Three groups of chocolate purchasers are pursuing antitrust claims against chocolate manufacturers: those who have purchased directly from the manufacturers (“direct purchasers”); those who have not purchased directly and who resell the chocolate they purchase (“indirect purchasers for resale”); and those who have not purchased directly and who use rather than resell the chocolate (“indirect end users”).

The indirect end users in this case, In re: Chocolate Confectionary Antitrust Litigation, 08-MDL-1935 (M.D. Pa. Feb. 18, 2011), pending in federal district court in Pennsylvania, sought to amend their class action complaint to add a claim based on the Illinois Antitrust Act. Section 7 of the Illinois Antitrust Act bars indirect purchasers from asserting Illinois Antitrust Act claims on behalf of a class. Plaintiffs contended, however, that Rule 23 of the Federal Rules of Civil Procedure, which governs class actions in federal court case, displaces and makes section 7 of the Illinois Antitrust Act inapplicable in federal court cases.

Plaintiffs based their argument on the Supreme Court’s recent decision in Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., ___ U.S. ___, 130 S. Ct. 1431 (2010), which holds that Rule 23 displaces a New York statute that otherwise bars claims that seek recovery of penalties or statutory sums from being “maintained as a class action.” To read our bulletin on Shady Grove click here.

The Pennsylvania federal district rejected plaintiffs’ argument. Shady Grove , the court explained, holds that Rule 23 displaces procedural state statutes but cannot “abridge, enlarge or modify any substantive right,” or “displace a [s]tate’s definition of its own rights or remedies.” Section 7 of the Illinois Antitrust Act “defines substantive rights and remedies—specifically, the civil actions and remedies emanating from violations of the [Act].” Unlike the “purely procedural” New York statute at issue in Shady Grove, Rule 23 thus does not displace the Illinois substantive statute. The court also noted that “several federal district courts have reached similar conclusions, and found that state laws with similar provisions were substantive in nature and therefore not preempted by Rule 23.” The court accordingly denied plaintiffs’ motion to amend their complaint and barred them from asserting an Illinois Antitrust Act claim.

This decision provides significant guidance concerning the interpretation of Shady Grove and the extent to which Rule 23 will—and will not—displace state laws that limit rights to assert class action claims.