UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
February 9, 1971
In Re Coordinated Pretrial Proceedings in Antibiotic Antitrust Actions
Lord, D. J.
The opinion of the court was delivered by: LORD
(Government Entity Class Actions)
LORD, D. J.
Alleged antitrust violations by five corporate defendants
in the marketing of broad spectrum antibiotics are the subject of approximately 114 actions filed in this district or transferred here pursuant to 28 U.S.C. § 1407.
All of these actions were originally assigned to the Honorable Inzer B. Wyatt. Settlement has been reached in a number of these actions. Forty-three states, their governmental subdivisions and individual consumers have accepted a settlement offer from the defendants, as have a national class of wholesaler-retailers. State of West Virginia v. Chas. Pfizer & Co., 314 F. Supp. 710 (S.D.N.Y. 1970). In addition a settlement was recently reached by the defendants and a national class of private hospitals and Blue Cross plans. Recognizing the demanding nature of the task before Judge Wyatt in supervising the settlement proceedings, the Judicial Panel on Multidistrict Litigation reassigned the remaining nonsettling cases to this judge for the completion of pretrial proceedings, In re Antibiotic Drugs Litigation, 320 F. Supp. 586 (J.P.M.L. 1970). Among these nonsettling cases
are the seven above-captioned actions brought by the states of California, Hawaii, Kansas, North Carolina, Oregon, Utah and Washington.
These states, like the states which accepted the defendants' settlement offer, make purchases of broad spectrum antibiotics for their own use and similar institutional purchases were made by the counties, cities, public hospitals and other government entities within each state. Each of the states now seeks to represent a class composed of themselves and all other government entities within their jurisdiction similarly situated.
The court is convinced that the proposed government entity classes, led by the states, satisfy the pre-requisties of Rule 23 and the motions for establishment of these classes are granted.
I. Requirements of Rule 23(a)
The proposed classes of government entities within each state are sufficiently numerous that joinder is impracticable, and the claims of each of the states are typical of the class. The states, through their attorneys general, are also the natural representatives of the class and will undoubtedly provide fair and adequate representation to the class. State of Illinois v. Harper & Row Publishers, Inc., 301 F. Supp. 484, 487 (N.D. Ill. 1969); State of Minnesota v. United States Steel Corp., 44 F.R.D. 559, 565-66 (D. Minn. 1968); Philadelphia Elec. Co. v. Anaconda Am. Brass Co., 43 F.R.D. 452, 456 (E.D. Pa. 1968); State of Iowa v. Union Asphalt & Roadoils, Inc., 281 F. Supp. 391, 401-2 (S.D. Iowa 1968). We do not understand defendants to dispute these conclusions.
II. Requirements of Rule 23(b)(3)5
This leaves for discussion the requirements that there be questions of law or fact common to the class which predominate over any individual questions and that the class action be superior to other methods of adjudicating the controversy.
A. Existence and Predominance of Common Questions
The elements which the plaintiffs must prove to recover from the defendants are: (1) that the defendants did violate the antitrust laws by fixing prices at a higher level than would otherwise have occurred, (2) that plaintiffs were injured by the defendants' price fixing and (3) the amount of damage sustained as a result of the defendants' violations. See Philadelphia Elec. Co. v. Anaconda Am. Brass Co., supra 43 F.R.D. at 457.
The defendants admit, as they must, that the questions of their violation of the antitrust laws is common to these actions. As we read their arguments, however, they do contend that the question of the fact of damage to the plaintiffs in a treble damage action, as well as the amount of damages suffered by each plaintiff, is an individual question which cannot be tried on a class-wide basis and that common questions of fact cannot be said to predominate.
The case law contradicts the arguments of the defendants. The cases conclude that all aspects of the liability question, including the fact of damage to the plaintiff class, are common questions appropriate for resolution on a class-wide basis. City of Philadelphia v. Emhart Corp., 50 F.R.D. 232, 235 (E.D. Pa. 1970); State of Illinois v. Harper & Row Publishers, Inc., supra 301 F. Supp. at 488-89; State of Minnesota v. United States Steel Corp., supra 44 F.R.D. at 568-71; State of Iowa v. Union Asphalt & Roadoils, Inc., supra 281 F. Supp. at 401-2; Philadelphia Elec. Co. v. Anaconda Am. Brass Co., supra 43 F.R.D. at 457-58. See Gold Strike Stamp Co. v. Christensen, 436 F.2d 791 (10th Cir. 1970) (denying mandamus to stay a class action order after concluding that the question of the effect of an illegal price discrimination on competition under the Robinson-Patman Act was common to the class and litigable through the representative parties). But cf. Chicken Delight, Inc. v. Harris, 412 F.2d 830 (9th Cir. 1969) (granting a writ of mandamus directing the deletion from a Rule 23(c)(2) notice of reference to a resale price maintenance question as one common to the class.)
These cases also hold that these common liability questions predominate over any remaining individual questions.
B. Superiority of the Class Action
Before allowing a class action to proceed, the court must determine that it is "superior to other available methods for the fair and efficient adjudication of the controversy," taking into consideration four criteria listed in the rule as pertinent to this finding. The individual members of the proposed classes have little interest in pressing their relatively small claims in the absence of a class action and it is unlikely these claims could be vindicated in any other manner. And, as was noted in State of Illinois v. Harper & Row Publications, Inc., supra 301 F. Supp. at 489-90, the class action will further promote the "desirable economies of time, effort and expense" begun by the transfer of these cases here under 28 U.S.C. § 1407. The other advantages of class determination of antitrust price fixing questions to both plaintiffs and defendants have been explored elsewhere and are not questioned by the parties, and need not be restated here. State of Illinois v. Harper & Row Publishers, Inc., supra at 489-92; State of Minnesota v. United States Steel Corp., supra 44 F.R.D. at 572; State of Iowa v. Union Asphalt & Roadoils, Inc., supra 281 F. Supp. at 402-3; see Esplin v. Hirschi, 402 F.2d 94, 101 (10th Cir. 1968); Hohmann v. Packard Instrument Co., 399 F.2d 711, 714-15 (7th Cir. 1968).
Although the administration of these actions on behalf of government entities will not be simple, they certainly cannot be characterized as unmanageable. Whatever difficulties are encountered, and with the aid of counsel those should be few, "to process the pending litigation and most of the remaining active, inactive and the potential litigation by a large number of separate trials would 'raise administrative difficulties far exceeding those present in this class action.'" Technograph Printed Circuits, Ltd. v. Methode Electronics, 285 F. Supp. 714, 724-25 (N.D. Ill. 1968); State of Minnesota v. United States Steel Corp., supra 44 F.R.D. at 572; State of Iowa v. Union Asphalt & Roadoils, Inc., supra 281 F. Supp. at 403.
III. Rule 23(c)(2) Notice
Since these classes are small and the members easily identifiable, it is practicable for the notice requirement by Rule 23(c)(2) to be served by mail on each class member, within each state. The parties are directed to draft such a notice for the court's approval and each of the plaintiff states is directed to secure the names and addresses of the members of the class it represents in preparation for the mailing. Penalty free envelopes may be used by the plaintiffs who will be responsible for all other costs involved in preparing, mailing, receiving and processing these notices.
The parties have apparently agreed that it is necessary for each class member to "make an appearance for the purpose of defining their claims." The court believes that this can be accomplished, at least for the present, by attaching a proof of claim form to the (c)(2) notice which could be detached, completed and returned by each class member. This procedure would provide the court and parties with basic information concerning the claim. Troublesome claims could be isolated on the basis of the information received. At that time it would be appropriate to decide whether a personal appearance by the class member was necessary. The notice form itself should inform the class members that their claims will be barred unless they complete and return the proof of claim form within the prescribed time or unless they "opt-out" of the class.
While not required by Rule 23, and clearly inappropriate where the class is large and the individual claim small, it appears that, in this instance, the proof of claim form is a useful device. This requirement was apparently first imposed in Philadelphia Electric Co. v. Anaconda American Brass Co., 43 F.R.D. 452, 459 (E.D. Pa. 1968), where the court felt the requirement "would reveal the true scope of the litigation, and would either greatly reduce the trouble and expense of any subsequent notices which may be required, or provide a basis for informed reappraisal of the class action question under 23(c)(1)." The same requirement was imposed in several later cases involving similar classes of government entities. State of Minnesota v. United States Steel Corp., 44 F.R.D. 559; State of Iowa v. Union Asphalt Roadoils, Inc., supra 281 F. Supp. at 403-404.
These government entity cases all involved classes with readily identifiable members whose purchases can be ascertained and where claims are sufficiently large to make the expense of this procedure justifiable. Cf. Korn v. Franchard Corp., 50 F.R.D. 57 (S.D.N.Y. 1970).