BOSTON (CN) – The 1st Circuit decertified a class of at least 13 million car buyers in a high-stakes antitrust lawsuit accusing automobile manufacturers of illegally driving up prices by blocking the importation of cheaper Canadian cars.
Citing a lack of any ongoing controversy, the court reversed certification of the “potentially massive” class and remanded for reconsideration of additional evidence from the plaintiffs.
“The district court should now have a complete record before it from which to test the viability of plaintiffs’ novel theory for proving common impact,” Judge Lynch wrote for the majority. If the district court recertifies the class and allows the claim to proceed, the damages could top $3 billion.
The class action claimed U.S. car dealers interfered with Canadian imports in a variety of legal and illegal ways from 2001 through 2003, such as refusing to honor warranties on Canadian cars, discouraging dealers from installing domestic odometers and gas gauges on the imports, imposing disciplinary measures on Canadian dealers who sold to exporting customers and withholding information about safety recalls from exporting buyers.
“When Canadian cars were discovered in the United States, automakers would impose a ‘chargeback,’ a monetary penalty sometimes amounting to thousands of dollars, on the Canadian dealer who sold the car,” the 54-page ruling explains.
U.S. car makers argued that these and other challenged businesses practices amount to vertical restraints between manufacturers and dealers that do not violate antitrust law.
But plaintiffs maintain that the auto makers knowingly and intentionally conspired to stop buyers from taking advantage of the exchange rate between the then-strong U.S. dollar and the cheaper Canadian dollar.
The alleged wrongdoing all but stopped when the U.S. dollar tanked and the opportunities for arbitrage disappeared.
Judge Torruella dissented in part, expressing concern that the majority’s decision to remand for reconsideration on additional evidence gives the impression that the court now requires a high level of fact-finding before certification.