In Re: Vitamins Antitrust Class Actions

• Decision Date: 09 June 2000
• Docket Number: Nos. 99-7256,99-7281,s. 99-7256
• Citation: 215 F.3d 26
• Parties: (D.C. 2000) In Re: Vitamins Antitrust Class Actions, et al.,
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 26

215 F.3d 26 (D.C. 2000)

In Re: Vitamins Antitrust Class Actions, et al.,

Nos. 99-7256, 99-7281

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 3, 2000

Decided June 9, 2000

Appeals from the United States District Court For the District of Columbia(No. 99 MS 00197)

Elaine Metlin argued the cause for appellants Agri Beef Company, et al. With her on the briefs were C. Brooks Wood, Kenneth L. Adams, James van R. Springer, Gerald G. Saltarelli, Mary Martin, James Morsch, Michael C. Manning, Jenny J. Clevenger and John J. Rosenthal. Carmine R. Zarlenga entered an appearance.

C. Brooks Wood argued the cause for appellant NutraBlend, L.L.C.

Stephen Susman argued the cause for appellees. With him on the brief were Michael D. Hausfeld, Ann C. Yahner, David Boies, Robert Silver, Jonathan D. Schiller, William A. Isaacson, Tyrone C. Fahner, Andrew S. Marovitz, D. Stuart Meiklejohn, Lawrence Byrne, Bruce L. Montgomery, Michael L. Denger and John M. Majoras. George T. Manning entered an appearance.

Before: Williams, Sentelle and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Williams.

Williams, Circuit Judge:

Over the 1990s, and even farther back, vitamin manufacturers allegedly fixed prices on bulk vitamin sales in violation of the antitrust laws. By September 1999 a Department of Justice investigation had secured guilty pleas from several major suppliers. Dozens of private antitrust actions followed, and by late November 1999 approximately 49 cases were pending before the district court.

At a status conference for all interested parties on November 3, 1999, counsel for the proposed representatives of a broad class of purchasers revealed that they had reached a tentative settlement that would dispose of the class's claims against seven of the defendants (who together with their affiliates account for more than 90 percent of the bulk vitamins market). The then-draft agreement contained a socalled "most favored nation" ("MFN") clause, requiring defendants to hike their payments to the class in the event that within two years of that date they reached a more favorable settlement with a plaintiff who had opted out of the class.See Settlement Agreement p p 1, 22. Appellants--who were then presumptive members of the class but who have since opted out--moved to intervene under Federal Rule of Civil Procedure 24 for the limited purpose of opposing the MFN clause. They argued--reasonably enough--that the clause would make it harder for them to arrive at an independent settlement, because it would raise the cost to defendants of any more favorable agreement. The district court denied the appellants' motion to intervene but granted them leave to participate as amici curiae. Appellants filed timely notices of appeal from denial of the motion to intervene.

While this appeal was pending, appellants all chose to opt out of the class action. See Tr. of Oral Arg. (Apr. 3, 2000), at 4. The district court held its final hearing regarding class certification and the proposed settlement, and on March 31, 2000 certified the class and approved the settlement. Neither of those decisions is at issue in this appeal.

In rejecting appellants' motion for intervention, the district court reasoned that they lacked standing to challenge the settlement agreement on the grounds asserted. We agree.

* * *

Appellants focus on their claim to intervention as of right.Federal Rule of Civil Procedure 24(a)(2) allows such intervention for anyone who "claims an interest relating to the ... transaction which is the subject of the action and ... is so situated that the disposition of the action may as a practical matter impair or impede [his] ability to protect that interest, unless [his] interest is adequately represented by existing parties." Id. Appellants argue that their interest in being able to opt out of the class and to " 'go it alone' unhampered by any judgment in the class action" qualifies as "an interest relating to the ... transaction which is the subject of the action." Fed. R. Civ. P. 24(a).

But appellants trip immediately over our decision in Mayfield v. Barr, 985 F.2d 1090 (D.C. Cir. 1993). There we held that class members who have opted out of a 23(b)(3) class action have no standing to object to a subsequent class settlement; by opting out they "escape the binding effect of the class settlement." Id. at 1093. We distinguished cases in which plaintiffs lost claims involuntarily, and concluded:

Our decision rests on the principle that those who fully preserve their legal rights cannot challenge an order approving an agreement resolving the legal rights of others .

Id. Compare New Mexico ex rel. Energy & Minerals Dep't v. United States Dep't of the Interior, 820 F.2d 441 (D.C. Cir. 1987), in which we concluded that dismissal of the intervening Navajo Tribe's complaint was proper because the settlement reached by the other parties "d[id] not serve to dispose of the Tribe's claims." Id. at 445.

Appellants point to a number of cases in which we indicated a willingness to construe Rule 24(a)'s "interest" requirement liberally. See Cook v. Boorstin, 763 F.2d 1462, 1466 (D.C. Cir. 1985); Foster v. Gueory, 655 F.2d 1319, 1324-25 (D.C. Cir. 1981); Smuck v. Hobson, 408 F.2d 175, 179 (D.C. Cir. 1969) (plurality opinion); Nuesse v. Camp, 385 F.2d 694, 700 (D.C. Cir. 1967). But of all these, only Nuesse even addressed the issue of standing. Thus, because decisions that depend on a merely assumed jurisdiction have no precedential value on the jurisdictional issue, Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 91 (1998); Lewis v. Casey, 518 U.S. 343, 352 n.2 (1996), only Nuesse could assist appellants. But Nuesse affords them no help, as there the court found on the specific facts a sufficient interest for standing in the stare decisis effect of a judgment, an analysis that has no parallel here.

Standing, of course, is issue-specific. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 571-78 & nn.7-8 (1992). And as we noted in Mova Pharmaceutical Corp. v. Shalala, 140 F.3d 1060 (D.C. Cir. 1998), potential intervenors must demonstrate "prudential" as well as constitutional standing. Id. at 1074-76. In the case of statutory rights, this requires would-be intervenors to show that their interests are "arguably within the zone of interests to be protected or regulated by the statute." Association of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150, 153 (1970). Even if a particular litigant is outside the class for whose benefit the statute was enacted, that litigant retains prudential standing so long as "its interests are sufficiently congruent with those of the intended beneficiaries that the litigants are not more likely to frustrate than to further ... statutory objectives." Mova Pharmaceutical, 140 F.3d at 1075 (internal quotation marks omitted).

But as appellants' counsel admitted at oral argument, their interests are not congruent with the interests of the settling class that were in play at the time of their motion to intervene. See Tr. of Oral Arg. at 13-14. As opt-out plaintiffs they have no interest in the specifics of the settlement except for their desire to be free of a troublesome MFN clause. Id. at 14.

Appellants' MFN objection is, moreover, incongruent with the interests that the rules charge the district court with addressing. When appellants moved to intervene, the court had remaining before it the questions of whether (1) the proposed class satisfied the prerequisites for certification under Rule 23(a) and (b), (2) the form and manner of notice satisfied Rule 23(c), and (3) the proposed settlement satisfied the requirements of Rule 23(e). Appellants' arguments against the MFN clause have no logical relationship to any of these. The first two questions are clearly irrelevant to appellants' claims. Appellants do not seek to argue that the proposed class failed to satisfy the conditions for class certification. See Fed. R. Civ. P. 23(a), (b)(3). And appellants' Rule 23(c) arguments--which are treated more fully below-do not challenge the form and manner of notice at all.

On the subject of class viability an extra word is needed for appellant Nutra-Blend. According to its complaint, some of the settling defendants compete with Nutra-Blend, selling mixed vitamin products at retail prices below their wholesale charges for the raw components and thus subjecting NutraBlend to a "price squeeze." Accordingly it has argued that the class representatives do not adequately represent its interests. This of course sounds like the inquiry under Rule 23(a)(4) as to adequacy of representation. But Nutra-Blend's objections were not made on the premise assumed by Rule 23(a)--namely, that the prospective class member would be bound by the ensuing litigation supposedly conducted on its behalf.¹

Of course, in passing on the proposed settlement agreement, the district court has a duty under Fed. R. Civ. P. 23(e) to ensure that it is fair, adequate, and reasonable and is not the product of collusion between the parties. See Pigford v. Glickman, 206 F.3d 1212, 1215 (D.C. Cir. 2000); Thomas v. Albright, 139 F.2d 227, 231 (D.C. Cir. 1998). Thus Rule 23(e) provides a check against settlement dynamics that may "lead the negotiating parties--even those with the best intentions-to give insufficient weight to the interests of at least some class members." Manual for Complex Litigation (Third) 30.42, at 238-40 (1995); see also Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 621-22 (1997) (noting the dangers that can arise owing to the usually non-adversarial posture of a Rule 23(e) hearing). But the district court's duty is to the class members themselves; it lacks the power to conduct a free-ranging analysis as to the broader implications of the proposed settlement agreement. Compare Agretti v. ANR Freight Sys., 982 F.2d 242, 248 (7th Cir. 1992) ("Nor do we know of any cases...