The courthouse door in North Carolina is now wide open to antitrust plaintiffs making indirect purchaser claims, after the Court of Appeals’ decision this week in Teague v. Bayer. That decision reverses the North Carolina Business Court’s dismissal of the case for lack of standing.
For those whose hearts don’t start beating faster when reading about antitrust cases, an "indirect purchaser" is "one who purchases a product from some intermediary party rather than directly from the manufacturer."
Teague alleges that he purchased garden hoses, roofing materials, and other items which contained ethylene propylene diene monomor alastomers (EPDM) sold by the defendant chemical companies to the manufacturers of those items. Teague, an indirect purchaser of EPDM, claimed that the manufacturers of EPDM had conspired to fix its price.
Indirect purchasers can’t make claims under the federal antitrust laws after the Supreme Court’s seminal decision in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), but these types of claims can be made under state antitrust laws, per Associated General Contractors v. Carpenters, 459 U.S. 519 (1983). North Carolina has allowed such claims since Hyde v. Abbott Laboratories, 123 N.C. App. 572, 473 S.E.2d 680 (1996).
In the lower court ruling, Judge Tennille dismissed the case based on standing grounds, relying on a variation of the factors set out by the Supreme Court in the Associated General Contractors decision for determining standing under the federal antitrust laws. I summarized the Business Court decision in an earlier post, but this was the gist of what the Business Court considered in dismissing the case nearly two years ago:
the relevant market (it determined that plaintiff was a participant in a collateral market, a factor working against standing), the directness of impact (what the court termed a complex issue involving multiple distribution chains, which weighed against standing), that other indirect purchasers were likely to have been more heavily impacted (having absorbed some or all of the price increase without passing it on to plaintiff), and the daunting and complex nature of the calculation of damages (which the Court found even more complex than the calculation considered in its dismissal of an earlier case, Crouch).
The Court of Appeals reversed, holding that the Associated General Contractors factors don’t apply to antitrust claims by consumers. It acknowledged the Business Court’s point on the difficulty that plaintiff would have proving his claims, especially as to causation and damages, but said that these matters would be better addressed at the class certification and summary judgment stages. Here’s the key part of this week’s holding:
Defendants contend that courts would have to isolate the effect of the alleged conspiracy on the price of EPDM and rule out the numerous other factors that could cause a price increase in these products such as inflation, prices of other inputs, transport costs, product demand, and market conditions. Thus, a rigorous economic analysis would be required to determine whether increased prices were the result of the alleged price fixing or the result of some other factor.
The U.S. Court of Appeals for the Ninth Circuit has recognized, "Complex antitrust cases . . . invariably involve complicated questions of causation and damages." Forsyth v. Humana, Inc., 114 F.3d 1467, 1478 (9th Cir. 1997). Even if the present case proves to be no exception, that is not sufficient reason to dismiss for lack of standing. As the trial court found, considering several products containing EPDM adds to the complexity of apportioning damages in this case. The analysis described above would have to be conducted for every product at issue in order to accurately calculate Plaintiff’s damages. Our Court recognized in Hyde that a suit by indirect purchasers under our antitrust laws would be complex. However, "fear of complexity is not a sufficient reason to disallow a suit by an indirect purchaser, given the intent of the General Assembly to ‘establish an effective private cause of action for aggrieved consumers in this State.’" Hyde, 123 N.C. App. at 584, 473 S.E.2d at 687-88 (quoting Marshall, 302 N.C.at 543, 276 S.E.2d at 400). . . . We therefore hold that Plaintiff has standing to bring this antitrust and consumer fraud action.
The Teague decision also calls into question another Business Court decision, Crouch v. Compton Corp., 2004 NCBC 7 (N.C. Super. Ct. Oct. 26, 2004), in which the Court dismissed an indirect purchaser claim on standing grounds.