Choice-of-Law Rules Prevent Costco from Suing as Indirect Purchaser in California

Patterson Belknap Webb & Tyler LLP

In another development in the ongoing cathode ray tube (CRT) multidistrict litigation, Judge Tigar of the Northern District of California ruled that Costco could not recover any damages it sustained as an indirect purchaser of price-fixed CRTs.  Costco attempted to bring state law antitrust claims against the conspirators under California law, which allows indirect purchasers to recover damages.  However, applying Washington choice-of-law principles (where Costco originally filed suit before the case was transferred to the MDL court), the court held that Washington law, which does not allow for recovery by indirect purchasers, governed Costco’s claims.

Under the “most significant relationship test,” to determine which state’s law applies, Judge Tigar examined (a) the place where the injury occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation and place of business of the parties; and (d) the place where the relationship, if any, between the parties is centered.  While the court acknowledged that factor (b), the place where the conduct causing the injury occurred, should be given substantial weight, this factor did not point to any one jurisdiction because the “Defendants did not focus their collusive activity in any particular state; rather, their conspiratorial conduct allegedly spanned the globe.”  The court then noted that the “place of Costco’s injury is…the most important contact,” and   Washington was the place of injury because Washington is where Costco is headquartered and where the company agreed to buy the inflated CRTs.  The fact that Costco “bought and sold more CRT Finished Products in California than in any other state; issued purchase orders for these products, in part, from its California offices; purchased a significant amount of CRT Finished Products from California-based vendors; and had title transferred to Costco when the CRT Finished Products were delivered (many to California locations), bore “no legal weight” because “the ultimate destination of the panels does not have any part in Costco’s antitrust injury or in its state-law claims.”

This ruling demonstrates that courts will not let retailers simply plead state law claims from whatever jurisdiction is most favorable to them, even if the retailer has a significant presence in that jurisdiction.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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