B. Custom Kitchen v. Owens-Illinois, Inc.

• Decision Date: 11 March 1987
• Docket Number: INC,OWENS-ILLINOI
• Citation: 191 Cal.App.3d 1341,235 Cal.Rptr. 228
• Court: California Court of Appeals Court of Appeals
• Parties: , 55 USLW 2534, 1988-1 Trade Cases P 68,053 B.W.I. CUSTOM KITCHEN, A Sole Proprietorship of Betty W. Imes, Plaintiff and Appellant, v.; Brockway Inc.; Dart Industries, Inc.; Anchor Hocking Corporation; Glass Containers Corporation; Chattanooga Glass Co.; Ball Corporation; Arkansas Glass Co.; and Latchford Glass Co., Defendants and Respondents. A034787.

Page 228

235 Cal.Rptr. 228

191 Cal.App.3d 1341, 55 USLW 2534, 1988-1 Trade Cases P 68,053

B.W.I. CUSTOM KITCHEN, A Sole Proprietorship of Betty W. Imes, Plaintiff and Appellant, v. OWENS-ILLINOIS, INC.; Brockway Inc.; Dart Industries, Inc.; Anchor Hocking Corporation; Glass Containers Corporation; Chattanooga Glass Co.; Ball Corporation; Arkansas Glass Co.; and Latchford Glass Co., Defendants and Respondents.

A034787.

Court of Appeal, First District, Division 5, California.

March 11, 1987.

Certified for Partial Publication ^*

Review Denied July 2, 1987.

Francis O. Scarpulla, Stephen V. Scarpulla, Scarpulla & Scarpulla, San Francisco, for B.W.I. Custom Kitchen.

Rocky Unruh, Marvin D. Morgenstein, Jean L. Bertrand, Morgenstein, Ladd & Jubelirer, San Francisco, Earl E. Pollock, Gary Senner, Robert T. Joseph, Sonnenschein, Carlin, Nath & Rosenthal, Chicago, Ill., for Owens-Illinois, Inc.

David M. Schiffman, H. Blair White, Charles W. Douglas, Sidley & Austin, Chicago, Ill., Peter I. Ostroff, Sidley & Austin, Los Angeles, for Brockway, Inc.

William Drescher, Frederick L. McKnight, Jones, Day, Reavis & Pogue, Los Angeles, for Anchor Hocking Corp.

Kurt W. Melchior, Stevenson, Werson, Berke & Melchior, San Francisco, John H. Morrison, Randall A. Hack, Kirkland & Ellis, Chicago, Ill., L. John Fletcher, Northbrook, Ill., for Dart Industries, Inc.

John J. Waller, Jr., John J. Hanson, William E. Wegner, Gibson, Dunn & Crutcher, Los Angeles, for Glass Containers Corp.

G. Joseph Bertain, Jr., Law Offices of G. Joseph Bertain, Jr., San Francisco, W.F. Sondericker, Olwine, Connelly & Chase, New York City, Marcia Schwartz, Whyte & Hirschboeck, Milwaukee, Wis., for Chattanooga Glass Co.

Micheal Bien, William S. Boyd, Brobeck, Phelger & Harrison, San Francisco, for Ball Corp.

Jack T. Swafford, Lagerlof, Senecal, Drescher & Swift, Los Angeles, for Latchford Glass Co.

Desmond G. Kelly, Louis L. Phelps, George G. Nagle, Sullivan, Roche & Johnson, San Francisco, for Arkansas Glass Container Corp.

HANING, Associate Justice.

Plaintiff B.W.I. Custom Kitchen, an indirect purchaser of glass containers, brought a class action against numerous corporate defendants alleging they had engaged in a conspiracy to set noncompetitive prices for glass containers in violation of California's antitrust statute, the Cartwright Act (Bus. & Prof.Code, § 16700 et seq.) and the unfair competition statutes. (Bus. & Prof.Code § 17200 et seq.) Plaintiff sought certification of a class comprised of California businesses which purchased glass containers indirectly from defendant manufacturers and paid inflated prices for such containers due to defendants' alleged price-fixing conspiracy. The trial court refused to certify the class, holding that common questions of law and fact did not predominate over questions affecting only individual class members. We reverse.

Plaintiff B.W.I. Custom Kitchen, a sole proprietorship of Betty W. Imes, is in the business of packaging food products. The named defendants are corporations engaged in manufacturing glass containers. The first amended complaint alleges that defendants "engaged in a continuing conspiracy ... to fix, raise, maintain and stabilize the prices and terms and conditions of sale of glass containers and to allocate among themselves the glass container business in the State of California." Plaintiff seeks to recover treble damages under the Cartwright Act as well as actual and punitive damages under the unfair competition statutes. Plaintiff also seeks to represent a class composed of all California businesses "who have purchased glass containers indirectly from any defendant in the State of California" during the time frame covered by the complaint. Plaintiff claims there are "several thousand" potential class members.

Most users of glass containers purchase them directly from the manufacturers. Plaintiff, however, and the class she seeks to represent, are "indirect purchasers." That is, they did not deal directly with any defendant but instead purchased their glass containers from independent distributors who in turn purchased glass containers from defendants as well as other manufacturers. ¹ As indirect purchasers, plaintiff and all others similarly situated are precluded from suing defendants under federal antitrust laws. In Illinois Brick Co. v. Illinois (1977) 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707, the court ruled that, with few exceptions, indirect purchasers of an alleged price-fixed product cannot maintain a treble-damage action under federal antitrust laws predicated on the theory that the price-fixer's overcharge was passed on to the indirect purchaser. In other words, in order to maintain a treble damage action involving price-fixing under federal law, the plaintiff must have dealt directly with the alleged price-fixer. As part of the rationale for its ruling, the court referred to the "evidentiary complexities and uncertainties" which would attend the efforts of indirect purchasers to establish that illegal overcharges were passed on to them. (Id., at p. 732, 97 S.Ct. at p. 2067-2068.)

The California Legislature promptly rejected the reasoning of Illinois Brick, and amended the Cartwright Act to allow anyone injured by an antitrust violation to bring suit, regardless of whether the plaintiff dealt directly or indirectly with the violator. ² As the California Supreme Court subsequently observed, the Legislature's action endorsed the view "that indirect purchasers are persons 'injured' by illegal overcharges passed on to them in the chain of distribution." (Union Carbide Corp. v. Superior Court (1984) 36 Cal.3d 15, 20, 201 Cal.Rptr. 580, 679 P.2d 14; see Comment, The California Legislature Steers the Antitrust Cart Right Off the Illinois Brick Road (1979) 11 Pacific L.J. 121.)

The main thrust of defendants' opposition to the class was directed toward the class members status as "indirect purchasers." Defendants took the position that any alleged price increase for glass containers paid by indirect purchasers was too remote from the source of the overcharge and too individualized to be susceptible of class-wide proof. The trial court agreed and declined to certify the class, finding that plaintiff had failed to show "that conspiracy could be proved by class-wide evidence, that impact could be proved by class-wide evidence, or that these issues (even if they were common) predominate over the complex individualized issues of damages in indirect purchaser actions brought under the Cartwright Act."

I ^**

II

We now resolve the issues of class certification. "[W]hen the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all." (Code Civ.Proc., § 382.) The party seeking certification as a class representative must establish the existence of an ascertainable class and a well-defined community of interest among the class members. (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 704, 63 Cal.Rptr. 724, 433 P.2d 732.) The community of interest requirement embodies three factors: "(1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class." (Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470, 174 Cal.Rptr. 515, 629 P.2d 23.) The California Supreme Court has repeatedly directed that in the absence of controlling state authority, our courts should utilize the procedural guidelines of rule 23 of the Federal Rules of Civil Procedure. ⁵ (See Richmond v. Dart Industries, Inc., supra, pp. 469-470, fn. 7, 174 Cal.Rptr. 515, 629 P.2d 23; LaSala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864, 872, 97 Cal.Rptr. 849, 489 P.2d 1113; Vasquez v. Superior Court (1971) 4 Cal.3d 800, 821, 94 Cal.Rptr. 796, 484 P.2d 964.) "We note that it has never been the law in California that the class representative must have identical interests with the class members. The only requirements are that common questions of law and fact predominate and that the class representative be similarly situated. [Citation.]" (Classen v. Weller (1983) 145 Cal.App.3d 27, 46, 192 Cal.Rptr. 914.)

Trial courts have great discretion with regard to class certification, and reviewing courts will not disturb a trial court ruling on class certification which is supported by substantial evidence unless (1) improper criteria were used or (2) erroneous legal assumptions were made. (Richmond v. Dart Industries, Inc., supra, 29 Cal.3d at p. 470, 174 Cal.Rptr. 515, 629 P.2d 23.)

In addition, a class certification order may be conditional and may be altered or amended before a decision on the merits. (Occidental Land, Inc. v. Superior Court (1976) 18 Cal.3d 355, 360, 134 Cal.Rptr. 388, 556 P.2d 750; Vasquez v. Superior Court, supra, 4 Cal.3d at p. 821, 94 Cal.Rptr. 796, 484 P.2d 964; Lazar v. Hertz Corp. (1983) 143 Cal.App.3d 128, 144, 191 Cal.Rptr. 849.)

Plaintiff's complaint alleges that defendants engaged in a horizontal price-fixing conspiracy to set the prices of glass containers in violation of the Cartwright Act, as well as the unfair competition statutes. ⁶ As a consequence, she contends, indirect purchasers such as plaintiff, "have paid more for glass containers than they would have but for the unlawful combination and conspiracy." As stated by the United States Supreme Court in Northern Pac. R. Co. v. United States (1958) 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545: "[T]here are certain agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use." (Id., at p. 5, 78 S.Ct. at p. 518.) Conspiring to fix prices has been...