UNION CARBIDE CORPORATION et al., Petitioners, v. THE SUPERIOR COURT OF THE CITY AND COUNTY OF SAN FRANCISCO, Respondent; VILLMAR DENTAL LABS, INC., et al., Real Parties in Interest.
S.F. No. 24462
Supreme Court of California
Apr. 20, 1984.
36 Cal. 3d 15
Robert D. Raven, Samuel R. Miller, James P. Bennett, Penelope A. Preovolos, Morrison & Foerster, H. Blair White, Nathan P. Eimer, Sidley & Austin, Bruce Whitney, James M. Mabon, Jr., Henry P. Sailer, Covington & Burling, John J. McHugh, Chadwell, Kayser, Ruggles, McGee & Hastings, William G. Schops, Joyce L. Logan, Valentine A. Weber, Reuben & Proctor, Robert A. Lipstein, Miles W. Kirkpatrick, Morgan, Lewis & Bockius, J. A. McManus, John E. Burke, Robert C. Newman, Ross, Hardies, O‘Keefe, Babcock & Parsons, Robert O‘Connell, Bruce J. Phillips, James T. Dougherty, John F. McClure, Frank C. McAleer, Arnstein, Gluck, Weitzenfeld & Minow, Thomas L. Van Kirk and Buchanan, Ingersoll, Rodewald, Kyle & Buerger for Petitioners.
No appearance for Respondent.
Francis O. Scarpulla, Stephen V. Scarpulla, Scarpulla & Scarpulla, Norman H. Stone and Martin H. Eber for Real Parties in Interest.
George Deukmejian, Attorney General, Sanford N. Gruskin, Assistant Attorney General, Michael I. Spiegel, Peter K. Shack, Owen Lee Kwong, Michael R. Granen and Charles M. Kagay, Deputy Attorneys General, as Amici Curiae on behalf of Real Parties in Interest.
REYNOSO, J.---Petitioners are named as defendants in a complaint seeking treble damages under the Cartwright Act (
I
The complaint was filed January 23, 1981. It alleges: The three named plaintiffs are users of industrial gas which they purchased indirectly from petitioners through California distributors. Petitioners and others conspired to fix prices of the gas, causing plaintiffs to pay more for it than they would have paid in the absence of the conspiracy. The action is brought on behalf of a class composed of all California end-users who similarly purchased the gas indirectly from petitioners, and no plaintiff‘s individual damages exceed $10,000. Plaintiffs were unaware of the conspiracy and could not have uncovered it earlier by the exercise of due diligence because it was actively concealed by petitioners.
Petitioners demurred to the complaint, claiming a defect of parties (
The complaint was filed pursuant to
The amendment was enacted in response to the holding in Illinois Brick Co. v. Illinois (1977) 431 U.S. 720 [52 L.Ed.2d 707, 97 S.Ct. 2061], that
II
Petitioners contend that
As to direct purchasers, petitioners call our attention to a class action in the United States District Court for the Northern District of Illinois (In re Industrial Gas Antitrust Litigation, No. 80 C 3479), brought by residents of states other than California, who allege that they purchased industrial gas directly from petitioners and were injured by essentially the same price-fixing activities as those alleged in the complaint now before us. On October 24, 1983, the federal court authorized the suit to proceed as a class action on behalf of essentially all those in the United States who purchased gas (directly) from petitioners between July 1, 1974, and June 30, 1980. Petitioners argue that the federal suit exposes them to a substantial risk of multiple liability, i.e., liability to direct purchasers under the Sherman and Clayton Acts for damages based on the same alleged overcharges for which plaintiffs in the present action seek damages under the Cartwright Act as indirect purchasers and consumers.
As to intermediate purchasers who bought indirectly from petitioners and resold directly or indirectly to plaintiffs, petitioners contend that their ab-
There are reasons to be cautious in requiring joinder, under subdivision (a)(2)(ii) of
Moreover, in the context of an indirect-purchaser suit under the Cartwright Act, we must take care to avoid an application of
The fact that petitioners have raised their objections to nonjoinder of parties by demurrer (
By their demurrer and motion to dismiss, petitioners raise their joinder claim “at the pleading stage,” basing it wholly upon plaintiffs’ complaint, the complaint in the Illinois federal case, and the proceedings in that case regarding certification of the plaintiff class. As we now explain, those papers do not demonstrate a substantial risk of multiple liability sufficient to require that additional parties be joined in the complaint (or named therein with sufficient reasons for nonjoinder) as a prerequisite to petitioners’ being required to answer the complaint in order to avoid default.
We consider first petitioners’ contention that joinder of direct purchasers who were in the chain of distribution to plaintiffs is required by the pendency of the Illinois federal class action, in which recovery is sought for damages based on overcharges paid by those direct purchasers regardless of whether the overcharges were passed on. Petitioners are not entitled to joinder of additional parties on account of a substantial risk of multiple liability (
Petitioners also seek joinder of intermediate purchasers who purchased the gas indirectly from petitioners and sold it directly or indirectly to plaintiffs as end users, or consumers. Petitioners argue (1) that an intermediate purchaser could sue separately under the Cartwright Act for all or part of the overcharges claimed by the present plaintiffs, asserting that those overcharges were absorbed rather than being passed on, and (2) that the separate suit could result in petitioners’ being held liable to both the intermediate purchaser and the plaintiff end users under the same statute for the same overcharges. On the record before us, however, the risk of any such exposure to multiple liability is not “substantial” as required by
In the first place, the complaint does not state that there were in fact any intermediate purchasers in plaintiffs’ chain of distribution; it is neither alleged nor denied that the distributors who bought the gas directly from petitioners sold indirectly, rather than directly, to plaintiffs. The complaint alleges that plaintiffs were “indirect-purchaser, end-user/consumers of substantial amounts of industrial gas manufactured by one or more of the defendants [petitioners]” ([¶] 8), that “[p]urchasers of industrial gas from defendants [petitioners] include independent distributors, who in turn re-sell industrial gas to users” ([¶] 24), and that “defendants [petitioners] sold substantial quantities of industrial gas to distributors in the State of California who then re-sold such industrial gas to end-user/consumers such as the plaintiffs” ([¶] 25). Thus, on the face of the complaint, the only persons in the chain of distribution between plaintiffs and petitioners may have been direct purchasers who are members of the plaintiff class in the Illinois federal action and need not now be joined for the reasons already stated.
Moreover, the fact of purchasers intermediate between plaintiffs and direct purchasers in the chain of distribution, even if assumed, would not
We do not foreclose the possibility that through discovery or other means petitioners may be able later to make a showing of substantial risk of multiple liability that would entitle them to a joinder order. Nor do we have occasion now to consider questions of whether or how potential plaintiffs should be represented if the present suit goes forward as a class action. (See
III
Finally, petitioners contend that the trial court should have granted its motion to strike the following allegations of the complaint for uncertainty: “CONCEALMENT [¶] 22. At all times relevant hereto, plaintiffs and the members of the class had no knowledge of the combination and conspiracy alleged herein, or of any facts which might have led to the discovery thereof. Plaintiffs and the members of the class they represent could not have uncovered the conspiracy at an earlier date by the exercise of due diligence, inasmuch as the unlawful conspiracy was actively concealed by the defendants through the adoption of elaborate schemes, including their resort to secrecy to avoid detection.”
We have concluded that petitioners’ contention should be rejected for the reasons stated in the following portion of the opinion prepared in this case by Justice Barry-Deal for the Court of Appeal:
“Business and Professions Code section 16750.1 provides that any civil action to enforce state antitrust laws ‘shall be commenced within four years after the cause of action accrued.’ In an apparent attempt to recover maximum damages, [plaintiffs] have alleged in their complaint that the offenses began at a ‘date unknown’ and that fraudulent concealment prevented plaintiffs from learning about the unlawful conduct. Petitioners object that the fraudulent concealment allegations quoted earlier in this opinion are not specific and factual.
“Petitioners argue that [plaintiffs] are required to plead: (1) when the facts giving rise to their claims were discovered; (2) what facts were discovered that led to the initiation of the claim and under what circumstances such facts were discovered; (3) that neither plaintiffs nor any of the putative class members had actual or presumptive knowledge of facts sufficient to put them under a duty to inquire; (4) that plaintiffs and putative class members are not at fault for failing to discover the facts underlying their cause of action sooner; and (5) that the failure to discover such facts was attributable to affirmative acts of fraudulent concealment perpetrated by defendants.
“Petitioners cite Kimball v. Pacific Gas & Electric Co. (1934) 220 Cal. 203, 215 [30 P.2d 39], Baker v. Beech Aircraft Corp. (1974) 39 Cal.App.3d 315, 321 [114 Cal.Rptr. 171, 91 A.L.R.3d 981], and other authority for the proposition that when the plaintiff seeks to avoid the statute of limitations by showing fraudulent concealment of the cause of action, the plaintiff must plead with particularity the facts showing fraudulent concealment. Petitioners accurately interpret those authorities. However, we find them distinguishable.
“The principle applied by those authorities is the well-recognized proposition that if on the face of the complaint the action appears barred by the statute of limitations, plaintiff has an obligation to anticipate the defense and plead facts to negative the bar. (3 Witkin, Cal. Procedure (2d ed. 1971) Pleading, §§ 313, 779, pp. 1983, 2395.) Here, however, nothing appearing on the face of the complaint suggests that the action is barred by the statute of limitations. The complaint alleges that the offenses began at a time unknown and continued up to the date of the filing of the complaint. Thus, the filing of the action was not barred by the statute of limitations. At most, plaintiffs will be limited to recovering damages for actions occurring within the four years preceding the complaint.
“Because the complaint does not reveal on its face that it is barred by the statute of limitations, real parties were not required to plead fraudulent concealment as an excuse for late filing. Thus, the fraudulent concealment
The Court of Appeal‘s footnote 6 states:
“Petitioners contend that the requirement of particularized pleading in anticipation of the statute of limitations should be enforced here because otherwise real parties will be permitted to seek discovery concerning injuries ‘stretching back through the endless corridors of time, . . .’ However, it is only through this discovery that [plaintiffs] can uncover the beginning of the alleged conspiracy which they assert has been concealed by petitioners. The situation differs markedly from one in which the complaint alleges an open or public injurious act and that there has been concealment from the plaintiff of the defendant‘s involvement or of the as-yet-unrealized injurious consequences of the act. By its nature, a conspiracy to fix prices in violation of antitrust law is a secret act whose effects are public. Only through discovery or chance disclosure can an antitrust plaintiff learn about the actions leading to the observable effects.”
The petition for a peremptory writ of mandate is denied, and the alternative writ is discharged.
Bird, C. J., Mosk, J., Kaus, J., Broussard, J., and Grodin, J., concurred.
RICHARDSON, J.*-I respectfully dissent, believing that a writ should issue. In my view, several rules enunciated by the United States Supreme Court in Hanover Shoe v. United Shoe Mach. (1968) 392 U.S. 481 [20 L.Ed.2d 1231, 88 S.Ct. 2224] and Illinois Brick Co. v. Illinois (1977) 431 U.S. 720 [52 L.Ed.2d 707, 97 S.Ct. 2061], considered in conjunction with the Legislature‘s 1978 amendment to
In Hanover Shoe the high court interpreted
*Retired Associate Justice of the Supreme Court sitting under assignment by the Chairperson of the Judicial Council.
Subsequently, in Illinois Brick, the Supreme Court examined the application of the “pass on” concept when used as a plaintiff‘s device, rejecting the proposal that indirect purchasers could demonstrate that damages had been “passed on” to them. Referring to the Clayton Act, the high court said: “Permitting the use of pass-on theories under § 4 essentially would transform treble-damages actions into massive efforts to apportion the recovery among all potential plaintiffs that could have absorbed part of the overcharge-from direct purchasers to middlemen to ultimate consumers. However appealing this attempt to allocate the overcharge might seem in theory, it would add whole new dimensions of complexity to treble-damages suits and seriously undermine their effectiveness.” (431 U.S. at p. 737 [52 L.Ed.2d at p. 719].)
In the year after Illinois Brick the Legislature amended the California antitrust law by the addition of a clause in
Nonetheless, as we stressed in Marin County Bd. of Realtors, Inc. v. Palsson (1976) 16 Cal.3d 920, 925 [130 Cal. Rptr. 1, 549 P.2d 833], “A long line of California cases has concluded that the Cartwright Act is patterned after the Sherman Act and both statutes have their roots in the common law. Consequently, federal cases interpreting the Sherman Act are applicable to problems arising under the Cartwright Act. [Citations.]” (See also Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 315 [70 Cal.Rptr. 849, 444 P.2d 481].) The Legislature‘s declaration in section 2 of the amendment demonstrates a general intent to preserve this approach.
There is little applicable precedent governing the interplay of federal and state law on the subject. Several congressional proposals to overrule Illinois Brick have been unsuccessful. Six other states by statute have adopted a rule permitting, as does California, actions by indirect purchasers under state antitrust provisions (Alabama, Ala. Code, § 6-5-60(a) (1975); Hawaii, Hawaii Rev. Stat., § 480-14(c) (amended 1980); Illinois, Ill. Ann. Stat., ch. 38, § 60-7(2) (amended 1979); Mississippi, Miss. Code Ann., § 75-21-9 (1973); New Mexico, N.M. Stat. Ann., § 57-1-3(A) (amended 1979); and Wisconsin, Wis. Stat. Ann., § 133.18(1) (amended 1980)). These have yet to be judicially construed.
A critical factor in resolving the issue before us is the fact that defendants here are also defendants in a United States District Court action presently pending in the Eastern Division of the Northern District of Illinois (In re Industrial Gas Antitrust Litigation, Master File No. 80 C 3479). Based upon plaintiffs’ demonstration in the district court action that a common method of proof of damages could be used for all class members on November 3, 1983, the district judge recertified the class of direct purchasers to include: “All persons, firms, and corporations in the United States that purchased industrial gas from any defendant [including their respective subsidiaries or affiliates] at any time during the period of July 1, 1974, to and including June 30, 1980, but excluding (a) any defendants, or other industrial gas manufacturers and their subsidiaries and excluding (b) all on-site and pipe-line purchasers.” All direct purchasers at the top of the chain of distribution are included in the class and, as such, if they prevail under federal law are entitled to treble damages for any overcharges by defendants.
In my view, in order to afford complete relief the direct and indirect purchasers in the chain of distribution to plaintiff must be joined as parties. Joinder is appropriate if there are persons not parties to the action in whose “absence complete relief cannot be accorded among those already parties,” or who claim an interest in the subject matter of the action and whose absence may impair their ability to protect that interest or subject any of
The first problem is the potential for duplicative damages against defendants. Direct purchasers under Illinois Brick may recover treble damages for overcharges paid by them even though the overcharges were “passed on” to others and regardless of any proven injury. In addition, under the Legislature‘s amendment to
The Illinois Brick court expressly found such risk of duplicative recoveries wholly unacceptable. (431 U.S. at pp. 730-731, and fn. 11 [52 L.Ed.2d at pp. 715-716].) The high court, stating “we are unwilling to ‘open the door to duplicative recoveries’ under § 4” (p. 731 [52 L.Ed.2d at p. 716]), was entirely consistent with its earlier decision in Hawaii v. Standard Oil Co. (1972) 405 U.S. 251 [31 L.Ed.2d 184, 92 S.Ct. 885], in which it held that
The holdings of lower federal and state courts following Illinois Brick have demonstrated the problem. Thus, in Alton Box Bd. Co. v. Esprit de Corp. (9th Cir. 1982) 682 F.2d 1267, the Ninth Circuit sustained the refusal by the district court, on procedural grounds, to enjoin a state court action by indirect purchasers. Finding no independent basis for federal jurisdiction the Alton court held that an injunction would be procedurally inappropriate. (See
In attempting to accommodate the federal rule limiting treble damages to one action, some commentators have argued that the rule is not binding on state legislatures which may adopt a policy of compensation in preference to deterrence. (See Note, State Indirect Purchaser Statutes: The Preemptive Power of Illinois Brick (1982) 62 B.U.L.Rev. 1241, 1266-1268, 1270-1271; Note, Indirect Purchaser Suits Under State Antitrust Laws: A Detour Around the Illinois Brick Wall (1981) 34 Stan. L.Rev. 203, 208-211, 218-220 [recommending a legislative solution to the unacceptable problems of potential duplicative liability].) However, we are not asked, either by pleading or argument, to determine at this time whether the effect of Illinois Brick is to preempt those state laws which may result in duplicative liability. Nonetheless, the Legislature has expressly said that the substantial risk of such multiple liability is a basis for joinder. (
In fact, plaintiffs rather than claiming a right to duplicative recovery, instead attempt to suggest methods by which the problems of such recovery could be ameliorated. Each of the remedies suggested by plaintiffs raises substantial difficulties. It may be difficult for defendants to interplead or otherwise gain access to damages that may be awarded to direct purchasers in the federal action. (
Next, plaintiffs assert that the risk to defendants of multiple liability becomes substantial only after plaintiffs have won. However, joinder is an appropriate protective remedy before any duplicate relief to plaintiff is assured. In the case before us, for example, a parallel federal action is proceeding in which direct purchasers from defendants are an integral part of the plaintiff class at the top of plaintiffs’ distribution chain.
Apart from the danger of improper duplicative awards, another related consideration persuades me that a joinder of plaintiffs is required. If the present federal action involving direct purchasers across the United States results in a jury verdict for defendants it is arguable that such a verdict will have either a res judicata or collateral estoppel effect on the present case. The majority completely ignores this problem, commenting only that questions of pass-on are irrelevant and therefore not subject to an inconsistent result in the federal action. (See ante, p. 23.) Plaintiffs in the case before us can recover only if they can establish an overcharge by defendants to direct purchasers which overcharge has been passed down the distribution chain to them as indirect purchasers. If there is a judgment for defendants in the federal action on the ground that there was no antitrust violation causing an overcharge to direct purchasers, that judgment arguably would
Thus, in my view, joinder is appropriate because of the substantial possibility of multiple recovery. Moreover, even if plaintiffs before us are correct that, upon proof of “pass on,” they are entitled to relief through apportionment of any recovery received by plaintiffs in the federal action, and thus problems of duplicative recovery will not occur, a determination will still have to be made regarding the competing rights of various sets of plaintiffs to any treble damages recovery.
In Bank of California v. Superior Court (1940) 16 Cal.2d 516, 521 [106 P.2d 879], we described situations relating to a “common fund” which require all interested parties to be joined: “There may be some persons whose interests, rights, or duties will inevitably be affected by any decree which can be rendered in the action. Typical are the situations where a number of persons have undetermined interests in the same property, or in a particular trust fund, and one of them seeks, in an action, to recover the whole, to fix his share, or to recover a portion claimed by him. The other persons with similar interests are indispensable parties. The reason is that a judgment in favor of one claimant for part of the property or fund would necessarily determine the amount or extent which remains available to the others.”
Contrary to the majority, but consistent with Illinois Brick, I view the damages flowing from an overcharge antitrust violation, if multiple recoveries are barred, as constituting a common fund. The Supreme Court had this precisely in mind when it observed: “potential plaintiffs at each level in the distribution chain are in a position to assert conflicting claims to a common fund-the amount of the alleged overcharge-by contending that the entire overcharge was absorbed at that particular level in the chain.” (Illinois Brick, 431 U.S. at p. 737 [52 L.Ed.2d at p. 720], fn. omitted; see
I find unpersuasive the majority‘s contention that there is no logical inconsistency in simultaneous federal and state antitrust awards. It is no answer to the problem before us to note that in “common fund” situations the prospective claimants may recover pro rata shares of the fund while here the plaintiffs may be in an adversarial position. Whenever there are competing claims, the competitors with interest in the funds are adversaries. The real problem remains-if indeed the right to recover for an overcharge creates a common fund-what will be the effect on the excluded claimants in a related state action of a federal court decision awarding all interests in the common fund to one of several potential claimants? To me the competing claims here involved make invocation of the joinder statute entirely proper.
In summary, because of the significant unresolved issues affecting the rights of parties to this action as well as persons not parties but with interests affected by this suit, I find compelling the high court‘s assessment of joinder in Illinois Brick: “A treble-damages action brought by one of these potential plaintiffs [persons at each level of the distribution chain] (or one class of potential plaintiffs) to recover the overcharge implicates all three of the interests that have traditionally been thought to support compulsory joinder of absent and potentially adverse claimants: the interest of the defendant in avoiding multiple liability for the fund; the interest of the absent potential plaintiffs in protecting their right to recover for the portion of the fund allocable to them; and the social interest in the efficient administration of justice and the avoidance of multiple litigation. [Citations.]” (431 U.S. at pp. 737-738 [52 L.Ed.2d at p. 720].)
Additional guidance favoring joinder may be found in the Law Revision Commission comment to the 1971 amendment to
A secondary issue, raised by plaintiffs for the first time in their petition for hearing with us, involves the party upon whom falls the burden of naming those to be joined in the litigation. It seems to me that the plaintiffs have more accurate knowledge of, or at least access to, identification of those persons or entities along the chain of distribution. In the federal action the number of direct purchasers from defendants is so numerous that plaintiffs are proceeding as a class action. Defendants would have a difficult task if they were required to trace the sales to plaintiffs here through all their direct purchasers, the majority of whom may well have no relationship to this action.
Furthermore,
Finally, on the burden point, it may be observed that plaintiffs had apparently named as defendants in their action three direct purchasers whom they have subsequently dismissed because of the federal court‘s recertification of the class. It thus appears to me that plaintiffs do indeed have knowledge of the persons through whom they must prove their case and the added obligation to plaintiffs becomes no burden at all. Plaintiffs will be required to discover the persons or entities in the chain of distribution between their purchase and defendants’ initial sale in order to prove that any overcharge was passed on to them. Nor are we here faced with a claim by defendants that plaintiffs must now join any users to whom plaintiffs might have sold their product thus making identification more difficult. As to such an assertion, Illinois Brick suggested that one possible procedural solution in such a situation was appointment of a class representative of such consumers. (431 U.S. at p. 739 [52 L.Ed.2d at p. 720].) Alternatively, another approach is to allow courts to inquire whether users further down the distribution chain are too remote or speculative to permit standing. (See Harris & Sullivan, Passing On The Monopoly Overcharge: A Comprehensive Policy Analysis (1979) 128 U.Pa.L.Rev. 269, 347, and fns. 149, 150.) In any event, plaintiffs, who will be required to identify the others in the line of
From the foregoing, I conclude that joinder is appropriate for purchasers in the distribution chain leading to plaintiffs. I would issue a writ of prohibition directing the superior court to vacate its order denying defendants’ motion to dismiss and ordering it to effect joinder of other purchasers within the line of distribution leading from defendants to plaintiffs. If it appears that any of such parties are not amenable to the court‘s jurisdiction, then the trial court should exercise its balancing function carefully applying those factors described by the Legislature in