well be that multiple recovery is merited because damage impacted more than one party and various parties were damaged in different ways. Nevertheless, the procedures of the Judicial Panel for Multidistrict Litigation and the fact that most antitrust cases involving both direct and indirect purchasers are consolidated for discovery and trial eliminates any realistic danger of multiple recovery. The above discussion would apply if only Ilinois Brick were repealed by Congressional legislation. If the rule in Hanover Shoe were also to be repealed, then defendants would be able to use the "passing on" defense and the danger of multiple recovery or liability would be reduced to nearly zero or virtually eliminated since only the persons who could prove that they suffered actual damage would be able to recover from an antitrust defendant. Question 11. Should indirect purchasers be allowed to sue for consequential damages in addition to passed on overcharge damages? Answer. Yes, they should be. Under current antitrust damages law, such recoveries should be possible. I see no particular need for legislation in this area and in fact would discourage it since developing case law appears to be both favorable and adequate. Question 12. Should the committee clearly address the issue of standing for indirect purchasers of overcharged goods? The Supreme Court declined to rule on this issue in Illinois Brick. Answer. I think that it would be extremely inadvisable for Congress to attempt to get into the complicated areas of standing. This is particularly true because immediate repeal of the basic rule in Illinois Brick is vital. Any attempt to get involved in complicated issues of standing could seriously reduce the possibilities for prompt repeal of Illinois Brick. Moreover, the law of standing as has developed in the courts is generally good and favorable to antitrust plaintiffs. This is particularly true in the Ninth Circuit. Question 13. Should we make it clear who bears the burden of proof concerning pass on damages? Answer. I see virtually no point in getting into this complicated area at this time. As a practical matter, the attorneys general in their treble-damage antitrust suits are able and willing to prove the exact amount of their damages, including the fact and effect of pass on. Thus, attempting to resolve issues in this respect with legislation would unnecessarily complicate the relatively simple solution to the disastrous result of Illinois Brick without providing any substantial bene. fit to offset the problems created. Hon. PETER W. RODINO, Jr., Chairman, Committee on the Judiciary, ATTORNEY GENERAL, Phoenix, Ariz., September 22, 1977. House of Representatives, Washington, D.C. DEAR REPRESENTATIVE RODINO: During my testimony on September 9, 1977, before the Subcommittee on Monopolies and Commercial Law, I was granted leave to supplement my oral remarks in two respects. At one point, a question arose whether the amount of overcharge sustained by an indirect purchaser could, in fact, be proven. I indicated that in the course of In re Cement and Concrete Antitrust Litigation being prosecuted by the Attorney General of Arizona this office obtained copies of documents which demonstrated that the increase in the price of raw materials (in this case cement) could readily be proven. I was granted leave to supplement my oral remarks by providing a copy of that document. Enclosed is a paper entitled "Cement Prices and the Cost of Construction" prepared by the Portland Cement Association and dated September 15, 1972. At another point, a question arose regarding the constitutionality of making H.R. 8359 applicable to cases pending on or after June 9, 1977. I was granted leave to supplement my oral remarks with a brief memorandum on the constitutionality of such a provision. That memorandum is being forwarded under separate cover. I trust that these materials can be included in the written record at the appropriate places. Respectfully yours, KENNETH R. REED, Assistant Attorney General. Enclosure. Hon. PETER W. RODINO, Jr., U.S. Senate, Washington, D.C. [Mailgram] GRAND UNION CO., Elmwood Park, N.J., September 23, 1977. I am writing to express Grand Union's opposition to H.R. 8315 (S. 1874), which seeks to overrule the recent Supreme Court decision of Illinois v. Illinois Brick Co. As you know, in Illinois Brick the court refused to permit indirect purchasers to press claims for alleged illegal overcharges allegedly passed on to them through the chain of distribution. Supporters of the proposed legislation claim that Illinois Brick is anticonsumer. I would like to point out that neither the Illinois Brick decision nor the proposed legislation will affect the consumer's right to bring an antitrust action against supermarkets. Illinois Brick did not change existing law which gives a consumer that right. Grand Union, and all supermarkets, deal directly with consumers. Thousands of consumers pass daily through our approximately 500 retail outlets. We are proud to be on the "front line", and proud of our continuing effort to serve and satisfy our customers. As you may know, like many other companies in today's complex society, Grand Union is a defendant, along with approximately 30 other supermarket chains, in a series of antitrust lawsuits brought by companies with whom Grand Union has no business dealings whatsoever. Those companies sell cattle to packers who in turn sell to us. (These cases have been consolidated in the United States District Court for the Northern District of Texas under the caption in re Beef Industry Antitrust Litigation MDL Docket No. 248.) Because none of these cattle producers conducts any business with Grand Union, the Supreme Court's decision may result in a dismissal of these claims. We believe that dismissal based on Illinois Brick is the proper result for these cases and is consistent with sound antitrust enforcement policy. Grand Union's experience in the beef industry litigation convinces us that the proposed legislation to overrule Illinois Brick is unwise, and overlooks important policy considerations embodied in the Supreme Court's decision. First, these cattlemen plaintiffs have no business dealings with Grand Union and it is doubtfull that any has ever heard of Grand Union. To them, the name Grand Union, if it means anything, is simply a name supplied by an attorney who consulted a "Fortune 500" list or similar corporate directory for the purpose of preparing a roster of "deep pocket" defendants. Second, in order to press any claim for damages against Grand Union, these cattlemen, under the proposed legislation, would be required to prove that alleged damages were "passed-on" through a long and complicated chain of independent businesses and industries. Plaintiffs who are feedlot operators sell live cattle to packers, whereas Grand Union purchases dressed beef from packers or wholesalers. Cattle sold by more remotely located cattlemen pass through as many as four or five vertical tiers, and must be fattened, slaughtered, cut up into boxed cuts (usually these steps are all done by different business firms). The ultimate product may not reach supermarkets or other retail outlets in the form of dressed beef for perhaps 10 months to a year. The Supreme Court in Illinois Brick recognized that the remoteness of claims such as these coupled with the complex nature of antitrust proof and the adequacy of other remedies warranted the dismissal of this case and similar cases. Leading legal authorities believe that Illinois Brick recognizes that a requirement limiting antitrust claims to persons in direct contact with the alleged violators will not eliminate legitimate legal claims, but will help to curb abuse of the antitrust laws through the filing of doubtful or frivolous claims. Grand Union purchases beef from most of the major packing houses in the United States. Packing and slaughtering is a major American industry. The leading packing firms are corporate giants or are subsidiaries of large corporate conglomerates. They are well financed, powerful companies, represented by able legal counsel. There is simply no basis for believing that they have been or could be intimidated or coerced into foregoing legitimate legal rights. Businessmen who deal with each other do press legitimate legal claims, they do not lightly file frivolous claims. Allowing antitrust plaintiffs, such as cattlemen plaintiffs in the beef cases, who are far removed from the defendants' marketplace to file such lawsuits in the hope that the terrible defense costs will result in large settle ments makes a mockery or effective antitrust enforcement and harms the consuming public. We believe that plaintiffs' claims in the beef cases are completely devoid of merit. Nevertheless, whether or not plaintiffs will ever produce one shred of evidence of price-fixing against Grand Union or any other supermarket, defendants have been and will be forced to expend literally millions of dollars defending these lawsuits. As frivolous as plaintiffs' claims may be, they cannot be ignored. Based on their damage claims, we estimate that plaintiffs are claiming damages, presumably recoverable from Grand Union individually, in excess of $150 billion after trebling, or approximately 100 times Grand Union's net worth as reported in its most recent annual report. Court procedures impose tremendous burdens and costs in pretrial discovery. Under the current antitrust laws, the costs to Grand Union of defending against these extortionate claims cannot be recovered from the plaintiffs or their attorneys, but must be absorbed as another escalating cost of doing business. In conclusion, I am concerned that supporters of the proposed legislation to overrule Illinois Brick may assume that all antitrust defendants, especially corporate defendants, are guilty, and evaluate the proposed legislation from that narrow and ill-conceived perspective. I urge you to approach this proposed legislation and the Illinois Brick case with the realization that antitrust allegations are easy to make, hard to prove, extremely costly to defend, and impose great burdens on the judicial system. Very truly yours, ERNEST H. BERTHOLD, Senior Vice President-Operations. Hon. PETER W. RODINO, Jr., PILLSBURY, MADISON & SUTRO, San Francisco, Calif., October 6, 1977. Chairman, Committee on the Judiciary, House of Representatives, DEAR MR. RODINO: My partner Richard J. MacLaury was to have testified before your committee today with respect to H.R. 8359. Because of his illness, however, he was unable to attend, and Mr. David Foster, a co-member with Mr. MacLaury of the Committee on Civil Practice and Procedure of the Antitrust Section of the American Bar Association was good enough to appear in his stead. Mr. MacLaury, like Mr. Foster, intended to express the view that the legislation is undesirable. However, in line with his discussions with Mr. Thomas Runge, counsel for your committee, Mr. MacLaury prepared proposed amendments to the parens patriae provisions of the Antitrust Improvements Act of 1976. He also prepared a number of amendments to H.R. 8359 which he suggests should be adopted if legislation is enacted. Pursuant to Mr. Runge's suggestion to Mr. MacLaury I enclose copies of both sets of proposed amendments. I call your particular attention to two amendments suggested by Mr. MacLaury which, I am told, were not covered in Mr. Foster's presentation. These are in paragraphs 2 and 4 of Mr. MacLaury's proposed amendments to H.R. 8359. Paragraph 2 would provide that pass-on should not be recognized beyond a point in the level of distribution where the price-fixed article is fabricated into a different form. For example, as long as steel is sold as steel the overcharge could be followed, but as soon as the steel is fabricated into other forms or into a machine, the purchasers of these fabricated articles would not have a cause of action. This seems to be in line with accepted concepts of causation and would avoid carrying the pass-on principle into an area where proof of injury would be unrealistic if not impossible. Paragraph 4 would limit the amount of recovery against any defendant to the total amount of the overcharge upon sales made by that defendant. The principal vice of consumer class actions is the aggregating of millions of small claims into an amount of possible recovery so staggering that small companies, regardless of how meritorious their defense may be, are forced into in terrorem settlements. Under present law a co-conspirator is jointly and severally liable for the total amount of damage resulting from the acts of all conspirators. As a result, settlements can readily be forced upon small companies if a conspiracy suit is brought naming all the companies in an industry. The total possible liability of the small company in such cases can be hundreds of times its total assets. It would seem, if a remedy is to be extended through class actions to innumerable persons at numerous levels of distribution, that every objective of the legislation would be assured-and at the same time fairness to the defendant be achieved-if a company were to be held liable only for its own overcharge. Mr. MacLaury expects to be back in the office before long and I know he would be pleased to discuss these proposed amendments with Mr. Runge, or with any other member of the staff, if this is desired. Yours sincerely, FRANCIS R. KIRKHAM. PROPOSED SUPPLEMENT TO TITLE III OF THE ANTITRUST IMPROVEMENT ACT OF 1976 (MacLaury Draft) Sections 41, 4J, 4K(a), (b), (c), and 4L are supplemental sections to Section 4C of the Clayton Act (15 U.S.C. § 15c). 41 In any action brought under § 4C of the Clayton Act (15 U.S.C. § 15c), the Attorney General of a state may sue to recover an overcharge, paid by natural persons residing in such state, which was directly or indirectly caused by reason of a violation of the Sherman Act. 4J The court shall exclude from amount of monetary relief awarded on an action brought pursuant to §§ 41 and 4C (15 U.S.C. § 15c, i) any amount of relief awarded by judgment of settlement agreement approved by a court o persons injured by a direct purchase of the product claimed by the Attorney General of a state to have been subject to an unlawful overcharge. 4K (a) In any action brought to recover an overcharge, pursuant to § 41 of the Clayton Act (15 U.S.C. § 15i), the State Attorney General shall, at such times, in such manner, and with such content as the court may direct, cause notice thereof to be given to all intermediaries between defendant and the natural persons on whose behalf the state sues. (b) Any person receiving notice pursuant to subsection (a) of this section may join in such action as a party-plaintiff to recover on his own behalf the alleged overcharge. (c) Any person receiving notice pursuant to subsection (a) of this section, who elects not to join the action as a party-plaintiff within the period designated by the court in said notice, shall be forever barred from bringing or maintaining a separate, pending or new action with respect to the same alleged violation of the Sherman Act. 4L In any action brought under §§ 4C and 41 (15 U.S.C. § 15c, i), the defendant shall be entitled to prove that an illegal overcharge was not passed on to the natural persons referred to in § 41 of the Clayton Act. H.R. 8359 (MacLaury Draft) 1. In any action under sections 4, 4A or 4C of the Clayton Act (15 U.S.C. §§ 15 or 15c (a) (1)) damages caused by an agreement or conspiracy to increase prices, the fact that a plaintiff is not in privity with a defendant shall not bar recovery; provided, however, that in any action under sections 4, 4A or 4C any defendant shall be entitled to prove as a partial or complete defense to a damage claim that the plaintiff has passed on to others some or all of what would otherwise constitute injury. 2. Neither the United States nor any person, who is not in privity with the defendant, may recover damages where the person in privity with defendant has altered or converted the price-fixed item or service into a different item. product, thing or service. 3. In any action in which a person or the United States not in privity with a defendant is allowed to recover damages for price fixing, such person or the United States must establish proof of his actual injury and the extent thereof. 4. In any action in which a person or the United States not in privity with a defendant is allowed to recover damages, joint and several liability shall not be imposed upon any defendant; instead each defendant shall be liable only to the extent that an overcharge on products or services supplied by him caused injury. 5. Nothing herein shall be construed as altering existing law which limits damages to injury proximately caused by an antitrust violation. 6. The Court shall exclude from amount of monetary relief awarded pursuant to sections 4, 4A or 4C any amount of monetary relief awarded by a judgment or awarded pursuant to settlement agreement approved by the Court in an action brought by an intermediary for damages which are established to constitute a duplicate recovery. 7. Duplicative recovery of damages for the same injury are prohibited. 8. Any action under sections 4, 4A or 4C brought by a person or the United States not in privity with a defendant shall be forever barred by the limitation period provided in section 4B of the Clayton Act (15 U.S.C. § 15b) and said period shall not be extended by claim or proof of fraudulent concealment. 9. The effective date of this action shall be (The date enacted.) TULIA FEEDLOT INC., Tulia, Tex., October 12, 1977. PETER W. RODINO, Jr., Rayburn House Office Building, DEAR MR. RODINO: The legislation that has been introduced to the United States Congress regarding anti-trust violation is of vital concern to the beef industry and the consumer. Involved as a major aspect of the cattle business as well as a consumer, Tulia Feedlot, Inc. supports bills S.B. 1874 and H.B. 8359. We are counting on your support and influence in passage of these bills. ROBERT N. ALLEN, Manager. NATIONAL ASSOCIATION OF ATTORNEYS GENERAL, Washington, D.C., October 19, 1977. Senators EDWARD M. KENNEDY, JOHN L. MCCLELLAN, BIRCH BAYH, JAMES B. ALLEN, HOWARD M. METZENBAUM, STROM THURMOND, CHARLES MCC. MATHIAS, Jr., and PAUL LAXALT, U.S. Senate, Washington, D.C. DEAR SENATORS: Since June 9 when the Supreme Court announced its decision in Illinois Brick Co. v. Illinois, holding that states' could not maintain civil damage actions under Section 4 of the Clayton Act against pricefixers from whom they purchased through a middleman, the Antitrust and Monopoly Subcommittee has had referred to it S. 1874 which would overrule that decision." Hearings were promptly held and testimony from numerous interested parties, including representatives of the business community, the academic world, the judiciary and antitrust practitioners as well as state Attorneys General, was considered. The question now is whether the Subcommittee will act on the bill this session. The interests of the states will be gravely affected by your vote and we therefore believe you should fully understand the reasons for our sense of urgency. 1 The United States Government is likewise affected; accordingly, the Administration has testified in favor of overruling that decision. 2 The decision was based upon the 6 member majority's interpretation of Section 4 of the Clayton Act, not upon any constitutional issue. |