brick ban on indirect purchaser standing for federal antitrust damages claims, the plaintiffs appeared to concede that there was no state law authority from any of the five states at issue holding that such claims were permissible, the court observed. In the absence of any such authority, as based on the particular facts of these cases involving a multi-layered distribution chain, the court found it appropriate to follow the precedent established for the Ninth Circuit in In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 691 F.2d (9th Cir. 1982), rejecting umbrella theory claims as “unacceptably speculative and complex.”

Pass-On Defense

The court concluded that the defendants sufficiently demonstrated that it was appropriate under the circumstances of this multidistrict litigation to permit them to assert a pass-on defense as to the California, New York, Michigan, Illinois, and Minnesota law claims. While only the New York Donnelly Act explicitly mandated consideration of a pass-on defense, each of the other states’ antitrust statutes either expressly or impliedly permitted the court to take “any steps necessary” to avoid duplicative recovery. “Where multiple levels of purchasers have sued defendants alleging identical and/or overlapping claims, consideration of pass-on was necessary to avoid duplicative recovery,” the court declared.

The consolidated multidistrict litigation is No. M 07-1827 SI, MDL No. 1827. The orders both relate to cases C 09-4997 SI, C 10-4572 SI, C 10-0117 SI, C 10-4945 SI within that litigation.

Janet Irene Levine (Crowell & Moring LLP) for AT&T Corporation. David Martinez (Robins Kaplan Miller & Ciresi L.L.P.) for Best Buy Co., Inc. John C. McGuire (Sedgwick, Detert, Moran & Arnold) for AU Optronics Corporation.

Cases: Antitrust CaliforniaNews