Because of differences in relevant state law, common issues of law don’t predominate, the court said, vacating the district court’s order certifying a nationwide indirect purchaser class in the multidistrict litigation.
Consumers who bought certain cellular phones for their own use sued Qualcomm alleging antitrust and consumer law violations. They sought to certify a class of up to 250 million individuals and pleaded more than $4 billion in damages, according to the decision. A district court certified the class after deciding California law applied, and Qualcomm appealed.
The Department of Justice advocated for tossing the lawsuit to the extent its underlying theory was rejected by the court in FTC v. Qualcomm Inc.
Although the U.S. Court of Appeals for the Ninth Circuit didn’t reach the issue, it acknowledged that FTC v. Qualcomm “may well warrant dismissal” of the indirect purchasers’ claims.
Choice of Law
“When properly analyzed, California’s choice of law rules preclude the district court’s certification” of a damages class “because the laws of other states—beyond California’s Cartwright Act—should apply,” the court said.
Plaintiffs are indirect purchasers and can’t seek damages for alleged Sherman Act violations under Supreme Court case law. Consequently, their claims turn on state laws authorizing indirect purchasers to sue for antitrust damages notwithstanding the high court’s decision.
Under California choice of law rules, a class action plaintiff bears the burden of showing that each class member’s claims have “significant contact or significant aggregation of contacts” to the state. But the other party can prove that another state’s law ought to apply despite those contacts, where it finds the interests of other states outweigh California’s interests.
In making that determination, the lower court overlooked differences in state laws, the Ninth Circuit said.
The lower court was wrong to conclude that “other states have no interest in applying their laws to the current dispute,” the appeals court said.
The Ninth Circuit’s decision in FTC v. Qualcomm, which vacated an injunction that would have prohibited Qualcomm’s “core business practices” on the basis that its conduct was lawful and not anti-competitive, was premised on “the principle” that “the antitrust laws, including the Sherman Act, were enacted for the protection of competition,” and that harms to consumers that fall “outside of the relevant markets are beyond the scope of antitrust law.”
In light of that principle, “there is no basis for concluding that California is the only state that has an interest,” the court said.
According to the Ninth Circuit, relevant interests aren’t “simply about the benefit or harm to resident consumers or liability to resident antitrust defendants,” but include harm to the competitive process and in-state business activity.”
Allowing states that bar the plaintiffs’ antitrust claims to apply their laws to class members furthers those states determinations of how to effectively enforce the antitrust laws.
Thirty-five states and the District of Columbia have statutes that repeal “in one form or another” the Supreme Court decision establishing that indirect purchasers are barred from seeking damages for alleged Sherman Act violations, the decision said.
On remand, the Ninth Circuit instructed the district court “to reconsider its certification of the entire class,” including certification for purposes of injunctive relief, given FTC v. Qualcomm.
Judges Eugene E. Siler, Jay S. Bybee and Ryan D. Nelson joined in the ruling.
The case is Stromberg v. Qualcomm Inc., 9th Cir., No. 19-15159, 9/29/21.