A group of aggrieved convenience stores wanted certification as a class against Anheuser-Busch over an alleged coupon scheme that they claimed allowed a wholesaler to violate California’s price posting laws (for those of you that don’t live in price-posting states, this is a practice where beverage prices are disclosed to the state and have to be offered uniformly to similarly situated retailers – a stop-gap mechanism meant to help enforce laws prohibiting discriminatory pricing (most states have non-discriminatory pricing laws, but many do not require the posting of prices for added transparency)).

So the law in California, like most price-posting states, prohibits a wholesaler from charging different retailers disparate prices – the beer has to be invoiced at the price the wholesaler has filed with the state. The convenience store owners alleged that the wholesaler and the brewer, Anheuser, engaged in a systematic scheme to favor some select retailers over others in the price of beer. Claiming that over the course of four years, the wholesaler was able to sell beer at effective wholesale prices lower than those filed with the state.

The complainants allege that the wholesaler and Anheuser accomplished this circumvention of the pricing laws by providing “favored retailers” with disproportionately large numbers of consumer coupons – some issued by Anheuser-Busch – that gave discounts off the retail price of beer. The convenience stores asserted that instead of giving these coupons to customers, the favored retailers redeemed the coupons themselves, unrelated to a particular sale to a consumer as the coupons required.

The convenience stores alleged that these favored retailers presented the coupons to the distributor for credit against subsequent purchases of beer by redeeming them through a third-party redemption center or if in the form of a check, by depositing the check into the retailer’s bank account. The plaintiffs also asserted that the defendants (wholesaler and Anheuser and some favored retailers) also sometimes dictated resale prices to them forcing them to sell beer at a price higher than what the favored retailers were allowed to sell the beer at.

The complaint asserted that the use of the coupons allowed the favored retailers to effectively pay wholesale prices below the prices filed with the state and lower prices than those paid by the convenience stores giving them an unfair competitive advantage.

The plaintiffs sought class certification, but the trial court and the appellate court had issues with the way the plaintiffs had defined the class and the proof they’d put forward to support their assertions that they should be allowed class status.

For starters, the courts had an issue with the class definition because a different definition of the class was given in the motion to certify than the plaintiffs had used in their complaint without explaining the reason for the difference and failed to explain how they’d determined that some parties were favored retailers. Additionally, the court was troubled by the methodology used to identify the favored retailers which the court’s opinion notes wasn’t well grounded in science or a particular objective methodology, but rather, appeared to simply start with all the retailers in the wholesaler’s database and just excluded stores that the plaintiffs’ attorneys wanted excluded.

Particluarly with regard to the favored retailers, the court noted that “Nowhere in Plaintiffs[‘] papers is there a mention or attempt to explain how the list of ‘favored retailers’ came about.” It concluded “[p]laintiffs … failed to demonstrate the existence of an ascertainable class by failing to identify the means available for identifying class members without unreasonable time by reference to official records.”

Another defect was that for some reason, while coupons were prominently featured in the complaint’s allegations and were the apparent mcguffin in the conspiracy, the class definition failed to adequately define the class in terms of utilization or underutilization of coupons: “Although plaintiffs proposed a new class definition, it still was not limited to purchasers of beer products that were subject to coupon promotions. It also still did not reflect the distinction between “non-favored” retailers who received either no coupons or a disproportionately small number and value of coupons, and favored retailers who received a disproportionately large number and value of coupons.”

In the end the appellate court affirmed the lower court’s denial of certification of the class based on this lack of criteria – an important lesson in looking to define a class: “Plaintiffs cannot avoid the requirement that the class be defined “in terms of objective characteristics and common transactional facts” by substituting their own judgment concerning who should be excluded in place of objective criteria. “Trust us” does not constitute objective criteria.”

You can read the opinion in this case, Dhillon v. Anheuser-Busch here (link).