Instead, the releases expressly state that class members may not sue the
settling defendants even if the class members do not share in the
proceeds. The parties all agree that the four settling defendants get the
full benefit of the class releases, regardless of how the settlement
proceeds are allocated.
Further, when class counsel sought approval of the settlements, they
justified the fairness of the settlements by showing that the amounts
were based on approximately 10 percent of each of the settling
defendants' citric acid sales. That is, each settling defendant
contributed money to the settlement fund based on its own market share of
Class counsel contends that it is common practice in class actions to
allow class members who purchased from non-settling defendants to share
in the recovery. Plaintiffs cite In re Cement & Concrete Antitrust
Litigation, for this proposition. See 817 F.2d at 1439. However, Cement
is distinguishable, because there the non-settling defendants remained as
defendants and were alleged to be co-conspirators at the time of the
settlement allocation, and were therefore potentially jointly and
severally liable to all class members. Here, the Ninth Circuit has
conclusively determined that Cargill was not a co-conspirator. Citric
Acid, 191 F.3d at 1106. This determination by the court of appeals is the
law of the case and may not be ignored. Herrington v. County of Sonoma,
12 F.3d 901, 904 (9th Cir. 1993).
While there is no case precisely on point, this court is of the opinion
that class members should not receive settlement proceeds based on their
purchases from a defendant which has been adjudicated to be not liable.
This result is required because the class members have been found not to
have been harmed by any action of Cargill. The anti-trust laws require
that a successful claimant suffer "anti-trust injury." Atlantic Richfield
Co. v. USA Petroleum Co., 495 U.S. 328, 334, 110 S.Ct. 1884, 109 L.Ed.2d
333 (1990). Here the class members have not suffered any antitrust injury
in their purchases from Cargill, because Cargill has been found not to
have violated the anti-trust laws.
Nevertheless, class counsel advances the argument that the conspiracy
indirectly raised the price of citric acid purchased from Cargill,
thereby causing harm to the class as a whole — the "price umbrella"
theory. The Ninth Circuit has ruled against applying that theory to grant
standing to purchasers from a non-conspirator in a multi-level
distribution context. See In re Coordinated Pretrial Proceedings in
Petroleum Products Antitrust Litigation, 691 F.2d 1335, 1340 (9th Cir.
1982). More recently, a district court also rejected the theory in a
single-level distribution scheme like the one alleged here. See Garabet
v. Autonomous Tech. Corp., 116 F. Supp.2d 1159, 1169 (C.D.Ca. 2000).
Based on Petroleum Products and Garabet, the "price umbrella" is not a
legal basis for conferring standing on an antitrust plaintiff. For the
same reasons, it should not be a valid basis for recovering for purchases
from a non-settling, non-liable defendant.
The Ninth Circuit addressed a similar situation in In re Mego Financial
Corp. Securities Litigation, 213 F.3d 454, 461 (9th Cir. 2000), a
securities class action. The district court approved a distribution of
settlement proceeds based on a rescissory measure of damages. Certain
class members objected to the method of distribution, arguing that it
would leave a large portion of the class without recovery from the
defendant. The trial court overruled the objector's arguments and the
Ninth Circuit affirmed. The Ninth Circuit reasoned that a class member
should be legally
harmed in order to recover, a principle in keeping with other courts. See
In re Chicken Antitrust Litigation American Poultry, 669 F.2d 228, 238
(5th Cir. 1982) (finding that it would be improper to allow class members
without valid legal claims to share in settlement funds); Law v. Nat'l
Collegiate Athletic Ass'n, 108 F. Supp.2d 1193, 1200 (D.Kan. 2000)
(same). Here, since Cargill did no legal harm to any class member, the
class shall not recover for their purchases from Cargill.
Class counsel argue that all class members should recover simply
because they were in the class when it settled. However, the Mego and
Cement decisions make clear that there is no right to recovery in a class
action simply because one is a class member. Class counsels' other
arguments, that deference should be afforded to the opinion of class
counsel, and that the class representatives were all Cargill purchasers,
do have some merit. They do not, however, overcome the fundamental point
that it has been judicially determined that Cargill did not legally harm
For the reasons discussed, class counsels' motion for approval of the
proposed plan for distribution of the settlement proceeds is DENIED. Class
counsel is to submit a new distribution plan in which the class members'
purchases of citric acid from Cargill are excluded from the calculations
of the distributions to the class members.
IT IS SO ORDERED.
© 1992-2003 VersusLaw Inc.