California Appeals Court Reverses Denial Of Class Certification In Anheuser-Busch Pricing Suit
On May 29, 2020, the Court of Appeal for the Fifth Appellate District of California (Judge Brad Hill) reversed the lower court’s denial of certification for a class of convenience store owners pursuing a price discrimination claim under California law. Dhillon, et al. v. Anheuser-Busch, LLC, et al., No. F074952, 2020 WL 2786837 (Cal. Ct. App. May 29, 2020). Plaintiffs alleged that defendants, a major brewer and its distributor, violated California law requiring wholesalers to sell to retailers on a nondiscriminatory basis and charge only the prices filed with the Department of Alcoholic Beverage Control. Specifically, plaintiffs alleged that defendants engaged in a systematic scheme to favor certain retailers over others in the pricing of beer by issuing a disproportionately large number of consumer coupons to favored retailers. Those retailers, in turn, allegedly redeemed the coupons themselves rather than issuing them to customers to use in connection with a particular beer sale. Based on this scheme, plaintiffs alleged, the favored retailers effectively received wholesale prices, below the prices paid by “disfavored” retailers.
Plaintiffs moved for class certification, defining the putative class as retailers in two California counties who were classified using any one of nine channel descriptions and channel ID numbers used in the defendant distributor’s records, but excluding any alleged co-conspirators (the so-called “favored retailers”). Plaintiffs specifically named a few retailers as co-conspirators, but did not explain how they concluded they were co-conspirators, or how the trial court would do so in identifying member of the class. The trial court found the exclusions problematic, and concluded that “the class is either unascertainable or is ascertainable only based on a case-by-case reference to [the defendant distributor’s] business records, and some other known and unidentified criteria to determine who allegedly conspired with Defendants.” Because plaintiffs “offered no means by which only those class members who have claims can be identified without unreasonable expense [or] time by reference to official records,” the court denied class certification.
The Court of Appeal initially agreed and affirmed the trial court’s decision. Plaintiffs appealed to the California Supreme Court, which reversed and remanded with instructions for the Court of Appeal to reconsider in light of the California Supreme Court’s decision in Noel v. Thrifty Payless, Inc., 7 Cal. 5th 955 (2019). Noel found that the California appellate courts’ treatment of the ascertainability requirement had not been consistent. One approach required that the class members “be readily identif[iable] without unreasonable expense or time by reference to official records.” The Noel Court rejected this view, and specifically the notion that class action plaintiffs must prove “the existence of records . . . through which individual class members can be identified.” The Noel Court also rejected the notion that plaintiffs must demonstrate that this identification process could be completed “without unreasonable expense or time.” The Noel Court adopted an alternative, less exacting requirement for ascertainability for California class actions: to establish ascertainability, plaintiffs need only define the class “in terms of objective characteristics and common transactional facts” that make “the ultimate identification of class members possible when that identification becomes necessary.” The Noel Court noted that difficulties in identifying members of the class should be considered in connection with other elements of the class certification analysis, such as whether a class would be manageable and whether it would be superior to alternative procedures.
Applying this new framework on remand, the Court of Appeal found that the proposed class definition contained common transactional facts (retailers who purchased the brewer’s products from the distributor defendant) and objective characteristics (certain types of retail businesses as defined by existing categories in the distributor’s sales records). The Court of Appeal did not completely resolve the analysis, but remanded to the trial court to conduct its own analysis under the Noel standard to determine “whether the evidence presented by plaintiffs demonstrates the categories in their proposed class definition actually exist in [the distributor’s] records, and make ‘the ultimate identification of class members possible when that identification becomes necessary.’” With respect to the trial court’s concern about plaintiffs’ exclusion of “favored” retailers from the class definition, the Court of Appeal found that this concern should not be considered when addressing the ascertainability requirement but that concern is “more appropriately considered in connection with the other elements of the class certification analysis: a well-defined community of interest and substantial benefits to the litigants and the court from class certification.”
The Court of Appeal’s decision that specific criteria that are used in existing business records, to the extent they exist, may be sufficient to identify members of the class is consistent with Noel, so far as it goes. The more difficult question is one of identifying the alleged co-conspirators or “favored retailers” who meet the objective criteria for class membership from a defendant’s business records, but who should be excluded from the class because they are beneficiaries of the alleged wrongful conduct and are specifically excluded from the proposed class definition. The California Supreme Court did not address this issue in Noel because it was not a conspiracy case. Proposed class definitions in antitrust and other conspiracy-based cases invariably exclude co-conspirators, but identifying who to exclude is easy in some cases and more difficult in others, particularly vertical cases alleging that a supplier conspired with some downstream firms against others. As noted, the Court of Appeal’s directive that this issue not be considered a factor in the ascertainability analysis does not remove the issue from consideration in the class certification decision, but as a practical matter may make resolution more difficult. In this case, for example, in the pool of retailers who meet the objective criteria, there may well be potential intra-class conflicts between those who received favorable treatment and those who did not, including but not limited to the problem of drawing a line between the two, that the trial court will be need consider before certifying a class.