United States District Court, Southern District of New York
October 17, 1991
STATES OF NEW YORK AND MARYLAND, STATE OF WEST VIRGINIA, STATE OF ALABAMA, STATE OF ALASKA, STATE OF ARIZONA, STATE OF ARKANSAS, STATE OF CALIFORNIA, STATE OF SOUTH CAROLINA, STATE OF COLORADO, STATE OF SOUTH DAKOTA, STATE OF CONNECTICUT, STATE OF DELAWARE, STATE OF TENNESSEE, DISTRICT OF COLUMBIA, STATE OF FLORIDA, STATE OF GEORGIA, STATE OF TEXAS, STATE OF UTAH, STATE OF HAWAII, STATE OF IDAHO, STATE OF ILLINOIS, STATE OF VERMONT, STATE OF VIRGINIA, STATE OF WASHINGTON, STATE OF WISCONSIN, STATE OF WYOMING, STATE OF INDIANA, STATE OF NEVADA, STATE OF NEW HAMPSHIRE, STATE OF NEW JERSEY, STATE OF LOUISIANA, STATE OF NEW MEXICO, STATE OF NORTH CAROLINA, STATE OF IOWA, STATE OF NORTH DAKOTA, STATE OF OHIO, STATE OF OKLAHOMA, STATE OF OREGON, STATE OF PENNSYLVANIA, STATE OF KANSAS, STATE OF RHODE ISLAND, STATE OF MAINE, STATE OF KENTUCKY, STATE OF MASSACHUSETTS, STATE OF MICHIGAN, STATE OF MINNESOTA, STATE OF MISSISSIPPI, STATE OF MISSOURI, STATE OF MONTANA, STATE OF NEBRASKA, PLAINTIFFS,
NINTENDO OF AMERICA, INC., DEFENDANT.
The opinion of the court was delivered by: Sweet, District Judge.
The plaintiffs, the Attorney Generals of the fifty States and
the Corporation Counsel of the District of Columbia ("Attorney
Generals"), and the defendant, Nintendo of America, Inc.
("Nintendo"), have moved for an Order granting final approval
of the settlement agreements between the parties filed with
this Court on or before June 20, 1991 ("Settlement
Agreements"). A number of objections to the settlement and
requests for additional notice have been received.
The requests for additional notice are denied. With respect
to the substantive objections to the settlement, the settlement
is fair, reasonable, and adequate, and the motion to approve
the Settlement Agreements is granted.
The Attorney Generals are plaintiffs parens patriae pursuant
to 15 U.S.C. § 15c.
Susan Robbins, Julie Ellingson, Lane Christensen, Tami Hoshii
and Virginia Nelson are all California residents and plaintiffs
in a class antitrust action in California state court against
Nintendo. Nolan M. Kennedy, Judy Brown, Iris A. Cooke, Julie
Heaton, Dolores Dyer, Kim Kirchick, Helen Rakove, Arthur
Farnsworth, III, Shirley Corbitt, Michael Mattos and Lenore
Sollecito are all California residents and plaintiffs in a
class antitrust action in the United States District Court for
the Northern District of California. They are retail purchasers
of Nintendo products that are the subject of the Settlement.
Collectively, they will be referred to as the "California
Jeff Price, Christie Price and Linda Bentley are all Alabama
residents and plaintiffs in a class antitrust action in Alabama
state court against Nintendo. They are retail purchasers of
Nintendo products that are the subject of the Settlement.
Nintendo is a corporation organized under the laws of the
State of Washington with its principal place of business in
Redmond, Washington. Nintendo, a maker of video games and
equipment, is a wholly-owned subsidiary of Nintendo Co., Ltd.,
a corporation with its principal place of business in Kyoto,
The Attorney Generals of New York and Maryland each filed a
complaint and settlement agreement on April 10, 1991, in the
United States District Court for the Southern District of New
York and for the District of Maryland, respectively. The
Attorney Generals' power to bring these actions and the Court's
jurisdiction are based on 15 U.S.C. § 15c.
On June 11 and 20, 1991, the Attorney Generals of the other
48 states and the Corporation Counsel of the District of
Columbia filed complaints and agreements that are substantially
similar to those in the New York and Maryland actions
("Settlement Agreements"). This court granted preliminary
approval to the Settlement Agreements, including the notice
provisions, on April 12, June 12, and June 20, 1991.
On July 5, 1991, the California plaintiffs filed objections
to the notice and the Settlement Agreements. Oral argument was
heard on July 25, 1991. On July 30, 1991, the court denied the
California Plaintiffs' request to include additional
information in the notice and held that the notice satisfied
due process. The court declined to rule on their substantive
objections at that time.
In accordance with the terms of the settlement, nationwide
publication notice was printed in more than 800 newspapers,
TV Guide, USA Today, and four video game magazines. An eight
page brochure describing in greater detail the rights to be
affected was made available on request. The notice alerted
Nintendo console owners as to the existence of the lawsuit and
that their rights may be affected by it. It summarized the
terms of the settlement and provided the address of the
Nintendo Settlement Trustee for those who wished to
opt out of the settlements. An 800 number and another address
also were provided for receiving inquiries and adding names to
the list of persons eligible for a refund. 48 individual
requests to opt out have been received.
On September 20, 1991, the Attorney Generals and Nintendo
moved for an order to grant final approval to the Settlement
Agreements. A hearing was held on September 26, 1991.
Representatives of the Alabama and California Plaintiffs were
present at the hearing and objected to the notice that was
given and to the Settlement Agreements themselves.
The Settlement Agreements
The Settlement Agreements provide for three types of relief:
(1) damages in the form of $5.00 coupons for injured
purchasers; (2) monetary damages to be used for court-approved
public purposes; and (3) injunctive relief.
The Settlement Agreements require Nintendo to reimburse up to
$25 million to retail dealers for redeeming consumer coupons
from qualified purchasers. Qualified purchasers are those
persons who purchased Nintendo's eight-bit video game console
between June 1, 1988, and December 31, 1990, reside in a
participating state, and submit a valid request for a coupon or
were pre-approved. Approximately 4.8 million purchasers were
pre-approved because they are included in Nintendo's data base
of Nintendo Fun Club members, Nintendo Power Magazine
subscribers, consumer service callers, and warranty card
filers. An additional 232,519 purchasers were approved after
they called an 800 number maintained by Nintendo or wrote to
The coupon will entitle the bearer to an immediate $5.00
reduction in the purchase price of any Nintendo video game
cartridge that can be played on a Nintendo eight-bit video game
console. Nintendo will be enjoined from raising the wholesale
price and the suggested retail price of the games during the
redemption period. If fewer than a million purchasers redeem
the coupons, Nintendo will pay the difference up to $5 million
to the Attorney Generals.
Nintendo will pay $3 million to the Attorney Generals for use
at the States' option for one of the following purposes:
antitrust enforcement, deposit into a state antitrust revolving
fund, defraying the costs of experts used in multistate
antitrust investigations, benefitting those unidentified
consumers for whose benefit the settlement was entered, or
payment into a state's treasury.
Nintendo also has agreed to be subject to an injunction
prohibiting it from engaging in any action to coerce or to
secure the agreement of retailers on actual or advertised
retail prices on any Nintendo products. The injunction will
last for five years. During that time, Nintendo may not
terminate any dealer for reasons related to that dealer's
resale prices. Moreover, Nintendo has agreed to notify all of
its retailers that they may independently determine their
retail prices for all Nintendo products.
Finally, the Settlement Agreements provide that Nintendo will
pay $1.75 million to the States for their administrative costs.
This includes the cost of the notice and attorney fees.
In return for the above, the Attorney Generals agree to
dismiss any and all claims arising under any federal or state
antitrust laws with respect to the maintenance of the resale
prices of all Nintendo products between March 1, 1987, and
December 31, 1990.
A. Objections to the Notice
The California Plaintiffs renew many of their previous
objections to the notice. They now also object to the notice on
grounds that it did not properly convey the scope of the
To the extent that these objections replicate those made
previously, they are governed
by the Court's opinion of July 30, 1991, 1991 WL 148830.
With respect to the new objections, the California Plaintiffs
essentially are asking for a notice that includes information
pertaining to the allegations in their cases. But the notice
only needs to apprise prospective class members of the terms of
this particular settlement fairly. In re Mid-Atlantic Toyota
Antitrust Litig., 585 F. Supp. 1553, 1563 (D.Md. 1984). It need
not fully explore the options available to the prospective
class members. Grunin v. International House of Pancakes,
513 F.2d 114, 122 (8th Cir. 1975).
The notice here fairly summarized the terms of the
settlement, including the ability to opt out. If a consumer
desired more information, the notice provided two addresses and
an 800-number for the consumer to contact. Over 300,000 people
contacted Nintendo in response to the Notice. Brochures
providing more detail were sent to those persons desiring them.
The notice and the brochures both satisfactorily conveyed the
scope of the settlements. The notice stated:
The legal rights of all buyers of Nintendo
products between March 1, 1987 & December 31,
1990; including game consoles, game cartridges,
accessories or related items; will be affected by
The brochures further stated
Additionally, the States have agreed, on their own
behalf and on behalf of the individuals they
represent, not to sue Nintendo dealers as to the
claims alleged in these lawsuits.
Together, the notice and brochures informed all those who were
interested of the full extent of the Settlement Agreements.
The preamble to the revised Final Judgment and Consent
Decree, submitted to the Court on October 9, 1991, states that
it represents a "full and final settlement of the claims set
forth in the Complaint, and any and all claims, actions and
causes of action arising under any federal or state antitrust
laws with respect to resale price maintenance of Nintendo
Products" during the relevant time period. Although this
language is broader than that in the proposed Final Judgment
and Consent Decree submitted to the Court on September 26, it
is consistent with both the notice provisions and the release
covenant attached to the Settlement Agreements. This recital
does not, however, constitute a construction of the scope of
the covenant and preamble.
Nintendo and the Attorney Generals are under no obligation to
advertise the existence of the other actions. Due process only
requires that the terms of the Settlement Agreements be
summarized fairly, which they were. The California Plaintiffs
can point to no authority to the contrary. Their request to
have Nintendo publish and mail additional notice is therefore
B. Objections to the Settlement
A parens patriae action may not be dismissed or settled
without the approval of the Court. 15 U.S.C. § 15c(c). While
the statute does not state the standard to use in approving a
parens patriae settlement, courts have adopted the standard
used in class actions. Under this standard, the Court will
approve the Settlement Agreements if they are "fair, reasonable
and accurate." See, e.g., In re Minolta Camera Prods. Antitrust
Litig., 668 F. Supp. 456, 459 (D.Md. 1987); In re Mid-Atlantic
Toyota, 585 F. Supp. at 1558-59.
1. The Settlement Agreements are Fair
Fairness concerns the nature of the negotiations leading to
the Settlement Agreements. Any settlement should be the result
of good faith, arms-length bargaining between experienced
counsel. See In re Panasonic Consumer Elecs. Prods. Antitrust
Litig., 1989-1 Trade Cas. (CCH) ¶ 68,613, 1989 WL 63240
(S.D.N.Y. 1989); In re Minolta, 668 F. Supp. at 460.
The settlements grew out of investigations conducted by the
Attorney Generals of New York and Maryland in coordination with
the Federal Trade Commission. The Attorney Generals have
extensive experience in complex antitrust cases brought under
their parens patriae powers. Nintendo's counsel, Mudge, Rose,
& Ferdon, is also experienced in antitrust matters. The
proposed Settlement Agreements were reached only after spirited
arms-length negotiations by the parties.
In light of these findings, the Court deems the Settlement
2. The Settlement Agreements are Reasonable and
When determining whether a settlement is reasonable and
adequate, a court should weigh against the compensation
tendered to the plaintiffs the following factors:
(1) the relative strength of the plaintiffs' case
on the merits; (2) the existence of any
difficulties of proof or strong defenses the
plaintiffs are likely to encounter if the case
goes to trial; (3) the anticipated duration and
expense of additional litigation; (4) the solvency
of the defendants and the likelihood of recovery
on a litigated judgment; and (5) the degree of
opposition to the settlement.
In re Montgomery County Real Estate Antitrust Litig., 83 F.R.D.
305, 315-16 (D.Md. 1979). The Court finds that these factors
favor approving the Settlement Agreements.
The merits of the Attorney Generals' case are debatable. They
believe that they would be able to develop a strong factual
showing of an unlawful price maintenance scheme. However, the
Attorney Generals express doubts as to the evidentiary standard
they would have to meet and to their ability to prove damages.
Nintendo, on the other hand, categorically denies any
allegation that it engaged in illegal resale price maintenance
and questions the strength of the Attorney Generals' proof.
The litigation is in its initial stages. The first complaint
was filed on April 10, 1991. If the litigation proceeds to
trial, it no doubt will be complex, protracted, and costly.
Even if the Attorney Generals ultimately prevail, it could be
years before consumers received any meaningful restitution.
There is little opposition to the Settlement Agreements. Only
48 individuals have decided to opt out. More than 300,000
people contacted Nintendo concerning the Settlement after the
notice was published and over 5 million people have qualified
to receive the coupons.*fn2 In addition to the opposition
registered by counsel for the California and Alabama
Plaintiffs, ten letters were received opposing the Settlement
Agreements' terms. Opposition was directed mostly at the five
During the time period in question, the suggested retail
price for a console was $99.99. In the absence of the alleged
wrongdoing, the Attorney Generals estimate that the retail
price of a console would have been no less than $94.95. This
conclusion was confirmed by the Attorney Generals' expert, Dr.
Gary Dorman of the National Economic Research Associates, Inc.
The Attorney Generals and Dr. Dorman believe that $5.00 per
consumer is adequate.
The coupons, while not an ideal form of compensation, are
adequate. Consumers obviously would prefer a check or cash.
However, the Attorney Generals point out that, based on their
past experiences, the cost of a check reimbursement scheme
would approach $5.00 per check. The States would bear this
cost, essentially off-setting the benefits received.
On the other hand, Nintendo has agreed to bear the cost of
the coupon redemption program. Additionally, the Court is
persuaded that sufficient controls will be in place to ensure
that the costs of the cartridges will not go up during the
redemption period and that Nintendo pays the agreed minimum.
Moreover, the coupons will be freely transferable. Dr. Dorman
believes that this further enhances the value of the coupons
and may render them cash equivalents.
Finally, the Nintendo console cannot be operated without game
cartridges. It is
therefore likely that consumers will receive a direct benefit.
Compensation in the form of coupons has been approved by
other courts. See, e.g., Phemister v. Harcourt Brace
Jovanovich, Inc., 1984-2 Trade Cas. (CCH) ¶ 66,234, 1984 WL
21981 (N.D.Ill. 1984); In re Cuisinart Food Processor Antitrust
Litig., 1983-2 Trade Cas. (CCH) ¶ 65,680, 1983 WL 153 (D.Conn.
1983); Ohio Public Interest Campaign v. Fisher Foods,
546 F. Supp. 1 (N.D.Ohio 1982). The Court finds their use here
adequate and reasonable in light of the questionable merits of
the underlying case, the experience of the Attorney Generals in
like matters, the analysis provided by Dr. Dorman, the
relatively small amount of opposition to the Settlement
Agreements, and the speed with which these matters can be put
For the reasons set forth above, the requests for additional
notice are denied. Final approval of the settlement agreements
between the fifty States and the District of Columbia and
Nintendo is hereby granted.
It is so ordered.