A War with Rechargeable Batteries: Indirect Buyers v. Direct Buyer in Anti-Trust Litigation

Indirect Purchaser Plaintiffs v. Michael Bednarz (N.D. Cal.); 17-17367 (Ninth Circuit), derives from a multi-district litigation by both direct and indirect purchasers of lithium-ion batteries. The case implicates various manufacturers, including the three companies involved in this appeal: Hitachi Maxell, Ltd., LG Chem, Ltd, and NEC Corporation (the “Companies”). (Dorothy Atkins, Law 360).  The litigation addresses the causes of action indirect purchasers have to redress injuries resulting from companies who manufacture components of their final goods sold. (Eleanor Tyler, Bloomberg Law). If this case goes before the Supreme Court, the Court will address indirect purchasers’ ability to redress their injuries.

Direct purchasers are companies like Apple, who bought lithium ion batteries directly from manufactures, which batteries were then used to create their final good, like a cellphone. While indirect purchasers are consumers who bought the final finished good (the cellphone).

The purchasers alleged from years 2000 through 2011 they paid higher prices on lithium-ion batteries due to an alleged price-fixing scheme by the Companies and other makers of the rechargeable batteries. (Nadia Dreid, Law 360). Allegedly, these Companies engaged in an antitrust conspiracy, which resulted in over $573 million in damages. (Mathew Evola, The National Law Review).

In 2013, several of these antitrust suits were consolidated in a multi-district litigation in the Northern District of California (the “District Court”). (Dorothy Atkins, Law 360). Since the consolidation, there have been many settlements involving both direct purchasers, and indirect purchasers. (Michael Macagnone, Law 360). However, on October 27, 2017, the District Court approved a settlement between both direct purchasers and indirect purchasers for over $45 million, which was met with controversy because it did not follow precedent. (Dorothy Atkins, Law 360). 

Although roughly half of states provide indirect purchasers with a cause of action against manufacturers, federal law provides these indirect purchasers no remedy. (Eleanor Tyler, Bloomberg Law).  However, the District Court certified a settlement class and approved a settlement, which combined both indirect and direct purchasers. As a result, the settlement funds were distributed to several indirect purchasers nationwide, regardless of whether their states’ laws afforded them a remedy. (Hamilton Law Institute). 

Michael Bednar, Appellant, challenged the class certification and settlement on the grounds that indirect purchasers have no cause of action.  He argues allowing indirect purchasers dilutes the $45 million settlement by about $20 million. (Dorothy Atkins, Law 360).  Bednar believes the District Court erred and  argued it should have precluded the indirect purchasers’ recovery under the Supreme Court’s decisions in Illinois Brick v. Illinois and Hanover Shoe Inc. v. United Shoe Machinery Corp., which prohibited an indirect purchaser’s right to sue. Id.  

Others, including the Justice Department’s antitrust chief Makan Delrahim, believe precluding indirect purchasers’ causes of action under federal law is no longer valid and hope the Supreme Court revisits this issue. (Eleanor Tyler, Bloomberg Law).

On August 28, 2019, the Ninth Circuit heard the parties’ arguments regarding the case and the judges of the Court had their doubts about the District Court’s decision. (Perry Cooper, Bloomberg Law). One such judge, Judge Bybee, found it odd that the District Court certified the settlements even though roughly half of the states included in the deal have not appealed the Illinois Brick Rule. He further stated the District Court’s ruling “seems like a plain legal error.” (Dorothy Atkins, Law 360).

The Ninth Circuit must address the narrow issue of the rights of class members who have a viable claim but are precluded from raising the claim in state law. (Eleanor Tyler, Bloomberg Law). However, if this case goes before the Supreme Court, the Court could address the issues regarding the disparity between state consumers. Id.  Currently, there is a disparity between consumers (or indirect purchasers) in different states regarding their ability to seek damages from third party companies and a dispute settlement may be the only way to address this issue. Id.