UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW … · joint memorandum of law in support of...
Transcript of UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW … · joint memorandum of law in support of...
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
IN RE VITAMIN C ANTITRUST LITIGATION This Document Relates To: ALL CASES
MASTER FILE 06-MD-1738 (BMC) (JO)
JOINT MEMORANDUM OF LAW IN SUPPORT OF DIRECT AND INDIRECT PURCHASER PLAINTIFFS’MOTIONS FOR PRELIMINARY APPROVAL OF
SETTLEMENTS WITH DEFENDANT ALAND (JIANGSU) NUTRACEUTICAL CO., LTD.
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 1 of 32 PageID #: 13541
i
TABLE OF CONTENTS
I. INTRODUCTION .............................................................................................................. 1
II. BACKGROUND ................................................................................................................ 2
A. The Litigation.......................................................................................................... 2
B. Clarification of Class Definitions ........................................................................... 3
C. Settlement Negotiations .......................................................................................... 4
D. The Certified Classes Settlement Agreement ......................................................... 5
1. The Direct Purchaser Damages Class ......................................................... 5
2. The Injunction Class ................................................................................... 6
3. The Direct Purchaser Settlement Fund ....................................................... 6
4. The Release from Direct Purchaser Damages Releasors ............................ 6
5. The Release from Injunction Releasors ...................................................... 7
6. Injunctive Relief and Other Provisions ....................................................... 7
E. The Indirect Purchaser Settlement Agreement ....................................................... 7
1. The Indirect Purchaser Settlement Class .................................................... 8
2. The Indirect Purchaser Settlement Fund ..................................................... 8
3. The Release from Indirect Purchaser Damages Releasors ......................... 8
F. Rescission ............................................................................................................... 9
III. ARGUMENT ...................................................................................................................... 9
A. The Settlement of Complex Litigation Is Favored ................................................. 9
B. The Proposed Settlements Exceed the Standards for Preliminary Approval ................................................................................................................. 9
1. The Proposed Settlements Are the Result of Arm’s Length Negotiations Conducted by Highly Experienced Counsel. ....................... 11
2. The Proposed Settlements Fall Within the Range of Possible Approval. .................................................................................................. 13
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 2 of 32 PageID #: 13542
ii
C. The Proposed Indirect Purchaser Damages Settlement Class Should Be Certified Pursuant to Rule 23 .......................................................................... 16
a. The Settlement Class Is So Numerous That it Is Impracticable to Bring All Class Members Before the Court........................................................................................ 17
b. Indirect Purchaser Plaintiffs and the Indirect Purchaser Damages Settlement Class Share Common Legal and Factual Questions. ........................................................ 17
c. Indirect Purchaser Plaintiffs’ Claims Are Typical of the Claims of the Members of the Indirect Purchaser Damages Settlement Class. .......................................... 18
d. Settlement Class Counsel for the Indirect Purchasers, and Representative Plaintiffs Will Fairly and Adequately Protect the Interests of the Classes. ........................... 19
2. The Proposed Indirect Purchaser Damages Settlement Class Meets the Requirements of Rule 23(b)(3). ............................................... 20
a. Common Questions of Law and Fact Predominate. ..................... 21
b. A Class Action Is the Superior Method to Adjudicate These Claims. ................................................................................ 22
D. Notice to the Class ................................................................................................ 23
IV. PRELIMINARY APPROVAL ORDER .......................................................................... 24
V. CONCLUSION ................................................................................................................. 24
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 3 of 32 PageID #: 13543
iii
TABLE OF AUTHORITIES
Page(s) CASES
Amchem Prods. Inc. v. Windsor, 521 U.S. 591 (1997) .................................................................................................................21
Bano v. Union Carbide Corp, 273 F.3d 120 (2d Cir. 2001).......................................................................................................9
Barone v. Safway Steel Prods., Inc., No. CV-03-4258, 2005 WL 2009882 (E.D.N.Y. Aug. 23, 2005) ..................................... 20-21
Bourlas v. Davis Law Associates, 237 F.R.D. 345 (E.D.N.Y. 2006) .........................................................................................9, 11
Cont’l Orthopedic Appliances, Inc. v. Health Ins. Plan of Greater New York, 198 F.R.D. 41 (E.D.N.Y. 2000) ...............................................................................................21
Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974)...............................................................................................11, 16
Edge v. C. Tech Collections, Inc., 203 F.R.D. 85 (E.D.N.Y. 2001) ...............................................................................................17
Fox v. Cheminova, 213 F.R.D. 113 (E.D.N.Y. 2003) ..................................................................................................22
Gross v. Wash. Mut. Bank, F.A., 02 CV 4135, 2006 WL 318814 (E.D.N.Y. Feb. 9, 2006) ........................................................17
In re Alcoholic Beverages Litig., 95 F.R.D. 321 (E.D.N.Y. 1982) ...............................................................................................19
In re Buspirone Patent Litig., 210 F.R.D. 43 (S.D.N.Y. 2002) ...............................................................................................21
In re Cendant Corp. Litig., 264 F.3d 201 (3d Cir. 2001).....................................................................................................14
In re Chambers Dev. Sec. Litig., 912 F. Supp. 822 (W.D. Pa. 1995) ...........................................................................................15
In re Corel Corp. Sec. Litig., 293 F. Supp. 2d 484 (E.D. Pa. 2003) .......................................................................................13
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 4 of 32 PageID #: 13544
iv
In re Currency Conversion Fee Antitrust Litig., No. 01 MDL 1409, 2006 U.S. Dist. LEXIS 81440 (S.D.N.Y. Nov. 8, 2006) .........................10
In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285 (2d Cir. 1992).....................................................................................................19
In re General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litig., 55 F.3d 768 (3d Cir. 1995).......................................................................................................22
In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436 (S.D.N.Y. 2004) ..................................................................................... passim
In re Indep. Energy Holdings, 210 F.R.D. 476 (S.D.N.Y. 2002) .............................................................................................17
In re Joint E. & S. Dists. Asbestos Litig., 878 F. Supp. 473 (E.D.N.Y. 1995) ..........................................................................................12
In re Linerboard Antitrust Litig., 292 F. Supp. 2d 631 (E.D. Pa. 2003) .................................................................................5, 6, 7
In re Medical X-Ray Film Antitrust Litig., No. CV 93-5904, 1997 WL 33320580 (E.D.N.Y. Dec. 26, 1997) ..........................................11
In re MetLife Demutualization Litig., 229 F.R.D. 369 (E.D.N.Y. 2005) .............................................................................................20
In re NASDAQ Mkt.-Makers Antitrust Litig., 187 F.R.D. 465 (S.D.N.Y. 1998) (“NASDAQ II”).............................................................12, 15
In re NASDAQ Mkt. Makers Antitrust Litig., 176 F.R.D. 99 (S.D.N.Y. 1997) (“NASDAQ I”) ......................................................1, 10, 11, 13
In re Newbridge Networks Sec. Litig., No. Civ. A. 94-1678-LFO, 1998 WL 765724 (D.D.C. Oct. 22, 1998) ....................................14
In re Nig. Charter Flights Contract Litig., 233 F.R.D. 297 (E.D.N.Y. 2006) .............................................................................................22
In re PaineWebber Ltd. P’ship Litig., 171 F.R.D. 104 (S.D.N.Y. 1997) .............................................................................................12
In re Playmobil Antitrust Litig., 35 F. Supp. 2d 231 (E.D.N.Y. 1998) ...........................................................................19, 21, 23
In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283 (3d Cir.1998)......................................................................................................22
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 5 of 32 PageID #: 13545
v
In re Sterling Foster & Co. Sec. Litig., 238 F. Supp. 2d 480 (E.D.N.Y. 2002) .....................................................................................12
In re Twinlab Corp. Sec. Litig., 187 F. Supp. 2d 80 (E.D.N.Y. 2002) .......................................................................................12
In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124 (2d Cir. 2001).....................................................................................................19
In re Vitamin C Antitrust Litig., 2012 U.S. Dist. LEXIS 16475 (E.D.N.Y. 2012) ........................................................................3
In re Vitamin C Antitrust Litig., 279 F.R.D. 90 (E.D.N.Y. 2012) .....................................................................................3, 12, 18
In re Vitamin C Antitrust Litig., 584 F. Supp. 2d 546 (E.D.N.Y. 2008) .......................................................................................2
In re Vitamin C Antitrust Litig., 810 F. Supp. 20 (E.D.N.Y. 2011) ..............................................................................................3
In re Warfarin Sodium Antitrust Litig., 212 F.R.D. 231 (D. Del. 2002) ................................................................................................13
Kapps v. Wing, 283 F. Supp. 2d 866 (E.D.N.Y. 2003) .....................................................................................20
Larsen v. JBC Legal Group, P.C., 235 F.R.D. 191 (E.D.N.Y. 2006) .............................................................................................20
Medicare Beneficiaries’ Defense Fund v. Empire Blue Cross Blue Shield, 938 F. Supp. 1131 (E.D.N.Y. 1996) ........................................................................................16
Nichols v. Smithkline Beecham Corp., No. 00–6222, 2005 U.S. Dist. LEXIS 7061, 2005 WL 950616 (E.D. Pa. Apr. 22, 2005) ........................................................................................................................................13
Reade-Alvarez v. Eltman, Eltman & Cooper, P.C., 237 F.R.D. 26 (E.D.N.Y. 2006) ...................................................................................17, 18, 19
Sullivan v. DB Investments, Inc., 667 F.3d 273 (3d Cir. 2011).....................................................................................................21
Wal-Mart Stores, Inc. v. Dukes, ___ U.S. ___, 131 S. Ct. 2541 (2011) ......................................................................................18
Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96 (2d Cir. 2005).......................................................................................................10
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 6 of 32 PageID #: 13546
vi
Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982).......................................................................................................16
STATUTES
28 U.S.C. § 1292(b) ...................................................................................................................3, 15
Section 1 of the Sherman Act, 15 U.S.C. § 1.....................................................................2, 5, 7, 21
OTHER AUTHORITIES
Fed. R. Civ. P. 23 ................................................................................................................... passim
Fed. R. Civ. P. 45(b) ........................................................................................................................7
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 7 of 32 PageID #: 13547
1
I. INTRODUCTION
Under the Certified Classes Settlement Agreement, Direct Purchaser Plaintiffs have
negotiated a settlement with Aland (Jiangsu) Nutraceutical Co., Ltd. (“Aland”) in the amount of
$9.5 million for the Direct Purchaser Damages Class. In addition, Aland has agreed to comply
with any injunction entered against any non-settling Defendant by the Court. Indirect Purchaser
Plaintiffs have negotiated a separate settlement with Aland for $1 million.
Plaintiffs seek preliminary approval of these settlements under Federal Rule of Civil
Procedure 23(e) because each is an excellent result for the respective classes. At the preliminary
approval stage, the Court only determines if, on its face, the proposed settlements are “at least
sufficiently fair, reasonable and adequate to justify notice to those affected and an opportunity to
be heard” or, put another way, to make sure that the settlements are within the range of possible
approval. In re NASDAQ Mkt. Makers Antitrust Litig., 176 F.R.D. 99, 102 (S.D.N.Y. 1997)
(“NASDAQ I”).
This is the first settlement in this case since the first Complaint was filed over seven years
ago in 2005. This settlement also marks the first civil settlement with a Chinese company in a
U.S. antitrust cartel case. As such, the settlement is an important step in private enforcement of
U.S. antitrust laws. The settlement follows hard-fought litigation against the Defendants and the
Ministry of Commerce of China. The settlements, totaling $10.5 million, represent a significant
initial recovery from the first settling cartel defendant in this case without prejudicing the
ongoing claims for damages and injunctive relief against the remaining non-settling cartel
Defendants. The difference in levels of the direct class settlement ($9.5 million) and the indirect
class settlement ($1 million) is within the range of historical approvals of class action settlements
and also fairly reflects that the direct class litigation is further progressed than the indirect class
litigation. Both the direct class and indirect class following this settlement are well positioned to
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 8 of 32 PageID #: 13548
2
pursue their claims against the remaining Defendants and to secure recoveries for their respective
classes.
As detailed below, the settlements are well within the range of possible approval and
should be preliminarily approved by this Court under Rule 23(e).
II. BACKGROUND
A. The Litigation
Plaintiffs’ Ranis and Animal Science commenced this action on January 26, 2005.
Related actions were subsequently filed in other districts, and all of these cases were eventually
coordinated by the Judicial Panel for Multidistrict Litigation and transferred to this Court for
pretrial proceedings. In these actions, Plaintiffs filed complaints individually and on behalf of
various classes of persons and entities who purchased, either directly or indirectly, vitamin C
from Aland and/or the other manufacturers named as defendants. The Direct Purchaser Plaintiffs
filed their First Consolidated Amended Complaint in September 2007, naming Aland and eight
other defendant manufacturers. Dkt. 124. The Indirect Purchaser Plaintiffs filed an Amended
Consolidated Class Action Complaint in November 2006. Dkt. 85. Plaintiffs alleged that
Defendants conspired to unlawfully fix prices of vitamin C to be exported to the United States
and worldwide, and committed other unlawful practices designed to inflate the prices of vitamin
C sold to plaintiffs and other purchasers in the United States and elsewhere, in violation of
Section 1 of the Sherman Act, 15 U.S.C. § 1.
Motion practice ensued on the Direct Purchaser Plaintiffs’ complaint, and continued
throughout discovery, until Judge Trager denied Defendants’ motions to dismiss the Direct
Purchaser Plaintiffs’ complaint on several grounds in November 2008. In re Vitamin C Antitrust
Litig., 584 F. Supp. 2d 546, 559 (E.D.N.Y. 2008). Also in November 2008, a stipulation and
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 9 of 32 PageID #: 13549
3
order was entered staying the Indirect Purchaser Plaintiffs’ cases until a final judgment is entered
by the Court in the Direct Purchaser Action. Dkt. 340.
The current operative Direct Purchaser complaint (the Third Consolidated Amended
Complaint) was filed in December 2008. Dkt. 355.
Following extensive briefing, this Court denied Defendants’ motions for summary
judgment. In re Vitamin C Antitrust Litig., 810 F. Supp. 20, 522 (E.D.N.Y. 2011). The Court also
denied Defendants’ request for permission to take an interlocutory appeal of that decision under
28 U.S.C. § 1292(b). In re Vitamin C Antitrust Litig., 2012 U.S. Dist. LEXIS 16475 (E.D.N.Y.
2012). The Court granted Direct Purchaser Plaintiffs’ motion for class certification. In re Vitamin
C Antitrust Litig., 279 F.R.D. 90 (E.D.N.Y. 2012).
B. Clarification of Class Definitions
In seeking approval of the Aland settlement, and prior to notifying class members that
two classes have been certified, Plaintiffs request that the definition of the Damages Class and
the Injunction Class be limited to fixed time periods, as described below. In its January 26, 2012
Memorandum Decision and Order, the Court certified a Damages Class of direct purchasers
under Rule 23(b)(3) and an Injunction Class under Rule 23(b)(2) (the “Certified Classes”).
Plaintiffs request that the Court clarify the definitions of both the Damages Class and the
Injunction Class to include definite beginning and end dates to the class period. The current
definition of the Damages Class reads:
All persons or entities, or assignees of such persons or entitles, who directly purchased vitamin C for delivery in the United States, other than pursuant to a contract containing an arbitration clause, from any of Defendants or their co-conspirators, other than Northeast Pharmaceutical (Group) Co. Ltd., from December 1, 2001 to the present. Excluded from the proposed class are all governmental entities, Defendants, their co-conspirators, and their respective subsidiaries or affiliates.
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 10 of 32 PageID #: 13550
4
Plaintiffs’ expert has estimated the damage period as December 1, 2001 through June 30, 2006,
and this is the period of time for which Plaintiffs will prove that Defendants’ cartel caused
damages to direct purchasers. Expert Report of B. Douglas Bernheim, Ph.D., Section IV and
¶ 169 (November 14, 2008). For this reason, Plaintiffs request that the Court clarify that the
Damages Class period ends on June 30, 2006. Accordingly, Plaintiffs have reached a settlement
with Aland that tracks this clarified definition for the [Direct Purchaser] Damages Class.
Further, the Injunction Class was previously defined as follows:
All persons or entities, or assignees of such persons or entities, who purchased vitamin C manufactured by Defendants for delivery in the United States, other than pursuant to a contract with a Defendant containing an arbitration clause, requiring injunctive relief against Defendants to end Defendants’ antitrust violations.
Dkt. 453. Rather than proceed with an Injunction Class not limited to any time period, Plaintiffs
propose that the Injunction Class period begin on the same date as the Damages Class
(December 1, 2001) for consistency. The Injunction Class period necessarily will extend to the
present. Plaintiffs’ settlement with Aland uses this time-limited definition. If the Court approves
these modifications, then the proposed notices to class members will reflect these time periods.
C. Settlement Negotiations
Direct Purchaser Plaintiffs and Aland began discussions in February 2012 regarding
settlement with the certified classes. Declaration of Michael D. Hausfeld in Support of Plaintiffs’
Motion for Preliminary Approval of Certified Classes Settlement with Defendant Aland
(“Hausfeld Decl.”), ¶ 2. Co-Lead Counsel and counsel for Aland discussed settlement for several
weeks in arm’s-length negotiating sessions. Id.
Based upon these discussions, Direct Purchaser Plaintiffs and Aland agreed to a
settlement figure of $9.5 million. Plaintiffs assented to allow Aland to pay the settlement amount
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 11 of 32 PageID #: 13551
5
in installments. Id. With respect to injunctive relief, Aland agreed to abide by any injunction
enforcing Section 1 of the Sherman Act, should it be entered against a non-settling defendant.
Shortly thereafter, Indirect Purchaser Plaintiffs began to negotiate with Aland to reach a
settlement, and arrived at a settlement of a $1 million. Declaration of Daniel C. Hedlund in
Support of Plaintiffs’ Motion for Preliminary Approval of Indirect Purchaser Class Settlement
with Defendant Aland (“Hedlund Decl.”), ¶ 2.
Plaintiffs’ settlements with Aland are the first settlements in the litigation, thus
representing a significant step forward in private enforcement of U.S. antitrust laws against cartel
conduct. Such settlements also add value as an “ice-breaker” with the potential to lead to
settlements with other Defendants. See In re Linerboard Antitrust Litig., 292 F. Supp. 2d 631,
643 (E.D. Pa. 2003) (“The Court also notes that this settlement has significant value as an ‘ice-
breaker’ settlement – it is the first settlement in the litigation – and should increase the likelihood
of future settlements.”).
D. The Certified Classes Settlement Agreement
The Certified Classes Settlement Agreement, attached to the Hausfeld Decl. as Exhibit A,
includes the following material terms:
1. The Direct Purchaser Damages Class
The Certified Classes Settlement Agreement defines the Direct Purchaser Damages Class
as follows:
All persons or entities, or assignees of such person or entities, (but excluding all governmental entities, Defendants, their co-conspirators, and their respective subsidiaries or affiliates, and any person or entity that timely and validly elects to be excluded from the Damages Settlement Class) who directly purchased Vitamin C Products for delivery in the United States, other than pursuant to a contract containing an arbitration clause, from any Defendants or their co-conspirators, other than Northeast Pharmaceutical (Group) Co. Ltd.,(“Northeast”) from December 1, 2001 to June 30, 2006.
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 12 of 32 PageID #: 13552
6
Certified Classes Settlement Agreement ¶ 2.1
2. The Injunction Class
The Certified Classes Settlement Agreement defines the Injunction Class as follows:
All persons or entities, or assignees of such persons or entities, (but excluding all governmental entities, Defendants, their co-conspirators, and their respective subsidiaries or affiliates) who purchased vitamin C manufactured by Defendants for delivery in the United States, other than pursuant to a contract with a Defendant containing an arbitration clause, from December 1, 2001 to the present, requiring injunctive relief against Defendants to end Defendants’ antitrust violations.
Certified Classes Settlement Agreement ¶ 3.
3. The Direct Purchaser Settlement Fund
Pursuant to the terms of the Certified Classes Settlement Agreement, Aland will pay the
Settlement Amount of $9.5 million into an Escrow Account for the Direct Purchaser Damages
Class. Id. ¶ 30. All interest earned on the Settlement Fund shall become and remain part of the
Settlement Fund. Id. ¶ 11. Aland will pay the $9.5 million Direct Purchaser Settlement Amount
in three installment payments. Id. ¶ 30. The first payment of $4 million will be paid within thirty
(30) days of full execution of the Agreement. Id. at ¶ 30. The second payment of $3 million will
be paid within 180 days after the first payment, and the third payment of $2.5 million will be
paid within 90 days after the second payment. Id.
4. The Release from Direct Purchaser Damages Releasors
In exchange for monetary and other consideration paid by Aland, the parties agreed to
broad releases of the antitrust claims. The Aland Releasees are completely released, acquitted, 1 As defined in the Certified Classes Settlement Agreement, the term “Defendant” means each and all named defendants in the action entitled In re Vitamin C Antitrust Litigation, 06-MD-1738 (BMC) (JO) (E.D.N.Y.) (the “Action”). Settlement Agreement, ¶ 5. When used in reference to the Direct Purchaser Settlement and Release “Vitamin C” or “Vitamin C Products” means all products containing vitamin C, also known as ascorbic acid, either in its pure form or in combination with other substances.
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 13 of 32 PageID #: 13553
7
and forever discharged by Direct Purchasers from any and all claims, demands, actions, suits,
causes of action, whether class, individual, or otherwise in nature in any way arising out of or
relating to any act or omission of Releasees (or any of them) concerning the pricing, production,
development, marketing, sale or distribution of Vitamin C Products during the period from the
beginning of time to the present, including claims based on the conduct alleged and causes of
action asserted, or that could have been asserted, in complaints filed in the Action by the Settling
Plaintiffs.
The release, discharge, and covenant not to sue do not include other claims, such as those
solely arising out of product liability, contract or warranty claims in the ordinary course of
business. Id. ¶¶ 21, 23-24.
5. The Release from Injunction Releasors
In exchange for Aland’s agreement to comply with any injunction entered against any
non-settling Defendant by the Court, the Injunction Releasors shall release, acquit, and discharge
their claims related to injunctive relief against Aland. Id. ¶¶ 26-27, 29.
6. Injunctive Relief and Other Provisions
Aland has agreed to obey a Section 1 injunction against violations of the antitrust laws
should it be entered by the Court. Aland has agreed to be treated as if it remains a defendant in
the Action through trial or settlement, including for purposes of a Fed. R. Civ. P. 45(b) trial
subpoena, notwithstanding this Agreement.
E. The Indirect Purchaser Settlement Agreement
The Indirect Purchaser Settlement Agreement, attached to the Declaration of Daniel C.
Hedlund in Support of Plaintiffs’ Motion for Preliminary Approval of Indirect Purchaser Class
Settlement with Defendant Aland (“Hedlund Decl.”) as Exhibit A, includes the following
material terms:
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 14 of 32 PageID #: 13554
8
1. The Indirect Purchaser Settlement Class
The Indirect Purchaser Settlement Agreement defines the Indirect Purchaser Damages
Class as follows:
[A]ll persons or entities, (but excluding all governmental entities, Defendants, their co-conspirators, and their respective subsidiaries or affiliates, and any person or entity that timely and validly elects to be excluded from the Settlement Class) residing in a Settling Jurisdiction who indirectly purchased Vitamin C Products for use or consumption and not for resale from within one or more Settling Jurisdictions at any time from December 1, 2001 to June 30, 2006.
Indirect Purchaser Settlement Agreement ¶ 5. The “Settling Jurisdictions” are California, New
York, Arizona, District of Columbia, Florida, Iowa, Kansas, Maine, Massachusetts, Michigan,
Minnesota, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, South Dakota,
Tennessee, Vermont, West Virginia, and Wisconsin. Indirect Purchaser Settlement Agreement
¶ 2. For the Indirect Purchaser Settlement and Release, “Vitamin C Products” means capsules or
tablets containing Vitamin C used for pharmacological purposes.
2. The Indirect Purchaser Settlement Fund
Pursuant to the terms of the Indirect Purchaser Settlement Agreement, Aland will pay the
Settlement Amount of $1 million into an Escrow Account within 30 days of execution. Id. ¶ 22.
All interest earned on the Settlement Fund shall become and remain part of the Settlement Fund.
Id. ¶ 9.
3. The Release from Indirect Purchaser Damages Releasors
In consideration of payment of the Indirect Purchaser Settlement Fund, the Aland
Releasees will be completely released, acquitted, and forever discharged from any and all claims,
demands, actions, suits, causes of action, whether class, individual, or otherwise in nature,
concerning the pricing, production, development, marketing, sale or distribution of Vitamin C
during the period from the beginning of time to the present, including claims based on the
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 15 of 32 PageID #: 13555
9
conduct alleged and causes of action asserted, or that could have been asserted, in complaints
filed in the Action by the Settling Indirect Purchaser Plaintiffs.
F. Rescission
The Settlement Agreements permit Aland to rescind the Agreements if either Agreement
is not approved by the Court. Certified Classes Settlement Agreement ¶ 37; Indirect Purchaser
Settlement Agreement ¶ 29.
III. ARGUMENT
A. The Settlement of Complex Litigation Is Favored
Plaintiffs and Aland have reached agreements that advance Plaintiffs’ recovery. Having
negotiated for a substantial cash payment from Aland, Plaintiffs have avoided the potential risks
inherent in complex antitrust class action litigation and secured a favorable settlement for the
Settlement Classes. Reaching such a positive result at this stage from a partial settlement of the
litigation only enhances the attractiveness of this settlement. See In re Global Crossing Sec. &
ERISA Litig., 225 F.R.D. 436, 455 (S.D.N.Y. 2004) (“[F]ederal courts favor settlement,
especially in complex and large-scale disputes, so as to encourage compromise and conserve
judicial and private resources.”). While reviewing these proposed settlements, the Court should
be mindful of the “general public policy favoring settlement.” Bourlas v. Davis Law Associates,
237 F.R.D. 345, 354-55 (E.D.N.Y. 2006) (noting that class actions are amenable to settlement
“because of the difficulties of proof, the uncertainties of the outcome, and the typical length of
the litigation”). Accord Bano v. Union Carbide Corp, 273 F.3d 120, 129-30 (2d Cir. 2001).
B. The Proposed Settlements Exceed the Standards for Preliminary Approval
When parties to a class action seek to settle, they must proceed before the court in two
steps – first, they must seek preliminary approval of the proposed settlement as well as
certification of the proposed settlement class and then, should such preliminary approval and
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 16 of 32 PageID #: 13556
10
class certification be granted, they must provide notice to the settlement class and appear at a
fairness hearing after which the court may grant final approval to the settlement. See Manual for
Complex Litigation (Fourth) § 21.63 (2004); NASDAQ I, 176 F.R.D. at 102. Here, the Direct
Purchaser Damages Class and the Injunction Class have already been certified, and thus only the
Indirect Purchaser Damages Class need go through the step of certification of a settlement class.
Because the first step of this process is only “preliminary,” the standards for preliminary
approval are less exacting than those applied for final approval. “[A] court must determine
whether the terms of the proposed settlement warrant preliminary approval. In other words, the
court must make ‘a preliminary evaluation’ as to whether the settlement is fair, reasonable and
adequate.” In re Currency Conversion Fee Antitrust Litig., No. 01 MDL 1409, 2006 U.S. Dist.
LEXIS 81440, at *13 (S.D.N.Y. Nov. 8, 2006) (citation omitted); see also Wal-Mart Stores, Inc.
v. Visa U.S.A. Inc., 396 F.3d 96, 116 (2d Cir. 2005). Preliminary approval of a proposed
settlement is granted so long as the settlement was arrived at through a fair process and the terms
of the settlement are within the “range of possible approval.” NASDAQ I, 176 F.R.D. at 102
(emphasis added).
In conducting this inquiry, a court considers both the negotiating process leading up to
the settlement and the settlement’s substantive terms. Global Crossing, 225 F.R.D. at 455. A
court determines whether the settlement is “at least sufficiently fair, reasonable and adequate to
justify notice to those affected and an opportunity to be heard.” NASDAQ I, 176 F.R.D. at 102
(citations omitted). Preliminary approval should be granted “if the settlement is the result of
serious, informed and non-collusive negotiations and the proposed settlement has no obvious
deficiencies, such as giving preferential treatment to class representatives, or granting excessive
attorneys fees.” In re Medical X-Ray Film Antitrust Litig., No. CV 93-5904, 1997 WL 33320580
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 17 of 32 PageID #: 13557
11
at *6 (E.D.N.Y. Dec. 26, 1997) (citing NASDAQ I, 176 F.R.D. 99, and Manual for Complex
Litigation (Third) § 30.14). In considering preliminary approval, the sole issue is whether the
proposed settlement falls within the range of possible approval. NASDAQ I, 176 F.R.D. at 102.
The negotiations here were conducted by experienced counsel on both sides at arm’s
length and lasted for several months. Hausfeld Decl. ¶ 2; Hedlund Decl. ¶ 2. Plaintiffs’ counsel
were well-informed of the material facts and the negotiations were non-collusive. Hausfeld Decl.
¶¶ 2-3; Hedlund Decl. ¶¶ 2-3. Based upon these facts, preliminary approval is warranted and, as
will be demonstrated in detail at the final fairness hearing, this settlement is a “fair, reasonable,
and adequate” settlement of the class claims. See Detroit v. Grinnell Corp., 495 F.2d 448, 463
(2d Cir. 1974).2
1. The Proposed Settlements Are the Result of Arm’s Length Negotiations Conducted by Highly Experienced Counsel.
The process that led to these proposed settlements was fairly conducted by highly-
qualified counsel who sought to obtain the best possible result for their clients, both classes
certified by the Court, and the Indirect Purchaser Damages Settlement Class. When counsel
engage in a lengthy arm’s-length negotiation that results in a settlement, courts find that the
settlement is entitled to a presumption of fairness. In re NASDAQ Mkt.-Makers Antitrust Litig., 2 There are nine relevant factors that courts consider in evaluating a settlement’s substantive terms at the time of final approval: (1) the complexity, expense and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the trial; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.” Grinnell Corp., 495 F.2d at 463. As the Court has recognized, there is little to be gained by applying the Grinnell factors at the preliminary approval stage. See Bourlas, 2006 WL 2513021, at *7 n.7 (“[I]t is apparent that several of the Grinnell factors themselves were designed for application at a later stage in the class settlement approval process.”). As a result, they are discussed herein only when they provide a useful guide to assess the settlement’s fairness at this stage.
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 18 of 32 PageID #: 13558
12
187 F.R.D. 465, 474 (S.D.N.Y. 1998) (“NASDAQ II”) (“So long as the integrity of the arm’s
length negotiation process is preserved … a strong initial presumption of fairness attaches to the
proposed settlement.”); see In re Sterling Foster & Co. Sec. Litig., 238 F. Supp. 2d 480, 484
(E.D.N.Y. 2002); In re Twinlab Corp. Sec. Litig., 187 F. Supp. 2d 80, 83 (E.D.N.Y. 2002); In re
Joint E. & S. Dists. Asbestos Litig., 878 F. Supp. 473, 567 (E.D.N.Y. 1995). Furthermore, when
the settlement that results from such negotiations is being championed by experienced and
informed counsel, courts afford counsel’s opinion considerable weight because they are closest
to the facts and risks associated with the litigation itself. See Joint E., 878 F. Supp. at 567 (“A
substantial factor in determining the fairness of a settlement is the opinion of counsel involved in
the settlement” (citations omitted)); In re PaineWebber Ltd. P’ship Litig., 171 F.R.D. 104, 125
(S.D.N.Y. 1997) ( “great weight” is accorded to the recommendations of counsel, who are most
closely acquainted with the facts of the underlying litigation). The process that led to this
settlement confirms that the initial presumption of fairness is correct.
The Court has found that counsel are capable and have the requisite qualifications and
experience to handle this litigation. In re Vitamin C Antitrust Litig., 279 F.R.D. at 100 (finding it
undisputed that counsel are “qualified, experienced, and generally able to conduct the litigation”
and are “seasoned class action litigators”). Similarly, counsel for the Indirect Purchasers have
extensive experience litigating complex class cases. Infra. Section C(1)(d) below.
In this case, the basic terms of the settlement agreements were negotiated over a period of
several months in a process that involved in-person meetings, numerous telephone conferences,
and other correspondence. Hausfeld Decl. ¶ 2; Hedlund Decl. ¶ 2. The discussions were
meaningful and informed as Co-Lead Counsel and Indirect Purchaser Counsel took steps to
ensure that they had all of the necessary information to advocate for a fair settlement that served
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 19 of 32 PageID #: 13559
13
the best interests of both certified classes, as well as the Indirect Purchaser Damages Settlement
Class. Hausfeld Decl. ¶¶ 2-3; Hedlund Decl. ¶¶ 2-3. Due to the extensive record of the case,
counsel was in a position to analyze and evaluate many contested legal and factual issues posed
by the litigation so that adequate demands and accurate evaluation of Aland’s positions could be
made. Thus, Co-Lead Counsel and Indirect Purchaser Counsel were well-informed of the facts of
the case and the strength of the claims asserted when the terms of the settlement agreements were
negotiated. See In re Global Crossing, 225 F.R.D. at 458.
2. The Proposed Settlements Fall Within the Range of Possible Approval.
To preliminarily approve these settlements, the court must decide that the proposed
settlements fall within the range of settlement that could possibly be approved as “fair, adequate
and reasonable.” NASDAQ I, 176 F.R.D. at 102. Plaintiffs’ expert, Dr. Douglas Bernheim,
estimates that the direct purchaser damages class as $58.5 million. Expert Report of B. Douglas
Bernheim, Ph.D., Section IV and ¶ 143 (November 14, 2008). The Direct Purchaser Plaintiffs’
settlement with one defendant (Aland) thus constitutes over 16% of estimated single damages.
Defendants however argue that there are no damages in this case. If the settlement is evaluated
based on the median of the damage estimates of plaintiffs and defendants, the settlement
constitutes at least 32% of single damages. Settlements of this magnitude are routinely approved.
See, e.g., In re Corel Corp. Sec. Litig., 293 F. Supp. 2d 484, 489–90 (E.D. Pa. 2003) (approving
a settlement valued at 15% of estimated damages); Nichols v. Smithkline Beecham Corp., No.
00–6222, 2005 U.S. Dist. LEXIS 7061, at *52, 2005 WL 950616 (E.D. Pa. Apr. 22, 2005)
(upholding a settlement in the range of 9.3–13.9% of damages as “consistent with [the range]
approved in other complex class action cases.”); In re Warfarin Sodium Antitrust Litig., 212
F.R.D. 231, 257 (D. Del. 2002) (upholding a settlement valued at 33% of Plaintiffs’ alleged
damages); In re Cendant Corp. Litig., 264 F.3d 201, 241 (3d Cir. 2001) (upholding a settlement
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 20 of 32 PageID #: 13560
14
valued at 36-37% of damages, and noting that typical recoveries in securities class actions range
from 1.6% to 14% of damages); Molecular Diagnostics Laboratories v. Hoffmann-La Roche
Inc., 04-cv-1949, Doc. 111 (D.D.C. Dec. 29, 2008) (approving settlement constituting one third
of estimated damages); In re Newbridge Networks Sec. Litig., No. Civ. A. 94-1678-LFO, 1998
WL 765724, at *2 (D.D.C. Oct. 22, 1998) (approving settlement equal to 6-12% of potential
damages in securities fraud class action, holding that such a figure “seems to be within the
targeted range of reasonableness”).
For both direct and indirect purchasers, Aland’s settlement also marks the first civil
settlement of a Chinese company in an antitrust cartel case in a U.S. court. Under these
circumstances and considering these benefits, the proposed settlement not only falls well within
the range of possible approval, but also represents an excellent result for members of the classes.
The Indirect Purchaser Plaintiff Settlement represents a substantial portion of their
estimated damages related to the sales of Aland. Damages in the indirect purchaser action vary
from those in the direct purchaser action in several important ways. First, the Indirect Purchaser
Settlement Class includes only 21 jurisdictions comprising less than half the U.S. population.
Second, the Indirect Purchaser Settlement Class is limited to purchasers of pharmaceutical
vitamin C in tablet and capsule form, representing less than half the market for vitamin C. Third,
NEPG’s sales remain in the Indirect Purchaser case (unlike the direct purchaser case), making
this ice breaker settlement all the more valuable to indirect purchasers. Adjusting for relevant
jurisdictions and product market, the Indirect Purchaser Settlement represents a recovery of 21
percent of single damages based on Aland’s sales.3
3 Because NEPG remains in the indirect purchaser case, a comparison of the indirect purchaser and direct purchaser recovery percentages based on total defendant sales is not meaningful.
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 21 of 32 PageID #: 13561
15
Although a smaller recovery than the Direct Purchaser Settlement, the Indirect Purchaser
Settlement represents an excellent outcome for the class. The indirect purchaser action, which
has been stayed, is less advanced than the direct purchaser action and faces unique litigation
risks. The joint prosecution efforts and shared work product between Direct and Indirect
Purchaser Counsel that led to this global settlement positions Indirect Purchasers to pursue their
claims vigorously and efficiently against the remaining Defendants.
Continuing this litigation against Aland would entail a lengthy and highly expensive trial.
Plaintiffs will also depend on complicated expert opinions with regard to damages.4 See
NASDAQ II, 187 F.R.D. at 475-76. Defendants’ recent attempt at an interlocutory appeal of the
Court’s denial of their summary judgment motions under 28 U.S.C. § 1292(b), arguing that
Chinese law and international comity require the Court to dismiss this case entirely, evidences
that any jury verdict in Plaintiffs’ favor would surely be appealed, potentially delaying resolution
of Plaintiffs’ claims for years more. The Ministry of Commerce of the People’s Republic of
China has filed amicus briefs in support of Defendants’ position, and would likely continue to do
so on appeal.
Given this uncertainty, “[a] very large bird in the hand in this litigation is surely worth
more than whatever birds are lurking in the bushes.” In re Chambers Dev. Sec. Litig., 912 F.
Supp. 822, 838 (W.D. Pa. 1995).
Furthermore, because liability is joint and several under the Sherman Act and the antitrust
laws of many of the class jurisdictions, Aland’s sales remain in the case for purposes of assessing
damage liability against non-settling defendants. Thus, this settlement does not prejudice the
4 Because Co-Lead Counsel will likely have to litigate against the other Defendants through trial and appeal, their duties to the Class preclude a full discussion of their potential litigation risks.
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 22 of 32 PageID #: 13562
16
classes’ ability to recover its full treble damages caused by the alleged conspiracy, where
applicable.
As the first settlement in a case that has extended for over six years – and the first civil
antitrust settlement by any Chinese company ever in U.S. courts, the settlement amounts of $9.5
million for the direct purchasers, and $1 million for the indirect purchasers, are excellent results
for the classes.
Based upon the foregoing, the Settlement Agreement is well within the possible range of
approval as a “fair, reasonable, and adequate” settlement of the Settlement Class’s claims. See
Grinnell Corp., 495 F.2d at 463.
C. The Proposed Indirect Purchaser Damages Settlement Class Should Be Certified Pursuant to Rule 23
Because the Court has already certified the Direct Purchaser Damages Class, and the
Injunction Class, only the Indirect Purchaser Damages Settlement Class need be certified for
settlement under Rule 23. Due to the similarities between the indirect and direct purchasers’
claims against Defendants, however, much of the Court’s reasoning in granting certification to
the Direct Purchaser Damages Class – and the Injunction Class – is applicable here.
The Second Circuit has long acknowledged the propriety of certifying a class solely for
purposes of settlement. See Weinberger v. Kendrick, 698 F.2d 61, 73 (2d Cir. 1982); In re Global
Crossing, 225 F.R.D. 451 (S.D.N.Y. 2004). A court may grant certification where, as here, the
proposed settlement class satisfies the four prerequisites of Rule 23(a) (numerosity,
commonality, typicality and adequacy), as well as one of the three subsections of Rule 23(b). See
Weinberger, 698 F.2d at 73; Medicare Beneficiaries’ Defense Fund v. Empire Blue Cross Blue
Shield, 938 F. Supp. 1131, 1140 (E.D.N.Y. 1996). Here, Indirect Purchaser Plaintiffs seek
certification of the following Settlement Class:
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 23 of 32 PageID #: 13563
17
[A]ll persons or entities, (but excluding all governmental entities, Defendants, their co-conspirators, and their respective subsidiaries or affiliates, and any person or entity that timely and validly elects to be excluded from the Settlement Class) residing in a Settling Jurisdiction who indirectly purchased Vitamin C Products for use or consumption and not for resale from within one or more Settling Jurisdictions at any time from December 1, 2001 to June 30, 2006.
Indirect Purchaser Settlement Agreement ¶ 5.
1. The Proposed Indirect Purchaser Damages Settlement Class Meets the Requirements of Rule 23(a)
a. The Settlement Class Is So Numerous That it Is Impracticable to Bring All Class Members Before the Court
First, Rule 23(a) requires that the class be so numerous that joinder of all members would
be “impracticable.” Fed. R. Civ. P. 23(a)(1); see also Edge v. C. Tech Collections, Inc., 203
F.R.D. 85, 89 (E.D.N.Y. 2001). While no magic number exists for satisfying the numerosity
requirement, and Indirect Purchaser Plaintiffs are not required to allege the exact number or
identity of class members, courts in this circuit generally “find a class sufficiently numerous
when it comprises forty or more members.” See In re Indep. Energy Holdings, 210 F.R.D. 476,
479 (S.D.N.Y. 2002); Gross v. Wash. Mut. Bank, F.A., 02 CV 4135, 2006 WL 318814 at *2
(E.D.N.Y. Feb. 9, 2006) (citing Robidoux v. Celani, 987 F.2d 931, 935 (2d Cir. 1993)).
Here, the proposed Indirect Purchaser Damages Settlement Class consists of millions of
end-user purchaser of Vitamin C Products from December 1, 2001 to June 30, 2006. Thus, the
numerosity requirement is satisfied here.
b. Indirect Purchaser Plaintiffs and the Indirect Purchaser Damages Settlement Class Share Common Legal and Factual Questions.
Second, Rule 23(a) requires the existence of questions of law or fact common to the
class. Fed. R. Civ. P. 23(a)(2); see also Reade-Alvarez v. Eltman, Eltman & Cooper, P.C., 237
F.R.D. 26, 31 (E.D.N.Y. 2006). Questions are common to the class if class members’ claims
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 24 of 32 PageID #: 13564
18
“depend upon a common contention” that is “of such a nature that it is capable of class wide
resolution – which means that determination of its truth or falsity will resolve an issue that is
central to the validity of each one of the claims in one stroke.” Wal-Mart Stores, Inc. v. Dukes,
___ U.S. ___, 131 S. Ct. 2541, 2551 (2011). The commonality element “may be found when
‘injuries derive from a unitary course of conduct by a single system.’” Reade-Alvarez, 237
F.R.D. at 32). The commonality element “‘does not require an identity of claims or facts among
class members; instead, [t]he commonality requirement will be satisfied if the named plaintiffs
share at least one question of fact or law with the grievances of the prospective class.’” In re
Global Crossing, 225 F.R.D. at 451 (quoting Johnston v. HBO Film Mgmt., Inc., 265 F.3d 178,
184 (3d Cir. 2001)).
Defendants did not contest commonality when opposing Direct Purchaser Plaintiffs’
motion for class certification, and in granting their motion for class certification, this Court found
that
[t]he most significant question posed by this lawsuit will generate common answers among all class members: did the defendants’ price-fixing agreement cause an artificial increase in the market price of vitamin C? Because the answer to this question could not logically vary between class members, the answer will be applicable to all members of this proposed class.
In re Vitamin C Antitrust Litig, 279 F.R.D. at 99. This question is the same for members of the
[Direct Purchaser] Damages Class, the Injunction Class, the Indirect Purchaser Damages
Settlement Class. Thus, the element of commonality is met.
c. Indirect Purchaser Plaintiffs’ Claims Are Typical of the Claims of the Members of the Indirect Purchaser Damages Settlement Class.
Third, Rule 23(a) requires typicality of the class representatives’ claims. See Fed. R. Civ.
P. 23(a)(3). The typicality requirement is satisfied where, as here, the claims of the representative
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 25 of 32 PageID #: 13565
19
Indirect Purchaser Plaintiffs arise from the same course of conduct that gives rise to the claims of
the other class members, and the claims are based on the same legal theories. See Reade-Alvarez,
237 F.R.D. at 32; see also In re Playmobil Antitrust Litig., 35 F. Supp. 2d 231, 241 (E.D.N.Y.
1998); In re Alcoholic Beverages Litig., 95 F.R.D. 321, 324 (E.D.N.Y. 1982). “Indeed, when ‘the
same [alleged] unlawful conduct was directed at or affected both the named plaintiffs and the
class sought to be represented, the typicality requirement is usually met irrespective of minor
variations in the fact patterns underlying individual claims.’” In re Global Crossing, 225 F.R.D.
at 452 (citation omitted).
Here, the claims of the representative Indirect Purchaser Plaintiffs are typical when
compared to those held by the other members of the Indirect Purchaser Damages Settlement
Class. Plaintiffs have alleged that the Defendants created and maintained an illegal cartel with
the purpose and effect and fixing prices, creating supply restraints, allocating market share, and
committing other unlawful practices designed to inflate the prices of bulk vitamin C and products
made with or from Vitamin C sold indirectly to Plaintiffs and other consumers across the United
States. See Amended Consolidated Class Action Complaint, Dkt. 85, ¶ 2.
d. Settlement Class Counsel for the Indirect Purchasers, and Representative Plaintiffs Will Fairly and Adequately Protect the Interests of the Classes.
Fourth, Rule 23(a) requires that the representative parties fairly and adequately represent
the interests of the class. Fed. R. Civ. P. 23(a)(4). As the Second Circuit has stated, “adequacy of
representation is measured by two standards. First, class counsel must be ‘qualified, experienced
and generally able’ to conduct the litigation. Second, the class members must not have interests
that are ‘antagonistic’ to one another.” In re Drexel Burnham Lambert Group, Inc., 960 F.2d
285, 291 (2d Cir. 1992); see also In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124,
142 (2d Cir. 2001); In re MetLife Demutualization Litig., 229 F.R.D. 369, 376 (E.D.N.Y. 2005) .
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 26 of 32 PageID #: 13566
20
Both requirements are satisfied here. Indirect Purchaser Settlement Class Counsel are
qualified, experienced, and thoroughly familiar with antitrust class action litigation. Indirect
Purchaser Settlement Class Counsel have successfully prosecuted numerous antitrust class
actions on behalf of injured indirect purchasers throughout the United States. Counsel have
provided the Court with resumes demonstrating their years of experience in litigating complex
antitrust class actions. See Firm Resumes attached to the Hedlund Decl. as Exhibits B to D.
Counsel are capable of, and committed to, vigorously protecting the interests of the Indirect
Purchaser Settlement Class.
Moreover, in reaching this Settlement Agreement, the interests of the indirect purchaser
class members were adequately protected and were not in conflict. See Kapps v. Wing, 283 F.
Supp. 2d 866, 873 (E.D.N.Y. 2003) (vacated in part on other grounds, 404 F.3d 105 (2d Cir.
2005)). All Indirect Purchaser Damages Settlement Class Members share an overriding interest
in obtaining the largest monetary recovery possible from Aland. See Global Crossing, 225
F.R.D. at 453. They also share an interest in resolving the litigation, and in reaching a first ice-
breaker settlement. For these reasons, Plaintiffs and Plaintiffs’ Counsel adequately protect the
interests of the proposed classes under Rule 23(a).
2. The Proposed Indirect Purchaser Damages Settlement Class Meets the Requirements of Rule 23(b)(3).
Once the four prerequisites of Rule 23(a) are met, as in this case, Indirect Purchaser
Plaintiffs must also show that the proposed Indirect Purchaser Damages Settlement Class
satisfies one of the requirements of Rule 23(b), in this case Rule 23(b)(3). See, e.g., Larsen v.
JBC Legal Group, P.C., 235 F.R.D. 191, 196 (E.D.N.Y. 2006). Under Rule 23(b)(3), Indirect
Purchaser Plaintiffs must first demonstrate that “questions of law or fact common to the class
predominate over questions affecting individual members.” Barone v. Safway Steel Prods., Inc.,
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 27 of 32 PageID #: 13567
21
No. CV-03-4258, 2005 WL 2009882 at *15 (E.D.N.Y. Aug. 23, 2005) (quoting Rule 23(b)(3)).
Second, Indirect Purchaser Plaintiffs must show that a “class action is superior to other available
methods for the fair and efficient adjudication of the controversy.” Id. With respect to both
requirements, the Court need not inquire whether the “case, if tried, would present intractable
management problems, for the proposal is that there be no trial.” Amchem Prods. Inc. v.
Windsor, 521 U.S. 591, 620 (1997) (citation omitted).
a. Common Questions of Law and Fact Predominate.
“[I]n cases involving allegations of a pure price-fixing conspiracy, common questions of
law and fact generally predominate on all issues.” Cont’l Orthopedic Appliances, Inc. v. Health
Ins. Plan of Greater New York, 198 F.R.D. 41, 46 (E.D.N.Y. 2000)). Because Indirect Purchaser
Plaintiffs’ claims allege a single global conspiracy from which all Indirect Purchaser Plaintiffs’
injuries arise, issues common to the class members—for example, the existence and scope of the
alleged price-fixing conspiracy among Defendants, the impact of Defendants’ conspiracy, and
the amount of damage suffered by the class as a result of an alleged violation of Section 1 of the
Sherman Act—predominate over any individual questions, and therefore class treatment of the
claims is appropriate for purposes of this settlement. See Amchem, 521 U.S. at 625
(“Predominance is a test readily met in certain cases alleging consumer or securities fraud or
violations of the antitrust laws.”); Playmobil, 35 F. Supp. 2d at 247 (finding predominance where
case involved allegations of “pricing structure to regulate prices . . . , to maintain prices at
artificially high levels, and to hinder price competition”); In re Buspirone Patent Litig., 210
F.R.D. 43, 58 (S.D.N.Y. 2002) (citing Amchem) (finding predominance requirement satisfied
where “[p]roof of the allegedly monopolistic and anti-competitive conduct at the core of the
alleged liability is common to the claims of all the plaintiffs”); Sullivan v. DB Investments, Inc.,
667 F.3d 273, 301 (3d Cir. 2011) (finding predominance and approving certification of a
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 28 of 32 PageID #: 13568
22
settlement class of indirect purchasers). Further, “variations in the rights and remedies available
to injured class members under [state law] do not defeat commonality and predominance.” DB
Investments, Inc., 667 F.3d at 301; In re Prudential Ins. Co. Am. Sales Practice Litig. Agent
Actions, 148 F.3d 283, 315 (3d Cir.1998); In re General Motors Corp. Pick-Up Truck Fuel Tank
Products Liability Litig., 55 F.3d 768 (3d Cir. 1995). “[A]s Prudential and GM Truck explain,
where a defendant’s singular conduct gives rise to one cause of action in one state, while
providing for a different cause of action in another jurisdiction,” the courts may group both
claims in a single class action to permit litigation in an “efficient, expedited, and manageable
fashion.” DB Investments, 677 F.3d at 302. The same goals are advanced by certifying the
Indirect Purchaser Settlement Class here, and the predominance prong is easily satisfied.
b. A Class Action Is the Superior Method to Adjudicate These Claims.
The Court must balance, in terms of fairness and efficiency, the advantages of class
action treatment against alternative available methods of adjudication. In re Nig. Charter Flights
Contract Litig., 233 F.R.D. 297, 301 (E.D.N.Y. 2006). See Fed. R. Civ. P. 23(b)(3) (listing four
considerations relevant to this determination). The Court needs to consider “the efficient
resolution of the claims or liabilities of many individuals in a single action, as well as the
elimination of repetitious litigation and possibly inconsistent adjudications.” D’Alauro, 168
F.R.D. at 458). Here, the interests of class members in individually controlling the prosecution of
separate claims are outweighed by the efficiency of the class mechanism. Thousands of
consumers indirectly purchased Vitamin C Products during the class period and settling their
claims in the context of a class action would conserve both judicial and private resources and
would hasten the class members’ recovery. See Fox v. Cheminova, 213 F.R.D. 113, 130
(E.D.N.Y. 2003) (stating that “the larger the class, the more judicial resources would be saved by
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 29 of 32 PageID #: 13569
23
proceeding as a class action”); In re Playmobil, 35 F. Supp. 2d at 249 (certifying a class because
“proceeding forward as a class action for liability is superior and would avoid duplication,
unnecessary costs and a wasting of judicial resources”). The Court found the superiority
requirement satisfied in the direct purchaser action, and it is equally satisfied in the indirect
purchaser action.
D. Notice to the Class
For the purpose of efficiency and cost-savings to the classes, Plaintiffs propose
combining notice of the settlements with Aland with notice of class certification. The notices and
the notice plan will meet the requirements of Rule 23, include a date for a fairness hearing on the
settlements, and will be submitted to the Court separately for approval.5
5 Preliminary approval of settlements, with notice plans and forms of notice to be submitted at a later date, is not an uncommon practice in this District. For example, Judge Gleeson has granted preliminary approval to fifteen settlements in In re Air Cargo Shipping Services Antitrust Litigation with notice plans and/or forms of notice submitted separately. See, e.g., Order Granting Preliminary Approval of Settlement with Defendant Qantas Airways Limited, No. 06-MD-1775, Doc. 1381 (January 26, 2011) (granting preliminary approval of settlement, and noting that “[b]y February 27, 2011, Settlement Class Counsel shall submit to the Court for approval a notice plan…”); Order Granting Preliminary Approval of Settlement with Defendants Air Canada and AC Cargo LLP, No. 06-MD-1775, Doc. 1652 (February 13, 2012) (granting preliminary approval of settlement, and noting that “[a]t a later date, Settlement Class Counsel shall submit to the Court for approval a notice plan…”). Plaintiffs plan to file their proposed notice plan with the Court before May 25, 2012, in compliance with the revised schedule entered by the Court on May 16, 2012.
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 30 of 32 PageID #: 13570
24
IV. PRELIMINARY APPROVAL ORDER
Plaintiffs respectfully submit that the proposed Direct and Indirect Purchaser Settlement
Agreements with Aland fall well within the range of possible approval, and that certification of
the Indirect Purchaser Damages Settlement Class is appropriate. Plaintiffs also submit that the
clarifications to the certified class definitions are appropriate. Plaintiffs therefore request that the
Court:
1. Preliminarily approve the Certified Classes Settlement Agreement and find that its terms are sufficiently fair, reasonable, and adequate for notice to be issued to the certified classes;
2. Preliminarily approve the Indirect Purchaser Settlement Agreement and find that its terms are sufficiently fair, reasonable, and adequate for notice to be issued to proposed Indirect Purchaser Damages Settlement Class;
3. Certify the Indirect Purchaser Damages Settlement Class, for purposes of settlement only pursuant to Federal Rule of Civil Procedure 23(c), and authorize Indirect Purchaser Plaintiffs to represent the Indirect Purchaser Damages Settlement Class;
4. Order Class Counsel to disseminate notice to the Classes, upon submission of proposed notices and approval by the Court of the form of notice and the notice plan; and
5. Approve Rust Consulting as Administrator of the Settlements, and Citibank as Escrow Agent.
V. CONCLUSION
For the foregoing reasons, the Court should grant Plaintiffs’ Motion for Preliminary
Approval of Direct and Indirect Purchaser Settlement, and certify the Indirect Purchaser
Damages Settlement Class.
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 31 of 32 PageID #: 13571
25
Dated: May 21, 2012 Respectfully submitted, /s/ Michael D. Hausfeld______________ Michael D. Hausfeld Brian A. Ratner Brent W. Landau HAUSFELD LLP 1700 K Street, NW Suite 650 Washington, DC 20006 Tel: (202) 540-7200 Fax: (202) 540-7201
/s/ William A. Isaacson_____________ William A. Isaacson Tanya Chutkan Jennifer Milici BOIES, SCHILLER & FLEXNER LLP 5301 Wisconsin Avenue, NW, Suite 800 Washington, DC 20015 Tel.: (202) 237-2727 Fax: (202) 237-6131
/s/ James T. Southwick______________ James T. Southwick Shawn L. Raymond Suyash Agrawal (SA-2189) SUSMAN GODFREY L.L.P. 1000 Louisiana, Suite 5100 Houston, TX 77002 Tel.: (713) 651-9366 Fax: (713) 654-6666
Alanna Rutherford (AR-0497) BOIES, SCHILLER & FLEXNER LLP 575 Lexington Avenue, 7th Floor New York, New York 10022 Tel: (212) 446-2300 Fax: (212) 446-2350
Co-Lead Counsel for the Certified Direct Purchaser Damages Class and Injunction Class
/s/ Daniel E. Gustafson__________ Daniel E. Gustafson Daniel C. Hedlund Michelle J.Looby GUSTAFSON GLUEK, PLLC 650 Northstar East 608 Second Avenue South Minneapolis, MN 55402 Tel: (612) 333-8844 Fax: (612) 339-6622
/s/ Timothy Battin__________________ David Boies Timothy Battin STRAUS & BOIES, LLP 4041 University Drive, Fifth Floor Fairfax, VA 22030 Tel: (703) 764-8700 Fax: (703) 764-8704
/s/ R. Alexander Saveri______________ R. Alexander Saveri SAVERI & SAVERI, INC. 111 Pine Street Suite 1700 San Francisco, CA 94111 Tel: (415) 217-6810
Co-Lead Counsel for Putative Indirect Purchaser Settlement Class
Case 1:06-md-01738-BMC-JO Document 470-1 Filed 05/21/12 Page 32 of 32 PageID #: 13572