District Court Order Restricting Definition of Class in Price Fixing Action Reversed

In a case pending since 2004, the Kansas Court of Appeals reversed a district court order that had severely restricted the definition of the class of plaintiffs authorized to sue defendant for alleged price fixing in violation of the Kansas Restraint of Trade Act (the “Act”). Plaintiffs alleged that the defendant, a manufacturer and retailer of handbags, accessories, and luggage, violated the Act by illegally fixing the prices its independent retailers could charge for its products. The district court originally granted summary judgment in favor of the defendant, based upon Leegin Creative Leather Products v. PSKS, Inc., 551 U.S. 877 (2007).  In that case, the U.S. Supreme Court held that resale price maintenance agreements (the practice whereby a manufacturer and its distributors agree that the distributors will sell the manufacturer's product at certain prices (resale price maintenance), at or above a price floor (minimum resale price maintenance) or at or below a price ceiling (maximum resale price maintenance)) were subject to a "rule of reason" analysis.  But the Kansas Supreme Court reversed in 2012, ruling that the United States Supreme Court case was inapplicable since the case was based on the Kansas Act, not federal law, and that Kansas law held that resale price maintenance agreements were per se unlawful.  On remand, the defendant had asked the district court to decertify the class, and the district court had significantly modified the class to include only those consumers who had purchased the defendant’s luggage from an exclusive luggage seller.   In it's remand opinion, the Kansas court of Appeals stated that its opinion would have “very limited precedential value going forward” since it was applying the Kansas Restraint of Trade Act before it was substantially reworked by the Kansas Legislature in April of 2013.  Indeed, in its 2013 session, the Kansas legislature abrogated the Kansas Supreme Court's opinion in the case by passing legislation (which was later signed into law) reestablishing a rule of reason analysis for resale price maintenance agreements under Kansas antitrust law.  Accordingly, such agreements will not be deemed unlawful if they are reasonable.   [Note:  Some states still deem resale price maintenance agreements to be per se unlawful and there is opposition to the 2006 U.S. Supreme Court opinion in the U.S. Congress.  Thus, businesses that have national resale networks should carefully consider the legality of such agreements.] The Kansas Court of Appeals went on to find that the district court had applied erroneous legal principles in excluding most of the class because of the mere existence of one or more individual questions. The district court also failed to rigorously analyze the class certification factors. As such, the court could not grant meaningful review of the district court’s exercise of discretion. The court remanded for further proceedings in accordance with the opinion.  O’Brien v. Leegin Creative Leather Products, Inc., No. 108,988, 2013, Kan. App. Unpub. LEXIS 221 (Kan. Ct. App. Apr. 4, 2014).

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