Free v. Abbott Laboratories, Inc.

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 97-31341

ROBIN FREE AND RENEE FREE,

Plaintiffs-Appellants,

versus

ABBOTT LABORATORIES, BRISTOL-MYERS SQUIBB COMPANY,
AND MEAD JOHNSON & COMPANY,

Defendants-Appellees.

Appeal from the United States District Court
for the Middle District of Louisiana

June 3, 1999

Before REYNALDO G. GARZA, JONES, and DeMOSS, Circuit Judges.

EDITH H. JONES, Circuit Judge:

The appellants, consumers of infant formula, sued the

above-named manufacturers of infant formula under Louisiana’s

antitrust laws alleging a price-fixing conspiracy. Because this

case is before us for a third time, it is unnecessary to

recapitulate the procedural and factual history. See Free v.

Abbott Lab., Inc., 164 F.3d 270 (5th Cir. 1999); Free v. Abbott

Lab., 51 F.3d 524 (5th Cir.), reh’g denied, 65 F.3d 33 (1995).

This panel certified two state law questions to the

Louisiana Supreme Court: 1) whether Louisiana antitrust law grants

standing to indirect purchasers1 of consumer products; and, 2)

1
Indirect purchasers “are not the immediate buyers from the
alleged antitrust violators,” but are those who buy goods through
whether Louisiana antitrust law provides a cause of action for

interstate conspiracies in restraint of trade, or whether such

suits are limited to wholly intrastate conspiracies. See Abbott

Lab., 164 F.3d at 277. The Louisiana Supreme Court denied

certification, leaving us to fathom Louisiana’s unsettled antitrust

law as Louisiana courts would do it. See Federal Deposit Ins.

Corp. v. Abraham, 137 F.3d 264, 268 (5th Cir. 1998). In our best

judgment, the Louisiana courts would follow the federal indirect

purchaser rule and deny standing to the appellants. See Illinois

Brick Co. v. Illinois, 431 U.S. 720, 97 S. Ct. 2061 (1977). In

reaching this conclusion, we assume arguendo that Louisiana

antitrust laws apply to a conspiracy carried on interstate that has

effects within the state. But see HMC Management Corp. v. New

Orleans Basketball Club, 375 So. 2d 700, 706-07 (La. Ct. App.

1979).

DISCUSSION

Louisiana law permits any person “who is injured in his

business or property by any person by reason of any act or thing

forbidden by this Part, [to] sue . . . and . . . recover threefold

the damages sustained by him, the cost of suit, and a reasonable

attorney’s fee.” La. Rev. St. Ann. § 51:137 (West 1987). This

section is virtually identical to the federal antitrust enforcement

an intermediary such as a retailer or wholesaler. Kansas v.
Utilicorp United, Inc., 497 U.S. 199, 207, 110 S. Ct. 2807, 2812
(1990).

2
provision, § 4 of the Clayton Act.2 Although the Clayton Act is

silent with respect to the standing afforded indirect purchasers,

the United States Supreme Court long ago interpreted it to deny

standing to indirect purchasers. See Illinois Brick, 431 U.S. at

745-48, 97 S. Ct. at 2074-75.

No Louisiana case directly addresses the issue of

standing. The Louisiana Supreme Court afforded relevant insight to

interpreting state antitrust statutes that are “virtually

identical” to their federal counterpart when it noted that “the

United States Supreme Court’s interpretation . . . should be a

persuasive influence on the interpretation of our own state

enactment.” Louisiana Power and Light Co. v. United Gas Pipe Line

Co., 493 So. 2d 1149, 1158 (La. 1986). Lower Louisiana courts have

likewise considered federal antitrust standards a starting point

for interpreting counterpart state statutes. See, e.g., Louisiana

ex rel. Ieyoub v. Bordens, Inc., 684 So. 2d 1024, 1027 (La. Ct.

App. 1996), writ denied, 690 So. 2d 42 (La. 1997); Reppond v. City

of Denham Springs, 572 So. 2d 224, 228 (La. Ct. App. 1990). The

courts are not, however, required to abide by the federal standard

2
Section 4 of the Clayton Act, 15 U.S.C. § 15 (1997), states
in part:

[A]ny person who shall be injured in his business or
property by reason of anything forbidden in the antitrust
laws may sue therefor in any district court of the United
States . . . and shall recover threefold the damages by
him sustained, and the cost of suit, including a
reasonable attorney’s fee.

3
if compelling justifications exist for not doing so. See Louisiana

Power, 493 So. 2d at 1158 (cautioning that “federal analysis is not

controlling”); Reppond, 572 So. 2d at 228 n.2 (same).

In Louisiana Power, the Louisiana Supreme Court held that

a parent company and its subsidiary are capable of conspiring in

restraint of trade under the Louisiana antitrust law--contrary to

the United States Supreme Court’s interpretation and in spite of

virtually identical state and federal statutes. See 493 So. 2d at

1158-60; cf. Copperweld Corp. v. Independence Tube Corp., 467 U.S.

752, 104 S. Ct. 2731 (1984). The court articulated a number of

reasons for deviating from the Copperweld decision. First, as a

1931 state court decision had held intraenterprise conspiracies

violative of Louisiana antitrust law, the state’s precedent was

firmly established. Second, before the United States Supreme Court

modified its interpretation of the Sherman Antitrust Act in

Copperweld, it, too, had proscribed intraenterprise conspiracies

under the federal law.3 Moreover, Copperweld does not expressly

exclude federal antitrust liability where the conspirator is

partially-owned, as in Louisiana Power, rather than a wholly-owned

subsidiary. Third, a per se rule exempting parent/subsidiary

conspiracies from Louisiana antitrust law would divest the courts

of authority reposed in them by the legislature--a result

particularly worrisome because intraenterprise activity can have

3
See United States v. Yellow Cab Co., 332 U.S. 218, 67 S. Ct.
1560 (1947).

4
the same adverse economic effects as traditional conspiracies in

restraint of trade. Fourth, the Louisiana antitrust laws aspire to

a political as well as strictly economic purpose: their political

goal is to “provid[e] an environment conducive to the preservation

of our democratic political and social institutions.”4 Fifth, the

Louisiana court was commanded by the “unqualified” statutory

prohibition of “every” contract, combination or conspiracy in

restraint of trade in Louisiana. La. Rev. Stat. Ann. § 51:122;

Louisiana Power, 493 So. 2d at 1160.

A careful comparison demonstrates that Louisiana Power is

distinguishable from this case. Consider first the superficially

formidable issue of the “plain meaning” of the remedy statute.

Although the language of § 137, the statute here at issue, is also

broad, whether it is “unqualified” like § 122 is the issue before

us. No Louisiana court has squarely so held,5 and the Supreme

Court decision in Illinois Brick rested not on the breadth of “any

person,” but on the extent of injury to “business or property”

comprehended by the antitrust laws. See 431 U.S. at 729, 97 S. Ct.

at 2066. Antitrust injury has always been a policy laden-concept

4
Louisiana Power, 493 So. 2d at 1152 (quoting Northern Pac.
Ry. Co. v. United States, 356 U.S. 1, 4, 78 S. Ct. 514, 517
(1958)).
5
In State ex rel. Ieyoub v. Borden, Inc., 1995 WL 59548 (E.D.
La. Feb. 10, 1995), the federal district court noted, while
discussing an issue of diversity jurisdiction, the absence of
Louisiana caselaw interpreting whether § 137 provides a remedy for
indirect purchasers. The decision contains no holding on the issue
before us.

5
designed, inter alia, to distinguish damages caused by

anticompetitive conduct from those not so caused. See, e.g.,

Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458-59, 113 S.

Ct. 884, 891-92 (1993). Louisiana courts have not eschewed the

importance of defining antitrust injury in this manner but, in

fact, have deferred to federal precedent. See, e.g., J.B.N. Morris

v. Rental Tools, Inc., 435 So. 2d 528, 534 n.1 (La. Ct. App. 1983).

The nature of antitrust injury encompassed by § 137 thus best

characterizes the question before us.

Viewed from this perspective, the purposes of § 137 and

§ 122 differ significantly and further distinguish Louisiana Power.

Section 122 was interpreted as “unqualified” in order to proscribe

conduct promoted by one enterprise that may be economically as

harmful as classic conspiratorial conduct between unrelated

entities. Section § 137, however, runs the risk of functional

deconstruction if interpreted to provide an “unqualified” right of

recovery. In addition, the courts’ role in policing conduct

violative of Louisiana antitrust policy would not be diminished by

a rule restricting recovery to direct purchasers; on the contrary,

the remedy would become more effective. The Louisiana Power

decision, on the other hand, concluded that a narrower construction

of § 122 would divest courts of authority under the antitrust laws.

See 493 So. 2d at 1159. Finally, the political goal of the

antitrust laws and the goal of furthering the economically

efficient allocation of resources are both well served by

6
rationalizing the antitrust remedy as the Supreme Court did in

Illinois Brick.

The Illinois Brick rule permitting only direct purchasers

to sue for antitrust injury reduces the “dimensions of complexity”

that would otherwise curtail the effectiveness of antitrust suits,

see 431 U.S. at 737, 97 S. Ct. at 2070, and encourages “vigorous

private enforcement” by enhancing direct purchasers’ incentive to

bring antitrust suits. See id. at 745-46, 97 S. Ct. at 2074-75.

In contrast, the rule advocated by the Frees for antitrust recovery

suits resembles chaos theory (a butterfly flapping its wings in the

Amazon will affect global climate). See James Gleick, Chaos:

Making a New Science (1987). The focus of suits would shift from

the amount of increased prices caused by defendants’

anticompetitive conduct (a relatively straightforward inquiry) to

the allocation of damages among parties in the line of distribution

to ultimate consumers. Litigation would be prolonged, would become

far more complex factually and strategically, and would benefit

lawyers and determined defendants while reducing recoveries for

plaintiffs.6

6
As appellees correctly describe the non-Illinois Brick
position: “To recover damages, every member of the [Frees’]
putative class would have to prove not only the magnitude of the
alleged overcharge in wholesale prices at the time they bought
infant formula, but the retail prices paid and the proportion of
the alleged wholesale overcharge passed on to consumers through
those retail prices.” Appellees’ brief at 32.

7
 The Frees seem to object that adopting the Illinois Brick

rule deprives them of a state law recovery that would supplement,

not conflict with federal law. See California v. ARC America

Corp., 490 U.S. 93, 109 S. Ct. 1661 (1989). But this assertion

misses the mark. Neither the California case nor any cited

Louisiana policy advocates increasing penalties on antitrust

defendants or maximizing Louisiana plaintiffs’ recovery as compared

with federal law remedies. Instead, the question is whether

Louisiana seeks to enforce a coherent state antitrust law that

places the incentive to sue on the party best situated to recover.

Because the Illinois Brick scheme is preferable for this purpose,

we believe Louisiana courts would follow it.

Bolstering this conclusion is the fact that the majority

of state appellate courts faced with this same issue have decided

to follow the Illinois Brick road.7 For these reasons, the

7
See Blewett v. Abbott Lab., Inc., 938 P.2d 842, 845-46 (Wash.
Ct. App. 1997); Mack v. Bristol-Myers Squibb Co., 673 So. 2d 100,
108, (Fla. Dist. Ct. App. 1996); Stifflear v. Bristol-Myers Squibb
Co., 931 P.2d 471, 475-76 (Colo. Ct. App. 1996). But see Hyde v.
Abbott Lab., Inc., 473 S.E.2d 680, 685-86 (N.C. Ct. App. 1996)
Several states have statutorily overruled Illinois Brick’s indirect
purchaser rule, allowing any person to sue for antitrust violations
whether injured “directly or indirectly.” See, e.g., Minn. Stat.
§ 325D.57 (1994) (recognized in Minnesota ex rel. Humphrey v.
Philip Morris, Inc., 551 N.W.2d 490 (Minn. 1996)); Cal. Bus. &
Prof. Code § 16750(a) (West 1997) (recognized in Cellular Plus,
Inc. v. Superior Court, 18 Cal. Rptr. 2d 308 (Cal. Ct. App. 1993)).
Other states have taken the opposite approach and statutorily
denied standing to indirect purchasers. See, e.g., 740 Ill. Comp.
Stat. Ann. 10/7(2) (West 1994) (recognized in Gaebler v. New Mexico
Potash Corp., 676 N.E.2d 228, 230 (Ill. App. Ct. 1997) (permitting
only the state attorney general to bring indirect purchaser
suits)).

8
appellants, as indirect purchasers of infant formula, lack standing

to bring the present state antitrust claim.

Accordingly, we AFFIRM the district court’s dismissal of

appellants’ claims.

AFFIRMED.

9