B.W.I. Custom Kitchen v. Owens-Illinois, Inc

In B.W.I. Custom Kitchen v. Owens-Illinois, Inc. (1987) 191 Cal. App. 3d 1341, the court addressed the issue of when a proposed class is able to supply proof on a generalized basis that defendants' overcharges or inflated prices were "passed-on" to them. The court summarized the question as follows: "Whether the necessity of tracing a price-fixed product through the chain of distribution presents such complex individual issues that injury cannot be proven on a class-wide basis is the issue most vigorously contested herein." (Ibid.) The court noted that it was an unresolved issue in California whether a defendant in a Cartwright Act suit should be able to assert a "pass-on defense," (i.e., that any overcharges that it caused to a plaintiff by selling a product did not cause lasting injury, because the plaintiff then passed on any losses to the next purchaser of the product). On this point, the court's language was: "Whether defendants can bar class certification or negate injury by showing plaintiff and the class 'passed on' the overcharge is a question that has not been addressed by any California court, and it would be premature to resolve it at this juncture because we do not have an adequate factual record. However, even if a plaintiff has passed on the entire overcharge, he or she is not per se precluded from otherwise proving injury. For example, even though the entire overcharge has been passed on, the plaintiff may have lost a percentage share of the market or otherwise suffered reduced sales." (B.W.I. Custom Kitchen, supra, at p. 1353, interpreting Illinois Brick Co. v. Illinois (1977) 431 U.S. 720.) In B.W.I. Custom Kitchen, supra, 191 Cal. App. 3d 1341, the court noted that if classwide issues of antitrust violations and impact upon the class members may be resolved as common questions, then it is appropriate to treat the individual damages issues within the class action context. For example, a bifurcated trial, subclasses, or other remedial procedures could be used to make individual damage determinations. (Id. at p. 1354.) In some such cases, it is justified for courts to assume that "consumers were injured when they purchased products in an anticompetitive market, even though the price and terms of sale for the price-fixed product were individually negotiated." (Id. at pp. 1352-1353.) In the consumer context, at least a portion of the illegal overcharge by a manufacturer will presumably be passed on by the independent distributors to consumer class members in the form of higher prices. However, in a case in which the subject product was substantially altered or added to when it was received by a middleman from the manufacturer, the effects of any price-fixing by the manufacturer will be obscured and classwide proof of injury will be more difficult. (B.W.I. Custom Kitchen, supra, 191 Cal. App. 3d at p. 1352.)