Amicus Curiae Brief — Hawaii v. Standard Oil Co. of Cal.

‘StaNDaa On Company OF CALIFORNIA? Union at

COMPANY OF CALIFORNIA; SHELL On. ComPAaNy ea

_ CHEVRON ASPHALT ghee

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Page

Westra nico eer h Sei diinnliniiccscttls Lage denise eters Eee _

Nature of Case So aa aid 2

Argument deDRibedadegoddscvocsssbaones * ctbvenivbteced de Lacebechseseddaden

; a Im

Hawaii, as Parens Patriae, States a Cause of.

_ Section 4 of the Clayton. DAGR sccopapeeressncop teen dope

The Economy Was Not Held to Be an

Action "fer Damages to Its ‘Econoniy Under

A.

B.

ee

Peraaciic gece ty in Georgia v. . Pennsylvania R.

i, Macinl ed iad SR lito :

Injury to Business or Property RR IOERET,

The Injury to Hawaii Was Not Remote Ae

Suits by a State Parens- Patriae in Conspiracies

Effecting Consumer: Goods Are Essential for

11

- 2

14°

the Fulfillment of the: Enforcement of jas _.

_ trust Laws oe

A. “Introduction Goodie Lah etts :

'B. This Court Has pascal Treble Dam-

‘age Actions as a Means of Private En-

_ forcement of the Antitrust Laws ...... aot

C. . The Great Bulk of: Consumer Clairiis Will -

. “Not Be Presented in a Traditional Anti-

, _. trust Case Involving Consumer Goods ..

| D. If Consumer Claims. Are Not Wasnt

' There Can Be No Effective Private En-.

"forcement - ssvesncosenss

spl ;

Mk Of Page ae

he. "Origins. “and ‘Devtlopaicnt of the Common

'/ Law -Doctrine- of .Parens Patriae Justify Its’

| Application to Treble Damage cles Tnvolv-

J ing, ‘Consumer ae ET ASE RO Coen

eC,

is.

oA The Doctrine of Parens Patrige Originated .

in the Authority of the Sovereign to Rep- ..

resent’ Persons. Who Are Non Sui: Juris .

sw AD .

&B. The Parens Patriac Doctrine Has Bees -

».Applied* to Allow States ‘to © Represent

Large. Masses of Its Citizéns -..........+....-

Cc. ‘Parens Patriae Should. Be Developed to

. Permit the State to Present All Antitrust

Claims Based. on Consumer Sales. ......:..:..

De - Parens Patriae Is a Common Law Doctrine

. Properly Subject t to Development by the.

ia Courts aicadernigueswabdanusctcncenegbeoytlousane nani

The Bringing of Parens’ Patriae Actions Is a Fund.

tion of the Sovereign but .They Are Not Neces-.

sarily Brought on Behalf of the Sovereign ..

AS ~ Suits in a ‘Quasi-Soyereign ‘Capacity oor

‘B, ‘Suits by'a State Parens pawn - sisi eet

vO

- Consumer Claims Is Best Used in Conjunction

y ‘With a Rule 23 Class Action nseideceeeeeenpeenerseees=

_Conitusion Bi a iadbatlacensiai canoe ce

16

17

17

| The ‘Parent ee Doctrine ‘in’ R vering for -

23

TABLE OF AUTHORITIES CITED

| Cases > Page .

Attorney General v. Dublin (Mayor of), 1 Bligh :

NSS. 312. (1827), 4 Eng. Rep. 888 (1901) ..-....- 15...

7 Bigelow v.. RKO Radio Pictures, 327, US. (252 :

(1946). ...<..-.0..--.. iccusinensigentansibeduesianstiecsertevabcubiubenses AF

. Coordinated Pretrial Proceedings in Antibiotic Anti-

_ + trust Actions, In re, M 19-93 A. W.2.-c.cicuin piidishintthaan 23

Daar v. Yellow Cab Co., 67 Cal. 2d 695, 63 Cal. :

Rptr. : 724 (1967) vnsuneesmenenshinninanaseduirentanetiaisil Nu. 24

- Georgia v. Evans, 316 US. 159. (1942) bivedavommcineiatet _ 19

Georgia v. Pennsylvania R. Co.,. 324 US. 439 te

(1945) ...--.-n--eeeeeeenpeeriees 1, 2, 5,6, 7, 8.16, 21

Georgia V. Tennessee Copper. Co., 206 U.S. 230

| 1 DOT) ceca wees sn cscncsterncnquenneschneeniels 19, 20, 21

_ Hanover Shoe v. United Shoe Mach., 392 US. 481 +

. © (1968)... .eeneeeeeeeeeeeeceeceeteneenneeeneeneenetnengeenseees 13, 14 |

Kansas v. Colorado, 206 U.S. 46 (1907) bp estevdsicn 8

Keogh v.C. & N. W. Ry..Co., 260 US. 156 (1922) |

i Pa A NONE ATE OME SN. TRONS

‘eidiiins v. Texas, 176 US. 1 (1900). . S| a aiglbas 22

Missouri v. Illinois, 180 US. 208. (1901). a ae

' Multidistrict Vehicle Air Pollution, In fe, M.D. L pet

No. 3i . cam anepinsehs TittiniRicccomenmemmennennnphamttinaeee scteececenss 2

N.Y. v. Louisiana, 108 US. 76 (1883) iptioellioapieet 22

Oklahoma v. Cook, 304 U.S. 387° (1938) Ssehtnipene” 22.

Penna. v. West Virginia, 262 U.S. 553% 1923) ......-. 8

. Perkins v. . Standard Oil Co., 395 U. S. 642 (1969)... 9

Perma Mufflers v. Int'l Parts Corp. .» 392 U. S. 134

(EpeS) aiesesenentncecesenstesnenensesnsesnquesescacsenmanenenenenes ul

iv.

a= 4 a [. Page

_ Radiant Burners ° v. Peoples Gas Co., 364 U. S. 656 ©

(1961 ) onn..n.ceeccneettgencceeceecescenecenserseeneteceesnceseeessnenes 7

Shaftsbury (Earl of) v. Shaftsbury, Gilb, Rep. 172 |

(1725), 29 Eng. Rep. 121 (1903) t+ 15 .

State of West Virginia v: Chas. Pfizer & Co., 314 F.

Supp. 710 (1970) ....--------:---eececececeeeeeeeneeeeeeegeees 13.

Waldron v. British Petroleum: Co.,.231 F. Supp. n .

(1964) Landinecneneeeeeeecceecsseeeecenceqeeceneeeereetcseecacentenes 8

. exits Corp. v. Hazeltine, 395 US. 100 (1968) ©

) Rules - ~

Federal Rules. of Civil. Procedure, Rule 23 seteee 4, 23

Rules‘ of Supreme Court of United States, Rule 42... 1

Statutes 5 |

Clayton Act, Sec. 4)... 5 6,7, 8, 19, 22.

‘Clayton Act, Sec. 16 ...---esereee titers pinnae ©

Stierman Act, Sec. 1 ieee enero ete “47

Textbooks -

43 California Bar Journal, pp. 509; ‘524, 4, S313 -

(1968) ......-------ceeeceeeeceeseenegeees puesta cieeeepooeen .

6 Columbia Journal of Law and Social Problems,

(1970), pp. 411, 4IO-43 1 ...-220.-2cnqeesnnernoresenes= 23

e |

. IN THE.

- Supreme Court of the United sales

October Term, 1970

No. 1060 -

t

STATE OF HAWAI, — —

-_ Petitioner,

vS.

STANDARD on Couranty oF CALIFORNIA; UNION OIL ok

COMPANY OF CALIFORNIA; SHELL Or GoMPANY and —

CHEVRON ASPHALT COMPANY,

. ; 2 = Respondents.

| a ; | |

BRIEF OF AMICUS CURIAE

Introduction

The State of California files this amicus curiae brief

in support of Hawaii pursuant to Rule 42 of the Rules

of this Court. :

9 This Court in Georgia v. Pennajiwanit R. Co., 324°

US. 439 (1945), held that a state could sue parens .

patriae to recover for damages to the ecoriomy under

the antitrust laws,

, fg The facts alleged in the present case and those pre-

sented i in. Georgia, supra, are similar. In each case the

state sued as parers patriae alleging a price-fixing con-

spiracy and in each case. the state. sought to recovet

for similar types of damages to the economy. = |

.~ * ° r : ; ee r

—,

Notwithstanding Georgia v. Pennsylvania R. Co. o

supra, the Ninth Circuit held that Hawaii, “as parens

patriae, could not sue under Section 4 of the Clayton.

Act. to recover damiages to its “genéral economy. Ha-.

._ waii’s petition ‘for certiorari from this decision has been

- granted. Amicus supports Hawaii’s contention that the

opinion of the Circuit Court.in denying this cause of

action conflicts with the holding by this Court in .

Georgia and. impairs the purpose of the’ antitrust laws. -

Pursiant to the Congressional policy of encouraging —

private law enforcement of the antitrust laws California,

and other states, have brought treble damage and in-

? junctive actions to enforce these laws. In doing so, it

~ has become evident that the type of harm capable of :

being done by those who violate the antitrust laws re- .

‘sults’ in damage not only to specific pérsons (including

_ States in their proprietary capacity) but also to the

mass of consumers, 3s well as to the general economy |

and welfare of the state.

Under such circumstances, states “in begun utiliz-

ing the parens patriae concept in order to fully recover

- . for the harm done by violators of the antitrust laws.

Perhaps the most notable are the automobile air pollu- _ |

tion cases brought by. California and other states,’

| against the automobile manufacturers alleging a conspir-

acy to delay the development and installation of smog

devices : on. automobiles. The vety issue before =. .

el

vAppronimately 34 states have fled lawouis sk sh itis ee. °

been consolidated for pre-trial proceedings in the United States _

District Court for the Central District of California. In re Multi-—

district Vehicle Air ee MDL, No. 31. |.

Court is presently pending on interlocutory appeal be- ‘

fore the Ninth Circuit in the air pollution cases.

The Bession by this Court on the question of parens .

riae is therefore of great importance to not only 7

pending cases, but to the future role of states in their.

enforcement of the antitrust laws. |

_ Hawaii has as raised in its brief. the .bringing

of a parens patriae cause of action to recover damages

as representative of the consumers in Hawaii (Hawaii’s

Brief, pp. 62-67). There are presently pending in fed-

eral courts other antitrust cases which’ states’ have |

brought alleging parens patriae representation of con-

sumers, the most notable being the broad spectrum

antibiotic drug cases brought by amicus and other states.

California agrees with Hawaii that such a cause of action»

- is proper in antitrust cases.

Unless reversed, the Hawait decision. will pritensts .

"effect the ability of states to recover for injuries result-

ing from violations of the antitrust laws and will |

severely curtail the Congressional policy of encouraging

‘private law enforcement of antitrust violations.

Nature of Case

_ The nature of the case has epee ne

in Hawaii’s brief, Briefly, Hawaii’ S complaint alleged

- that the defendants conspired to fix the price of gaso-

- line and ‘other products sold in the State of Hawaii.

Count One alleged a cause: of action by the staté

suing in its proprietary capacity. This cause of action .

is not before the esti

Count Two was brought “. . . by virtue of its [Ha-

waii’s] duty to protect the general.welfare of the State

and its citizens, acting herein as parens patriae, trustee,

guardian and representative of its citizens, to recoyer

damages for, and secure injunctive ‘relief against, the

violations of the antitrust. laws, hereinbefore alleged.”

(Hawaii’s Brief, p. 8.) This count alleged that the

“conspi y of the defendants injured and adversely af-

fected the economy and prosperity of the State of

Hawaii. | oat

“s

- Count Three sought recovery pursuant to ) Rule 23

of the Federal Rules of Civil Procedure .as. representa-

tive of. a class’ comprised of all purchasers.of the de-

fendants’ gasoline _ other refined Jac prod-

ucts. |

' The District Court secialiniia Count Two but dis-

missed Count’ Three. The dismissal was not appealed —

_ by Hawaii. The Court of Appeals reversed the District

Court in’ regard to Count Two from which decision -

-«

Hawaii's petition for certiorari has been granted.

se

_ ARGUMENT

Hawaii, as. Parens Patriae, States a of Action |

’ _ for Damages to Its Economy U: Section 4 of

| the Clayton Act 7 a |

In dismissing Hawaii’s cause of action to. recover as;

parens patriae for damages to the economy the Ninth

Circuit found that the general economy was an abstrac- .

tion- and had no‘value in itself. The Court went on to

state that even if. injury to the economy could-be mea-* = «

sured, it was not an injury to business or property |

within the meaning of Section 4 of the Clayton Act,

and furthermore, the injury was too indirect and ree

mote to permit recovery. The Circuit —. erred in |

these conclusions. — 3 |

A. The" Economy Was Not Held to Me sn Abstcton te

' Georgia v. Pennsylvania R. Co. :

The injury and damages set forth in Count Two of

™ . Hawaii’s complaint are similar to those alleged in the

; Georgia case. The Ninth. Circuit was concerned with’

Hawaii’s inability to articulate a’ .precise measure of

damagés and found that the economy was an abstrac-

tion for which no damages could be recovered:)

This Court, however, had no problém with the econ-

. -Omy being an abstraction when it decided that-Geergia

. could allege an action for damage to its economy un-

der. us antitrust laws.

. The rights which Georgia asserts, parens

. patie, are those ‘arising from an alleged con-

_ $piracy of private | persons whose price-fixing

scheme, Se ee

Georgia. . . .. And we. find no indication that,

: . °

when Congress fashioned those civil remedies, it

restricted the States-to suits to protect their pro-

prietary interests. Suits by a State, parens patriae,

have long been recognized. There is no apparent

” reason why those suits should be excluded: from

the purview of the anti-trust acts.”

Georgia v. Pennsylvania R. Co., supra, at p. 447.

“Since the claim which Georgia asserts as par-

ens patriae as well as proprietor meets the stand-

ards of justiciability and since. Georgia is a ‘per-

son’ entitled to enforce the civil sanctions of the

anti-trust laws, the ‘reasons which have been ad-

-vanced for denying Georgia the opportunity to pre-

sent her cause of actjon to this Court fail.”

' Georgia v. Penrisylvania R. Co., supra, at p. 452.

The civil sanctions. of the antitrust laws _ provide for |

means of relief by both injunction and damages LSec-

' tion 4 and Section 16 of the Clayton Act). If an il-

legal act did indeed occur, resulting in injury to Ha-

_ - waii’s economy, then Hawaii should not be deprived of

its statutory right to seek and prove damages.

This Court made it clear that it denied Georgia’s

* action for damages only because the injury was based

. on discrimination in railroad rates and tariffs. Such a

recovery was ‘precluded by Keogh v. C. & N. W. Ry.

Co., 260 U.S. 156 (1922), a case which held_ that

private antitrust damage actions cannot be brought in

regard to rates —— by the Interstate Commerce

Commission.

7 Nowhere i ‘in “Georgia did this Court hold that a state

may not sue to recover for damages to the economy.

On the contrary, that decision specifically stated that

a state, suing under the civil sanctions of the antitrust ~

laws, could State a cause of action “for such me

a | ; ; 7 ‘ 7 5 _

_As to requiring a precise measure of damage, Ha-

_waii should not be compelled to establish its. proof at

. the pleading stage. Under the liberal Tules of |

in antitrust cases, all Hawaii need do to withstand a.

‘motion to dismiss was‘ allege a violation of Section 1 of.

- the Sherman. Act and’ that it was damaged thereby:

Radiant Burners v. Peoples Gas Co., 364 U.S. 656, 660

(1961). This it has done.

| By its action’ the Court failed ‘to distingyish between

e the fact of damage and: the measyre of damage. The

oS fact of damage alleged by Hawaii paralleled that as- ar

serted in the Georgia case and. Hawaii should: not haye

_been precluded at the pleading stage from the oppor- -

tunity of } proving damages at trial. If Hawaii can in. fact ~

prove that its economy has been damaged, uncertainty

as to the amount of damage should not prevent: recovery.

- Bigelow v. RKO Radio Pictures, 327 USS. 252 1946).

' B Injery to Business or Property

pr aie if damages to the economy could’ be nitasured,

the Ninth Circuit stated that such injury does not con-

stitute injury to business or property within the mean-

ing of Section 4 of the Clayton ‘Act. In recognizing the ©

right of a state to sue. under te antitrust laws for

damages to its economy this Court tated:

. Georgia. as a representative of the public - ;

os sensei nadiat coemeatenie if proven, limits

_ + the opportunities of her people shackles her indus-

* tries, retards her development, and relegates her to

an inferior economic. position among her’ sister =

States. These are matters of grave public concern © G

in which. Georgia has an interest apart from. that ~ ;

of particular individuals who may be affected.

Georgia's interest.is not remote; it is immediate.”

- Georgia v. Pennsylvania R. Co:, supra, at p. 451.

ee

“The interests that Hawaii seeks to protect are the —

same as ‘those alleged by Georgia which were recog-! \

; nized by this Court as ‘being legitimate interests sub-

ject to the protection by a state under antitrust

_ laws. In finding@that Hawaii was not injured in its —

business or property the Circuit Court narrowly. inter- i.

preted the meaning of these words.

There is no simple definition of the terms “business

“or property”. Nor, in our rapidly changing society, —

‘should the courts attempt a définition which purports _

to describe for all time exactly what constitutes “busi

ness or property”. |

‘In Waldron v. British Petroleum Co., 231 F. ey |

72 (S.D.N.Y. 1964), the court noted that tle words

“business or property” are used in the disjunctive and

that “property” has wider Scope and is more extensive

than - word “business”.

If it is decided that the rights, privileges |

ond powers possessed by plaintiff should receive

judicial sanction, that conclusion would be ex-

: pressed by declaring that" Piaintitt possesses ‘prop-

erty.”

. Waldron v. British Petroleum Co. supra, at 86, -

_ This Court has time and again held that a state

has sufficient interest to bring lawsuits for the purpose

of: protecting the health, comfort and general welfare ,

of its people. Penna. v. West Virginia, 262. U.S. 553

_ (1923); Kansas v. Colorado, 206 U.S. 46 (1907);

» Georgia v. Tennessee Copper Co.,‘ 206 U.S. 230

_. (1907). Whether it be deemed “business” or “prop-

erty,” the intérest of Hawaii in protecting its economy ©

and the general welfare of its ‘people is certainly sub-

Ve Re ee ee ee

tion 4 of the Clayton: Act.

2

=

Cc. The Injury to Hawall Was Not Remote

‘In dismissing Count Two the Ninth Circuit found |

that the injury to: the. .economy was too femote. The

~ ‘remoteness test is one which has been. self-imposed by

~ lower courts and is not a criteria contained in the anti-

"trust laws. In fact, this Court in. Perkins v. Standard —

_ @Qil Co., 395 U.S. 642 (1969), reversed a decision by.

_ vania R. Co., 324 US. 439 (1945), the Ninth Cir-

cuit found that injury-to the economy was too remote _.

and held as a matter of law that Hawaii could not bring

decision not only conflicts with Georgia,

the Ninth-Circuit where the Circuit. Court denied a jury

verdict for petitioner on the ground that the injury suf-

feted was too remote” from the unlawful ny to per-.

mit recovery.

Moreover, in the remoteness cases Aine an action

. to a particular plaintiff which were relied upon by. the

Ninth Circuit, there was always a party with a more : ©

proximate injury who was available to bring the action. ‘.-

The specific: injuries alleged by Hawaii to its 5

clearly reveal that they were not remote and inly

there is no more appropriate party than Hawaii ta bring Bes

_ this action. ee : 2

In spite of. the ‘similarities with Georgia: v, 'Pennsyl-

a parenspatriae action to recover for . This

recognize the propriety of a parens patriae §

mote. One good. example is the air. pollution case where

the conspiracy . involved not. ordinary Price fixitg-but a

t fails to

by a.

state for damage to its economy. where.facts clearly re-

veal an impact upon a state’s economy which is not re-

"The Court of Appeals describtd Perkins’ injury’ as “Furth

level” since sluce be: <lelpped, talety trom. competi pee. es Se

aaa monet the gasoline sold by Standard Oil. _ Perkins ©

Standard Oil ., 395 US. 642, 647 ee :

™.

?

sini mee

conspitacy 5 which, _as a natural al consequent, injured the

‘economy. | ot |

Unless-reversed, the Hawaii decision would preibiae « .

} ens ‘patria cause of action by a — |

- state to recover for daifiage.

to. its economy regardless

i the facts: ‘constituting violations of the antitrust laws.

we RT ZR gee eas |

Suits 5 ie a Siate Parens Patriae in » Conmplracied Effect-

_& > img Consumer Goods Are Essential for the Fuk~

fillment of the Enforcement of the Antitrust Laws .

x.

A. Introduction aN

Ambo ania the contention raised by Hawaii that

in a conspiracy injuring a large. number of consumers,

who will ‘otherwise be unable ‘to present their damage

claims, a state has a proper role to sue parens' patriae,

‘Itvis well established that in permitting treble’ dam-

age actions the. intent of Congress was to encourage |

the private law enforcement of antitrust violations. To

the extent that private antitrust enforcement -is thwarted,

because of the type of. violation, the. ‘effect of these.

_ laws becomes diluted. °

_ The best example of ‘where antitrust violations may

occur. without fear of punishment, and reap largé re-

‘turns to. the ‘violators, are those conspiracies which in-

jure a large group ‘of consumers: and involve small’

_. purchases. Most. consumers injured by such a conspir- ~

acy wil not recover. either on an. individual or class. <—

‘action basis - thereby enabling the defendants to retain

their unlawful profits. 3 P tye

| Consistent with the private antitrust enforcement pol- ;

_ icy, states should have parens patriae standing to present

evidence of total consumer purchases i in antitrust actions

P

P °

e ERENCE ON ERT RPG” oe ES HL RRR TR. «He

ie?

Cr °

~ based on 1 violations involving consumer goods. In ada:

_ Corp., 392 U.S. 134, 139 (1968%

The essence of. private enforcement - has’ been ‘the ~ -

‘establishment. of procedures which warn those who

- ‘ > igh

tion” to policy factors requiring this<tesult, the historical |

precedents regarding parens patriae are consistent with —

this approach. ‘The doctrine was created and applied to”

deal with ‘situations in which, but for this concept, there

would be no remedy for’ ilfégal acts. :

The doctrine of parens patriae originated when the —

sovereign was granted ‘the right to represent its citizens .

‘who were non sui juris, It was, subsequently used to.

_ allow the sovereign to sue when all, or substantially all,

of its citizens had been injured. Permitting a state to

sue parens patriae in antitrust cases where its citizens

have: been injured in a manner which realistically ‘pre-

cludes them from bringing their own actions is another _

logical application of the parens ‘patriae doctrine.

B. This Court-Hiss Recognized ‘Treble Damage Actions as &

ena. of Palsote Reafhtcoment of the Anttent Lag ,

In the case of Zenith Corp. v. Hazeltine, 395 us...

100, 130-31 (1969), Justice White stated: | i

“Moreover, the purpose of giving private par- .

ties treble-damage- and injunctive remedies was not

‘merely to provide, private relief, but was to serve —

as well hg high purpose of enforcing ” antitrust :

laws. .

Vigorous private enforcement of the’ antritrust laws ~

. has repeatedly. been recognized as being: “a bulwark

of antitrust enforcement.” Perma Mufflers v. Intl Parts.

ws °

violate. the. antitrust laws that they will have to pay -

damages equal to three times the amount of damages |

. caused by their unlawful activities. If there is no like-

}

Sa Se

E St ete ag ar eeey eter Se te _—

| ae Cael

. lihood that. treble damage actions can,

‘brought against those who Violate the laws, the deter-

». pent effect of private enforcement actions will necessarily

- . be severely diminished. - Thus, the. permitting of parens ©

' patriae dctions in. consfmer conspiracies is. consistent

" with the purpose of permitting: private enforcement of

.* the antitrust laws.

C. The Great Bok of Consumer Claims will Not Be . Pre-

sented in a Traditional Antitrust Case Involving Consumer -

‘The possibility of violations : of the. antitrust laws

‘relating to c6nsumer goods i is apparent. 8 =

The very nature of consumer goods is such that the ;

possibility of successfull treble damage actions is small.

The. facts ‘in the instant case clearly demonstrate the

problems involved in bringing a successful. treble dam-

age action in relation to consumer goods. Even with a.

product such as gasoline which is purchased on a

regular basis, and-in which _ purchases may amount to

eral hundred: or even several | thousand doljars for.

individual-consumer during’ a conspiracy of several

years, it is net realistically possible due to the notori-

ous expenses of suit for consumers to bring individual

actions. —

Even if a traditional class action was established, it

would not resolve the problem of presenting the claims

of all consumers if each individual class membet is re-

quired to prove his individual purchases i in order to re--

-cover ges. It is apparent that when this procedure

is used the ‘defendants will not be required to pay dam-

" 8Recent cases relating to consumer goods ‘have =e -tetra-

cycline, ampicillin, ——— eggs, gasoline, quinidine and

— ee. ;

re

'

—~

i

ages based on all sales. The realities of life age that:

(a) it is simply impossible to get everybody in a large

consumer class to participate in a class action; “(b) even

~ among. those who desire to. ‘parficipate * the’ ability may __

_ be: lacking ‘because of such things as missing records —

to prove purchases; and (c) in relation to conspiracies

in certain products, such as drugs, the’ consumer will

frequently not even know that he purchased ‘the product

in suit. The result is that ‘ even if a class is. established,

‘most of the claims involved will not be presented.‘

In cases involving consumer goods, such as eggs or

potato chips, it is apparent that most consumers will

not have actual proof of purchases. Even in those sit-

uations involving commodities where there may be doc-

uments to prove purchases, such as credit card slips_

for the. purchase of gasoline, the proof of purchase will -

‘often have ‘disappeared. The result is that if a con-

. $piracy injures consumers and it is necessary to pre-

sent records of purchases to prove damages it will be

difficult, if not impossible, for most members of a class.

to recover. The defendants, therefore, will not be penal-

\

~

ized by being separated from their illegal profits and

hence the alleged deterrent effect of treble damage ac-

tions will not exist in relation to conspiracies involving

consumer goods. © -

It is trug that the doctrine established in the case

sof Hanover*Shoe v. United Shoe Mach., 392°US. 481

(1968) may resolve this problem on occasiom by pro-

viding that the cause of action resides witha party

‘It is noted that in the Second Circuit decieicn: approving ‘the

settlement reached by certain plaintiffs in the broad spectrum anti-

_ biotic cases only 38,000 claiftis were received from 43 settling .

_ States, despite the fact that obviously millions of people used

the drug in question, State of West Virginia v. Chas.- Pfizer &

Co., 314 F. Supp. 710 (SDNY. 1970).

2 fe

a .

who can realistically bring a treble damage’ action.

_ This could be the manufacturer, wholesaler, or some

other party in the line of “distribution. However, it is _

equally true that there may well be consumer situations

which fall within the exception set forth in Hanover

. tegarding . situations analogous to “cost plus contracts,”

Such a situation is exemplified by the broad spectrum —

antibiotic drug cases. In those cases .the product which _

' was the su ject of the conspiracy passed unchanged in

form through the chain ‘of distribution. Each level ‘in-

cluded a price markup. This marketing process js analo-

gous to a “cost plus contract” in that it can be easily

_ proven that the original overcharge was paSsed on to

the consumer. This method of pricing is: normal | within

Pr.

consumer markets.

In addition, as illustrated by the instant case, , there

may be no independent intervening parties between the.

_ violator and consumer since the defendant Standard —

- Oil sells through their own ‘retail outlets. and the con-

sumer directly pays the amount of the alleged illegal _

overcharge.

D. - - If Consumer Claims Are Not Presented, There Can Be No

__ Effective Piivate Enforcement

If it is assumed that only-a small portion of the ‘claims

in an antitrust consumer conspiracy will be presented i in

a traditional class action, then although damages are

- _ trebled the defendants will -not-even-be required: pay

full’ single damages. Unless a state is permitted as |

parens patriae to present evidence of total purchases so

.. _ that full, damages can be assessed, the defendants will

- retain. their “illegal: profits and have achieved the goals —

_ intended by their unlawful conspiracy. The entire

.. thrust of treble damage actions to provide effective pri-

vate enforcement would thus be negated. .

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The Origins and Development of the Common: ‘Law |

Doctrine of Parens Patriae Justify Its Application

‘to, Treble anne Actions Involving Conmanse |

The origin of the common law Ancacin’ of parens

patriae and its subsequent development by the courts

‘indicate that it is an appropriate and idea¥ legal ve-

“ hicle to’ use in presenting claims of consumers injured

_ by: antitrust violations in consumer markets. oa

A. ‘The Doctrine of Parens Pairise Originated in the Authority

~ off the moneaniga't to Represent Persons Who Are Non Sui

. Juris afd pales

Ia early. English peas a idiots, ‘incompetents

and infants were non sui juris. Because the individual

incompetent was,anable to: appear in court, the _legal

_ doctrine .of pars patriae was developed, This doc-

trine provided ‘that . the. sovereign through ‘its attorney

— ~~ general ‘could represent: all _persons’ who ‘were non sui

juris. See Attorney General v. Dublin (Mayor of),

| Bligh N.S. 312 (1827), 4 Eng. Rep. 888 (1901); _¢

| | _ Shaftsbury ( Earl of) vy. Shaftsbury, Gilb, Rep. 12

(1725), 2. Eng. Rep. 121 (1903). 7 Y,

The need for such a legal doctrine is clear. The,

__ government-eould not permit a situation in Which, for

' example, an incompetent could. have his property con-

verted but because he was non sui juris no one could.

bring an action in conversion. The law allowed the .

sovereign to stand in a representative capacity on bee.

half of the person who was non sui juris. °

The crucial elements regarding the origin of parens

patriae in relation to the instant case are: (1) it is a

— *

common law doctrine and therefore subject to expan-

_ sion and development by this common law court; (2).

"it is an ‘interstitial doctrine designed to fill a gap.in .

the law where the need for such gap filling is obvious;

amd (3) the state in bringing an action parens_ patriae

, was not bringing it to recover for injury done to the -

. “state itself.

ON

B. The Parens Paste Doctine Has Been Apyled t Allon

States to Represent Large Masses of Its Citizens - = .

In the United States ; the doctrine of parens patriag - -

hase been-used by: ‘states, to bring actions. in situations —

_ .where the mass of their citizens were injured or threat-

ened. In these cases, the action is not brougltt on behalf.

of. an individual person who’ is non. sui juris, but is

= — brought on behalf of an amorphous: mass of. citizens.

Missouri v. Illinois, 180 U,S. 208, 241 (4901); Georgia

v. Pennsylyania R. Co.;-324 US. 439, 451 (1945).

The requisité element for the state~bringing parens . .

" patriae action in these cases was the existence of an»,

injury to a large number of its citizens. Most of these

actions were invariably injunctive in nature. The state

- in its capacity as parens patriae would seek. to enjoin

some eterious activity, not ‘because it was injuring - -

‘the state in its proprietary Capacity, but because it was

| _ injuring or threatening to injure its citizens. These were

| " situations in which it. would have been unreasonable and

impractical to expect any one citizen to bring. an action

because of the magnitude of the problem and because

‘no one citizen’s injury was . markedly different from |

that of any other citizen, a

. _— Patrise Should Be: Developed to’ Permit the State to

Present AH Antitrust Claims Based on Consumer Sales

The fundamental issue ptesented™ by the consumer

representation aspect _of this. case. is that absent such :

representation arr antitrust ‘conspiracy can cause injury

_ to_vast“numbers of consumers and damage claims will

“not be made for “such ‘injuries. To. this extent, the

: present case, is quite analogous to those. cases —

ting parens, patriae actions where there has been injury

~ to one who is non sui juris—or to a. large number of

Petsons—who are unable to sue on their own ‘behalf. .

Th permitting parens patriae by a state. in antitrust

cases, as Tepresentative of its consumer citizens, ‘dam-

age clain s of consumers who do not otherwise present

their

ment of the doctrine of parens patriae.

D. Parens Patriae Is a Conimon Law Doctrine Peery Sub-

ject to Development by the Courts .

The. concept. of parens patriae, as a common law —

doctrine is properly. subject to development . by the ©

courts. In describing the need to develop the common -

~ law former Chief Justice Roger Traynor of the Cali-

fornia Supreme Court stated:

aims can be brought before the court ‘and result -

Separating the defendants from their illegally ob- ,

“tained profits. The idea that a person should have |

freedom to injure. others and remain immune from

civil actions is abhorrent to any legal. system. Thus,’

* the application of parens patriae actions in consumer

- conspiracies is consistent with the Purpose and develop-

2

| Our reésporisibility was ns... to create the

. - most vations) rule possible for a novel spusaaiare ;

_ almost but not quite covered by a statute.”

“Statutes Revolving in Common am Orbits,” “

Cal. BJ. 509, 531-532 (1968). |

° Tt has béen. argued that changes in ‘the law in ‘rela- lis

_ tion to parens patriae should be directed ‘to Congress

rather than the courts. This is, of course, an argument .

made by defendants at all times when attempting to

stop developments of the law which they find antitheti-

cal to their interest. While Congress may act if it feels

it appropriate, the courts nevertheless have the right to —

develop the doctrine. The- right of courts to keep the—

common law viable. was noted, iby Chief Justice Pi

-. Ror stating: iz +6 PP

“Confronted with a. moribund rule iets was s pat- -

ently awaiting a coup de grace, we noted that the —

rule had ‘been. judicially created in the first place ©

and hence it would be inappropriate to await its. ~°

undoing by the. Legislature. ‘In effect the conten-

tion is a request that courts abdicate their respon-

. ibjlity. for the upkeep of the common law. That .

‘upkeep it needs continuously, as this case: dam- -

-onstrates.’” “Statutes Revolving in Common, Law .

_ Orbits,” supra, at 524... ~

2 . >

“The Bringing of Paréus Patriae Actions Is 2 Function

_-@£ the Sovereign but They Are Not Necessarily

Brought on Behalf of the Sovereign

: The right of a state . to sue as parens patriae has*

created a great deal of. confusion, both conceptual ‘and

* semantic, The confusion is, however, susceptible to res--

olution upon a- -careful analysis of the cases and con-

— ve atest involved. : |

6 » ©

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“'y’

| ; injury has been suffered by the State, qua Statej*and -

any. damages recovered: are to be retained by the State.

” The requisites for a state filing an action. ‘parens: .

patriae are not \the santé as. thase required for. a state

‘suing ins as@quasi-sovercign capacity. The belief that a

state must have an interest independent of and behind

the title .of its citizens applies only when the suit con-

-s@erns quasi-sovereign interests. To sue in a parens pa- °

triae capacity, however, there need not be any injury _

to. the state itself and the need for injury to’ “business

or property” under Section 4 of the Clayton Act is satis-

fied if such injury has occurred to those who are rep. 7

resented i in the perete patriae ation.

“Sal

—_—

--

A. Suits in a° east Soverdign C Capacity

G >A

A state can bring an antitrust action in ‘its. sover-

“eign capacity to récover @r injuries ‘suffered as a

"sovereign. Georgia v. Evans, 316 U.S. 159 (1942).

In such a situation, the state is comparable to a citi-

zen suing to ‘recover for injuries to the citizen caused .

by an antitrust conspiracy. The instant, case is, in part,

Such an action. Hawaii has sued to recover damages. for .

injury in its. proprietary . capacity resulting from price’

fixing on gasoline purchased for use in state cars. The

The quasi-sovereign capacity of ,a state ‘is less clear.

The concept: is specifically: mentioned. in Georgia. Ve

_ Tennessee. Copper Co. 1-206 U.S. 230 (1907), where

Georgia. sued to enjoin” ‘the emission of” noxious gases

which “were emitted by a company in. a neighboring.

‘State. and ‘wege carried into ‘Georgia. J ustice Holmes

stated: : ae PEAY

“The case has been. argued largely. ou it ‘were’

one betwéen two private parties; but if is not. The

very elements tigat would be relied upon ‘in a suit

Aes i, OF ge .

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between fellow-citizens .as . ground for equitable.

relief are wanting here. - The State owns very little

of the territory alleged to be affected, and the dam- *

) age to it’ capable of estimate in money, possibly,

‘at ‘least, is small. This is a suit. by a. State for an

injury to. ‘it in its capacity of quasi-sovereign. In

that capacity the State has an interest independent "

of and behind the titles of its citizens, in all the |

. earth: and air within its.domain. It has the dast

‘word as to whether its mountains shall be stripped

of. their forests and, its inhabitants shall breathe

pure air. It might have to pay ‘individuals before

it could. utter that: word, but with it remains the ©

final power. “The alleged damage to the State as a

private owner is merely a makeweight, and we

may lay gh: one side the dispute as to whether

the destruction: of. forests has led to ‘the gullying .

"of its roads.” 206 U.S. at 237. .

3

While a state can bring an action in its a city as

sovereign for injury to property owned by the state, in

Tennessee Copper it was not injury to, - state’s prop-

erty that was the basis of the action. But, “. . . the State

has ‘an interest independent of ahd behind the titles

- @

of its citizens. .. . dt tras the last word as to whether :

its: mountains shall be stri of their forests ... It

might Rave to pay individuals before it could utter that -

word, but with it remains the final power.” Quasi-sov-

| ereignty is then, at least in part, the residual interest of .

the state’ in all-the real ‘property ‘within the state. As .

‘ peas

Justice Holmes notes, the state “has. the’ last word” ré- .

garding usage of property within the state. “It might

ty

‘their own behalf. yy

a

er i

have to pay” (i.e., ‘condemn the property) bat. it ™

_ the last word.

Thus, under Tennessee. Copper a state may sue in a :

quasi-sovereign capacity to.protect its residual interests.

Of particular importance in this decision is the fact

that it was’ the state interest that was being protected -

by the. state. The state was not suing to Protect ‘the

. property of individuals even though it may have been —

a necessary incidental effect of the guit. Since the’

state was suing to protect its own interest in property,

it necessarily had to have an interest to protect—thus |

- the statement “a State has. an interest independent of .

- and behind the title of its citizens.”

Q

_ Suits by a State Parens Patriae

In evaluating. the requisites: of a parens patriae

suit the nature of a quasi-sovereign suit must “be dis-

tinguished. Acting as parens patriae is one. of the func-

tions of sovereignty, but>in suing as parens patriae 2

state does not specessarily sue to recover damages for

injuries suffered by the state. Rather, the | ‘state sues

parens patriae as a representative of persons who have .

been wrongfully injured but cannot realistically sue on

Thus, there is. no need for a state suing parens

patriae to have an interest independent’ of and behind

the title of its citizens. In Georgia v. Pennsylvania R.

Co., 324 U.S. 439 €1945), this Court, first directing

its attention to. whether | ‘Georgia. could sue pareny

__ patride under the antitrust laws determined that it could ¢

ae

bring such ‘an action. because the civil’ remedies were’

not intended to restrict states to protecting only their

proprietary integests.. In holding hat .a state could sue

~~ parens patriae this Court properly made no reference .

‘ S? - .. to the requisite that a state have an interest independent

of and behind the title of its citizens.” |

4 The - state in suing. as parens patriae’ acts as a

; “trustee, guardian or representative of all her citizens.”:

Louisiana .v. Pexas, 176 U.S. 1, 19 (1900): Acting —

in this capacity, itis no more ‘necessary that the state

have suffered an injury than it is necessary that a guard-

|. lan be personally injured before he can sue on behalf

of his-ward. 7 ~F ee

This fact is important in applying the requirement

of Section 4 of.the.Clayton Act that a plaintiff be in-

jured in his business or property. Since the state is

suing on behalf of persons who will not be filing their

own claims, the court should look to the represented

parties to see if they have been injured in. their business

or property. Where a state is suing parens patriae to

recover for: over-charges to. a consumer class, there

can be no doubt that there was injury to the “bilsiness

“or property” of those consumers.

51t was only when this Court directed its attention to the. issue

of original jurisdiction that reference was made to the need of a

_ state having an interest independent of and behind the title of ‘its -

citizens as this relates to the issue of standing to bring an original

jurisdiction action. Cases often cited for the proposition that

_ ‘a stale cannot sue parens patriae without an independent interest

‘ do not deal with the traditional concept of parens patriae as

evolved from the common law. £.g., Oklahoma v. Cook, 304.

U.S. 387 (1938); N.Y. v. Louisiana, 108 U.S. 76 (1883).

= a

Vv.

The Parens Patriae Doctrine ‘in Recovering for Con-

sumer Claims Is Best Used. in seiacenik With

a Rule 23 Class Action

!

A parens ‘patriae action for consumers is -most ef-.

ficient when used in conjunction with a class action. _

- State Protection, of its Ecouemy and Environment: Pa-

rens Patriae Suits for Damages, 6, Columbia Journal of

Law and Social Problems, 411, 430-431 (1970).

‘Under this approach, a class actioh would be established

on behalf of all consumers who had purchased the goods

in question during the alleged conspiracy period.

Normal class action procedures would be followed

. whereby notice would be given to members of the class,

the .method of notice depending on the facts’of each

case. Those persons who do not -elect to be’ excluded

from: the class would be bound by the. judgment. Those

persons who elect to be excluded would not be bound

by the judgment and. would. ‘be free to pursue = ae

own remedies. .

In the trial of the Ese action, . ‘the class Tepresente- .

tive would be. allowed to prove total sales of the con-

sumer good in question, within the state. Damages

would then be assessed against defendants on the basis

of applying the percentage overcharge to the total sales

‘to determine single damages. Trebling the single dam-

ages thus ascertained would establish the measure of

total darhages to be paid by defendants.

The fund thus created would be used for two | primary

purposes. First, to. finance a program to bring forth

®Such a procedure has approved by the Honorable Miles

' W. Lord. in the currently \pending broad spectrum antibiotic ©

cases. In re Coordinated trial Proceedings in Antibiotic

Antitrust Actions, M 19-93A, . . -

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the maximum number of public class members to make

Claims against the fund. One method of doing so could

be by means of mass media advertising. Secondly, to

pay damages to class members who. appear and file

claims as. required by the Court. . The unclaimed re-

. | meindce would be disposed of pursuant to order of the —

The program described above is desirable as it ac-

complishes the goals of the antitrust laws. It achieves

‘the intent of. private enforcement actions, separates the

defendants from their illegal profits and returns the —

unlawful overcharges to as many consumers as possible. ~

- Conclusion - ,

‘Based upon the foregoing reasons amicus submits that

the’ judgment of the Court of Appeals should be re-

versed and the case remanded-to the District Court

with directions to proceed to trial on Count Two of _ . *¢

Hawaii’s complaint. - - <

- Respectfully submitted, |

EVELLE J. YOUNGER,

Attorney General, State of

California, |

ANTHONY C. JOSEPH,

ROBERT MuRPHY, |

HERBERT DAVIS,

ae MICHAEL I. SPIEGEL,

4 - . CaroLe A. KoRNBLUM, |

* Deputy Attorneys General, | .

_ Amicus. Curiae.::

» 7One possible var oot iy is to pltce the unclaimed fund into

the state treasury, ‘thereby providing benefit to those who have

‘been injured as well as to the general public. For another type

disposition see Daar v. Yellow Cab Co., 67 Cal. 2d 695, 63 Cal.

Rptr. 724 (1967). | |

2

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