B.W.I. Custom Kitchen v. Owens-Illinois, Inc.
B.W.I. Custom Kitchen v. Owens-Illinois, Inc.
Opinion of the Court
Opinion
Plaintiff B.W.I. Custom Kitchen, an indirect purchaser of glass containers, brought a class action against numerous corporate defendants alleging they had engaged in a conspiracy to set noncompetitive prices for glass containers in violation of California’s antitrust statute, the Cartwright Act (Bus. & Prof. Code, § 16700 et seq.) and the unfair competition statutes. (Bus. & Prof. Code, § 17200 et seq.) Plaintiff sought certification of a class comprised of California businesses which purchased glass containers indirectly from defendant manufacturers and paid inflated prices for such containers due to defendants’ alleged price-fixing conspiracy. The trial court refused to certify the class, holding that common questions of law and fact did not predominate over questions affecting only individual class members. We reverse.
Plaintiff B.W.I. Custom Kitchen, a sole proprietorship of Betty W. Imes, is in the business of packaging food products. The named defendants are corporations engaged in manufacturing glass containers. The first amended complaint alleges that defendants “engaged in a continuing conspiracy ... to fix, raise, maintain and stabilize the prices and terms and conditions of sale of glass containers and to allocate among themselves the glass container business in the State of California.” Plaintiff seeks to recover treble damages under the Cartwright Act as well as actual and punitive damages under the unfair competition statutes. Plaintiff also seeks to represent a class composed of all California businesses “who have purchased glass containers indirectly from any defendant in the State of California” during the time frame covered
Most users of glass containers purchase them directly from the manufacturers. Plaintiff, however, and the class she seeks to represent, are “indirect purchasers.” That is, they did not deal directly with any defendant but instead purchased their glass containers from independent distributors who in turn purchased glass containers from defendants as well as other manufacturers.
The California Legislature promptly rejected the reasoning of Illinois Brick, and amended the Cartwright Act to allow anyone injured by an antitrust violation to bring suit, regardless of whether the plaintiff dealt directly or indirectly with the violator.
The main thrust of defendants’ opposition to the class was directed toward the class members status as “indirect purchasers.” Defendants took the posi
I
II
We now resolve the issues of class certification. “[W]hen the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.” (Code Civ. Proc., § 382.) The party seeking certification as a class representative must establish the existence of an ascertainable class and a well-defined community of interest among the class members. (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 704 [63 Cal.Rptr. 724, 433 P.2d 732].) The community of interest requirement embodies three factors: “(1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.” (Richmond v. Dart Industries, Inc. (1981) 29 Cal. 3d 462, 470 [174 Cal.Rptr. 515, 629 P.2d 23].) The California Supreme Court has repeatedly directed that in the absence of controlling state authority, our courts should utilize the procedural guidelines of rule 23 of the Federal Rules of Civil Procedure (28 U.S.C.).
In addition, a class certification order may be conditional and may be altered or amended before a decision on the merits. (Occidental Land, Inc. v. Superior Court (1976) 18 Cal.3d 355, 360 [134 Cal.Rptr. 388, 556 P.2d 750]; Vasquez v. Superior Court, supra, 4 Cal.3d at p. 821; Lazar v. Hertz Corp. (1983) 143 Cal.App.3d 128, 144 [191 Cal.Rptr. 849].)
Plaintiff’s complaint alleges that defendants engaged in a horizontal price-fixing conspiracy to set the prices of glass containers in violation of the Cartwright Act, as well as the unfair competition statutes.
Most courts hold that when a conspiracy to fix prices has been alleged, common questions predominate over any questions affecting only individual class members. (See, e.g., Classen v. Weller, supra, 145 Cal.App.3d at p. 47 [“the existence of the conspiracy is the predominant common issue determi
In the instant case the trial court determined that class certification was improper because individual, as opposed to common, questions would predominate with respect to (1) violation or conspiracy, (2) injury or fact of damage, and (3) amount of damage. The trial court found that proof of the conspiracy could not be accomplished by generalized means. The court focused on the diversity of the bottles manufactured by defendants and surmised that “[e]vidence of a conspiracy to allocate sales of jars to food processors such as plaintiff might have no bearing on whether the defendant conspired to allocate sales of wine bottles to vintners.” This finding presupposes each individual class member will present evidence focusing on defendants’ conspiratorial efforts to fix the prices of the particular type of glass container purchased by that class member. It seems more likely that the evidence proving the existence of a conspiracy will concentrate upon the relationship among the alleged conspirators and the scope of the conspiracy without regard to the business relationship between the conspirators and any individual class member.
The central claim of plaintiff’s complaint, made on behalf of herself and the class she seeks to represent, is that defendants conspired “to fix, raise, maintain and stabilize the prices and terms and conditions of sale of glass containers and to allocate among themselves the glass container business in the State of California.” The proof necessary to demonstrate the existence of this alleged conspiracy will require a “common thread of evidence” which “correspond^] to evidence which otherwise would be introduced by absentee class members. [Citations.]” (In re Sugar Industry Antitrust Litigation, supra, 73 F.R.D. at p. 345.) The same conclusion was reached in State of Illinois v. Harper & Row Publishers, Inc. (N.D.Ill. 1969) 301 F.Supp. 484 [6 A.L.R. Fed. 1]: “The single most important issue is whether the defendants’ conspiratorial agreements actually existed. Offering the same facts, all class members will strive to establish a national conspiracy____” (Id., at p. 488; see also Classen v. Weller, supra, 145 Cal.App.3d at p. 47 [“violation as to each class plaintiff will be proved with facts of the same conspiracy”].) The fact that each or any proposed class member did not purchase all products affected
Ill
The trial court also determined that plaintiff failed to demonstrate that class-wide proof was available to substantiate her allegation that “plaintiff and the other members of the class paid more for glass containers than they would have paid in the absence of the illegal combination and conspiracy____” If plaintiff proves a violation of the antitrust laws, she still must prove that class members suffered the “fact of damage,” “impact” or “injury” as a consequence of that violation.
Courts have shown no hesitancy in ruling that when a conspiracy to fix prices has been proven and plaintiffs have established they purchased the price-fixed goods or services, the jury can infer plaintiffs were damaged. As the court stated min re Sugar Industry Antitrust Litigation, supra, 73 F.R.D.
The result reached by the trial court is inconsistent with the principles outlined above. It appears the trial court dismissed the reasoning in these cases because the proposed class consists of indirect purchasers. Plaintiff and the class can demonstrate they were damaged by the alleged conspiracy only if they can establish that the independent distributors increased prices for glass containers to compensate for defendants’ overcharges. (Union Carbide Corp. v. Superior Court, supra, 36 Cal.3d at p. 23.) In other words, the class must prove on a generalized basis that defendants’ overcharges were “passed-on” to them. (In re Sugar Industry Antitrust Litigation, supra, 73 F.R.D. at p. 346.) Whether the necessity of tracing a price-fixed product through the chain of distribution presents such complex individual issues that injury cannot be proven on a class-wide basis is the issue most vigorously contested herein.
Defendants argue that the considerations which persuaded the court in Hanover Shoe v. United Shoe Mach. (1968) 392 U.S. 481 [20 L.Ed.2d 1231, 88 S.Ct. 2224] to reject a “pass-on defense” should convince this court that
It is important to point out that the facts of Hanover Shoe presented a particularly complicated problem with respect to the pass-on issue. The “product” involved, shoe manufacturing machinery, was not itself resold by plaintiff. In effect, the court was being asked to determine whether plaintiff’s pricing decision for shoes reflected the illegal overcharge for the machinery which was used in their manufacture. Where the product in question is ultimately sold to the consumer, and is largely unchanged in form from the price-fixing manufacturer to the indirect purchaser, assessing whether the manufacturer’s overcharges were passed on is less difficult. Plaintiff and class members herein bought the price-fixed item itself, empty glass containers, from a middleman. The effects of the price-fixing were not obscured by substantially altering or adding to the item received from the manufacturer. Therefore, a class should be able to show on a generalized basis that its members absorbed at least some portion of the alleged overcharges.
As we have seen, courts have assumed consumers were injured when they purchased products in an anticompetitive market, even though the price and terms of sale for the price-fixed product are individually negotiated. (Rosack
It should also be pointed out that both plaintiff and defendants have invoked the pass-on theory in this case. As we have seen, in order to demonstrate that plaintiff and the proposed class were injured by the alleged conspiracy, plaintiff must demonstrate that defendants’ illegal overcharges were passed on to them in the form of higher prices for glass containers. Defendants have also invoked the pass-on theory but have used it defensively instead of offensively. Defendants argue that the indirect purchasers in this case sustained no injury because they passed on any overcharges to their customers further down the chain of distribution. The trial court was apparently of the view that because California has rejected Illinois Brick Co. v. Illinois, supra, 431 U.S. 720, and has allowed indirect purchasers to maintain a cause of action under the Cartwright Act, the defendant should be able to assert this “pass-on defense.” Whether defendants can bar class certification or negate injury by showing plaintiff and the class “passed on” the overcharge is a question that has not been addressed by any California court, and it would be premature to resolve it at this juncture because we do not have an adequate factual record. However, even if a plaintiff has passed on the entire overcharge, he or she is not per se precluded from otherwise proving injury. For example, even though the entire overcharge has been passed on, the plaintiff may have lost a percentage share of the market or otherwise suffered reduced sales. We cannot foresee and develop every possible scenario which will demonstrate injury; this can be determined only by an adequately developed trial record.
Finally, the court found that even if the violation and impact issues presented common questions, they would still be overshadowed by the separate individual damage issues if the plaintiff class prevails on the liability issue. It has been repeatedly held, however, that the presence of individual damage issues cannot bar certification. As the court stated in Samuel v. University of Pittsburgh (3d Cir. 1976) 538 F.2d 991: “In almost every class action, factual determinations [of damages]... to individual class members must be made. [Citations.] Still we know of no case where this has prevented a court from aiding the class to obtain its just restitution. Indeed, to decertify a class on the issue of damages or restitution may well be effectively to sound the death-knell of the class action device.” (Id., at p. 995, fn. omitted; see also Anthony v. General Motors Corp. (1973) 33 Cal.App.3d 699, 703 [109 Cal.Rptr. 254]; Bogosian v. Gulf Oil Corp., supra, 561 F.2d at p. 456; Hedges Enterprises, Inc. v. Continental Group, supra, 81 F.R.D. at pp. 475-476; In re Folding Carton Antitrust Litigation, supra, 75 F.R.D. at pp. 734-735; In re Sugar Industry Antitrust Litigation, supra, 73 F.R.D. at pp. 350-355.)
The problems of ascertaining individual damages in this case should not be overwhelming. The parties to this action are business entities which presumably kept records. The size of the class is manageable—plaintiff estimates there are several thousand class members who purchased glass containers from approximately 10 independent distributors. The court in Classen v. Weller, supra, 145 Cal.App.3d 27, observed: “[I]n most circumstances a court can devise remedial procedures which channel the individual [damage] determinations that need to be made through existing forums.” (Id., at p. 46.) A bifurcated trial, subclasses, and other methods may be employed to simplify the proceedings.
At this stage we are not prepared to state which method would be appropriate to resolve the individual damage questions presented. This question need not be resolved until the class-wide issues have been determined. As the court explained in Rosack v. Volvo of America Corp., supra, 131 Cal.App.3d at pages 762-763: “Speculative problems with regard to computation of damages should not have been fatal to class certification here. Any one of a number of procedures were available which would have allowed this action to proceed and which would have postponed a specific determination at this early stage of the precise formula for calculating individual damages.”
V
In conclusion, the trial court here focused on the individual interests of the various potential class members. These questions naturally involve such
The need for courts to adopt innovative methods for handling class-wide issues is amplified by the growing number of plaintiffs denied access to federal remedies who will sue under the Cartwright Act in our state courts. It can be presumed that a great number of these plaintiffs will be indirect purchasers. There are several reasons why these plaintiffs need access to the class-wide remedy. “A powerful supplier may gouge individual customers of minor amounts which, when totalled, comprise staggering sums. Absent the risk of class proceedings, the potential defendant has little to fear as there is no economically viable remedy for individual plaintiffs. Similarly, a single purchaser may be reluctant to risk the wrath of a dominant supplier. In these instances, class treatment allows buyers to combine their market power to prevent retaliation for enforcing their rights. Denial of class status in such situations may leave plaintiffs without a remedy and defendants with unlawful gains, secure in the knowledge of the low risk of government prosecution.” (Note, Substantive Policies and Procedural Decisions: An Approach to Certifying Rule 23(b)(3) Antitrust Class Actions, supra, 31 Hastings L.J. at pp. 494-495, fns. omitted.) Under these circumstances, courts should avoid interpreting procedural requirements in such a way as “would thwart the legislative intent ... to retain the availability of indirect-purchaser suits as a viable and effective means of enforcing California’s antitrust laws.” (Union Carbide Corp. v. Superior Court, supra, 36 Cal.3d at p. 21.)
The order denying class certification is reversed. The matter is remanded with directions to enter a new order granting class certification.
Low, P. J., and King, J., concurred.
A petition for a rehearing was denied March 30, 1987, and respondents’ petition for review by the Supreme Court was denied July 2, 1987. Lucas, C. J. and Panelli, J., were of the opinion that the petition should be granted.
Nothing in the complaint suggests that the independent distributors conspired with defendants to fix prices. In fact, a parallel federal action is proceeding in which direct purchasers from defendants are seeking relief under federal antitrust laws for the same conduct alleged herein. (Superior Beverage Co. Inc. v. Owens-Illinois, Inc., et al. (N.D. Ill.) Civ. No. 83 512 and related cases.)
In 1978, the California Legislature added the following paragraph to section 16750, subdivision (a) of the Business and Professions Code: “Such action may be brought by any person who is injured in his business or property by reason of anything forbidden or declared unlawful by this chapter, regardless of whether such injured person dealt directly or indirectly with the defendant.” (Italics added.)
See footnote, ante, page 1341.
To meet the requirements for a class under rule 23 of the Federal Rules of Civil Procedure plaintiff must show numerosity of the class, typicality of the named plaintiffs claim, and adequacy of representation. In addition, plaintiff must show that the common questions of law or fact predominate over questions affecting only individual class members and that the class action is the fairest and most efficient means of resolving the dispute.
Violations of the Cartwright Act are also unlawful business practices under the unfair competition statutes. (See People v. National Association of Realtors (1981) 120 Cal.App.3d 459, 473-476 [174 Cal.Rptr. 728, 22 A.L.R.4th 79].)
Courts and commentators have taken great pains to point out that injury or “fact of damage,” which must be proven on a class-wide basis, is separate and distinct from the issue of actual damages. As was pointed out in Zenith Corp. v. Hazeltine (1969) 395 U.S. 100,114, footnote 9 [23 L.Ed.2d 129, 143, 89 S.Ct. 1562], an antitrust plaintiffs “burden of proving the fact of damage ... is satisfied by its proof of some damage flowing from the unlawful conspiracy; inquiry beyond this minimum point goes only to the amount and not the fact of damage.” (See e.g., Rosack v. Volvo of America Corp., supra, 131 Cal.App.3d at p. 757; Hedges Enterprises, Inc. v. Continental Group (E.D.Pa. 1979) 81 F.R.D. 461, 474-475; Note, Substantive Policies and Procedural Decisions: An Approach to Certifyinq Rule 23(b)(3) Antitrust Class Actions (1979) 31 Hastings L.J. 491, 502-503.) “Fact of damage pertains to the existence of injury, as a predicate to liability; actual damages involve the quantum of injury, and relate to the appropriate measure of individual relief.” (Martino v. McDonald’s System, Inc. (N.D.Ill. 1980) 86 F.R.D. 145,147.) However, class treatment of fact of damage presumes the ability to prove the class as a whole was injured without becoming enmeshed in individual questions of actual damage. (Ibid.)
Plaintiff substantiates this proposition by stating that “each distributor whose deposition has been taken testified that price increases by the defendants/manufacturers were completely passed on to plaintiff and the members of the class.”
We note that class actions were frequently allowed prior to the United States Supreme Court’s decision in Illinois Brick Co. v. Illinois, supra, 431 U.S. 720, even though the class members were indirect purchasers and were injured in different amounts. (See, e.g.. In re Antibiotic Antitrust Actions (S.D.N.Y. 1971) 333 F.Supp. 278; In re Sugar Industry Antitrust Litigation, supra, 73 F.R.D. 322; In re Master Key Antitrust Litigation (D.Conn. 1975) 70 F.R.D. 23; In re Ampicillin Antitrust Litigation (D.D.C. 1972) 55 F.R.D. 269; City of Philadelphia v. American Oil Company (D.NJ. 1971) 53 F.R.D. 45; see generally In re Western Liquid Asphalt Cases (9th Cir. 1973) 487 F.2d 191; State of West Virginia v.Chas. Pfizer & Co. (2d Cir. 1971) 440 F.2d 1079; Karseal Corporation v. Richfield Oil Corporation (9th Cir. 1955) 221 F.2d 358.)
Case-law data current through December 31, 2025. Source: CourtListener bulk data.