Opinion

segura v. abbott labs

IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,

AT AUSTIN

NO. 3-93-319-CV

CRYSTAL SEGURA, TERI NORTON, SHERRI CHRETIEN,

JANICE KIMLER, TESSIA INNOCENTI, ANGELA CHRISTINE MARONEY,

MELISSA WHITTAKER DURAN, TRACEY FREEZIA LEUDEMAN,

ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED,

APPELLANTS

vs.

ABBOTT LABORATORIES, INC. (ROSS LABORATORIES DIVISION),

BRISTOL-MYERS SQUIBB COMPANY, MEAD JOHNSON & COMPANY, AND

AMERICAN HOME PRODUCTS CORPORATION

(WYETH-AYERST LABORATORIES DIVISION),

APPELLEES

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 331ST JUDICIAL DISTRICT

NO. 91-13079-A, HONORABLE PETER M. LOWRY, JUDGE PRESIDING

Crystal Segura and others, (1) on behalf of themselves and all others similarly situated

("plaintiffs"), appellants, intervened as plaintiffs in an antitrust suit originally brought by the State

of Texas against several defendants. Asserting claims of unconscionable conduct under the Texas

Deceptive Trade Practices-Consumer Protection Act ("DTPA"), Tex. Bus. & Com. Code Ann.

§§ 17.41 -.63 (West 1987 & Supp. 1994), plaintiffs sought damages from Abbott Laboratories,

Inc. (Ross Laboratories Division), Bristol-Myers Squibb Company, Mead Johnson & Company,

and American Home Products Corporation (Wyeth-Ayerst Laboratories Division) ("defendants"),

appellees. The trial court granted summary judgment for defendants, concluding that plaintiffs

did not state a cognizable claim under the DTPA and, alternatively, that plaintiffs lacked standing

to bring the suit. On appeal, plaintiffs assert that the trial court erred in both conclusions. We

will reverse the trial court's judgment and remand the cause.

FACTUAL AND PROCEDURAL BACKGROUND

In September 1991 the State of Texas brought an antitrust action against defendants

Abbott, Bristol-Myers, and Mead Johnson, as well as the American Academy of Pediatrics,

alleging a price-fixing conspiracy and monopolization in the sale of infant formula. See Texas

Free Enterprise and Antitrust Act of 1983 ("Texas Antitrust Act"), Tex. Bus. & Com. Code Ann.

§§ 15.01 -.52 (West 1987 & Supp. 1994). Among other claims, the State sought, on behalf of

Texas consumers, injunctive relief and damages for alleged overcharges for infant formula. See

Texas Antitrust Act § 15.21. In February 1992 the trial court dismissed these claims, concluding

that when the Texas Antitrust Act was interpreted in harmony with federal antitrust law, the

"indirect purchaser" doctrine deprived the State of standing to sue. See Illinois Brick Co. v.

Illinois , 431 U.S. 720 (1977).

Three months later, plaintiffs intervened in the action, dropping the American

Academy of Pediatrics as a defendant but adding American Home Products. In alleging violations

of the DTPA's unconscionability provisions, plaintiffs complained of the same conduct as that on

which the State's antitrust causes of action were based. See DTPA § 17.50(a)(3). In response

to defendants' special exceptions and plea to the jurisdiction, the trial court determined that

plaintiffs had not stated a cognizable cause of action under the DTPA and gave plaintiffs thirty

days to amend their pleadings.

Plaintiffs subsequently amended their plea in intervention and petition. Alleging

that defendants acted both independently and in conspiracy, plaintiffs summarized their allegations

of unconscionable actions as follows:

(A) Creating and maintaining the illusion that their infant formula products are

somehow unique and different nutritionally when the infant formula products

which they sell are generic formulations which are set and monitored by the

U.S. Government;

(B) Creating and maintaining dedicated franchise relationships with physicians

and hospitals that endorse the purchasing of a particular brand name product

of the Defendants while Texas consumers are kept ignorant of the monies

and lavish promotional resources which these physicians and hospitals

receive for these endorsements;

(C) Selling their infant formula products at unconscionably high prices to Texas

consumers when the costs of such products are very low;

(D) Giving free samples of infant formula products to Texas consumers through

their franchise physicians and hospitals during the first months of their

newborns' lives thereby creating an endorsement of the products and later

grossly overcharging Texas consumers in the retail market for baby formula

products;

(E) Using their market dominance to prevent other companies from selling baby

formula products to consumers through direct consumer advertising which

would inform Texas consumers about the generic nature of these products

and permit informed buying decisions based upon price and nutritional

information;

(F) Implementing price increases for more than twelve years which were nearly

identical and grossly unfair to Texas consumers while giving false and

misleading reasons for the price increases;

(G) Taking unfair advantage of Texas consumers to a grossly unfair degree by

preventing other sellers of infant formula products from entering the market

and introducing competitive, lower prices for these generic foods [sic]

products.

Defendants moved for summary judgment on two grounds. First, defendants

argued that plaintiffs' claims were not cognizable under the DTPA. Second, defendants argued

that plaintiffs lacked standing because: (1) the indirect-purchaser doctrine applies to the Texas

Antitrust Act under § 15.04 of that act; (2) the DTPA and the Texas Antitrust Act would be

conflicting statutes if one provided a remedy for indirect purchasers while the other did not; and

(3) the Texas Antitrust Act should exclusively control, because it is the later-enacted statute, and

thus the indirect-purchaser rule deprives plaintiffs of standing to sue under the DTPA.

The trial court granted defendants' motion for summary judgment and dismissed

plaintiffs' claims. The court concluded that plaintiffs' claims were not cognizable under the

DTPA and, alternatively, that the indirect-purchaser doctrine deprived plaintiffs of standing under

the DTPA. Plaintiffs' claims were severed from those remaining in the State's original suit,

resulting in the final judgment from which plaintiffs now appeal.

Plaintiffs bring four points of error in this appeal, asserting that the trial court erred

in (1) granting defendants' motion for summary judgment, (2) determining that plaintiffs have no

standing to pursue their claims, (3) holding that the claims alleged by plaintiffs are not cognizable

under the DTPA, and (4) concluding that, to the extent plaintiffs' claims may be cognizable under

the DTPA, the DTPA must be harmonized with the direct-purchaser rule applicable to the Texas

Antitrust Act, the later-enacted and more specific statute; as indirect purchasers under that statute,

plaintiffs lack standing under the DTPA to assert their claims. We will combine the points of

error for purposes of discussion.

DISCUSSION

A. Indirect Purchaser Standing Under the DTPA

In the present context, a "direct purchaser" is one who purchases goods or services

directly from a manufacturer, wholesaler, or other provider who has violated section 4 of the

Clayton Act, 15 U.S.C. § 15 (a) (1988). An "indirect purchaser" is one who purchases such goods

or services from a seller or provider who is down the marketing chain from the antitrust violator.

The indirect-purchaser rule of Illinois Brick deprives indirect purchasers of standing to sue

manufacturers or wholesalers for antitrust violations. As the United States Supreme Court

explained, allowing indirect purchasers to recover against antitrust violators would create difficult

issues of how much of the monopoly price was "passed on" to the end consumer by the

middleman, usually a retailer. See Illinois Brick , 431 U.S. at 741-47 .

Defendants assert that the indirect-purchaser rule should apply in Texas because

the Texas Antitrust Act requires that "[t]he provisions of this Act shall be construed . . . in

harmony with federal judicial interpretations of comparable federal antitrust statutes to the extent

consistent with" the purpose of maintaining and promoting economic competition in trade and

commerce. Texas Antitrust Act § 15.04. Accordingly, defendants argue that the indirect-purchaser doctrine established in Illinois Brick deprives plaintiffs of standing to sue under the

DTPA. Reaching this conclusion would require accepting the following propositions: (1) that

the indirect-purchaser rule applies to the Texas Antitrust Act to deny indirect purchasers standing

under that statute; (2) that, since plaintiffs allege some claims cognizable under both the Texas

Antitrust Act and the DTPA, the two statutes must conflict; and (3) that this conflict must be

resolved by concluding that the later-enacted statute, the Texas Antitrust Act, controls, thus

depriving plaintiffs of standing under the DTPA. We decline to accept this reasoning. Assuming

arguendo that the indirect-purchaser rule applies to the Texas Antitrust Act, (2) we conclude that

there is no conflict between that Act and the DTPA.

When two statutes conflict irreconcilably, the later-enacted statute controls. See

Tex. Gov't Code Ann. § 311.025 (a) (West 1988). In addition, "where there is a positive and

clear repugnance between two statutes, courts are enjoined to harmonize and give effect to both

enactments if at all possible by assigning to each a meaning that will permit both to stand in

harmony." Commissioners Court of Caldwell County v. Criminal Dist. Attorney, Caldwell

County , 690 S.W.2d 932, 936 (Tex. App.Austin 1985, writ ref'd n.r.e.) (citing Duval Corp. v.

Sadler , 407 S.W.2d 493 (Tex. 1966); Standard v. Sadler , 383 S.W.2d 391 (Tex. 1964); and State

v. Standard Oil Co. , 107 S.W.2d 550 (Tex. 1937)); see also State v. Jackson , 370 S.W.2d 797,

800 (Tex. Civ. App.Houston 1963), aff'd , 376 S.W.2d 341 (Tex. 1964). Courts may not create

repugnance by implication. The repugnance between two statutes must be " positive as well as

clear from the terms of the statute itself." Commissioners Court of Caldwell County , 690 S.W.2d

at 936 . This rule is based on the assumption that a legislature enacts a statute "with complete

knowledge of the existing law and with reference to it." Acker v. Texas Water Comm'n , 790

S.W.2d 299, 301 (Tex. 1990).

Both the Texas Antitrust Act and the DTPA have cumulative-remedies provisions.

The Texas Antitrust Act states that "[t]he provisions of this act are cumulative of each other and

of any other provision of law of this state in effect relating to the same subject." Texas Antitrust

Act § 15.02(a). Similarly, the DTPA states:

The provisions of this subchapter are not exclusive. The remedies provided in this

subchapter are in addition to any other procedures or remedies provided for in any

other law; provided, however, that no recovery shall be permitted under both this

subchapter and another law of both actual damages and penalties for the same act

or practice. A violation of a provision of law other than this subchapter is not in

and of itself a violation of this subchapter. An act or practice that is a violation

of a provision of law other than this subchapter may be made the basis of an action

under this subchapter if the act or practice is proscribed by a provision of this

subchapter . . . .

DTPA § 17.43(a) (emphasis added). The emphasized portions of section 17.43 were added by

the legislature in 1979. See Act of May 11, 1979, 66th Leg., R.S., ch. 603, § 1, 1979 Tex. Gen.

Laws 1327 , 1327 (codified as above). The effect of this amendment was to "keep a violation of

the DTPA from automatically resulting from the violation of another law and to preclude double

recovery under the DTPA and another statute for the same act or practice." Frizzell v. Cook , 790

S.W.2d 41, 44 (Tex. App.San Antonio 1990, writ denied). The existence of cumulative-remedies provisions in the two statutes indicates that the legislature did not, as a general matter,

consider the DTPA and the Texas Antitrust Act to be conflicting statutes and did not intend one

to supersede or preempt the other.

Other statutory enactments demonstrate that when the legislature wishes to exempt

certain defendants or claims from the coverage of the DTPA, it does so in unequivocal terms.

Several provisions of other acts have specifically exempted defendants from or limited claims

under the DTPA. See Act of May 29, 1989, 71st Leg., R.S., ch. 1072, § 1, 1989 Tex. Gen.

Laws 4338 , 4338 (codified at Tex. Prop. Code Ann. § 27.002 (West Supp. 1994)) (stating in part

that "[t]o the extent of conflict between this chapter and any other law, including the Deceptive

Trade Practices-Consumer Protection Act . . . , this chapter prevails"); Act of June 21, 1987, 70th

Leg., R.S., ch. 1122, § 20, 1987 Tex. Gen. Laws 3844 , 3851 (codified at Tex. Rev. Civ. Stat.

Ann. art. 8890, § 18C (West Supp. 1994)) (exempting veterinarians from DTPA claims for

malpractice or damages resulting from negligence); Medical Liability and Insurance Improvement

Act, 65th Leg., R.S., ch. 817, § 12.01(a), 1977 Tex. Gen. Laws 2039 , 2053 (codified at Tex.

Rev. Civ. Stat. Ann. art. 4590i, § 12.01(a) (West Supp. 1994)) (exempting physicians and health

care providers from DTPA claims for damages resulting from death or personal injury caused by

negligence). It is also clear that the legislature knows how to make provisions of the Texas

Antitrust Act exclusive, as it did with the provisions regarding the enforceability of covenants not

to compete. See Act of May 29, 1993, 73d Leg., R.S., ch. 965, § 3, 1993 Tex. Gen. Laws 4201 ,

4201-02 (codified at Texas Antitrust Act § 15.52) (providing that Texas Antitrust Act's new

provisions regarding covenants not to compete are "exclusive and preempt any other criteria for

enforceability of a covenant not to compete"). Finally, the legislature has created specific

exceptions within the DTPA itself. Section 17.49 states that the DTPA does not apply to

advertisers and others who run advertisements under certain circumstances, see DTPA § 17.49(a),

and does not apply to "acts or practices authorized under specific rules or regulations promulgated

by the Federal Trade Commission under Section 5(a)(1) of the Federal Trade Commission Act [ 15

U.S.C. § 45 (a)(1)]." DTPA § 17.49(b). Finally, the DTPA's definition of consumer exempts

any business consumer that "has assets of $25 million or more, or that is owned or controlled by

a corporation or entity with assets of $25 million or more." DTPA § 17.45(4). See also Act of

June 14, 1989, 71st Leg., ch. 380, R.S., § 2, 1989 Tex. Gen. Laws 1490 , 1491 (codified at

DTPA § 17.50(b)(1)) (applying limitations of Tex. Civ. Prac. & Rem. Code chapters 33 & 41 to

DTPA claims involving death, personal injury, and damage to property other than goods forming

basis of claim).

In light of the legislature's demonstrated ability to voice its intent with unmistakable

clarity, defendants' argument that the two statutes conflict is not persuasive. Holding that a

conflict exists between the DTPA and the Texas Antitrust Act would create a conflict by

implication and would force us to conclude that two statutes "conflict" any time they regulate the

same activity. This we will not do. The fact that one statute makes certain conduct actionable

while a later statute fails to make it actionable does not create a conflict requiring harmonization

of the statutes. Such a holding would also require accepting the proposition that the DTPA is

implicitly amended each time the legislature passes a statute that fails to give consumers a cause

of action. We do not accept this proposition.

This case is not one in which one statute explicitly makes legal certain conduct that

another statute makes illegal. See Jackson , 370 S.W.2d at 799-800 (holding that where later-enacted statute specifically makes certain conduct legal, regulation promulgated pursuant to

earlier-enacted statute could not make that conduct illegal). Nor is it a case of two statutes

imposing inconsistent obligations on defendants. See Texas State Bd. of Pharmacy v. Kittman ,

550 S.W.2d 104, 105-06 (Tex. Civ. App.Tyler 1977, no writ) (describing earlier-enacted

statute's requirement that appeal from board's order must be made within twenty days of order

and later-enacted statute's requirement that motion for rehearing must be submitted to board

issuing order as prerequisite to appeal). (3)

This conclusion is consistent with the Texas Supreme Court's repeated refusal to

recognize exemptions from or exceptions to the DTPA except where clearly mandated by the

legislature. Without fail, the supreme court has looked to the plain meaning of the DTPA's

provisions and has refused to approve implied exceptions to, or adopt unwarranted limiting

constructions of, those provisions. See, e.g., Birchfield v. Texarkana Memorial Hosp. , 747

S.W.2d 361, 368 (Tex. 1987) (holding that newborn baby was consumer of hospital's services);

Chastain v. Koonce , 700 S.W.2d 579, 582-83 (Tex. 1985) (refusing to require intent or

knowledge for defendant to be liable for unconscionable conduct); Kennedy v. Sale , 689 S.W.2d

890, 892 (Tex. 1985) (holding that "consumer" can be anyone who acquires goods that provide

basis for DTPA complaint even if goods were paid for by someone other than plaintiff); Flenniken

v. Longview Bank & Trust Co. , 661 S.W.2d 705, 707 (Tex. 1983) (refusing to require that DTPA

plaintiff be in privity with DTPA defendant and concluding that "[t]he only requirement is that

the goods or services sought or acquired by the consumer form the basis of his complaint");

Cameron v. Terrell & Garrett, Inc. , 618 S.W.2d 535, 540-41 (Tex. 1981) (refusing to limit liable

defendants to those who actually provided good or service that was basis of DTPA complaint).

Such cases are based on two principles: (1) that the DTPA must be construed liberally, and (2)

that the legislature expressly limits the DTPA when it so wishes. If the legislature had intended

to exclude indirect purchasers from coverage of the DTPA, "it could easily have done so by

simply drafting the restriction into the definition of consumer or some other provision of the Act."

Cameron , 618 S.W.2d at 540 .

This conclusion is consistent with the decision in Frizzell v. Cook , 790 S.W.2d 41

(Tex. App.San Antonio 1990, writ denied). In Frizzell , the plaintiff asserted a DTPA claim

involving a broker's failure to properly advise her regarding financial investments. The defendant

asserted that the provisions of the Texas Securities Act ("TSA"), (4) which establish a cause of action

for misrepresentation in connection with a securities transaction, preempted the plaintiff's DTPA

claim. Id . at 42. Since the TSA did not have a provision exempting any conduct from the DTPA,

the court looked to section 17.49 of the DTPA and concluded: "The only exemptions intended by

the Legislature are those delineated in section 17.49, which do not exempt securities transactions."

Frizzell , 790 S.W.2d at 44 .

Based on the absence of an express exemption in either the DTPA or the Texas

Antitrust Act, combined with the presumption against finding statutes to be in conflict by

implication, we decline to hold that the indirect-purchaser rule applies to the DTPA.

B. Plaintiffs' Cause of Action for Unconscionability

The trial court also based its summary judgment on the ground that plaintiffs had

not stated a claim for unconscionable conduct under DTPA § 17.50(a)(3). We will, therefore,

review the trial court's decision to grant defendants' motion for summary judgment directed solely

at plaintiffs' pleadings.

In reviewing a summary judgment granted on the pleadings, we must consider the

allegations in the pleadings in the light most favorable to the non-movant. (5) We must accept as

true every allegation of the pleadings against which the motion is directed. Trunkline LNG Co.

v. Trane Thermal Co. , 722 S.W.2d 722, 724 (Tex. App.Houston [14th Dist.] 1986, writ ref'd

n.r.e.); Labbe v. Carr , 369 S.W.2d 952, 954 (Tex. Civ. App.San Antonio 1963, writ ref'd

n.r.e.). If the pleadings, when liberally construed, are sufficient to show a material fact issue,

the motion must be overruled. Abbott v. City of Kaufman , 717 S.W.2d 927, 929 (Tex.

App.Tyler 1986, writ dism'd). Moreover, all doubts as to the existence of a genuine issue of

material fact must be resolved against the moving party, and the opposing party is entitled to the

benefit of every reasonable inference that can properly be drawn in its favor. Id . Taking all of

plaintiffs' allegations as true, we must consider whether the acts alleged support a cause of action

for unconscionability under the DTPA.

Section 17.50(a)(3) of the DTPA provides that a consumer may maintain a cause

of action where "any unconscionable action or course of action by any person" constitutes a

producing cause of actual damages. Section 17.45(5) contains two alternative definitions of

"unconscionable":

"Unconscionable action or course of action" means an act or practice which, to a

person's detriment:

(A) takes advantage of the lack of knowledge, ability, experience, or capacity of

a person to a grossly unfair degree; or

(B) results in a gross disparity between the value received and consideration paid,

in a transaction involving transfer of consideration.

DTPA § 17.45(5). These two acts are the only means of engaging in an unconscionable action

or course of action under the DTPA. Griffith v. Porter , 817 S.W.2d 131, 136 (Tex. App.Tyler

1991, no writ).

In Chastain , the supreme court interpreted the term "gross" as meaning "glaringly

noticeable, flagrant, complete and unmitigated." 700 S.W.2d at 583 . Thus, plaintiffs must allege

either (1) that defendants' course of conduct took advantage of plaintiffs' lack of knowledge,

ability, experience, or capacity to a glaringly noticeable, flagrant, complete and unmitigated

degree; or (2) that the disparity between the value and the price of the infant formula was

glaringly noticeable, flagrant, complete and unmitigated. (6)

1. Gross Price Disparity

Plaintiffs allege that defendants overcharged infant formula consumers to the extent

that a gross disparity existed between the value given and the value received. The court in

Chastain stated that "[a] slight disparity between the consideration paid and the value received is

not unconscionable; a glaring and flagrant disparity is." 700 S.W.2d at 583 . The disparity

between value and price must be determined at the time of the transaction. Id . at 582.

Plaintiffs specifically alleged that defendants "have abused their overwhelming

market dominance and, by direct action and by a conspiracy among them, have grossly

overcharged Texas consumers." Plaintiffs further alleged that defendants coordinated their price

increases, and they specifically set forth the following example of disparity in pricing: "The

average wholesale cost for a can of Similac 13 ounce concentrate increased from $.54 in 1978 to

$1.73 in August, 1990. During the same period, total manufacturing costs for that product

increased from just 20 cents a can to 32 cents a can."

Construing these allegations in the light most favorable to plaintiffs, we believe

plaintiffs have alleged a gross disparity between the price charged and the value received. (7) For

example, plaintiffs allege that the price of Similac in 1990 was over five times its cost. (8) This

disparity could certainly be considered more than "slight."

We do not accept defendants' argument that the gross-disparity cases reflect a rule

that unconscionability exists only where there is a price charged for something of little or no

value. See Wyatt v. Petrila , 752 S.W.2d 683, 686 (Tex. App.Corpus Christi 1988, writ denied)

("In reviewing other decisions in which the evidence supporting gross disparity was discussed,

we find that in each the value received was none or nearly so."). It is important to note that

simply because courts have found liability in such cases does not inexorably lead to the conclusion

that liability cannot exist in less severe cases, and nothing in the definition of unconscionability

supports the "little or no value" test as the exclusive test of gross disparity. For example, the

supreme court recently stated that an allegation of unconscionability based on a price paid of

$10,000 for equipment worth $2,000 was supportable. See Kinerd v. Colonial Leasing Co. , 800

S.W.2d 187, 191 (Tex. 1990); see also Fort Worth Mortgage Corp. v. Abercrombie , 835 S.W.2d

262, 266 (Tex. App.Houston [14th Dist.] 1992, no writ) (holding that, although "a case of a

shockingly high price being paid for something of little value" did not exist, "it is clear that the

jury found a gross disparity between what appellees were led to believe they would receive and

the benefits actually paid").

Plaintiffs' pleadings set forth claims of prices up to five times the alleged value of

the product purchased. Mindful of our duty to construe the pleadings in the light most favorable

to plaintiffs, we hold that plaintiffs have alleged a cognizable gross-disparity claim.

2. Taking Advantage of Plaintiffs to a Grossly Unfair Degree

Plaintiffs also alleged that defendants took advantage of their lack of knowledge and

capacity to a grossly unfair degree. They allege in their petition that defendants, separately and

in conspiracy, sought to ban direct advertising of infant formula in order to maintain high prices

and prevent market entry; sought to maintain a system in which pediatricians, nurses, and

hospitals recommended infant formula with the objective of maintaining high prices; and strove

to create the false impression that their products were unique when in fact the contents of infant

formula are regulated by the federal government and are essentially identical.

In Chastain , the court stated that although unfairness is a "more nebulous term than

disparity, . . . this is not a reason to create a new definition for `gross.'" 700 S.W.2d at 583 .

Thus, the same standard of "glaringly noticeable, flagrant, complete and unmitigated" applies.

Further, there is no requirement that the unconscionable conduct take place at the exact time of

the sale of the infant formula; rather, we must examine the entire transaction. See id . at 583;

Flenniken , 661 S.W.2d at 707 .

As already noted, this case is before us on the pleadings and is in an embryonic

stage of factual development. Plaintiffs' pleadings are occasionally somewhat conclusory, and the

true facts as later developed may or may not bear them out. For example, the success of claims

regarding physicians' and hospitals' use of defendants' products in efforts to encourage plaintiffs

to buy and use the products may depend a great deal on the degree of influence the physicians had

over plaintiffs and the degree of knowledge the average consumer possesses regarding infant

formula. Similarly, the viability of claims regarding the generic nature of infant formulas may

depend on the factual issues of what the ingredients were, what specific efforts defendants made

to create an "impression of uniqueness," and the plaintiffs' capacity to distinguish among the

formulas. However, in light of our obligation to construe the pleadings in the light most favorable

to plaintiffs, we hold that the allegations are sufficient to state a claim that defendants took

advantage of plaintiffs' lack of knowledge and capacity to a degree that was glaringly noticeable,

flagrant, complete and unmitigated. Plaintiffs alleged a course of conduct in which defendants

conspired among themselves and with others to keep material information from consumers like

plaintiffs by preventing direct advertising, by creating certain misimpressions, and by relying on

a network of physicians, nurses, and hospitals to refer plaintiffs to certain infant formula. We

hold that these claims are sufficiently alleged, especially in light of the early stage of factual

development of this case.

CONCLUSION

There is no clear indication that the legislature intended in any way to limit the

DTPA's coverage in the antitrust area. The legislature's failure either to amend the DTPA to

exempt antitrust-type claims or to state explicitly that the Texas Antitrust Act preempts other

statutory enactments is significant in light of the legislature's proven ability to express itself

clearly. Plaintiffs' pleadings, taken in the light most favorable to them, are sufficient to state

causes of action for unconscionable price disparity and taking advantage of plaintiffs' lack of

capacity, knowledge, and experience to a grossly unfair degree. We therefore sustain plaintiffs'

four points of error. We reverse the trial court's summary judgment and remand the cause for

further proceedings.

J. Woodfin Jones, Justice

Before Justices Powers, Jones and Kidd

Reversed and Remanded

Filed: March 23, 1994

Publish

1. Other plaintiffs were Teri Norton, Sherri Chretien, Janice Kimler, Tessia Innocenti,

Angela Christine Maroney, Melissa Whittaker Duran, and Tracey Freezia Leudeman.

2. Since we conclude that the indirect-purchaser doctrine does not deprive plaintiffs of

standing under the DTPA, we need not and do not determine whether the doctrine

actually applies to the Texas Antitrust Act; nor do we determine whether, if the indirect-purchaser doctrine does apply to that Act, it deprives the court of subject matter

jurisdiction or is simply a proper ground for judgment on the merits against the indirect

purchaser. Cf. Texas Ass'n of Business v. Texas Air Control Bd. , 852 S.W.2d 440, 444 (Tex.

1993) (holding that the standing requirement "is implicit in the open courts provision, [Tex.

Const. art. I, § 13], which contemplates access to the courts only for those litigants suffering

an injury").

3. It is important to note that the indirect-purchaser doctrine is not founded on the

principle that the antitrust defendant's conduct is legal under the antitrust laws. Rather, it is

founded on the principle that indirect purchasers are not the proper parties to seek enforcement

of those laws. See Kansas v. Utilicorp United, Inc. , 497 U.S. 199, 203-04 (1990). Thus the

DTPA and the Texas Antitrust Act do not regulate defendants' conduct in an inconsistent

manner.

4. Tex. Rev. Civ. Stat. Ann. art. 581-1 to 581-41 (West 1964 & Supp. 1994).

5. Even then, such a summary judgment generally can be granted only after the non-movant has had an opportunity to amend his pleadings after special exceptions have been

sustained. See Texas Dep't of Corrections v. Herring , 513 S.W.2d 6, 9-10 (Tex. 1974). In

the present case, the trial court followed this procedure.

6. The supreme court did not give much guidance as to whether these four terms

should be construed in the conjunctive (i.e. glaringly noticeable, flagrant, complete, and

unmitigated) or disjunctive (i.e. glaringly noticeable, or flagrant, or complete and

unmitigated). Although the court's phrase contains the term "and," this usage is not

conclusive, because the court quoted Webster's Third New International Dictionary 1002

(1976) for its definition of the term "gross." The fact that the court relied on a dictionary

definition supports the argument that the phrase should be read in the disjunctive, since

dictionaries often list several synonyms for a word when they define it. We believe there is a

large difference between, for example, a price disparity that is "glaringly noticeable" or

"flagrant" and one that is "complete and unmitigated." However, because we find that

plaintiffs' allegations are sufficient under either construction, we do not decide this issue.

7. Determining value is not a simple task. Plaintiffs apparently assume that the

wholesale cost per can of the infant formula is the "value" of the formula. Although this

may or may not be true, defendants did not present summary judgment evidence to the

contrary. Thus, reading the pleadings in the light most favorable to plaintiffs, for

purposes of evaluating the pleadings' sufficiency, we assume that the wholesale cost per

can is the "value" per can.

8. We do not hold that a mere price disparity alone, even a large one, is enough to

meet the test of unconscionability. Rather, to be glaringly noticeable, flagrant, complete,

and unmitigated, it may well be that there must be a gross price disparity "plus" some

type of culpable conduct. See, e.g., LaChalet Int'l, Inc. v. Nowik , 787 S.W.2d 101, 105-06

(Tex. App.Dallas 1990, no writ) (disparity in price and value received accompanied by

several misrepresentations); Butler v. Joseph's Wine Shop, Inc. , 633 S.W.2d 926, 931-32

(Tex. App.Houston [14th Dist.] 1982, writ ref'd n.r.e.) (gross disparity between price paid

and value received caused by defendant's selling of goods to someone else and then refusing to

return the money). In this case, plaintiffs have alleged that defendants conspired to raise

prices and to prevent direct advertising and forestall market entry. Such allegations are

enough to satisfy a "price disparity plus" standard.