Published on:

MDL Antitrust Class Action Defense Cases–In re New Motor Vehicles: First Circuit Affirms Dismissal Of Class Action Holding Plaintiffs Lacked Standing To Prosecute Claims In Antitrust Class Action Complaint Because They Are “Indirect Purchasers”

Class Action Plaintiff Lessees of Vehicles were “Indirect Purchasers” – not “Direct Purchasers” – within the Meaning of Illinois Brick and therefore Lacked Standing to Prosecute Antitrust Claims in Class Action Complaint First Circuit Holds

Plaintiffs, lessees of new cars, filed a class action against various automobile manufacturers alleging violations of the Sherman Act and the Clayton Act; the antitrust class action complaints alleged that “defendant manufacturers conspired to restrict the flow of cheaper Canadian cars into the U.S. market…resulting in artificially high rental payments under plaintiffs’ lease agreements in the United States.” In re New Motor Vehicles Canadian Export Antitrust Litig., 533 F.3d 1, 2 (1st Cir. 2008). Defense attorneys moved to dismiss the class action under the Supreme Court’s decision in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) and Kansas v. UtilCorp United, Inc., 497 U.S. 199 (1990); because plaintiffs were “indirect purchasers,” defendants argued that they lacked standing to prosecute the antitrust class action. Id. Previously, the district court had ruled that “a putative MDL plaintiff class containing both purchasers and lessees of new cars could not seek antitrust damages under federal law”; the court suggested that plaintiffs add dealers from whom they purchased or leased vehicles as named defendants. Id. Plaintiffs argued that because their class action complaint was on behalf of lessees only, not purchasers, that Illinois Brick did not apply; the district court rejected this argument, holding that the lessees were “indirect purchasers” and therefore lacked standing to prosecute the class action, id., at 2-3. The First Circuit affirmed.

In Illinois Brick, the Supreme Court established a bright-line rule prohibiting plaintiffs, as well as defendants, from relying on “passing-on” theories in antitrust cases; the rule is designed “to prevent multiple recoveries (by both direct and indirect purchasers) and to avoid the complexity and difficulty of apportioning damages.” In re New Motor Vehicles, at 3 (citation omitted). UtilCorp extended this rule to complaints alleging that “the direct purchaser would pass all of the illegal overcharge on to its consumers,” id. (citation omitted). The issue in this class action, then, is whether plaintiffs were “indirect purchasers,” or whether lessees were “direct purchasers” as held in In re Mercedes-Benz Anti-Trust Litig., 364 F.Supp.2d 468 (D.N.J. 2005). In re New Motor Vehicles, at 4. The First Circuit held that In re Mercedes-Benz was “easily distinguishable,” id.; the Circuit Court’s analysis may be found at pages 4 and 5 of the opinion. The First Circuit also rejected plaintiffs’ efforts to “recast” the allegations in the class action complaint so as to advance a “vertical conspiracy” theory, holding that the arguments were contrary to the pleadings and that it would in any event fail. See id., at 5-6. Because the class action complaints at issue “on their face do not allege a scenario in which plaintiffs could be direct purchasers,” the Circuit Court affirmed the order of dismissal. Id., at 6.

Download PDF file of In re New Motor Vehicles Canadian Export Antitrust Litigation