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Right-to-Sue Questions Bog Down TV Tube Case

SAN FRANCISCO (CN) - Attorneys for a multitude of companies sparring over cathode ray tube price-fixing claims gathered in a federal courtroom Wednesday to argue over a legal exception that could allow indirect purchasers to sue for antitrust violations.

In response to five motions for summary judgment, U.S. District Judge Jon S. Tigar had asked the attorneys to answer a series of questions centered on the control exception noted in the U.S. Supreme Court's ruling in Illinois Brick.

The landmark case established that only direct purchasers of a fixed-price product, like the cathode ray tubes used in televisions and computer monitors, have standing to pursue federal antitrust claims.

While federal antitrust damages are usually set aside for the direct purchasers who supply products to indirect purchasers, the high court offered a few exceptions that would grant standing to indirect purchasers like the big-box electronics stores who sued CRT manufacturers, including LG and Samsung, back in 2007.

One of these is the control exception, which provides standing when an indirect purchaser buys a product from a direct purchaser owned or controlled by the price-fixer.

The defendants said Tigar should limit the exception's application. To grant indirect purchasers standing in the event that there is no "realistic possibility" of a lawsuit from a direct purchaser, they argued, would contravene the Supreme Court's clear opposition to expanding the exception.

"Simply finding lack of realistic possibility of suit is insufficient for the court to apply that exception," said Susan Nash, lawyer for LG Electronics. "You still have to put bounds around the exception."

Nash pointed to Royal Printing v. Kimberly Clark, where the Ninth Circuit allowed claims to proceed against a paper manufacturer even though the buyer had purchased the paper products from a wholesaler and not from the manufacturer. The court reasoned that in this situation, the direct purchaser - the wholesaler - wouldn't sue Kimberly Clark, because it was one of the manufacturer's subsidiaries.

"The court applied that exception when control existed at time of sale and when the lawsuit was filed. The case made no sense otherwise," Nash said, adding, "It would be an expansion to apply it in any other situation."

In his list of questions, Tigar went with the definition of control outlined in In re ATM Fee Antitrust Litigation as "'to exercise restraint or direction over; dominate, regulate, or command,' or to have 'the power or authority to guide or manage.'"

He asked the parties what degree of control could trigger the exception.

Michael P. Kenny, lawyer for plaintiff Dell, said, "There is no bright-line test for degree of control. Indeed, the very two-part definition of control adopted by ATM Fee underscores the flexibility of the test and the nature of the inquiry. They recognize this is open-ended. They recognize there are many ways one company can control another."

Tigar, who just took over managing the almost decade-old litigation from retiring U.S. District Judge Samuel Conti, acknowledged that the exception's ambiguity has only added to its trickiness.

"If the contours of an exception haven't been defined in the case law - semantics isn't the right word - but that's the battle I see being waged," he said.

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