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April 23, 2014

Ninth Circuit Rules that Out-of-State Plaintiffs Can Sue under California's Indirect Purchaser Statute

The U.S. Court of Appeals ruled last week that California's Cartwright Act could be applied to claims alleging a global conspiracy to fix prices for liquid crystal display (LCD) panels, even though the plaintiffs had not purchased any of the LCD panels in California. The decision from the Court of Appeals for the Ninth Circuit is significant because the Cartwright Act provides a private cause of action to indirect purchasers of price-fixed goods, but the Sherman Act and the antitrust laws of most other states do not.

The Ninth Circuit's decision was issued in AT&T Mobility LLC, et al. v. AU Optronics Corp., et al., 2013 U.S. App. Lexis 3104 (Feb. 14, 2013). The Ninth Circuit reversed an order from the District Court (Judge Susan Illston) dismissing plaintiffs' California state antitrust law claims. Judge Illston had ruled that the application of the antitrust laws of any state other than the state where plaintiffs purchased the alleged price-fixed goods would violate defendants' rights to due process under the U.S. Constitution.

In Allstate Ins. Co. v. Hague (1981), the Supreme Court had held that the Due Process Clause of the 14th Amendment requires a court to invalidate the application of a state's law only where the state has "no significant contact . . . with the parties and the occurrence or transaction." The Ninth Circuit held that Judge Illston had interpreted the phrase "occurrence or transaction" too narrowly. The court noted that the Cartwright Act proscribed not only the sale of price-fixed goods in California, but also conspiratorial conduct within California leading to an agreement to fix prices, even if the price-fixed goods were sold outside the state. The court held that California's antitrust laws could be applied without violating a defendan's due process rights "when more than a de minimis amount of that defendant's alleged conspiratorial activity leading to the sale of price-fixed goods to plaintiffs took place in California." (Id. at *20.) The court reasoned that "[s]uch a defendant cannot reasonably complain that the application of California law is arbitrary or unfair when its alleged conspiracy took place, at least in part, in California." (Id. at *20-21) Thus, to the extent a defendant's conspiratorial conduct is sufficiently connected to California, and is not "slight and casual," the application of California law to that conduct is "neither arbitrary nor fundamentally unfair," and the application of California law does not violate that defendant's rights under the Due Process Clause

The court concluded that plaintiffs' allegations in their amended complaint – to the effect that defendants had entered into agreements in California to fix prices of LCD panels and implemented their conspiracy through offices they maintained in California – were sufficient to meet Constitutional standards.

© 2014 Schiff Hardin LLP

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