Segura v. Abbott Laboratories, Inc.

Decision Date23 March 1994
Docket NumberNo. 3-93-319-CV,3-93-319-CV
Citation873 S.W.2d 399
PartiesCrystal SEGURA, Teri Norton, Sherri Chretien, Janice Kimler, Tessia Innocenti, Angela Christine Maroney, Melissa Whittaker Duran, Tracey Freezia Leudeman, on Behalf of Themselves and All Others Similarly Situated, Appellants v. ABBOTT LABORATORIES, INC. (Ross Laboratories Division), Bristol-Myers Squibb Company, Mead Johnson & Company, and American Home Products Corporation (Wyeth-Ayerst Laboratories Division), Appellees.
CourtTexas Court of Appeals

Philip K. Maxwell, Longley & Maxwell, L.L.P., Austin, for appellant.

Brian S. Greig, Fulbright & Jaworski, L.L.P., Austin, for Abbott Laboratories and Ross Laboratories.

Louis P. Bickel, Akin, Gump, Strauss, Hauer & Feld, L.L.P., Dallas, for American Home Products Corp. and Wyeth-Ayerst Laboratories.

D.L. (Lin) Hughes, McGinnis, Lochridge & Kilgore, Austin, for Bristol-Myers Squibb Co. and Mead Johnson & Co.


JONES, Justice.

Crystal Segura and others, 1 on behalf of themselves and all others similarly situated ("plaintiffs"), appellants, intervened as plaintiffs in an antitrust suit originally brought by the State of Texas against several defendants. Asserting claims of unconscionable conduct under the Texas Deceptive Trade Practices-Consumer Protection Act ("DTPA"), Tex.Bus. & Com.Code Ann. §§ 17.41-.63 (West 1987 & Supp.1994), plaintiffs sought damages from Abbott Laboratories, Inc. (Ross Laboratories Division), Bristol-Myers Squibb Company, Mead Johnson & Company, and American Home Products Corporation (Wyeth-Ayerst Laboratories Division) ("defendants"), appellees. The trial court granted summary judgment for defendants, concluding that plaintiffs did not state a cognizable claim under the DTPA and, alternatively, that plaintiffs lacked standing to bring the suit. On appeal, plaintiffs assert that the trial court erred in both conclusions. We will reverse the trial court's judgment and remand the cause.


In September 1991 the State of Texas brought an antitrust action against defendants Abbott, Bristol-Myers, and Mead Johnson, as well as the American Academy of Pediatrics, alleging a price-fixing conspiracy and monopolization in the sale of infant formula. See Texas Free Enterprise and Antitrust Act of 1983 ("Texas Antitrust Act"), Tex.Bus. & Com.Code Ann. §§ 15.01-.52 (West 1987 & Supp.1994). Among other claims, the State sought, on behalf of Texas consumers, injunctive relief and damages for alleged overcharges for infant formula. See Texas Antitrust Act § 15.21. In February 1992 the trial court dismissed these claims, concluding that when the Texas Antitrust Act was interpreted in harmony with federal antitrust law, the "indirect purchaser" doctrine deprived the State of standing to sue. See Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977).

Three months later, plaintiffs intervened in the action, dropping the American Academy of Pediatrics as a defendant but adding American Home Products. In alleging violations of the DTPA's unconscionability provisions, plaintiffs complained of the same conduct as that on which the State's antitrust Plaintiffs subsequently amended their plea in intervention and petition. Alleging that defendants acted both independently and in conspiracy, plaintiffs summarized their allegations of unconscionable actions as follows:

causes of action were based. See DTPA § 17.50(a)(3). In response to defendants' special exceptions and plea to the jurisdiction, the trial court determined that plaintiffs had not stated a cognizable cause of action under the DTPA and gave plaintiffs thirty days to amend their pleadings.

(A) Creating and maintaining the illusion that their infant formula products are somehow unique and different nutritionally when the infant formula products which they sell are generic formulations which are set and monitored by the U.S. Government;

(B) Creating and maintaining dedicated franchise relationships with physicians and hospitals that endorse the purchasing of a particular brand name product of the Defendants while Texas consumers are kept ignorant of the monies and lavish promotional resources which these physicians and hospitals receive for these endorsements;

(C) Selling their infant formula products at unconscionably high prices to Texas consumers when the costs of such products are very low;

(D) Giving free samples of infant formula products to Texas consumers through their franchise physicians and hospitals during the first months of their newborns' lives thereby creating an endorsement of the products and later grossly overcharging Texas consumers in the retail market for baby formula products;

(E) Using their market dominance to prevent other companies from selling baby formula products to consumers through direct consumer advertising which would inform Texas consumers about the generic nature of these products and permit informed buying decisions based upon price and nutritional information;

(F) Implementing price increases for more than twelve years which were nearly identical and grossly unfair to Texas consumers while giving false and misleading reasons for the price increases;

(G) Taking unfair advantage of Texas consumers to a grossly unfair degree by preventing other sellers of infant formula products from entering the market and introducing competitive, lower prices for these generic foods [sic] products.

Defendants moved for summary judgment on two grounds. First, defendants argued that plaintiffs' claims were not cognizable under the DTPA. Second, defendants argued that plaintiffs lacked standing because: (1) the indirect-purchaser doctrine applies to the Texas Antitrust Act under § 15.04 of that act; (2) the DTPA and the Texas Antitrust Act would be conflicting statutes if one provided a remedy for indirect purchasers while the other did not; and (3) the Texas Antitrust Act should exclusively control, because it is the later-enacted statute, and thus the indirect-purchaser rule deprives plaintiffs of standing to sue under the DTPA.

The trial court granted defendants' motion for summary judgment and dismissed plaintiffs' claims. The court concluded that plaintiffs' claims were not cognizable under the DTPA and, alternatively, that the indirect-purchaser doctrine deprived plaintiffs of standing under the DTPA. Plaintiffs' claims were severed from those remaining in the State's original suit, resulting in the final judgment from which plaintiffs now appeal.

Plaintiffs bring four points of error in this appeal, asserting that the trial court erred in (1) granting defendants' motion for summary judgment, (2) determining that plaintiffs have no standing to pursue their claims, (3) holding that the claims alleged by plaintiffs are not cognizable under the DTPA, and (4) concluding that, to the extent plaintiffs' claims may be cognizable under the DTPA, the DTPA must be harmonized with the direct-purchaser rule applicable to the Texas Antitrust Act, the later-enacted and more specific statute; as indirect purchasers under that statute, plaintiffs lack standing under the DTPA to assert their claims. We will

combine the points of error for purposes of discussion.

A. Indirect Purchaser Standing Under the DTPA

In the present context, a "direct purchaser" is one who purchases goods or services directly from a manufacturer, wholesaler, or other provider who has violated section 4 of the Clayton Act, 15 U.S.C. § 15(a) (1988). An "indirect purchaser" is one who purchases such goods or services from a seller or provider who is down the marketing chain from the antitrust violator. The indirect-purchaser rule of Illinois Brick deprives indirect purchasers of standing to sue manufacturers or wholesalers for antitrust violations. As the United States Supreme Court explained, allowing indirect purchasers to recover against antitrust violators would create difficult issues of how much of the monopoly price was "passed on" to the end consumer by the middleman, usually a retailer. See Illinois Brick, 431 U.S. at 741-47, 97 S.Ct. at 2072-75.

Defendants assert that the indirect-purchaser rule should apply in Texas because the Texas Antitrust Act requires that "[t]he provisions of this Act shall be construed ... in harmony with federal judicial interpretations of comparable federal antitrust statutes to the extent consistent with" the purpose of maintaining and promoting economic competition in trade and commerce. Texas Antitrust Act § 15.04. Accordingly, defendants argue that the indirect-purchaser doctrine established in Illinois Brick deprives plaintiffs of standing to sue under the DTPA. Reaching this conclusion would require accepting the following propositions: (1) that the indirect-purchaser rule applies to the Texas Antitrust Act to deny indirect purchasers standing under that statute; (2) that, since plaintiffs allege some claims cognizable under both the Texas Antitrust Act and the DTPA, the two statutes must conflict; and (3) that this conflict must be resolved by concluding that the later-enacted statute, the Texas Antitrust Act, controls, thus depriving plaintiffs of standing under the DTPA. We decline to accept this reasoning. Assuming arguendo that the indirect-purchaser rule applies to the Texas Antitrust Act, 2 we conclude that there is no conflict between that Act and the DTPA.

When two statutes conflict irreconcilably, the later-enacted statute controls. See Tex.Gov't Code Ann. § 311.025(a) (West 1988). In addition, "where there is a positive and clear repugnance between two statutes, courts are enjoined to harmonize and give effect to both enactments if at all possible by assigning to each a meaning that will permit both to stand in harmony." Commissioners Court of Caldwell County v. Criminal Dist. Attorney, Caldwell County, 690 S.W.2d 932, 936 (Tex.App.--Austin 1985,...

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3 cases
  • Abbott Laboratories, Inc. (Ross Laboratories Div.) v. Segura
    • United States
    • Texas Supreme Court
    • October 27, 1995
    ...price disparity and taking advantage of plaintiffs' lack of capacity, knowledge, and experience to a grossly unfair degree." 873 S.W.2d 399, 408. We hold that indirect purchasers cannot recover under the DTPA upon allegations on which recovery would have been barred if brought under the Tex......
  • Celestino v. Mid-American Indem. Ins. Co.
    • United States
    • Texas Court of Appeals
    • July 29, 1994 state cause for deceptive trade practice under § 17.46(b) immaterial to cause under § 17.50(a)(3)). Compare Segura v. Abbott Lab., Inc., 873 S.W.2d 399, 406-08 (Tex.App.--Austin 1994, n.w.h.) (describing plaintiff's burden under § 17.50(a)(3)) with MacDonald v. Texaco, 713 S.W.2d 203, 20......
  • State v. Melton
    • United States
    • Texas Court of Appeals
    • May 21, 1998
    ...if at all possible, seemingly contradictory provisions, to give effect to all the provisions. See Segura v. Abbott Labs., Inc., 873 S.W.2d 399, 403 (Tex.App.--Austin 1994), rev'd on other grounds, 907 S.W.2d 503 Our review of the code provisions at issue reveals that the legislature, in ame......

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