California v. Arc America Corporation
| Citation | 104 L.Ed.2d 86,490 U.S. 93,109 S.Ct. 1661 |
| Decision Date | 18 April 1989 |
| Docket Number | No. 87-1862,87-1862 |
| Parties | CALIFORNIA, et al., Appellants v. ARC AMERICA CORPORATION et al |
| Court | United States Supreme Court |
Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707, held that, generally, only overcharged direct purchasers, and not subsequent indirect purchasers, are entitled to recover treble damages under § 4 of the Clayton Act for price fixing violative of § 1 of the Sherman Act. Appellant States—who are, at least in part, indirect purchasers of cement—brought class actions against various cement producers in the appropriate federal courts seeking treble damages under the federal antitrust laws for an alleged nationwide conspiracy to fix cement prices and damages for alleged violations of their respective state antitrust laws, which arguably allow indirect purchasers to recover for all overcharges passed on to them by direct purchasers. The cases were transferred to the District Court in Arizona for coordinated pretrial proceedings, and a settlement was reached with several major defendants. When appellants sought payment out of the settlement fund for their state indirect purchaser claims, appellees, class members who are direct purchasers, objected. The court refused to allow the claims, ruling that the state statutes are pre-empted by federal law because they are clear attempts to frustrate Congress' purposes and objectives, as interpreted in Illinois Brick. The Court of Appeals affirmed, holding that, depending on how they were construed, the state statutes would either conflict directly with federal law under Illinois Brick or would impermissibly interfere with the three federal antitrust policy goals that the court identified as having been defined by Illinois Brick and Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S. t. 2224, 20 L.Ed.2d 1231; avoiding unnecessarily complicated litigation; providing direct purchasers with incentives to bring private antitrust actions; and avoiding multiple liability of defendants.
Held: The rule limiting federal antitrust recoveries to direct purchasers does not prevent indirect purchasers from recovering damages flowing from state antitrust law violations. Pp. 100-106.
(a) The state indirect purchaser statutes are not pre-empted by the federal antitrust laws. There is no claim of express pre-emption or of congressional occupation of the field. The claim that the state laws are inconsistent with, and stand as an obstacle to, effectuating the congressional purposes identified in Hanover Shoe and Illinois Brick misunderstands these cases, which merely construed the federal antitrust laws and did not consider state-law or pre-emption standards or define the interrelationship between the federal and state law. Nothing in Illinois Brick suggests that it would be contrary to congressional purposes for States to allow indirect purchasers to recover under their own antitrust laws. Pp. 100-103.
(b) In any event, the state indirect purchaser statutes do not interfere with accomplishing the federal-law purposes as identified in Illinois Brick. First, the state statutes will not engender unnecessarily complicated federal antitrust proceedings, since they cannot and do not purport to affect available federal-law remedies; since claims under them could be brought in state court, separately from federal direct purchaser actions; and since federal courts have discretion to decline to exercise pendent jurisdiction over burdensome state claims. Second, claims under the state statutes will not reduce the incentives of direct purchasers to bring private federal antitrust actions by reducing their potential recoveries. Illinois Brick was not concerned with the risk that a federal plaintiff might not be able to recover its entire damages award or might be offered less to settle. Rather, it was concerned that requiring direct and indirect purchasers to apportion the recovery under a single statute—§ 4 of the Clayton Act—would result in no one plaintiff having a sufficient incentive to sue under that statute. The state statutes at issue pose no similar risk. That direct purchasers' recoveries may be reduced because they will have to share the settlement fund with indirect purchasers is not due to the impermissible operation of the state statutes but is, rather, a function of the fact and form of the settlement, which was intended to dispose of all claimants, whether claiming under federal or state law and whether direct or indirect purchasers. Third, claims under the state statutes will not contravene any express federal policy condemning multiple liability for antitrust defendants, since Illinois Brick and similar cases simply construed § 4, and did not identify a federal policy against imposing state liability in addition to that imposed by federal law. Pp. 103-106.
817 F.2d 1435, (C.A.9 1987) reversed.
WHITE, J., delivered the opinion of the Court, in which all other Members joined, except STEVENS and O'CONNOR, JJ., who took no part in the consideration or decision of the case.
Thomas Greene, for appellants.
Roy T. Englert, Jr., Washington, D.C., for U.S., as amicus curiae in support of appellants, by special leave of Court.
Theodore B. Olson, Washington, D.C., for appellees.
[Amicus Curiae Information from pages 95-96 intentionally omitted] Justice WHITE delivered the opinion of the Court.
In Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), the State of Illinois brought suit on its own behalf and on behalf of a number of local governmental entities seeking treble damages under § 4 of the Clayton Act, 38 Stat. 731, as amended, 15 U.S.C. § 15(a),1 for an alleged conspiracy to fix the price of concrete block in violation of § 1 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. § 1. The State and the local governments were all indirect purchasers of concrete block—that is, they did not purchase concrete block directly from the price-fixing defendants but rather purchased products or contracted for construction into which the concrete block was incorporated by a prior purchaser. The Court held that, with limited exceptions,2 only overcharged direct purchasers, and not subsequent indirect purchasers, were persons "injured in [their] business or property" within the meaning of § 4, and that therefore the State of Illinois was not entitled to recover under federal law for the portion of the overcharge passed on to it.
Appellants in the present case, the States of Alabama, Arizona, California, and Minnesota, brought suit in the appropriate federal courts on their own behalf and on behalf of classes of all governmental entities within each State, excluding the Federal Government, seeking treble damages under § 4 of the Clayton Act for an alleged nationwide conspiracy to fix prices of cement in violation of § 1 of the Sherman Act. Appellants are, at least in part, indirect purchasers of cement, and so under Illinois Brick, like the State of Illinois in that case, would not be entitled to recover on their indirect purchaser claims under § 4 unless those claims fell within one of the exceptions. In their complaints, however, appellants also alleged violations of their respective state antitrust laws under which, as a matter of state law, indirect purchasers arguably are allowed to recover for all overcharges passed on to them by direct purchasers.3 The claims under these state indirect purchaser statutes are the focus of this case.
Numerous similar actions were filed by other plaintiffs in various District Courts, and the actions were transferred to the United States District Court for the District of Arizona for coordinated pretrial proceedings. In re Cement and Concrete Antitrust Litigation, 437 F.Supp. 750 (JPML 1977). The District Court certified the actions as class actions and established a number of plaintiff classes. Between July 1979 and October 1981, several major defendants settled with the various classes, resulting in a settlement fund in excess of $32 million. The settlements left distribution of the fund for later resolution, subject to approval of the District Court.
Appellants sought payment out of the settlement fund for their state indirect purchaser claims. Appellees, class members who are direct purchasers, objected. When the District Court approved a plan for distributing the settlement fund, it refused to allow the claims against the fund pursuant to state indirect purchaser statutes. According to the District Court, "[s]uch statutes are clear attempts to frustrate the purposes and objectives of Congress, as interpreted by the Supreme Court in Illinois Brick, and, accordingly, are pre-empted by federal law." App. to Juris. Statement A-31 (emphasis omitted).
The Ninth Circuit affirmed. In re Cement and Concrete Antitrust Litigation, 817 F.2d 1435 (1987). The Court of Appeals identified "three purposes or objectives of federal antitrust law in this context," as defined by Illinois Brick and Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968): avoiding unnecessarily complicated litigation; providing direct purchasers with incentives to bring private antitrust actions; and avoiding multiple liability of defendants. 817 F.2d, at 1445. If state laws permitting indirect purchasers to recover were construed to restrict direct purchasers to suing only for the amount of any overcharge they have absorbed, the Court of Appeals was of the view that state law conflicted directly with federal law as construed in Illinois Brick. Alternatively, if state law permitted indirect purchasers to bring claims for damages in addition to the claims brought by direct purchasers, it would "impermissibly interfere with the three policy goals outlined in Hanover Shoe and Illinois Brick." 817 F.2d, at 1445. The Court of Appeals therefore held that state indirect purchaser claims that did...
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