Few would argue with the proposition that, in the antitrust context, indirect purchaser class actions raise more difficult questions of commonality, impact, and manageability than direct purchaser class actions even though there may have been harm sustained at both levels. As a result, indirect purchaser class actions in the United States often are not certified for class treatment under Rule 23 of the Federal Rules of Civil Procedure (“Rule 23”) or comparable class action rules in state courts.
This does not mean, however, that indirect purchaser class actions can or should never be certified. Nor should they be summarily dismissed without first carefully analyzing the nature of the underlying violation, the number of levels in the distribution chain involved, the size and composition of the purported class, the particular features of the industry and products involved, and the economic models proffered by plaintiffs’ economic experts in support of class treatment. Some cases will satisfy the requirements for class certification, and others may not, but in all cases, the decision on whether to certify a class should be made on the basis of the record developed in that case, not on the basis of preconceptions of whether some class actions are legally inappropriate.
The Division Article
In a recent article, Makan Delrahim, the Assistant Attorney General in Charge of the Antitrust Division of the U.S. Department of Justice (the “Division”), provided a commentary on the decision of the English Court of Appeal in the Mastercard case, which is now on appeal before the UK Supreme Court.2 While the ostensible focus of the Division’s article is on a comparison between the treatment in the U.S. and UK of class certification issues in indirect purchaser cases, particularly as related to the UK Mastercard case, most of the article focuses on class actions generally.
Although we agree with the general overview of Rule 23 provided by the Division, we disagree with a number of specific assessments in the article, starting with the Division’s comment that the U.S. experience demonstrates that courts should be wary of class actions because they create a risk of “in terrorem” settlements, meaning that once a class is certified, defendants are under enormous pressure to settle potentially meritless claims in order to avoid the risk of an unwarranted, exorbitant judgment if they should go to trial and lose.3 This comment disregards the facts that unlike the U.S., there is no treble damage risk in the UK, and the UK has a “loser pays” rule. Additionally, in the UK, but not in the U.S., a defendant can seek contribution from co-defendants in the event of an adverse judgment. Moreover, many of the class actions brought in the U.S. and UK are follow-on actions, where the defendants have already pled guilty or otherwise have been found guilty of the underlying offense giving rise to the private suit. Such follow-on class actions in particular cannot be automatically dismissed as meritless.
*Michael D. Hausfeld is Chair, Hausfeld, LLP, Washington, D.C. Irving Scher is Senior Counsel, Hausfeld, LLP, New York, N.Y. Hausfeld & Co. LLP, London, UK, acts for an intervenor, the Consumers’ Association, in the UK Mastercard proceedings. Laurence T. Sorkin is an Adjunct Professor, Fordham University School of Law, New York N.Y.