Abernathy v. Bausch & Lomb Inc.Abernathy v. Bausch & Lomb Inc.
ORDER
This is an action brought under Section 4 of the Clayton Act,
The violations alleged by the plaintiffs chiefly involve a scheme whereby Bausch and Lomb, a major producer of soft contact lenses and accessories, purportedly provided secret rebates on the price of its products to the other defendants, large chains of optical service centers, in order to gain or retain their business. The plaintiffs propose to represent a class consisting of all optome
In order to be certified as a class in an action for damages such as this one, plaintiffs must demonstrate that they satisfy the requirements of Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure. Defendants contend that the plaintiffs cannot satisfy the requirements of Rule 23(b)(3) as a matter of law. For the reasons set forth below, this Court has concluded that it agrees with the defendants, and that their motion to deny class certification should be granted.
I. Plaintiffs’ Allegations
At the outset it is necessary to focus our vision on the factual allegations and legal theories that form the basis of the plaintiffs’ complaint, before the class certification question can be considered. Cf. Alabama v. Blue Bird Body Co., Inc.,
According to the complaint, the plaintiffs are optometrists who have purchased soft contact lenses and accessories from defendant Bausch and Lomb during the four-year period prior to the commencement of their suit. Bausch and Lomb is the dominant producer and distributor of soft contact lenses in the nation. It sells its products to laboratories, individual optometrists and ophthalmologists, and large chain store operations which provide certain optometric services. The other named defendants— G.D. Searle, Pearle Vision, and Cole—come within this latter category.
Plaintiffs contend that Bausch and Lomb achieved its position of market dominance early in the history of the marketing of soft contact lenses. Although viable competitors have since eroded the initial monopoly Bausch and Lomb held, Bausch and Lomb still retains its dominance. Plaintiffs say it is estimated that Bausch and Lomb has a market share of 40-60 percent in the original fitting of soft lenses. Its market share in the replacement market is even greater, and is estimated at 90 percent.
As alleged, Bausch and Lomb developed certain marketing strategies in the mid-1970’s in order to preserve its position in the original fitting and replacement markets. In particular, one strategy allegedly involved dividing accounts into categories according to the size or type or the customer. One such category consisted of chain store and other large quantity purchasers. A special program devised to service this category of accounts included, according to the plaintiffs, giving rebates directly to those accounts where it was necessary to obtain or retain their business.
Plaintiffs allege that Bausch and Lomb, in carrying out this program, quoted the same price per lens to all its customers who did not receive a rebate, and represented to them that Bausch and Lomb had only one price which it charged to all its customers. Nevertheless, Bausch and Lomb allegedly carried out its rebate program in secrecy. Plaintiffs say the payments to the chain store and large quantity customers varied according to the customer with respect to lenses, but amounted to a flat 25 percent rebate for accessories. Allegedly, checks for payment of the rebates or “kickbacks” were mailed directly to account representatives, who in turn delivered them to some representative or agent of the chain store or large quantity customer who controlled that customer’s account.
Finally it is alleged that each plaintiff and each member of the proposed class was and is in competition with one or more of the defendants receiving the secret rebates, and that each was injured at least to the extent of the difference between the price he was required to pay for the lenses and accessories and the price paid by the chain store defendants.
On the basis of these allegations, plaintiffs make certain antitrust claims. First, they claim that Bausch and Lomb has engaged in unlawful price discrimination in the sale of commodities in a manner that could substantially lessen competition, in violation of section 2(a) of the Clayton Act as amended by the Robinson-Patman Act,
Second, they claim that Bausch and Lomb gave secret rebates and kickbacks to the purchasing defendants, either directly to an agent of the purchaser or through some intermediary buyer in the transaction, and that these rebates constituted sham brokerage payments in violation of section 2(c) of the Clayton Act as amended by the Robinson-Patman Act,
II. Rule 23(b)(3) and the Predominance of Common Questions
The issue presently before this Court is whether the plaintiffs’ proposed class, in the context of the particular claims made by plaintiffs, is capable of satisfying the requirements of Rule 23(b)(3).
As a prerequisite to the maintenance of a class action under Rule 23(b)(3), the court must find:
that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.
In order to find that common questions predominate, “the issues in the class action that are subject to generalized proof and thus applicable to the class as a whole must predominate over those issues that are subject only to individualized proof.” Nichols v. Mobile Board of Realtors, Inc.,
Defendants argue that individual questions of law or fact predominate over those common to the class members, and that class status should be denied for that reason; plaintiffs argue the contrary position.
To determine whether common or individual issues predominate, one must first identify the substantive law issues which are raised in the litigation. Blue Bird Body,
In antitrust suits where class certification is sought, it is frequently the case that proof of the antitrust violation or conspiracy can be made in a generalized manner; at the same time, the question of damages is typically a matter for individualized proof. See, e.g., Bogosian v. Gulf Oil Corp.,
Having made these general remarks, this Court will proceed to discuss whether common or individual issues predominate in the present case, first in terms of the section 2(a) claim, and then the section 2(c) claim.
III. The Robinson-Patman Claims
A. The Section 2(a) Claim
Section 2(a) of the Robinson-Patman Act generally makes it unlawful for a seller to discriminate in price between purchasers of goods where the effect of the price differential may be substantially to lessen competition between the favored and disfavored customers. For the plaintiffs to recover under section 4 of the Clayton Act for an alleged antitrust violation such as this, they “must make some showing of actual-— Injury attributable to something_fche__an±i=trust laws were designed to prevent.” J. Truett Payne Co. v. Chrysler Motors Corp.,
Because of this requirement, courts have consistently found section 2(a) claims ill-suited for maintenance as class actions. See, e.g., Mekani v. Miller Brewing Co.,
The reasons why courts have taken this position are manifest. The geographic markets in which the injury to competition allegedly occurred are generally local in nature, multitudinous, and often spread over a large geographic area. The discrimination in price by which favored customers are benefitted may vary from one favored customer to another, and from one location to another. The seller has certain defenses available to it, such as cost justification and meeting competition, and their applicability may vary from one market to another. Next, there may be variance in the extent to which price benefits to favored customers are passed on by them in retail sales. Finally, the extent to which this will affect a particular class member, if at all, will vary according to the degree of competition which exists between the class member and the favored customer.
Each of these considerations which cause a finding of competitive injury in a price discrimination ease to be a highly individualized matter, incapable of simple, formulaic proof, are applicable in the present case. Even if it is assumed that proof of an unlawful price discrimination scheme could be shown on a classwide basis, it still would be no simple matter to determine whether any particular class member has lost business or been otherwise injured in an anti-competitive fashion by the unlawful price discrimination. There are apparently some 52,000 optometrists, ophthalmologists, and dispensing opticians—all potential class members-—all over the country, each in their own local markets. They may or may not be in competition with Searle, Pearle Vision, Cole, or any other unnamed large quantity purchaser from Bausch and Lomb. Since plaintiffs allege that the favored customers did not all receive the same price reduction, or rebate, there will be further variations on the effect on their businesses. And Bausch and Lomb may assert legitimate defenses which may obtain in any of these local markets. Under these circumstances, the kaleidoscopic prospect of tens of thousands of mini-trials on the issues of injury and damages renders this proposed class action an emblem of unmanageability.
B. The Section 2(c) Claim
Plaintiffs appear to recognize the difficulties in maintaining a class action in a section 2(a) claim.
Section 2(c) of the Robinson-Patman Act makes it unlawful for any person engaged in commerce
to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid.
Under the broad language of this section, all payments covered by it are unlawful, regardless of whether or not any adverse competitive effect occurs, so long as the payments are not made to compensate “for services rendered.” L. Sullivan, supra, at 698. In this sense, the section creates a statutory per se rule. Id.
Although section 2(c) may state a per se violation for which no showing of anticompetitive effect is required in a government enforcement action, in a private action brought under section 4 of the Clayton Act the requirement of antitrust injury still obtains. See J. Truett Payne Co. v. Chrysler Motors Corp.,
In J. Truett Payne, the Supreme Court considered the contention of the petitioner that once it has proved a price discrimination in violation of section 2(a) it would be
The same analysis would adhere with respect to a private plaintiff’s allegation of a section 2(c) violation. Thus, the plaintiffs here must show essentially the same actual anticompetitive injury to themselves for their section 2(c) claim as they would for their section 2(a) claim. In referring to anti-competitive injury, this does not mean •that plaintiffs would have to establish an overall reduction in competition in the markets in which they are located. Cf. Klors, Inc. v. Broadway-Hale Stores, Inc.,
Plaintiffs here suggested, however, that to prove injury to themselves they are only required to show that they are in the “target area” at which the alleged anticompetitive acts of the defendants have been aimed. In so arguing, they have confused the issue of standing with that of the requisite proof of injury at trial. The test for standing in an antitrust suit is that the plaintiff must show that he is “within that sector of the economy which is endangered by a breakdown of competitive conditions in a particular industry.” Industrial Inv. Development Corp. v. Mitsui & Co.,
Because of the difficulties described, this Court concludes that plaintiffs’ section 2(c) claim is also ill-suited for class action status.
III. Conclusion
In sum, this Court concludes that, under the circumstances described above, a class action cannot here be maintained for these Robinson-Patman claims. The consistency with which other courts have dealt with this issue in the past, at least in the context of section 2(a) claims, gives this Court assurance of the appropriateness of its having ruled solely on the basis of the pleadings and briefs of counsel. The court emphasizes that no appropriate and manageable manner of providing generalized proof of injury has been suggested by the plaintiffs. In the absence of such manner of proof, this Court cannot envision these claims as other than unwieldy Rule 23(b)(3) class action vehicles.
It is so ORDERED.
Notes
. In addition, plaintiffs assert several claims under the Sherman Act. They charge Bausch and Lomb, by itself and in combination with the other defendants, with monopolizing and attempting to monopolize, in violation of section 2 of the Sherman Act,
In considering the class certification question, this Court has treated plaintiffs’ claims as constituting primarily a Robinson-Patman price discrimination case. This approach is taken not out of myopia, but rather in accordance with the position taken by both plaintiffs and defendants in their arguments on this motion. See Brief of Defendant Bausch and Lomb in Support of Cross-Motion (Sept. 4, 1981) at 3. Plaintiffs and defendants have disputed whether the focus of the complaint is on
. Although a violation of
. Section 4 provides in part that “any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor....”
. Of course, proof of fact of damage and of the amount of damages are often closely related. For instance, in price-fixing cases, where class actions are frequently permitted, proof by a class member that he made a purchase at a supra-competitive price illegally fixed will establish fact of injury, while the amount of damages will be the difference between what the free market price would have been and the higher price paid. South Central States Bakery,
. Contra, Gold Strike Stamp Co. v. Christensen,
the only price discrimination case to our knowledge which has sanctioned the certification of a price discrimination class action. The Court in Gold Strike assumed the existence of competition between the favored and disfavored customers, which we respectfully suggest is improper, especially in view of the recent admonition of the Court of Appeals in Unger v. Dunkin’ Donuts of America, Inc.,
. That is, they recognize that courts have been unreceptive to motions for class certification in such cases. See Plaintiffs’ Response to Cross-Motion of Defendant Bausch and Lomb to Dismiss Class Action Allegations (Oct. 7, 1981) at 9.
. See Plaintiffs’ Response to Defendant’s Reply Brief in Opposition to Class Certification (May 21, 1982) at 2. Again, plaintiffs make passing reference to their Sherman Act claims, id at 1 n. 1, but they offer no discussion of those claims or how the manner of proof for them would vary from the proof of their price discrimination claims.
.
This Court has some doubts as to the prominence of the plaintiffs’