O'Brien v. Leegin Creative Leather Prods., Inc.

• Citation: 2012 Trade Cases P 77884,294 Kan. 318,277 P.3d 1062
• Decision Date: 04 May 2012
• Docket Number: No. 101,000.,101,000.
• Parties: Sue O'BRIEN, individually and on behalf of a class of similarly situated individuals, Appellants/Cross-appellees, v. LEEGIN CREATIVE LEATHER PRODUCTS, INC., Appellee/Cross-appellant.
• Court: United States State Supreme Court of Kansas

294 Kan. 318

277 P.3d 1062

2012-1 Trade Cases P 77,884

Sue O'BRIEN, individually and on behalf of a class of similarly situated individuals, Appellants/Cross-appellees,

v.LEEGIN CREATIVE LEATHER PRODUCTS, INC., Appellee/Cross-appellant.

No. 101,000.

Supreme Court of Kansas.

May 4, 2012.

Syllabus by the Court

1. Cases interpreting federal antitrust statutes may be persuasive authority for any state court interpreting its antitrust laws, but such authority is not binding upon any court in Kansas interpreting Kansas antitrust statutes.

2. Vertical price-fixing involves participants at different rungs of the distribution ladder, e.g., a wholesaler and a retailer. Horizontal price-fixing involves participants who are at the same rung of the distribution ladder, e.g., two or more retailers.

3. Under the plain language of K.S.A. 50–101, there are several optional theories under which a Kansas restraint of trade plaintiff may proceed. Under the most forgivingof those theories, a plaintiff must prove the existence of a trust “for ... the ... purpose[ ] ... [t]o fix any standard or figure, whereby ... price to the public shall be, in any manner, controlled or established.” K.S.A. 50–101Fourth. As defined in K.S.A. 50–101, to establish the existence of a trust, a plaintiff need only show a “combination of capital, skill, or acts, by two or more persons.” A plaintiff need not show a relationship rising to the level of an agreement. Furthermore, it is enough to demonstrate that the combination is for the purpose to fix prices; a plaintiff does not have to show that the combination actually succeeds in increasing prices. The phrase “for the purpose” contemplates a subjective standard, one that requires examination of the intent behind a defendant's behavior.

4. Under the plain language of K.S.A. 50–112, there are alternate theories under which a Kansas restraint of trade plaintiff may proceed: A plaintiff may prove the existence of an arrangement, contract, agreement, trust, or combination between persons designed to advance, reduce, or control price, or one that tends to advance, reduce, or control price. Mere arrangements between persons are within the scope of the statute; a plaintiff does not have to show a relationship rising to the level of an agreement. In addition, it is enough to show that the arrangement is designed to or tends to control prices; a plaintiff does not have to show that the arrangement actually succeeds in increasing prices. Like “for the purpose” in K.S.A. 50–101, the phrase “designedto” contemplates a subjective standard. on the other hand, “ tend to” contemplates an objective standard, one that requires examination of the defendant's behavior to discern whether it would reasonably be expected to produce a particular result, regardless of the defendant's intention.

5. The concept of “antitrust injury” from federal antitrust jurisprudence essentially equates to the Kansas concept of causation.

6. In this case, the named plaintiff and class have come forward with enough evidence that the defendant's pricing policy and written applications and agreements were for the purpose of fixing prices or designed to control prices, that they tended to control prices, and that the named plaintiff and class members were injured or damaged to survive defendant's summary judgment motion.

7. The “rule of reason” of federal antitrust jurisprudence does not apply to lawsuits under the Kansas Restraint of Trade Act. K.S.A. 50–101, K.S.A. 50–102, and K.S.A. 50–112 forbid all vertical and horizontal price-fixing by two or more persons or between persons. Contrary holdings in Okerberg v. Crable, 185 Kan. 211, 341 P.2d 966 (1959), and Heckard v. Park, 164 Kan. 216, 188 P.2d 926 (1948)—decided during the period when the Kansas Fair Trade Act, R.S. 1937, 50–301 et seq., was in effect—are overruled.

8. The Kansas Restraint of Trade Act does not differentiate between vertical and horizontal price-fixing or outline a particular approach to a dual-distribution situation. In this case, named plaintiff and the class have alleged both vertical and horizontal price-fixing, and they are free to pursue the alternative theories as long as they are supported by the evidence.

9. The 3–year statute of limitations in K.S.A. 60–512(2) controls both full consideration and treble damages claims under the Kansas Restraint of Trade Act.

10. K.S.A. 50–101 and K.S.A. 50–112 do not demand that a defendant in a price-fixing case have had an explicit written agreement with the other person with whom the defendant engages in the unlawful behavior. However, more than unilateral behavior by the defendant is required. In this case, named plaintiff and the class have marshaled sufficient evidence to avoid summary judgment with respect to purchases made at stores other than those subject to explicit applications and agreements.

[294 Kan. 320]11. An appellate court reviews a district judge's decision to certify a class action under K.S.A. 60–223 to ensure that the judge has applied and rigorously analyzed the requirements of the statute. In this case, the district judge's findings of fact and legal conclusions are inadequate to support meaningful appellate review of the predominance factor for certification. A pending motion for decertification will be ripe for decision on remand to the district court, and the judge and the parties will have another opportunity to make and preserve a record sufficient for any eventual appellate review.

Robert W. Coykendall, of Morris, Laing, Evans, Brock & Kennedy, Chartered, of Wichita, argued the cause, and Will B. Wohlford and John W. Johnson, of the same firm, were with him on the briefs for appellants/cross-appellees.

James M. Armstrong, of Foulston Siefkin LLP, of Wichita, argued the cause, and Timothy B. Mustaine and Jeffrey A. Jordan, of the same firm, were with him on the briefs for appellee/cross-appellant.

Kristafer R. Ailslieger, deputy solicitor general, Clay Britton, assistant solicitor general, and Lynette Bakker, assistant attorney general, were on the brief for amicus curiae State of Kansas.

Rex A. Sharp, of Gunderson, Sharp & Walke L.L.P., of Prairie Village, was on the brief for amicus curiae Quin Jackson.

The opinion of the court was delivered by BEIER, J.:

This appeal and cross-appeal concern a dispute over retail pricing practices by a fashion accessories company.

Named plaintiff Sue O'Brien and a class of similarly situated consumers (O'Brien) sued the maker of Brighton handbags, other accessories, and luggage, defendant Leegin Creative Leather Products, Inc. (Brighton), alleging violations of the Kansas Restraint of Trade Act (KRTA), K.S.A. 50–101 et seq. We understand O'Brien to contend that Brighton's practices as a wholesale supplier and retailer constituted illegal price-fixing in violation of K.S.A. 50–101 and K.S.A. 50–112, entitling her and other class members to recovery under K.S.A. 50–108, K.S.A. 50–115, K.S.A. 50–147, and K.S.A. 50–161.

Brighton moved for summary judgment in the district court. In the alternative, it sought partial summary judgment and moved to decertify the class. District Judge Jeffrey E. Goering granted Brighton's motion for summary judgment, granted its motion for partial summary judgment in part, and did not reach the issue of decertification.

O'Brien appealed, and Brighton cross-appealed. We transferred this matter from our Court of Appeals on O'Brien's unopposed motion. We reverse and remand to the district court for further proceedings consistent with the rulings below.

Issues

We have reformulated and reorganized the questions presented by the parties for ease and flow of analysis. The six questions are:

(1) Did the district judge correctly interpret the KRTA on the issue of “antitrust injury”?

(2) Did the district judge err in relying on a “rule of reason” to evaluate whether there has been a violation of the KRTA?

(3) Does this case involve a claim for horizontal price-fixing as well as vertical price-fixing, and, if so, was summary judgment on that claim properly granted by the district judge?

(4) Did the district judge identify the correct statute of limitations applicable to a treble damages claim and to a full consideration claim under the KRTA?

(5) Did the district judge correctly determine that an explicit written agreement with each retailer was not a necessary prerequisite to liability under the KRTA?

(6) Did the district judge properly evaluate predominance when granting class certification?

Introduction

Before we set forth the pertinent factual and procedural background, a brief review of basic principles governing the relationship between Kansas and federal antitrust law and the types of price-fixing that can occur is in order.

Although there are federal antitrust statutes, e.g., the Sherman Act, 15 U.S.C. § 1 (2006)et seq., and a large body of interpreting caselaw, antitrust law has traditionally been the province of the states. McShares, Inc. v. Barry, 266 Kan. 479, 488–89, 970 P.2d 1005 (1998),cert. denied526 U.S. 1158, 119 S.Ct. 2048, 144 L.Ed.2d 215 (1999) (citing California v. ARC America Corp., 490 U.S. 93, 109 S.Ct. 1661, 104 L.Ed.2d 86 [1989] ). In addition, we have noted in the past that federal antitrust law is intended to supplement the remedies available under Kansas law, not to replace Kansas antitrust provisions. 266 Kan. at 488–89, 970 P.2d 1005.

Kansas' antitrust law under the KRTA, originally enacted in 1897, remains largely undeveloped; very few cases have reached this court. See Bergstrom v. Noah, 266 Kan. 829, 843, 974 P.2d 520 (1999). We have observed generally that the KRTA is broad in scope but that the bulk of its provisions have not been meaningfully interpreted by Kansas courts. 266 Kan. at 843, 974 P.2d 520.

While the KRTA and federal antitrust statutes share some similarities, they are not, in fact, the same. 266 Kan. at 844, 974 P.2d 520. Thus, “[w]hile ... cases [interpreting federal antitrust statutes]...