More lessons from the laboratories: CY pres distributions in parens patriae antitrust actions brought by state attorneys general

Fordham Law Review

Volumn 68, Issue 2, 1999, Pages 361-405

  Farmer, Susan Beth ^a  

^a NONE

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EID: 0033274283     PISSN: 0015704X     EISSN: None     Source Type: Journal    
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References (267)

1. See Hart-Scott-Rodino Antitrust Improvements Act (HSRA) of 1976, Pub. L. No. 94-435, 90 Stat. 1383 (1976) (codified as amended in scattered sections of 15 U.S.C.).
2. 90 Stat. at 1383.
3. The antitrust laws generally prohibit both anticompetitive agreements and unilateral actions having anticompetitive effects. See 15 U.S.C. §§ 1-2 (1994). The cases discussed in this article concern alleged conspiracies among firms at different levels of the distribution chain. Such conspiracies in restraint of trade are unlawful under section 1 of the Sherman Act of 1890 ("Sherman Act"). See Act of July 2, 1890, ch. 647, 26 Stat. 209 (codified as amended at 15 U.S.C. § 1 ). For a thorough description of the law, see generally Phillip Areeda & Louis Kaplow, Antitrust Law (1995 & Supp. 1999), Herbert Hovenkamp, Federal Antitrust Policy (1994), and Stephen Ross, Principles of Antitrust Law (1993).
4. See infra notes 119-24 and accompanying text. The bill also established a premerger notification and review process by requiring that merging firms notify the federal antitrust enforcement agencies, the United States Department of Justice and the Federal Trade Commission, of their plans to merge. See 15 U.S.C. § 18a. Merging firms must also provide information concerning the proposed transaction, and wait for a period specified by the statute before consummating the transaction. See id. The HSRA also amended 15 U.S.C. § 26, which concerned injunctive relief in private actions, to provide for the award of costs, including attorney's fees, to successful private plaintiffs. See id. § 26.
5. Literally, parens patriae means "parent of the country." See West Virginia v. Chas. Pfizer & Co., 440 F.2d 1079, 1089 (2d Cir. 1971). Early English common law recognized that the King's royal prerogative comprised various powers and duties, including the protection of infants and incompetent persons. See Michael Malina & Michael Blechman, Parens Patriae Suits for Treble Damages Under the Antitrust Laws, 65 Nw. U. L. Rev. 193, 198 (1970). The King, as parens patriae, also acted as the guardian of "all charitable uses in the kingdom." Id. at 197 (quoting William Blackstone, Commentaries 47-48 (E. Christian ed., 12th ed. 1794)).
6. See 15 U.S.C. § 15c.
7. See supra note 5.
8. See infra note 37 and accompanying text.
9. See infra note 95.
10. See, e.g., In re Montgomery County Real Estate Antitrust Litig., 452 F. Supp. 54, 60 (D. Md. 1978) (allowing state to seek injunctive relief for claimed violations).
11. See Stephen Calkins, An Enforcement Official's Reflections on Antitrust Class Actions, 39 Ariz. L. Rev. 413, 435-36 (1997).
12. See id. at 436.
13. See Pennsylvania v. Mid-Atlantic Toyota Distribs., 704 F.2d 125, 127 (4th Cir. 1983) (concerning statutory parens patriae actions by Delaware, Maryland, Pennsylvania, Virginia, West Virginia, and the District of Columbia on behalf of consumers who had purchased Toyota vehicles allegedly subject to a price fixing conspiracy).
14. See Burch v. Goodyear Tire, 554 F.2d 633, 634-35 (4th Cir. 1977) (concerning state antitrust action relating to tire distribution).
15. See In re Cuisinart Food Processor Antitrust Litig., M.D.L. 447, 1983 WL 153, at *1 n.2 (D. Conn. Oct. 24, 1983). In In re Grand Jury Investigation of Cuisinarts, Inc., 665 F.2d 24 (2d Cir. 1981), states sought access to grand jury materials in connection with the United States's investigation and indictment of Cuisinarts for antitrust violations. See id. at 28. Access to the materials was denied by the district court and affirmed on appeal. See id. Thereafter, the states investigated and filed a parens patriae action on behalf of consumers who had purchased Cuisinart food processors. See In re Cuisinart Food Processor Antitrust Litig., 1983 WL 153, at *1 n.2.
16. In In re Montgomery County Real Estate Litigation, 452 F. Supp. 54, 56 (D. Md. 1978), Maryland sued six real estate brokers and other individuals alleging price fixing of commission rates.
17. See New York v. Dairylea Coop., No. 81 Civ. 1891, 1985 WL 1825, at *1 (S.D.N.Y. June 26, 1985). In an earlier proposed settlement, the court refused to give its preliminary approval as the settlement required the defendant to spend $750,000 in printing and redeeming coupons on milk cartons and to pay $250,000 to governmental entities over five years. See New York v. Dairylea Coop., 547 F. Supp. 306, 308 (S.D.N.Y. 1982). The court decided that the plan had a "clear anti-competitive effect" because it "[gave] substantial future marketing advantages to Dairylea . . . and makes no effort to at least endeavor to provide that payments are at a minimum made to those very consumers actually injured in the past by Dairylea's allegedly wrongful conduct." Id. The court acknowledged that there might be no other practical alternatives for distributing the settlement fund, but that the record on that possibility was insufficient. See id.
18. See In re Nintendo Antitrust Litig., 775 F. Supp. 676, 678 (S.D.N.Y. 1991); In re Panasonic Consumer Elecs. Prods. Antitrust Litig., No. 89 Civ. 0368 (SWK), 1989 WL 63240, at *1 (S.D.N.Y. Jun. 5,1989); In re Minolta Camera Prods. Antitrust Litig., 668 F. Supp. 456, 457-58 (D. Md. 1987).
19. See New York v. Reebok Int'l Ltd., 903 F. Supp. 532, 532-33 (S.D.N.Y. 1995), affd 96 F.3d 44 (2d Cir. 1996); New York v. Keds Corp., No. 93 Civ. 6708 (CSH), 1994 WL 97201, at *1 (S.D.N.Y. Mar. 21, 1994).
20. See Pennsylvania v. Playmobil USA, Inc., Civ. A. No. 1: CV-95-0287, 1995 WL 787518, at *1 (M.D. Pa. Dec. 15, 1995). The state brought the case as parens patriae on behalf of consumers who had bought Playmobil toys between Jan. 1, 1991 and Dec. 31, 1993. See Court Approves Toy Importer's Settlement of State's Vertical Price Fixing Charges, 70 Antitrust & Trade Reg. Rep. (BNA) 37 (Jan. 18, 1996). The defendant agreed to an injunction prohibiting it from fixing resale prices and requiring it to pay $275,000 in settlement. See id. Approximately $3,000 was distributed to 86 consumers who could show that they had purchased at least $50 in Playmobile toys during the relevant time period. See id. at 38. Of the remainder, $201,000 was paid to 12 charitable groups whose purpose was to serve children, and $50,000 was paid to the state as costs and attorneys' fees. See id.
21. See Tennessee v. Highland Mem'l Cemetery, Inc., 489 F. Supp. 65, 66 (E.D. Tenn. 1980).
22. See In re Coordinated Pretrial Proceedings in Petroleum Prods. Antitrust Litig., 906 F.2d 432, 436 (9th Cir. 1990); Pennsylvania v. Budget Fuel Oil Co., 122 F.R.D. 184, 185 (E.D. Pa. 1988) (alleging a price fixing conspiracy involving home heating oil); see also Clark Oil & Refining Corp. v. Ashcroft, 639 S.W.2d 594, 595 (Mo. 1982) (holding that the Missouri Attorney General had authority under state law to bring federal statutory parens patriae antitrust actions).
23. See New York v. Salem Sanitary Carting Corp., No. CV85-0208 (ILG), 1989 WL 165596, at *1 (E.D.N.Y. Nov. 16, 1989); see also Garbage Haulers Resolve State Section 1 Charges of Allocating Customers, Collusive Bidding, 58 Antitrust & Trade Reg. Rep. (BNA) No. 17 (Jan. 4, 1990) (discussing background to case and summarizing the terms of settlement).
24. See New York v. Primestar Partners L.P., No. 93 Civ. 3868 (JES), 1993 WL 527984, at *1 (S.D.N.Y. Sept. 14, 1993); New York v. Primestar Partners L.P., No. 93 Civ. 3868 (JES), 1993 WL 720677, at *1 (S.D.N.Y. Sept. 14, 1993).
25. See infra part III.
26. See infra notes 212-17 and accompanying text.
27. See infra note 212 and accompanying text.
28. See infra part III.B.
29. See infra part III.B.
30. In these exceptional cases, the entirety of very large settlement funds has been distributed to charitable groups with the express purpose of indirectly benefiting the injured group of consumers represented by the state as parens patriae. These cases alleged antitrust violations that directly affected consumers, as is required by the parens patriae enabling legislation.
31. A review of published cases and interviews with state Assistant Attorneys General reveals only one example of a proposed settlement that was not approved by the court. In that case, New York v. Dairylea Cooperative Inc., the state proposed direct distribution of restitution to consumers through coupons. See 547 F. Supp. 306, 308 (S.D.N.Y. 1982). The court rejected the plan, see id., and ultimately adopted a cy pres distribution seeking to indirectly benefit the consumers. See New York v. Dairlylea Coop., No. 81 Civ. 1891, 1985 WL 1825, at *2 (S.D.N.Y. June 26, 1985).
32. In addition, it can be inferred that antitrust enforcement, including parens patriae actions, deters other antitrust violations. However, none of the cases described in part III was litigated to a verdict on the merits of the allegations, and none of the defendants admitted to liability in any of the settlement agreements reviewed. Therefore, it is equally plausible that these actions over-deter efficient or pro-consumer behavior rather than deter additional antitrust violations. In the absence of litigated results, both conclusions have some appeal.
33. For example, if the population of affected consumers is very mobile, if time has lapsed between the alleged conspiracy and a distribution method such as coupons, or if the product is a one-time purchase, then alternatives such as the one discussed in part III.C. should not be used.
34. See infra part H.A.
35. Malina & Blechman, supra note 5, at 197.
36. See Hawaii v. Standard Oil Co., 405 U.S. 251, 257 (1972). To sue under parens patriae, the governmental body must have had some interest apart from those of its individual citizens. See Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez, 458 U.S. 592, 607 (1982); Pennsylvania v. West Virginia, 262 U.S. 553, 564 (1923). This insures that the suit will be prosecuted vigorously. Second, the governmental body must be acting to protect a "substantial portion" of its populace. See id. at 592; see also Louisiana v. Texas, 176 U.S. 1, 28 (1900) (Brown, J., concurring) (dismissing case where state is not the proper party plaintiff). This insures that the public's resources are not squandered to aid only a discrete number of litigants. See, e.g., State ex rel. Barker v. Chicago & A.R. Co., 178 S.W. 129, 138 (1915) (stating that public funds should not be used in private disputes). The authority to sue parens patriae, in federal court, to protect its populace from discrimination is limited to states, commonwealths and territories. See Estados Unidos Mexicanos v. Decoster, No. Civ. 98-186-P-H, 1999 WL 636438, at *3 (D. Me. Aug. 9, 1999).
37. See, e.g., Georgia v. Tennessee Copper Co., 206 U.S. 230, 238-39 (1907) (discussing action to enjoin air pollution); Kansas v. Colorado, 185 U.S. 125, 145-47 (1902) (discussing action to enjoin water diversion); Missouri v. Illinois, 180 U.S. 208, 248 (1901) (discussing action to enjoin sewage discharges into a river); Louisiana v. Texas, 176 U.S. 1, 22-23 (1899) (allowing quarantine of imported goods assertedly to prevent spread of communicable disease).
38. See, e.g., Tennessee Copper Co., 206 U.S. at 238-39 (declaring the state to be the appropriate plaintiff on behalf of citizens); Kansas, 185 U.S. at 142 ("That suits brought by individuals, each for personal injuries, threatened or received, would be wholly inadequate and disproportionate, receives no arguments."); Missouri, 180 U.S. at 241 (declaring that suits brought by individual plaintiffs would be "wholly inadequate"); Louisiana, 176 U.S. at 28 (Brown, J., concurring) (stating that individual citizens are not proper plaintiffs). It should be noted that these were true parens patriae actions, brought solely on behalf of the interests of the citizens. The proprietary interests of the states were not alleged to have been harmed.
39. 262 U.S. 553 (1923).
40. Id. at 592 (emphasis added). In Pennsylvania, the states of Pennsylvania and Ohio challenged the constitutionality of a West Virginia statute that required West Virginia natural gas producers to sell to state purchasers before shipping out-of-state. See id. at 581. Pennsylvania and Ohio sued in their proprietary capacity as the operator of schools, and as parens patriae on behalf of consumers of natural gas. See id. at 591.
41. See Georgia v. Pennsylvania R.R., 324 U.S. 439, 447 (1945); Louisiana, 176 U.S. at 23 (Harlan, J., concurring); Malina & Blechman, supra note 5, at 203
42. See Pennsylvania R.R., 324 U.S. at 447-49.
43. See id.
44. See Hawaii v. Standard Oil Co., 405 U.S. 251, 260 (1972); Pennsylvania R.R., 324 U.S. at 450.
45. See Hawaii, 405 U.S. at 253 (disallowing state claims seeking damages for harm to the general economy of the state); California v. Frito-Lay, Inc., 474 F.2d 774, 778 (9th Cir. 1973) (barring state's claim for damages on behalf of individual consumers allegedly harmed by antitrust price fixing conspiracy); West Virginia v. Chas. Pfizer & Co., 440 F.2d 1079, 1089 (2d Cir. 1971) (affirming denial of state common law parens patriae claims and stating that the "use of the parens patriae theory has not, however, met with much success in the few attempts to apply it to the recovery of treble-damage antitrust claims" (citations omitted)).
46. 324 U.S. 439 (1945). The Court granted Georgia leave to file its complaint in the Supreme Court, seeking to invoke the Court's original jurisdiction. See id. at 452. However, the state could not recover damages, even if it proved the alleged conspiracy, because the challenged rail rates had been approved by the Interstate Commerce Commission. See id. at 453. The state could, however, obtain injunctive relief if it prevailed. See id. at 454.
47. Georgia, which owned a railroad and other institutions that shipped freight, sued to recover treble damages for harm to those businesses caused by the alleged rate fixing. See id. at 447. States are "persons" under the antitrust laws and are entitled to sue to recover damages and injunctive relief for their own proprietary injuries. See Georgia v. Evans, 316 U.S. 159, 162 (1942); see also Chattanooga Foundry & Pipe Works v. Atlanta, 203 U.S. 390, 396 (1906) (finding that the plaintiff, the City of Atlanta, was a person under section 7 of the Sherman Act and under the express provisions of section 8 of the Sherman Act). The Court, however, deemed the proprietary claim as "makeweight." Pennsylvania R.R., 324 U.S. at 450. The dissent agreed. See id. at 473.
48. In this claim, the state alleged that the illegal price fixing harmed the state in four ways: (1) it denied access to national markets for Georgia products; (2) it foreclosed development of Georgia's economy into manufacturing and other commercial enterprises; (3) it prevented progressive government initiatives; and (4) it prevented the economy from developing. See id. at 444.
49. See id. at 443-44.
50. The state argued that these fixed rates were nearly 40% higher than competitive rates in the North. See id. at 444.
51. Defendants also alleged that the complaint did not state a claim for relief, and that two defendants were Georgia citizens and therefore an original action in the Supreme Court could not be maintained. See id. at 445.
52. In enacting the antitrust laws, Congress authorized civil and criminal enforcement by the federal government and civil suits by other persons. See id. at 447. The Court found nothing in the statutes limiting civil actions brought by States to proprietary actions, and therefore concluded that there was no reason to exclude parens patriae antitrust actions. See id.
53. Id. at 450.
54. Id. at 451.
55. 15 U.S.C. § 15c (1994); see infra part II.B. for a discussion of statutory parens patriae actions.
56. Pennsylvania R.R., 324 U.S. at 451.
57. See id. at 452 ("This is not a suit in which a State is a mere nominal plaintiff . . . . This is a suit in which Georgia asserts claims arising out of federal laws and the gravamen of which runs far beyond the claim of damage to individual shippers.").
58. The United States may bring criminal prosecutions or suits for injunctions under the antitrust laws. See id. at 447. Under section 4a of the Clayton Act, the government may also bring suit to recover damages inflicted upon its proprietary interests. See 15 U.S.C. § 15a (1994).
59. The majority implicitly recognized that state actions for injunctive relief not brought in a proprietary capacity are law enforcement actions, stating that "Georgia is a 'person' entitled to enforce the civil sanctions of the anti-trust laws . . . ." Id. at 452. Therefore, the majority implicitly foresaw that the states could have a role in enforcing the antitrust law, not merely in obtaining redress for injury to the state or as parens patriae for the citizens of the state. The dissent warned that allowing states to enforce the antitrust laws, except in a proprietary capacity, risked creating an inconsistent competition policy. The dissent cautioned that: The authority to bring such [antitrust] suits includes the discretionary authority not to bring them, if the responsible officers of the government are of the opinion that a suit is not warranted or would be of disservice to the national interest. To permit a State to bring a Sherman Act suit in [sic] behalf of the public is to fly in the face of the national policy established by Congress that the federal government should determine when such a suit is to be brought and how it should be prosecuted. Id. at 474.
60. See 15 U.S.C. § 15 (1994).
61. See id. § 26.
62. See Hawaii, 405 U.S. at 261.
63. See 15 U.S.C. § 15.
64. See Hawaii, 405 U.S. at 261.
65. See Georgia v. Pennsylvania R.R., 324 U.S. 439, 447 (1945).
66. Although the Court recognized that claims under antitrust law for injuries to the quasi-sovereign interests of the state could exist, it declined to allow for recovery without explicit Congressional authorization. See Hawaii, 405 U.S. at 264.
67. See 15 U.S.C. § 15a ("Whenever the United States is hereafter injured in its business or property by reason of anything forbidden in the antitrust laws it may sue therefor . . . and shall recover threefold the damages by it sustained . . . .").
68. See Hawaii, 405 U.S. at 265.
69. See 15 U.S.C. § 15a.
70. See Hawaii, 405 U.S. at 265 ("[I]t is manifest that the United States cannot recover for economic injuries to its sovereign interests, as opposed to its proprietary functions.").
71. See id.
72. See id. at 266. If the state government acts as the lead plaintiff, it must satisfy the standing requirements, as all plaintiffs must.
73. Although the district court had dismissed Hawaii's initial class action suit, the district court based its dismissal on considerations of the unwieldy nature of class litigation; it did not hold that a state could never bring a class action on behalf of some or all of its consumer citizens. See id.
74. See id. at 268 (citing Georgia v. Pennsylvania R.R., 324 U.S. 439 (1945)); see also id. at 272-73 (Brennan, J., dissenting) ("As in Georgia, this can only be characterized as a wrong to the State . . . . If that injury would have been a sufficient basis for a damage claim by Georgia, as we held in that case, then it supports an identical action by Hawaii here."). For a discussion of Pennsylvania Railroad, see supra notes 46-65 and accompanying text.
75. See Hawaii, 405 U.S. at 269. Any harm to a state's economic growth and development constitutes the "collective" harm that is injury to the state's general economy. See id.
76. Id. The majority also viewed these concepts as essentially inseparable, characterizing the alleged injury to the general economy as no more than the sum of all injuries to individuals. See id. at 264.
77. See id. at 269-70 (Douglas, J., dissenting). Finding the difficulty of separating individual damages from collective ones to be "more imaginary than real," Justice Douglas described the majority decision as "rationales that express a prejudice against liberal construction of the antitrust laws. Since a collective damage is alleged, I would allow the case to go to trial, saving to [sic] Congress the question whether § 4 of the Clayton Act should be restricted to a State's proprietary interests." Id. at 270 (Douglas, J., dissenting).
78. 474 F.2d 774 (9th Cir. 1973).
79. See id. at 778. The same issue had been decided by district courts in Hawaii v. Standard Oil Co., 301 F. Supp. 982, 986 (D. Haw. 1969), Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corp., 309 F. Supp. 1057, 1061 (E.D. Pa. 1969), and In re Motor Vehicle Air Pollution Control Equipment, 52 F.R.D. 398, 401 (C.D. Cal. 1970), all holding that states lacked the authority to recover treble damages on behalf of consumers in parens patriae actions.
80. See Frito-Lay, 474 F.2d at 775 (alleging that "the duty to protect [California citizens'] interests and to enforce the policy of the anti-trust laws rests with their sovereign, the State of California").
81. See Hawaii, 405 U.S. at 258-59.
82. See Frito-Lay, 474 F.2d at 775. In Hawaii, the issue was whether the alleged injury constituted harm to the state's business or property. See Hawaii, 405 U.S. at 260. In Frito-Lay, the alleged harm was to the business or property of the consumers, and thus the issue was whether the state could sue on their behalf. See Frito-Lay, 474 F.2d at 775.
83. See Frito-Lay, 474 F.2d at 778.
84. See id. at 775 (noting that, despite some academic criticism, such claims had received "no judicial recognition in this country as a basis for recovery of money damages for injuries suffered by individuals").
85. See id. at 776. California's theory comported with traditional common law parens patriae doctrine in its original sense as guardian of incompetent citizens, because its argument assumed that individual consumers with small stakes could not maintain massive antitrust actions. See id. Historically, parens patriae authority established the sovereign as the guardian of "'infants, idiots and lunatics.'" Id. (citing William Blackstone, Commentaries 47-48 (E. Christian ed., 12th ed. 1794)). According to the court, guardianships administered by the courts have taken over the care of these classes and others, making protection in the form of parens patriae actions by the sovereign unnecessary. See Frito-Lay, 474 F.2d at 776. Similarly, consumers may assert their own antitrust claims in class actions, so parens patriae actions by the sovereign are not required to protect consumers' interests. See id. at 776-77.
86. See id. at 776-78.
87. See id. at 775. California also argued that unless the court allowed actions like California's to proceed, future conspiracies would not be deterred, and both consumers as well as competition would suffer. See id. at 777.
88. See id. at 776 & n.9. The Court saw Rule 23 as providing "safeguards" that the state sought to evade. Id.
89. Id. at 776. California had argued that any unclaimed damages would escheat to the state and "will serve a valid public purpose by providing the injured citizens with the closest equivalent of the recovery which, individually, is beyond their reach." Id. at 776-77.
90. See id. at 777. The Court refused to "restore[] to the substance of the common law rules of law in an area which has been pre-empted by legislation because of the need for careful control." Id.
91. See id. The Court "disclaim[ed] any intent to discourage the state in its search for a solution" to achieving maximum deterrence and protecting consumers. Id.
92. See id. (stating that the authority to sue parens patriae for antitrust injury can only come through "legislation and rule making, where careful consideration can be given to the conditions and procedures that will suffice to meet the many problems posed by one's assertion of power to deal with another's property and to commit him to actions taken in [sic] his behalf").
93. See HSRA, Pub. L. No. 94-435, sec. 301, § 4C, 90 Stat. 1383, 1394 (codified at 15 U.S.C. § 15c (1994)).
94. See H.R. Rep. No. 94-499, at 9 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2578.
95. See id. at 9, reprinted in 1976 U.S.C.C.A.N. 2572, 2579; see also Kansas v. Utilicorp United, Inc., 497 U.S. 199, 219 (1990) ("[Section] 4C did not establish any new substantive liability. Instead, '[i]t simply created a new procedural device -parens patriae actions by States on behalf of their citizens - to enforce existing rights of recovery under § 4 [of the Clayton Act].'" (quoting Illinois Brick Co. v. Illinois, 431 U.S. 720, 734 n.14 (1977)).
96. See 15 U.S.C. § 15c; see also id. § 15 (allowing private actions by injured persons, including foreign states); id. § 15a (allowing treble damages actions by the United States for injury to its business or property). For a discussion of the state of the law at the time of the HSRA's passage, see generally Hawaii v. Standard Oil Co., 405 U.S. 251 (1972), and California v. Frito-Lay, Inc., 474 F.2d 774 (9th Cir. 1973). These cases are discussed extensively supra notes 66-108 and accompanying text.
97. See 15 U.S.C. § 1 (declaring contracts, combinations, and conspiracies in restraint of trade or commerce to be felonies); id. § 2 (declaring monopolization, conspiracy, or attempts to monopolize to be felonies); id. § 4 (assigning to United States Attorneys the duty to institute equitable antitrust proceedings); id. § 25 (same).
98. Under 15 U.S.C. § 15, individuals may bring suit against an antitrust violator to recover treble the amount of antitrust damages suffered as a consequence of the defendant's actions.
99. See H.R. Rep. No. 94-499, at 6 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2576 (observing that consumers had "neither the incentive nor the resources to engage in protracted and extremely costly litigation to recover [their] tiny individual stake"). For a discussion on the relative merits of class action and parens patriae antitrust actions, see infra part II.C.
100. See H.R. Rep. No. 94-499, at 3 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2572.
101. See id. at 3, reprinted in 1976 U.S.C.C.A.N. 2572, 2572-73. The year after Congress enacted the HSRA, however, the Supreme Court held that states could not represent purchasers who had not bought directly from the antitrust violator ("indirect purchasers") in actions under the antitrust laws. See Illinois Brick Co. v. Illinois, 431 U.S. 720, 746-47 (1977). The Court held that tracing overcharges, which had been passed through the chain of distribution, was too complex and, as a matter of judicial efficiency, barred indirect purchaser suits. See id. at 745. The Court recognized pre-existing cost-plus contracts as the only exception to the absolute bar on indirect purchaser antitrust actions. See id. at 736; see also Kansas v. Utilicorp United, Inc., 497 U.S. 199, 217-18 (1990) (reinforcing the existence of such an exception). Many state legislatures circumvented the Court's holding in Illinois Brick by passing state antitrust laws that allowed suits by indirect purchasers. See, e.g., California v. ARC America Corp., 490 U.S. 93, 98 n.3 (1989) (collecting state statutes that allow suits by indirect purchasers). In ARC America, the Court ruled that federal antitrust laws did not preempt state statutes circumventing Illinois Brick. See id. at 105-06.
102. H.R. Rep. No. 94-499, at 3 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2573.
103. Id. at 3-4, reprinted in 1976 U.S.C.C.A.N. 2572, 2573. The Report observed that although the antitrust laws are traditionally understood to protect "competition, not competitors," see Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)), consumers are the ultimate victims of antitrust violations, and thus they benefit from more enforcement. See H.R. Rep. No. 94-499, at 4 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2573.
104. Id. at 4, reprinted in 1976 U.S.C.C.A.N. 2572, 2573.
105. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2573-74. Antitrust plaintiffs are entitled to recover treble damages for injury to their business or property. See 15 U.S.C. § 15 (1994). A consumer suffers damage to his or her property, even if the consumer is not claiming harm to a business interest, if he or she has suffered monetary damage. See Reiter v. Sonotone Corp., 442 U.S. 330, 337-39 (1979).
106. See H.R. Rep. No. 94-499, at 4 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2573-74.
107. See id. at 4-5, reprinted in 1976 U.S.C.C.A.N. 2572, 2573-74.
108. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2573-74.
109. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2573-74. Violation of the antitrust laws is a felony. See 15 U.S.C. §§ 1-2. The United States District Courts have jurisdiction to grant injunctive relief, see id. § 3, which may be sought by the government, see id. § 25, or private parties with standing to sue, see id. § 26.
110. See H.R. Rep. No. 94-499, at 4-5 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2573-74.
111. See, e.g., California v. Frito-Lay, Inc., 474 F.2d 774 (9th Cir. 1973). For a discussion of this case, see supra notes 94-108.
112. See H.R. Rep. No. 94-499, at 8 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2578 ("The thrust of the bill is to overturn Frito-Lay by allowing State Attorneys General to act as consumer advocates in the enforcement process, while at the same time avoiding the problems of manageability which some courts have found under Rule 23."). The HSRA was not, however, intended to change substantive antitrust doctrine or create new antitrust liability. See id. at 9, reprinted in 1976 U.S.C.C.A.N. 2572, 2578-79. The House Report notes that the parens patriae bill was supported by the Justice Department, the acting Director of the Federal Trade Commission Bureau of Competition, and the National Association of Attorneys General. See id. at 8, reprinted in 1976 U.S.C.C.A.N. 2572, 2578.
113. See id. at 5, reprinted in 1976 U.S.C.C.A.N. 2572, 2574-75. Although section 4C of the Clayton Act explicitly authorizes state parens patriae actions only for damages, courts have included the ability to seek injunctive relief as part of the bundle of remedies that state Attorneys General may seek. See In re Montgomery County Real Estate Antitrust Litig., 452 F. Supp. 54, 60 (D. Md. 1978). The enhanced federal-state cooperation was viewed as "[a]n extremely important benefit." See H.R. Rep. No. 94-499, at 5 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2575.
114. Id. at 5, reprinted in 1976 U.S.C.C.A.N. 2572, 2575. Indeed, the report views the elected status of most Attorneys General favorably because they will be "accountable" to their constituents. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2575.
115. The Act does not, however, prohibit the state official from hiring private counsel to represent the state in these parens patriae actions, but it does bar any private counsel who was retained on a contingency fee based on the size of the monetary recovery. See 15 U.S.C. § 15g(1)(A) (1994); see also H.R. Rep. No. 94-499, at 10 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2579 (same). Private counsel may be hired on other contingent arrangements, but the court must approve any award of attorney's fees to such lawyers. See 15 U.S.C. § 15g(1)(B); see also H.R. Rep. No. 94-499, at 10 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2579 (same). In its report, the House committee recognized that private counsel "may be especially necessary and useful" to coordinate parens patriae actions brought by a number of states, but limited the use of contingency fees in order to "encourage[] [States] to develop their own in-house antitrust capability." Id., at 10, reprinted in 1976 U.S.C.C.A.N. 2572, 2579. This Congressional encouragement of state antitrust enforcement was not new. In 1976, Congress authorized up to $10 million per year in grants to state attorneys general for antitrust enforcement. See Crime Control Act of 1976, Pub. L. No. 94-503, § 116, 90 Stat. 2407, 2415 (repealed 1979); see also Roger W. Stone, Reviving State Antitrust Enforcement: The Problems With Putting New Wine in Old Wine Skins, 1979 J. Corp. L. 547, 591-96 (1979) (describing the "seed money" grant program for state enforcement of federal antitrust law).
116. The legislative history confirms that the bill created no new substantive liability. Instead, the bill was meant to "provide[] an alternative means to make practically available Federal remedies at law, previously denied, for the vindication of existing substantive claims." H.R. Rep. No. 94-499, at 9 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2578-79.
117. The "monetary relief" to which natural persons are entitled is equal to treble damages plus the cost of suit, including attorney's fees. See 15 U.S.C. § 15c(a)(2). The attorney's fees are to be determined by the court pursuant to 15 U.S.C. § 15c(d)(1). The court may also award interest, to be calculated from the date of service of the action and ending with the date of the judgment, or for a shorter time period if the court determines that a more limited time period would be just. See id. § 15c(a)(2). Finally, attorney's fees may be awarded to a "prevailing defendant" if the court finds that the Attorney General who brought the case "acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Id. § 15c(d)(2).
118. Id. § 15c(a)(1). The term "natural persons" is intended to refer to citizens of the state; it excludes corporations, partnerships, sole proprietorships, and other business entities. See H.R. Rep. No. 94-499, at 9-10 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2578-79. Congress recognized that some citizens might be in a better position to bring their own antitrust lawsuits than some small struggling businesses, but opted as a matter of policy to include citizens and to exclude all other potential plaintiffs. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2579. The justification for this Congressional choice was that citizen-consumers are the ones "most in need of representation but presently unrepresented," and that businesses would ordinarily be able to take care of themselves. Id., reprinted in 1976 U.S.C.C.A.N. 2572, 2579.
119. 15 U.S.C. § 15c(a)(1). Parens patriae actions include any antitrust violation except violations caused by an anticompetitive merger in violation of section 7 of the Clayton Act, see id. § 18, or unlawful price discrimination in violation of section 2 of the Clayton Act, see id. § 13; see also H.R. Rep. No. 94-499, at 10 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2579.
120. See 15 U.S.C. § 15d.
121. See id. § 15e.
122. See id. § 15c(b).
123. See H.R. Rep. No. 94-499, at 11-15 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2581-85.
124. See Fed. R. Civ. P. 23(a); see also General Tel. Co. v. EEOC, 446 U.S. 318, 330 (1980) ("The typicality requirement is said to limit the class claims to those fairly encompassed by the named plaintiff's claims."); 1 Herbert Newberg & Alba Conte, Newberg on Class Actions § 3.13, at 3-76 (3d ed. Dec. 1992) ("Typicality determines whether a sufficient relationship exists between the injury to the named plaintiff and the conduct affecting the class, so that the court may properly attribute a collective nature to the challenged conduct.").
125. Despite liberalizing many of the traditional prerequisites to a class action suit, legislative history describes this section as "draw[ing] upon [the] established body of [existing] law" that mandates disgorgement of unlawful gains and permits plaintiffs to prove their damages by making reasonable estimates. See H.R. Rep. No. 94-499, at 13-14 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2583 (citing Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100 (1969) and other cases).
126. The bill was not intended to increase the amount of damages a defendant may be required to pay after an adverse judgment. See id. at 9, reprinted in 1976 U.S.C.C.A.N. 2572, 2579 ("The establishment of an alternative remedy does not increase any defendant's liability. . . . The likelihood of a financial recovery against an antitrust violator, however, is significantly increased because H.R. 8532 creates an effective remedy where none existed before.").
127. Antitrust injury is a judicially created criteria for standing in antitrust cases. See Associated Gen. Contractors, Inc. v. California State Council of Carpenters, 459 U.S. 519, 535 n.31 (1983). In addition to having ordinary standing to sue, the plaintiff must have been injured by anticompetitive conduct. See id. at 537-38; Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977) ("Plaintiffs must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." (emphasis in original)).
128. See 15 U.S.C. § 15d (1994).
129. See id. The section specifically allows for proving and measuring damages "without the necessity of separately proving the individual claim of, or amount of damage to, persons on whose behalf the suit was brought." Id. Congress recognized that estimation of damages made the case simpler to prove and believed that estimation and aggregation of total damages, so long as they were not speculative, were "necessary because the proof of individual claims and amounts would be impracticable and virtually impossible." H.R. Rep. No. 94-499, at 14-15 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2584.
130. Congress anticipated that parens patriae actions would "normally be brought in instances where thousands or millions of consumers have been injured." Id., reprinted in 1976 U.S.C.C.A.N. 2572, 2584. If damages could not be estimated in these cases, the parens patriae authority would be useless to secure monetary damages for injured consumers. Consumers do not usually keep records of all of their purchases, and sellers of small consumer products may not retain lists of their customers that could be used to reconstruct purchases in order to prove damages. See id. at 14-16, reprinted in 1976 U.S.C.C.A.N. 2572, 2583-86.
131. The Committee report observed that allowing estimation and aggregation of total damages is "necessary to avoid endless trials in which thousands or millions of individuals would have to appear to prove their individual claims and the amounts of their individual injuries." Id. at 15, reprinted in 1976 U.S.C.C.A.N. 2572, 2584.
132. Congress distinguished between speculative damages, which are forbidden, and reasonably estimated damages, which are permitted. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2585.
133. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2584-85.
134. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2585 ("[A] defendant who has committed an antitrust violation has no right, constitutional or otherwise, to the retention of one penny of measurable illegal overcharges or other fruits of the violation.").
135. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2583-85.
136. See 15 U.S.C. § 15c(a)(1) (1994).
137. See id. But see Kenneth Babcock, Note, Parens Patriae Suits by State Attorney Generals: An Effective Antitrust Remedy for Small Businesses, 13 U.C. Davis L. Rev. 649, 663-91 (1980) (recommending that parens patriae actions should be expanded to allow actions on behalf of businesses). Although Babcock's proposal was not adopted, a Connecticut statute authorizes the state Attorney General to bring antitrust actions on behalf of Connecticut business entities. See Conn. Gen. Stat. Ann. § 35-32 (West 1997); see also id. § 35-25 (defining "person" to include any "corporation, limited liability company, firm, partnership, incorporated and unincorporated association, or any other legal or commercial entity").
138. See 15 U.S.C. § 15c(a)(1).
139. Congress indicated that the sections on notice and claim preclusion are complementary. See H.R. Rep. No. 94-499, at 11 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2581 ("Subsections 4C(c) and 4C(d) . . . are designed to protect the constitutional due process rights of each individual potential claimant and defendant."). Thus, the statute protects both consumers and defendants by requiring notice and a right to be heard, and barring relitigation by consumers who did not opt out of the parens patriae action. See id., reprinted in 1976 U.S.C.C.A.N 2572, 2581.
140. See 15 U.S.C. § 15c; H.R. Rep. No. 94-499, at 11-13 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2581-82. The legislative history suggests that the House contemplated the possibility that the federal courts would use the notice provision of the forum state. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2581-82.
141. As a practical matter, citizens may receive actual notice from press releases or press conferences made by the attorney general bringing the action, or from subsequent news coverage about the case. Filings in federal court are public records, which are available for inspection by the public.
142. 15 U.S.C. § 15c(b)(1).
143. Congress recognized that "publication" should be construed broadly to include a variety of media, such as radio and television, in addition to print notices in newspapers. See H.R. Rep. No. 94-499, at 12 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2581.
144. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2581. The court can order notice by other means if it determines that notice by publication "would deny due process of law to any person or persons." 15 U.S.C. § 15c(b)(1).
145. H.R. Rep. No. 94-499, at 12 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2582.
146. See 15 U.S.C. § 15c(c). This provision was viewed as "an important safeguard for consumers in the event an attorney general seeks to terminate a parens patriae action by settlement." H.R. Rep. No. 94-499, at 13 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2583. The requirement of notice both protects consumers against "unjust or unfair settlements should their champion become fainthearted or inadequate" and promote "public confidence in the settlements of parens patriae cases by requiring court approval." Id., reprinted in 1976 U.S.C.C.A.N. 2572, 2583.
147. State Attorneys General often refer to those persons on whose behalf the action is brought as the "parens patriae group." See, e.g., Missouri ex rel. Nixon v. United Tel. Co., No. Civ. 4414-CV-C-66BA, 1995 WL 792066, at *5 (W.D. Mo. Nov. 15, 1995) (using "parens patriae group" interchangeably with the citizens on whose behalf the parens patriae action was brought); New York v. Salem Sanitary Carting Corp., No. CV85-0208 (ILG), 1989 WL 165596, at *1 (E.D.N.Y. Nov. 16, 1989) (same). This term will be used in an effort to distinguish a parens patriae case from a Rule 23 class action where those represented by the class representative are referred to as "class members." See Fed. R. Civ. P. 23 (referring to "class members" and "members of class").
148. To opt out of a parens patriae case, and to avoid the res judicata effect of a final judgment, a person must file notice with the district court excluding himself from the case within a certain time after the publication of notice. See 15 U.S.C. § 15c(b)(2).
149. See id. § 15c(b)(3). This provision is in the interest of consumers and defendants because it "provides protection for the potential claimant's interest in prosecuting his own action." H.R. Rep. No. 94-499, at 13 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2582. While protecting claimants, it also "safeguards the res judicata rights of defendants against claimants who fail to come forward and exclude themselves from the representational action," thus protecting the rights of a defendant in avoiding duplicative liability." Id., reprinted in 1976 U.S.C.C.A.N. 2572, 2582.
150. See H.R. Rep. No. 94-499, at 11 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2581.
151. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2581.
152. See id. at 9, reprinted in 1976 U.S.C.C.A.N. 2572, 2578-79. Summarizing the provisions of the House bill, which was subsequently adopted, the Report states that "[the bill] authorizes State Attorneys General to sue for damages on behalf of injured persons, subject to the other provisions of the bill, namely . . . the right of the individual to receive his appropriate share of any recovery." Id., reprinted in 1976 U.S.C.C.A.N. 2572, 2579.
153. See 15 U.S.C. § 15e.
154. See 15 U.S.C. § 15e(1)-(2).
155. Id. § 15e.
156. "[R]arely, if ever, will all potential claimants actually come forward to secure their share of the recovery." H.R. Rep. No. 94-499, at 16 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2585.
157. The clear Congressional preference was for distribution of damages to consumers who had paid illegal overcharges. "Once this claims procedure has run its course, § 4E [adopted as amended as 15 U.S.C. § 15e] commits the disbursement of the undistributed portion of the fund, which will often be substantial, to the discretion of the court." Id., reprinted in U.S.C.C.A.N. 2572, 2585 (emphasis added).
158. Id., reprinted in U.S.C.C.A.N. 2572, 2585. Congress cited with favor the "highly imaginative" cy pres distributions in prior cases. Id., reprinted in U.S.C.C.A.N. 2572, 2585.
159. With this section, Congress sought to promote cooperation among federal and state antitrust enforcement agencies. It also saw parens patriae cases "as a major aspect of antitrust enforcement. . . ." Id. at 17, reprinted in 1976 U.S.C.C.A.N. 2572, 2586.
160. See 15 U.S.C. § 15f(a). The United States Department of Justice currently has appointed an attorney, who formerly served as an Assistant Attorney General with the state of Virginia, with the responsibility for federal-state relations, communication, and cooperation. See Arizona Dental Plan Settles Federal, State Conspiracy Charges, 67 Antitrust & Trade Reg. Rep. (BNA) 277 (Sept. 1, 1994).
161. See 15 U.S.C. § 15f(b). This section "reflects the committee's desire that the Federal Government cooperate fully with State antitrust enforcers." H.R. Rep. No. 94-499, at 17 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2587. The Committee believed that improved cooperation among antitrust enforcement agencies at all levels of government should be encouraged, and antitrust enforcement efforts should be coordinated. See id., reprinted in U.S.C.C.A.N. 2572, 2587. Grand jury materials are not permitted to be disclosed except as provided by the Federal Rule of Criminal Procedure 6(e). Rule 6(e) allows disclosure to state Attorneys General upon a demonstration of particularized need. See Illinois v. Abbott & Assocs., 460 U.S. 557, 567 (1983) ("The scope of [the court's] authority has been delineated in a series of cases setting forth the standard of 'particularized need.'").
162. See, e.g., City of Philadelphia v. American Oil Co., 53 F.R.D. 45, 74 (D.N.J. 1971) (rejecting a proposed class of all citizens in a three-state area who had purchased retail gasoline between 1955 and 1965). In American Oil, the court stated: By any reasonable standard, it is difficult for this Court to believe that Rule 23, as presently written, was intended to reach the overly broad non-governmental class sought to be represented by Philadelphia-New Jersey in the pending actions. This is not to say that guilty conspirators should not be compelled to disgorge their ill-gotten gains. The solution to the problem, however, lies not in imposing an increased burden on the federal courts over and above that which may or should normally be expected of judges in the discharge of their judicial duties, but rather in having the antitrust laws or rules amended to alleviate the problem of manageability inherent in class actions wherein millions of members of the consuming public are involved. Id. at 74.
163. See, e.g., id. (rejecting a proposed class of all citizens in a three-state area who had purchased retail gasoline between 1955 and 1965 and expressing incredulity at the idea that Congress intended litigants to bring such broad class actions under Rule 23). Rather than certifying what it perceived to be a class that was inherently unmanageable because of its size, the court in American Oil called upon Congress to legislate a solution by either amending the antitrust laws or the Federal Rules of Civil Procedure. See id.; see also California v. Frito-Lay, Inc., 474 F.2d 774, 777 (9th Cir. 1973) (same).
164. See H.R. Rep. No. 94-499, at 6-7 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2576-77 (discussing Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), and other class action decisions).
165. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2576 (citing Donson Stores, Inc. v. American Bakeries Co., 58 F.R.D. 485, 489 (S.D.N.Y. 1973) (dismissing class action because it was deemed to be unmanageable); United Egg Producers v. Bauer Int'l Corp., 312 F. Supp. 319, 321 (S.D.N.Y. 1970) (same)). These problems concerning litigation included insuring proper notice, difficult evidentiary issues related to proof of damages, and distribution of damages at the end of a successful class action. See id., reprinted in U.S.C.C.A.N. 2572, 2576.
166. See id. at 7, reprinted in 1976 U.S.C.C.A.N. 2572, 2577 ("Individual suits and class actions have worked far better for business entities than for consumers injured by antitrust violations.").
167. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2577. Consumers also have less access to attorneys and investigators. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2577.
168. See id., reprinted in 1976 U.S.C.C.A.N. 2572, 2577.
169. The Report focused on the then-recently decided case of Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), in which the Supreme Court held that individual notice must be given to all identifiable class members regardless of the cost. The cost of personal notice to large consumer classes would exceed any possible recovery for the class action plaintiff and thus effectively foreclose Rule 23 consumer class action antitrust cases. See H.R. Rep. No. 94-499, at 6-8 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2576-77.
170. See 15 U.S.C. § 15c(a)(1) (1994).
171. See, e.g., Pennsylvania v. Budget Fuel Oil Co., 122 F.R.D. 184, 186 (E.D. Pa. 1988) (discussing consolidation of a consumer class action and parens patriae action under Federal Rule of Civil Procedure 42(a)); cf. In re Montgomery County Real Estate Antitrust Litig., No. B-77-513, 1988 WL 125789, at *2 (D. Md. July 17, 1988) (refusing to extend a Rule 23 class to include parens patriae group members for the purposes of settlement because it was not demonstrably superior to a parens patriae action).
172. See 122 Cong. Rec. 30,868, at 30,879 (1976); see also H.R. Rep. No. 94-499, at 6-8 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2578 (discussing the federal courts' expansion of the states' power to bring suit on behalf of its citizens'). Chairman Peter Rodino explained that the bill did not include the Rule 23 requirements that the claims be typical, manageable, etc., "for this bill represents the legislative conclusion that the State's attorney general is the best representative conceivable for the State's consumers - as the courts have repeatedly recognized." 122 Cong. Rec. at 30,879.
173. See Budget Fuel, 122 F.R.D. at 185; Montgomery County Real Estate, 1988 WL 125789, at *2.
174. Montgomery County Real Estate, 1988 WL 125789, at *1. The court found that allowing both to proceed would be "both legally impermissible and factually undesirable." Id.
175. See H.R. Rep. No. 94-499, at 5 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2575 (commenting that the state Attorney General's primary duty is to protect the health and welfare of the state's citizens).
176. See Budget Fuel, 122 F.R.D. at 186. The court pointed out that "[a]ny monies recovered on behalf of the consumer class should be used to pay consumer claims and not additional plaintiffs' attorneys' fees and costs." Id. Ordinarily, however, government lawyers in statutory parens patriae cases are compensated. First, they are paid by the state from tax dollars. Every dollar spent bringing one case cannot be used to bring another case, thus there is an opportunity cost. In addition, settlements in statutory parens patriae cases include costs and fees.
177. See id. (stating that statutory parens patriae does not "negate" class actions, but when the state Attorney General has "exercised his authority" under the statute, there is no need for an additional representative).
178. See id. at 185-86 (noting that class actions require court certification, and observing that the state was already in the process of negotiating a settlement agreement and stating that allowing additional counsel would delay the case).
179. Montgomery County Real Estate, 1988 WL 125789, at *2. The court described the possible conflict between two competing cases to be "utter chaos combined with the unseemly prospect of two distinct representatives vying for members to join their respective groups." Id. In addition, the notices necessary to make the situation clear to consumers would be "the very essence of confusion." Id.
180. See, e.g., Budget Fuel, 122 F.R.D. at 186 (holding that where the state and a putative class representative seek to represent the same group of consumers, "the parens patriae action is superior to that of a private class action.").
181. The basic prerequisites to a class action are numerosity of plaintiffs, common questions of law and fact among the plaintiffs, typicality of the representative plaintiff's injury, and fair and adequate representation of the plaintiff class. See Fed. R. Civ. P. 23(a).
182. A class can be maintained under this section if it appears that separate actions would create the risk of inconsistent decisions, which would subject the opponent to "incompatible standards of conduct." Fed. R. Civ. P. 23(b)(1)(A). Alternatively, this section authorizes class certification if it appears that individual actions would prejudice potential class members because a single action would effectively dispose of their interests or limit their ability to protect their interests. See id.
183. A class can be maintained under this section if injunctive or declaratory relief on a class-wide basis is appropriate because the opponent to the class has acted, or failed to act, with respect to all members of the class.
184. This is the most common type of class action for damages. In addition to the requirements of Rule 23(a), the court must also determine that a class is "superior to other available methods for the fair and efficient adjudication of the controversy." Fed. R. Civ. P. 23(b)(3).
185. See 1 Newberg & Conte, supra note 140, §§ 5.23-5.35 (explaining various disadvantages that plaintiffs often encounter in class action suits).
186. 521 U.S. 591 (1997).
187. Id. at 597.
188. See id. at 601-02. Because the issue involved a settlement, Rule 23(e), which concerns the settlement of class actions, controlled. This section provides that a "class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs." Fed. R. Civ. P. 23(e). The Court found that Rule 23(e) is "an additional requirement, not a superseding direction," Amchem, 521 U.S. at 621, which overlays the prerequisites of Rule 23(a) and (b) but that "[settlement is relevant to a class certification." Id. at 619. Consideration of the requirements of section (e) "protects unnamed class members 'from unjust or unfair settlements affecting their rights when the representatives become fainthearted before the action is adjudicated or are able to secure satisfaction of their individual claims by a compromise.'" Id. at 623 (quoting 7B Charles Alan Wright et al., Federal Practice and Procedure § 1797, at 340-41 (2d ed. 1986)).
189. Justice O'Connor did not participate. See id. at 596.
190. Id. at 617-18 (quoting Fed. R. Civ. P. 1 and citing Jack Weinstein, Individual Justice in Mass Tort Litigation: The Effect of Class Actions, Consolidations, and Other Multiparty Devices (1995); William Schwarzer, Settlement of Mass Tort Class Actions: Order Out of Chaos, 80 Cornell L. Rev. 837 (1995)). Some of the parens patriae actions described in part three have involved tens of thousands, perhaps more, consumers.
191. Id. at 624.
192. Id. at 629. The Court concluded that "[a]s this case exemplifies, the rulemakers' prescriptions for class actions may be endangered by 'those who embrace [Rule 23] too enthusiastically just as [they are by] those who approach [the Rule] with distaste.'" Id. (quoting Charles Alan Wright, Law of Federal Courts 508 (5th ed. 1994)).
193. See, e.g., California v. Levi-Strauss & Co., 715 P.2d 564, 570 (Cal. 1986) (explaining the difficulties in distributing damages from consumer class actions).
194. See supra notes 116-30 and accompanying text discussing the legislative history of the statute.
195. See H.R. Rep. No. 94-499, at 15 (1976), reprinted in 1976 U.S.C.C.A.N. 2572, 2584. For examples of these see supra notes 15, 17-20 and cases cited therein.
196. Edith L. Fisch et al., Charities and Charitable Foundations 413-14 (1974). The doctrine originated as "a remedial device which courts use[d] to prevent a charitable trust's failure by applying a trust's income or assets to an alternative charitable object." Matthew Perkins, Note, The Cy Pres Doctrine in the 1980's: The Case for Charitable Favoritism, 10 Prob. L.J. 163, 163 (1990). In his Note, Perkins describes the history of the doctrine and its origins: The term 'cy pres' appears to derive from the Norman-French term 'cy pres comme possible,' meaning 'as near as possible.' Cy pres is a rule of construction which courts employ to carry out the spirit of a trust's terms when literal application of such terms is not feasible. Rather than have a trust fail and the trust's assets revert back to the testator's successors in interest, courts apply the trust's funds 'cy pres' or 'as near as possible,' so that benefits from the trust may continue and the testator's intent may be approximately honored.
197. Edith L. Fisch et al., Charities and Charitable Foundations 413-14 (1974). The doctrine originated as "a remedial device which courts use[d] to prevent a charitable trust's failure by applying a trust's income or assets to an alternative charitable object." Matthew Perkins, Note, The Cy Pres Doctrine in the 1980's: The Case for Charitable Favoritism, 10 Prob. L.J. 163, 163 (1990). In his Note, Perkins describes the history of the doctrine and its origins: The term 'cy pres' appears to derive from the Norman-French term 'cy pres comme possible,' meaning 'as near as possible.' Cy pres is a rule of construction which courts employ to carry out the spirit of a trust's terms when literal application of such terms is not feasible. Rather than have a trust fail and the trust's assets revert back to the testator's successors in interest, courts apply the trust's funds 'cy pres' or 'as near as possible,' so that benefits from the trust may continue and the testator's intent may be approximately honored. Id. at 165 (footnotes omitted)
198. See Perkins, supra note 212, at 166-67.
199. See Evans v. Abney, 396 U.S. 435, 437 (1970). In 1911, Senator Augustus O. Bacon devised land to the city of Macon, Georgia, after the death of his wife and daughters, to be used as a public park for whites only. See id. at 436. In a prior decision concerning the trust, the Supreme Court had held that the park could not continue to be segregated. See Evans v. Newton, 382 U.S. 296, 302 (1966). The Georgia Supreme Court then decided that because the grantor's intent was impossible to fulfill, the trust failed and the property would revert to the other heirs. See Abney, 396 U.S. at 436. The case returned to the Supreme Court when the dissolution of the trust was challenged as a violation of the Fourteenth Amendment. See id. at 437. Petitioners, African-American citizens of Macon argued that the Court should apply the cy pres doctrine to eliminate the racially restrictive clause from the will and allow the trust to continue operating, albeit now open to all races. See id. at 439.
200. See Richard Posner, Economic Analysis of Law 509 (4th ed. 1992) ("A policy of rigid adherence to the letter of the donative instrument is likely to frustrate both the donor's purposes and the efficient use of resources."). Posner suggests that rather than dissolve a charitable trust, courts prefer authorizing the trust's administrators to apply the corpus to "a related (cy pres) purpose within the general scope of the donor's intent [if] continued enforcement of conditions in a charitable gift is no longer economically feasible, because of illegality . . . or opportunity costs." Id. at 510.
201. For example, the Georgia trial court found that Senator Bacon's intent included separation of races, and therefore the cy pres doctrine could not be applied in a way that would conflict with the testator's intent. See Abney, 396 U.S. at 442. In upholding that conclusion, the Supreme Court pointed out that it is up to the individual states to determine whether and how to apply their individual state cy pres rules. See id. at 447 ("Nothing we have said here prevents a state court from applying its cy pres rule in a case where the Georgia court, for example, might not apply its rule."). Justice Douglas, dissenting, thought that the testator's intent was to give the land to the city for "some municipal use." Id. at 448. Reforming the terms of the trust to allow all races to be admitted both fulfills the testator's intent of creating a park while complying with the mandates of the Constitution. See id. at 449.
202. See id. at 167. In particular, the cy pres method of distribution has been adopted by some courts attempting to dispose of funds not distributed to individual claimants who were class members in a successful class action suit. See 7B Charles Alan Wright et al., Federal Practice and Procedure § 1784 (2d ed. 1986).
203. See Kevin M. Forde, What Can a Court Do with Leftover Class Action Funds? Almost Anything!, Judges' J., Summer 1996, at 19, 19. Statutory parens patriae antitrust actions, involving thousands of consumers who have purchased a low-cost retail product, will often provide an opportunity for creative distribution of a large fund. See, e.g., New York v. Reebok Int'l Ltd., 96 F.3d 44, 49 (2d Cir. 1996) (holding that the settlement proceeds should be used by the states or nonprofit organizations to support recreational activities).
204. See Forde, supra note 218, at 19.
205. See id. at 20; Gail Hillebrand & Daniel Torrence, Claims Procedures in Large Consumer Class Actions and Equitable Distribution of Benefits, 28 Santa Clara L. Rev. 747, 765 (1988).
206. See Forde, supra note 218, at 23. Most courts have rejected this as an option. See, e.g., Van Gemert v. Boeing Co., 553 F.2d 812, 815 (2d Cir. 1977) (denying distribution of unclaimed damages to next-best class and ordering reversion of unclaimed funds to defendants), affd 739 F.2d 730 (2d Cir. 1984); Friar v. Vanguard Holding Corp., 509 N.Y.S.2d 374, 376 (App. Div. 1986) (stating that unclaimed funds should be delivered to the state comptroller as abandoned property).
207. See Herbert Newberg, Newberg on Class Actions § 4620, at 84, § 7572, at 93 (1977).
208. See Van Gemert, 553 F.2d at 816; California v. Levi Strauss & Co., 715 P.2d 564, 573 (Cal. 1986) (observing that such a distribution would not benefit absent class members and that it would create a windfall distribution to those who had already been compensated for their injuries).
209. See Van Gemert v. Boeing, Co., 739 F.2d 730, 737 (2d Cir. 1984) (describing equitable remedies as being a "special blend of what is necessary, what is fair, and what is workable" (quotation omitted)).
210. Newberg, supra note 222, § 7572, at 93 (footnote omitted).
211. See Newberg & Conte, supra note 140, § 11.20, at 11-26 to 11-29.
212. See, e.g., infra notes 240-51 and accompanying text.
213. See Natalie A. DeJarlais, Note, The Consumer Trust Fund: A Cy Pres Solution to Undistributed Funds in Consumer Class Actions, 38 Hastings L.J. 729, 730 (1987).
214. In re Matzo Food Prods. Litig., 156 F.R.D. 600, 605 (D.N.J. 1994).
215. See id. If the fund is created by settlement agreement, rather than by a verdict, the parties may decide among themselves how to deal with any funds remaining after notice, claim, and distribution to all claiming class members. The same reasoning applies to the remainder in a fund after distribution to citizens represented in a parens patriae action.
216. The remainder after distribution in the consumer class action West Virginia v. Chas. Pfizer & Co., 314 F. Supp. 710, 728 (S.D.N.Y. 1970), aff'd 440 F.2d 1079 (2d Cir. 1971), was $37 million of a $100 million settlement. The remainder in In re Corrugated Container Antitrust Litigation was approximately $1.1 million from a fund of more than $500 million, see Residual Funds from Box Settlement Will Be Distributed to 9 Organizations, ?3 Antitrust & Trade Reg. Rep. (BNA) 711 (Nov. 5, 1987), and the remainder in In re Folding Carton Antitrust Litigation was approximately $6 million from a fund of approximately $200 million. See 881 F.2d 494, 496 (7th Cir. 1989). In Van Gamert v. Boeing, 739 F.2d 730, 733 (2d Cir. 1984), more than $2.7 million remained undistributed after all known claims had been satisfied.
217. See, e.g., In re Folding Carton Antitrust Litig., 744 F.2d 1252, 1255 (7th Cir. 1984); Colson v. Hilton Hotels, Corp., 59 F.R.D. 324, 326 (N.D. Ill. 1972) (escheating funds to the state).
218. See Hillebrand & Torrence, supra note 220, at 764; Anna L. Durand, Note, An Economic Analysis of Fluid Class Recovery Mechanisms, 34 Stan. L. Rev. 173, 186-201 (1981); see also California v. Levi Strauss & Co., 715 P.2d 564, 572 (Cal. 1986) (discussing why a price rollback is not appropriate in non-monopoly markets because it is more likely to benefit the defendant and disadvantage its competitors).
219. See Levi Strauss, 715 P.2d at 572.
220. This option was considered and rejected in Levi Strauss. Id. at 572.
221. See id. at 575. Moreover, the court specifically noted that the escheat statute "was not intended to limit the equitable discretion of the courts in managing private consumer class actions." Id. at 574; see also Durand, supra note 233, at 180 (explaining how distribution of funds to the government enhances the disparity between the class benefited and the class harmed); Forde, supra note 218, at 19-20 (explaining that nothing changes the authority of a court to order equitable remedies); Hillebrand & Torrence, supra note 220, at 765 (noting that escheat should be used only as a last resort). Allowing residual funds to escheat, however, might enable the government to provide some benefit to consumers who failed to file claims. This procedure would also be inexpensive to administer because the government agencies to manage the fund already exist, thus preserving a substantial portion of the fund for the public. See Levi Strauss, 715 P.2d at 572, 576.
222. See Forde, supra note 218, at 21; Hillebrand & Torrence, supra note 220, at 766-73; Durand, supra note 233, at 179-80. Forde points out that these distributions have been made "apparently without regard to state or federal escheat statutes." Forde, supra note 218, at 20; see also Van Gamert v. Boeing, 739 F.2d 730, 735-36 (2d Cir. 1984) (holding that the federal escheat statute "[does] not control when a court fashions a plan for distributing unclaimed funds").
223. Creation of a trust fund "allows the court to create a flexible, equitable remedy." Forde, supra note 218, at 20. Discussing cy pres in class actions, one commentator stated: While the use of a cy pres distribution remains controversial and unsettled in an adjudicated class action context, courts are not in disagreement that cy pres distributions are proper in connection with a class settlement, subject to court approval of the particular application of the funds. Thus, even in circuits that have ruled that cy pres or fluid class recovery distributions are not valid in contested adjudications, these distributions have obtained a stamp of approval as part of a class settlement. Newberg & Conte, supra note 140, § 11.20, at 11-26 to 11-27 (footnote omitted).
224. See, e.g., Democratic Cent. Comm. v. Washington Metro. Area Transit Comm'n, 84 F.3d 451, 458 (D.C. Cir. 1996) (approving cy pres distributions of unclaimed funds remaining after distribution to class members); In re Agent Orange Prod. Liab. Litig., 818 F.2d 179, 183-85 (2d Cir. 1987) (approving the use of a portion of the settlement fund to provide programs for the class as a whole); Nelson v. Greater Gadsden Hous. Auth., 802 F.2d 405, 409 (11th Cir. 1986) (finding no objection to the use of fluid recovery system); Powell v. Georgia-Pacific Corp., 843 F. Supp. 491, 499 (W.D. Ark. 1994) (allowing the use of funds to establish a scholarship fund); Superior Beverage Co. v. Owens-Illinois, Inc., 827 F. Supp. 477, 479 (N.D. Ill. 1993) (permitting use of funds for public interest purposes); Pray v. Lockheed Aircraft Corp., 644 F. Supp. 1289, 1303 (D.D.C. 1986) (distributing funds to nonparty charitable organizations); see also Forde, supra note 218, at 21-23 (listing 25 antitrust cases where courts have applied a cy pres distribution). But see, Six (6) Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1308 (9th Cir. 1990) (approving generally of cy pres theory as permissible but rejecting the district court's plan as not adequately aiding absent class members). Examples of cases where cy pres distributions have been rejected include: In re Matzo Food Products Litigation, 156 F.R.D. 600, 605 (D.N.J. 1994) (rejecting proposal that entire settlement fund be distributed to charities); In re Folding Carton Antitrust Litigation, 744 F.2d 1252, 1254 (7th Cir. 1984) (ordering, on appeal, $6 million fund escheated to federal government to be held for claimants, but not disapproving cy pres distributions in appropriate cases).
225. 447 F. Supp. 468 (J.P.M.D.L. 1978), 80 F.R.D. 244 (S.D. Tex. 1978). The private actions followed federal indictments returned by a grand jury in the Southern District of Texas in 1978, charging 14 corporations and 26 individuals with price fixing involving corrugated containers in a geographic area east of the Rocky Mountains. See Corrugated Container, 447 F. Supp. at 471 n.3.
226. See Residual Funds from Box Settlement Will Be Distributed to 9 Organizations, 53 Antitrust & Trade Reg. Rep. (BNA) 711 (Nov. 5, 1987).
227. All of the actions were transferred to the United States District Court for the Southern District of Texas pursuant to 28 U.S.C. § 1407 (1994) for consolidated pretrial proceedings. The original cases had been filed as class actions naming a class of purchasers of corrugated containers and sheets, and two subclasses. The classes were certified, there was some pretrial discovery, and the cases proceeded. See In re Corrugated Container Antitrust Litigation, 441 F. Supp. 921, 923 (J.P.M.D.L. 1977).
228. Before the criminal trial, twenty-four defendants named in the civil actions entered into settlements, which were found to be fair, reasonable, and adequate by the Fifth Circuit. See In re Corrugated Container Antitrust Litig., 556 F. Supp. 1117, 1124-25 (S.D. Tex. 1982). Settlements were reached with eight other defendants after the criminal acquittals. See id. at 1127. Two more settlements were reached during the civil trial. See id. at 1125. These settlements equaled more than $298 million. See id. at 1124. The only remaining defendant proceeded to trial and was found liable for price fixing. See id. at 1125. Ultimately, that defendant also settled, agreeing to pay $45 million. See id. at 1126. The total settlement amount was thus more than $365 million, which the court found exceeded the actual damages. See id. Additional settlements were reached with ten more firms for $21,619,377. See id. One defendant reached separate settlement agreements with the two subclasses for $2,490,000 for the Container Purchaser subclass and $435,000 for the Sheet Plant subclass. See id. at 1127-28. In all, the total settlements including interest amounted to over $500,000,000. See id. at 1125.
229. See Residual Funds from Box Settlement Will Be Distributed to 9 Organizations, 53 Antitrust & Trade Reg. Rep. (BNA) 711 (Nov. 5, 1987).
230. Claimants to the residual fund included class members, universities, trade associations, and a group of state Attorneys General. See Residual Funds from Box Settlement Will Be Distributed to 9 Organizations, 53 Antitrust & Trade Reg. Rep. (BNA) 711 (Nov. 5, 1987).
231. In re Corrugated Container Antitrust Litigation, MDL No. 310, 1981 WL 2020, at *3 (S.D. Tex. Jan. 27, 1981) (denying permission to conduct discovery of absent class members). A distribution to a variety of charitable and non-profit organizations was ultimately ordered. See Residual Funds from Box Settlement Will Be Distributed to 9 Organizations, 53 Antitrust & Trade Reg. Rep. (BNA) 711 (Nov. 5, 1987) (distributing the balance of remainder to four Texas law schools, the law schools at the University of Pennsylvania and Stanford University, the National Association of Attorneys General, the Packaging Education Foundation, and the International Corrugated Packaging Foundation).
232. In Alabama v. Chas. Pfizer & Co., 68 Civ. 1099 (M 19-93), 1972 WL 664, (S.D.N.Y. Dec. 5, 1972), the court approved settlements of several classes, including governmental entities and consumers, stating that "[a]ny sum remaining from the $661,522 after all payments to consumers will, as noted previously, be used for public purposes in Alabama [and the other plaintiff states]; this will be to the benefit of all consumers there." Id. at *3.
233. In California v. Levi Strauss & Co., 715 P.2d 564 (Cal. 1986), the California Attorney General brought a class action on behalf of the state and consumers against Levi Strauss for overcharging on jeans during the 1970s. See id. at 565. The case was settled, allocating approximately $9.3 million for consumers who had purchased jeans, at up to $2 per pair. See id. at 565, 567. Notices were mailed to 8.6 million households, and by the deadline for filing claims, consumers had filed 1.4 million claims for 37 million pairs of jeans. See id. at 568-69. Approximately $1.5 million of the settlement fund was spent on the distribution plan, including the notice and processing of more than $1 million in claims. See id. at 569-70. In selecting a cy pres distribution, the court recognized that cy pres distributions may be "essential to ensure that the policies of disgorgement or deterrence are realized." Id. at 570-71. The court further noted the unfairness of allowing defendants to keep the fruits of a conspiracy because they harmed many people in small amounts rather than fewer people for larger sums. See id. The cy pres process described by the court required three steps: (1) payment of the entire damages amount into a settlement fund; (2) proof of claims by class members and distribution of individual damages; and (3) distribution of any remainder according to equitable principles. See id. at 571.
234. See, e.g., In re Chicken Antitrust Litig., 560 F. Supp. 943, 957, 998 (N.D. Ga. 1979) (ordering that the residual fund be distributed to the states for public food-related purposes or for antitrust enforcement).
235. See, e.g., Tennessee ex rel. Charles W. Burson v. Pet Inc., No. 3-93-0477, 1993 WL 330646, at *2 (M.D. Tenn. 1993) (approving a settlement in which the Attorney General had the right to use $75,000 from the settlement fund to pay for its future antitrust enforcement activities); In re Mid-Atlantic Toyota Antirust Litig., 585 F. Supp. 1553,1557 (D. Md. 1984) ("Any rebate [from the residual funds] due to certain Dealer defendants who made reduced contributions will be paid to the Attorney General's office for antitrust enforcement purposes."); see also, e.g., Colorado v. Airline Tariff Publ'g Co., Civ. A. No. 94-2429, 1995 WL 792070, at *8 (D.D.C. May 10,1995) (approving settlement in which residual amounts of an administration fund would be distributed for "public antitrust enforcement purposes"); New York v. Nintendo of America, Inc., 771 F. Supp. 676, 679 (S.D.N.Y. 1991) (approving settlement provision which requires the defendant to pay $3 million to Attorneys General for, among other purposes, future antitrust enforcement).
236. See, e.g., Court Approves Toy Importer's Settlement of State's Vertical Price Fixing Charges, 70 Antitrust & Trade Reg. Rep. (BNA) 37 (Jan. 18, 1996) (discussing court approval of Pennsylvania's plan in Pennsylvania v. Playmobile USA, Inc. to distribute restitution to claimants and dedicate the remainder, if any, to a cy pres public purpose). In Playmobile, fewer than 100 consumers filed claims on the $275,000 settlement fund. The remainder of the fund, after payment of claims, costs, and fees, amounted to more than $200,000. Pennsylvania selected the charitable organizations and foundations, which provide services to children, that received distributions from the settlement fund. See id.
237. See infra notes 253-74 and accompanying text.
238. See generally New York v. Reebok Int'l Ltd., 903 F. Supp. 532, 537 (S.D.N.Y. 1995), aff'd 96 F.3d 44 (2d Cir. 1996); New York v. Keds Corp., No. 93 Civ. 6708 (CSH), 1994 WL 97201, at *3 (S.D.N.Y. Mar. 21, 1994); New York v. Dairlylea Coop., No. 81 Civ. 1891 (RO), 1985 WL1825, at *2 (S.D.N.Y. Jun. 26, 1985).
239. See Keds, 1994 WL 97201, at *1. The agreement approved by the court provided that the funds be allocated to each state based upon its share of the national population. Each state could select one or more charities from a list of five agencies or select another "so long as the sponsored program benefits women aged 15 to 44" who represented most of the purchasers of the products. Id.
240. Id. at *3.
241. Id.
242. See Reebok, 903 F. Supp. at 534.
243. See id. at 537.
244. Id. at 534. The proposed distribution plans were submitted to the court as part of the States' motion for approval of the settlement. The court described the plans of New York, which planned to divide its $560,857 share among 58 organizations, and of California, which planned to distribute its $360,000 share to numerous school and public athletic programs. See id.
245. See id. at 537. The Court noted that a report of an economic expert in favor of the settlement estimated that more than 1.3 million pairs of shoes were sold during the relevant time period and that overcharges amounted to less than $4 per pair of shoes. Another expert estimated that it would cost $2.47 per claim to process claims and mail out refund checks. See id. at 534.
246. See id. at 537.
247. Id. Rejecting objections to the distribution plan that urged the court to require individual refunds, the court found that "any effort at individual refunds - which would not only be impractical but would be consumed in the costs of its own administration" would not be a fair, reasonable, and adequate settlement. Id. at 538.
248. New York v. Reebok Int'l Ltd., 96 F.3d 44, 49 (2d Cir. 1996).
249. Id. at 49 (citing the Keds and Dairylea cases as precedent).
250. 547 F. Supp. 306 (S.D.N.Y. 1982) (declining to approve the proposed settlement and rejecting proposed distribution by coupon).
251. See New York v. Dairylea Coop., No. 81 Civ. 1891 (RO), 1985 WL 1825, at *1 (S.D.N.Y. Jun. 26, 1985).
252. See id. at *2.
253. See id. at*1.
254. See id.
255. Id.
256. See id.
257. See New York v. Dairylea Coop., 547 F. Supp 306, 308 (S.D.N.Y. 1982); see also Durand, supra note 233, at 181-86 (critiquing restitution, in the form of coupons to consumers, for economic harm).
258. See New York v. Dairylea Coop., No. 81 Civ. 1891 (RO), 1985 WL 1825, at *1 (S.D.N.Y. Jun. 26, 1985).
259. Id. at *2.
260. See In re Western New York Coupon Litig., No. 97 CV-0707 A(M), Final Judgment, at 5-8 (W.D.N.Y. Mar. 18, 1997) (approving parties' settlement agreement).
261. Only one grocery store, Wegmans Food Markets, Inc., was named as a defendant. Consumers could use their coupons in all other grocery stores, mini-markets, and chain retailers, such as Wal-Mart, that sell grocery items.
262. The following ten manufacturers were named as defendants: Clorox Co., Colgate-Palmolive Co., Conopco, Inc. (named as a defendant for the alleged conduct of its division Lever Brothers Co.), The Dial Corp., DowBrands, Inc., James River Paper Co., Inc., S.C. Johnson & Sons, Inc., The Pillsbury Co., The Proctor & Gamble Co., and Reckett & Colman, Inc. Consumers could use the coupons to buy any grocery products, including those not manufactured by the defendants. Coupons could not be used to buy cigarettes and alcohol. See Manufacturers Will Pay $4.2 Million to Consumers to Settle Conspiracy Claims, 73 Antitrust & Trade Reg. Rep. (BNA) 293 (Sept. 18, 1997).
263. See supra notes 232-33 and accompanying text.
264. See, for example, a Maryland district court opinion in which the court stated that it could not "overlook the governmental nature of these parens patriae suits in which the primary concern of the Attorneys General is the protection of and compensation for the States' resident consumers, rather than insuring a fee for themselves." In re Minolta Camera Prods. Antitrust Litig., 668 F. Supp. 456, 470 (D. Md. 1987).
265. See, e.g., New York v. Salem Sanitary Carting Corp., CV-85-0208 (ILG), Order, Doc. No. 144, at 5 (E.D.N.Y. Sept. 25, 1989) (granting preliminary approval of the settlement and ordering notice). The order states: "[t]he Attorney General has waived any claim for attorney's fees in connection with this lawsuit and has waived any claim for costs, expenses or disbursements incurred to date." Id. Following preliminary approval, costs and expenses including the cost of giving notice and distributing the settlement fund, would be reimbursed.
266. Nothing in the antitrust laws prohibits a state from retaining private counsel to represent it in a parens patriae case. See 15 U.S.C. §§ 15c-15h (1994). The antitrust laws prohibit the employment of private counsel employed on a contingency fee based on a percentage of any award or settlement. See id. § 15g(1). Fees to private counsel retained in any other contingency fee arrangement must be approved by the court. See id. § 15g(1)(B).
267. A coupon refund that requires consumers to purchase products from a defendant or a mandated price roll-back would benefit the defendant by increasing its sales at the expense of competitors.