Vitamin C Plaintiffs Ward Off Challenges To Class Rep Status

Class representatives and their counsel in the Vitamin C Antitrust Litigation have won another initial round in their suit alleging that Chinese vitamin C manufacturers conspired to fix prices and to limit the output of vitamin C exported to the United States.

Federal Judge Brian Cogan of the Eastern District of New York has rejected all but one of defendants’ arguments seeking disqualification of class representatives and class counsel in Animal Science Products, Inc., et al. v. Hebei Welcome Pharmaceutical Co., Ltd. et al., 2012 WL 251909 (E.D.N.Y. 2012).  Judge Cogan had previously denied defendants’ motions to dismiss on foreign sovereign compulsion and related comity grounds.

The four main defendants are Hebei Welcome Pharmaceutical Co. Ltd.; Jiangsu Jiangshan Pharmaceutical Co. Ltd.; Northeast Pharmaceutical Co. Ltd.; and Weisheng Pharmaceutical Co. Ltd.  Plaintiffs The Ranis Company and Magno–Humphries Laboratories, Inc. (“MHL”) moved for class certification on behalf of a group of direct purchasers seeking treble damages against all defendants except Northeast Pharmaceutical Co. Ltd.  Plaintiff Animal Science Products, Inc. moved separately for certification of a class of direct and indirect purchasers seeking injunctive relief against all defendants, including Northeast.

Judge Cogan granted class certification on behalf of a damages class represented by Ranis, but concluded that MHL could not serve as class representative because it is not a member of the class it seeks to represent.  The court also granted certification of an injunction class represented by Animal Science.

In certifying representatives for a damage class under Federal Rule of Civil Procedure 23(b)(3) and an injunctive relief class under Rule 23(b)(2), Judge Cogan made three key rulings:  (1) the “own and control” exemption to the ban on indirect-purchaser damage claims under the rule of Illinois Brick v. Illinois, 431 U.S. 720 (1977), does not permit a plaintiff to sue a defendant based on purchases from a subsidiary; (2) a plaintiff whose claim was assigned and had no actual purchases from a defendant could serve as a class representative; and (3) a wholesale direct purchaser had no conflict of interest in representing a class containing retail direct purchasers, even though a wholesale purchaser might favor higher retail prices.

While Judge Cogan rejected most of defendants’ challenges to the plaintiffs’ representative status, the court did deny class representative status to MHL, a purchaser from a defendant’s subsidiary.  Judge Cogan held that under Illinois Brick, MHL could not represent the direct purchaser class since MHL had only purchased from a subsidiary of a defendant.

Judge Cogan rejected defendants’ argument that plaintiff Ranis could not be a class representative because it only had an assigned claim from a direct purchaser and had not itself purchased any vitamin C from defendants.  Defendants had claimed that there is a “rule” prohibiting assignment of a class membership.  Judge Cogan held that no such rule existed.

Similarly, Judge Cogan rejected defendants’ argument that Ranis, as an assignee of a wholesale purchaser, had a conflict of interest with many class members who were retail purchasers, and thus should be disqualified as a class representative.  The court disagreed that there was any conflict, holding that “Ranis and the rest of the class, including the end-users, have precisely the same goal in this case: to demonstrate that the defendants’ alleged antitrust violations caused each plaintiff to purchase vitamin C at an artificially inflated price.”

Judge Cogan also held that that inclusion of indirect purchasers in the injunctive class did not create a conflict of interest between direct and indirect purchasers.  Moreover, inclusion of indirect purchasers in the Rule 23(b)(2) injunctive class did not demonstrate that class counsel had prejudiced the state law claims of the indirect purchasers – making them inappropriate as counsel to the class – because inclusion of indirect purchasers in a Rule 23(b)(2) settlement should not extinguish their subsequent state-law claims, if any, on res judicata grounds.