In re Photochromic Lens Antitrust Litig.

• Decision Date: 03 April 2014
• Docket Number: MDL Docket No. 2173,8:10-cv-01850-T-27EAJ,8:10-cv-02051-T-27EAJ,8:10-cv-02171-T-27EAJ,8:10-cv-02043-T-27EAJ,8:10-cv-00984-T-27EAJ,Case No. 8:10-md-02173-T-27EAJ
• Court: U.S. District Court — Middle District of Florida
• Parties: IN RE: PHOTOCHROMIC LENS ANTITRUST LITIGATION

IN RE: PHOTOCHROMIC LENS ANTITRUST LITIGATION

MDL Docket No. 2173

Case No. 8:10-md-02173-T-27EAJ

8:10-cv-00984-T-27EAJ

8:10-cv-01850-T-27EAJ

8:10-cv-02043-T-27EAJ

8:10-cv-02051-T-27EAJ

8:10-cv-02171-T-27EAJ

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION

DONE: April 3, 2014

ORDER

BEFORE THE COURT is the Report and Recommendation (Dkt. 471) of the Magistrate Judge recommending that Direct Purchaser Plaintiffs' Motion for Class Certification (Dkt. 285) be denied. Direct Purchasers objected to the Report and Recommendation (Dkt. 486),¹ to which Defendants responded (Dkt. 495). Defendants also filed "Conditional Cross-Objections" (Dkt. 488), to which Direct Purchasers responded (Dkt. 494).

The Magistrate Judge found that Direct Purchaser Plaintiffs cannot establish adequacy of representation under Rule 23(a)(4) and predominance under Rule 23(b)(3). Upon consideration, the Report and Recommendation (Dkt. 471) is APPROVED in part for the reasons discussed below. Direct Purchaser Plaintiffs' Motion for Class Certification (Dkt. 285) is DENIED.

I. INTRODUCTION AND SUMMARY OF CLAIMSThe Parties and the Claims

This multi-district litigation involves antitrust claims brought by three distinct groups of Direct Purchaser Plaintiffs based on Defendant Transitions Optical, Inc.'s alleged anticompetitive conduct in the development, manufacture, and sale of photochromic treatments for corrective ophthalmic lenses. Direct Purchaser Plaintiffs contend that Transitions conspired with co-defendants Essilor of America, Inc. ("EOA") and Essilor Laboratories of America, Inc. ("ELOA") to restrain competition and enforce exclusive dealing agreements at all levels of the distribution chain.² Direct Purchasers assert claims for monopolization and conspiracy to monopolize under Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. For purposes of the class certification motion, the parties filed a Joint Statement of Stipulated facts, from which this Court draws (Dkt. 421).

Transitions purchases lens blanks from lens manufacturers ("lens casters"), applies its patented photochromic treatment to the lens blanks, then sells the treated lenses back to the lens casters. The lens casters, including EOA, sell the treated lenses to wholesale labs and optical retailers. The wholesale labs then sell corrective lenses to eye care professionals (ECPs), such asophthalmologists, optometrists, and opticians. The structure of the distribution chain and relevant market is outlined in Figure 1 of the Direct Purchaser Plaintiffs' Consolidated Amended Complaint (Dkt. 127). See also Dkt. 421 ¶ 11.³

The Proposed Class

The named Direct Purchaser Plaintiffs are Nouveau Vision, Inc.,Optical Supply, Inc., Florida Optical Express, Inc., Central Illinois Vision Associates, Ltd., and B&B Eyes, Inc.⁴ They seek certification of a class comprising those entities that purchased photochromic lenses directly from Transitions or its alleged co-conspirators, Essilor of America and ELOA, between March 3, 2006 and the present (the "Class Period"):

All persons or entities that purchased Transitions lenses directly from any Defendant or any Essilor-owned Lab at any time between March 3, 2006 and the present (the "Class Period"). Excluded from the Class are Defendants and their subsidiaries, parents, or affiliates, and government entities. Also excluded from the Class are persons or entities who, during the Class-Period, purchased only Transitions lenses sold by a non-Defendant, and subsequently resold by an Essilor-owned Lab.

(Dkt. 285 at 7).⁵

The proposed class would include three subcategories, or "groups" of direct purchasers: (1)lens casters who purchased lenses directly from Transitions ("Group A"),⁶ (2) laboratories and integrated retailers who purchased directly from EOA ("Group B"),⁷ and (3) eye care practitioners ("ECPs") who purchased Transitions lenses directly from Essilor-owned Labs, who in turn purchased those lenses from EOA ("Group C") (Dkt. 285 at 20-21).

None of the named Direct Purchaser Plaintiffs is a lens caster and none is an integrated retailer. Three are independent wholesale laboratories, and two are ECPs. None of the named Direct Purchaser Plaintiffs purchased lenses directly from Transitions. (Dkt. 421, ¶¶ 16, 18, 20). A diagram identifying the subcategories of direct purchasers is attached as Appendix I to the Report and Recommendation. See also Dkt. 421 ¶ 11.

The manner in which Plaintiffs define their proposed class, and the way in which they propose to establish the requisite impact on class members from Defendants' alleged anticompetitive conduct, illustrate the challenges which confronted the Magistrate Judge in addressing class certification. To illustrate the diverse nature of the proposed class members and put intoperspective the certification issues exhaustively discussed in the parties' briefs, the Court borrows from Defendants' opposition to class certification, none of which can be seriously disputed by Plaintiffs:

Plaintiffs' proposed single class ranges from lens manufacturers to wholesale laboratories to retailers to eye care professionals, each of whom purchases different products, from different sellers, at different prices, and in different markets.

. . .

Transitions sells photochromic lenses to as many as 17 different lens casters, at prices that are individually negotiated with each lens caster. Lens casters may also receive volume discounts or rebates from Transitions, which may vary across lens casters. Transitions also provides other monetary and non-monetary benefits to its customers, some of which are premised in whole or in part on exclusivity from the lens caster, and which also vary among lens casters.

Lens casters in turn sell those lenses (along with non-photochromic lenses, the vast majority of lenses sold) to more than 1500 independent wholesale labs and lens-caster owned wholesale labs. They also sell lenses to major retailers such as Costco and Wal-Mart, who operate their own labs. Wholesale labs may receive rebates or discounts from lens casters related to their purchase of lenses. Retailers negotiate prices independently with lens casters, often through competitive bidding. Wholesale labs and retailers may also receive financial benefits from Transitions.

Wholesale labs in turn resell the lenses to more than 36,000 different eye care professionals ("ECPs") or retailers. . . . ECPs or retailers may also be eligible for rebates and discounts from the labs, as well as cooperative funds or other financial benefits from Transitions for preferring Transitions photochromic lenses over other photochromic lenses or for agreeing to sell Transitions lenses as their exclusive photochromic lens. Some customers purchase through buying groups, which are able to qualify for volume discounts that the customer might not otherwise reach.

Dkt. 452 at 6-9.

The Proposed Class and Class Representatives. Plaintiffs [sic] proposed class includes lens casters, who purchase directly from Transitions (but who do not purchase lenses from defendants Essilor of America ("EOA") or Essilor Labs of America ("ELOA")), wholesale labs and large integrated retailers with labs, who purchase lenses from EOA (but not from Transitions or ELOA), and ECPs, who purchase lenses from ELOA (but not from Transitions or EOA). See Ptfs.' Br. at 1.

None of the five class representatives are lens casters or integrated retailers. NouveauVision, Florida Optical Express ("FOE") and Optical Supply are independent wholesale optical labs, Central Illinois Vision Associates ("CIVA") is an optical retailer and optometric practice, and B&B Eyes currently has no business operations but at one time was an optical retailer and eye-care practitioner. See Direct Purchaser Ptfs' Consol. Amend. Compl. at 4-6.

Dkt. 452 at 5.

Plaintiffs contend that they "are typical of the class in that they all bought TOI lenses directly from Defendants and/or their subsidiaries, and they all paid artificially-inflated prices for those lenses due to Defendants' conduct." (Dkt. 285 at 15). In sharp contrast, Defendants contend, pointing to the varying characteristics of the proposed class members, that Plaintiffs "have no common method of proving impact on a class-wide basis, which is fatal to . . . certification." (Dkt. 452 at 7). Defendants argue that Plaintiffs' "resulting effort to carve the class into separate "groups" underscores their failure to satisfy typicality, adequacy, and numerosity requirements," and "[e]ven accepting their restructuring, Plaintiffs' results demonstrate that not all class members were impacted." (Id. at 8-10).

Notwithstanding that Plaintiffs' expert (Dr. Singer) admits that some of the proposed class members, certain lens casters, actually benefitted from the exclusive agreements they had with Transitions, Plaintiffs contend that the adequacy prong of Rule 23(a)(4) is met, positing "[n]or are there any conflicts between the class representatives and other class members." (Id. at 10). As will be discussed, conflicts do exist among the class members and under controlling precedent, certification of the defined class is unwarranted.

II. STANDARD OF REVIEW

A district court may accept, reject, or modify a magistrate judge's report and recommendation. 28 U.S.C. § 636(b)(1). Those portions of the report and recommendation to whichobjection is made are accorded de novo review. § 636(b)(1)(C); Fed. R. Civ. P. 72(b)(3). Objections must "pinpoint the specific findings that the party disagrees with." United States v. Schultz, 565 F.3d 1353, 1360 (11th Cir. 2009); see Leatherwood v. Anna's Linens Co., 384 Fed. Appx. 853, 857 (11th Cir. 2010). In the absence of specific objections, there is no requirement that findings be reviewed de novo. Garvey v. Vaughn, 993 F.2d 776, 779 n.9 (11th Cir. 1993). Nevertheless, the district court reviews the report and recommendation for "clear error" in the absence of objections. Macort v. Prem, Inc., 208 Fed. Appx. 781, 784 (11th Cir. 2006)....