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Jun 14, 1999

Cyanamid Settlement Rattles Class-Action Cases in Two States

By Jonathan Ringel

Fulton County Daily Report

Farmers who won a major decision before the 11th US. Circuit Court of Appeals last week may never get to enjoy the fruits of victory.

The spoiler? A Tennessee state court which just a week before approved the settlement of a similar class action, resolving all state and federal claims.

At stake-aside from antitrust claims potentially worth more than S100 million-are constitutional questions about competing class action cases.

"It's one that could go all the way to the Supreme Court," says Atlanta lawyer Kenneth S. Canfield, one of a team of Alabama, Georgia and California lawyers for the federal plaintiffs.

Both cases are class actions and deal with farmers' antitrust claims against American Cyanamid Co. The farmers claim the company conspired to fix prices when they offered bonuses to herbicide dealers for selling Cyanamid products at or above wholesale prices.

American Cyanamid officials denied their sales program was anti competitive and last year won a dismissal of the federal case, which was brought by Doug Lowell and four other farmers in Mobile, Ala.

There, US. District Court Judge Brevard Hand ruled a 1977 US. Supreme Court case, Illinois Brick v. Illinois, barred cases by "indirect purchasers" against sellers. To sue Cyanamid, Hand wrote, the farmers would have to sue 2,500 dealers as well, a prospect Canfield calls "a nightmarish situation."


But while the federal case was on appeal at the 11th Circuit, Cyanamid and lawyers for James E. Fox and other Tennessee plaintiffs hammered out an agreement settling their case. The deal resolved all state and federal claims for $5.2 million, with a third going to the plaintiffs' lawyers.

In April, lawyers from the federal case went to Union City, Tenn., to ask Obion County Chancery Court Judge W. Michael Maloan to postpone approving the settlement until the 11th Circuit ruled in the federal case.

If revived by the 11th circuit, they argued, the federal case was worth at least $100 million, given six years' of alleged price-fixing and treble damages awarded in antitrust cases.

"The Lowell plaintiffs suspect, although American Cyanamid would never admit it, that American Cyanamid settled with the Fox plaintiffs because it fears that the 11th Circuit will rule against it,. the federal plaintiffs wrote in briefs.

Cyanamid responded that it expected a victory in the 11th Circuit, but even if it lost, the Tennessee Court of Appeals could review the fairness of the deal. In the meantime, Maloan should approve the settlement so that payments could be made, the company wrote.

On June 2, Maloan did just that, approving the settlement as "fair, reasonable and adequate."

A week later, an 11th Circuit panel of Judges J.L. Edmonson, Susan H. Black and, sitting by designation, Judge Jane A. Restani of the US. Court of International Trade, ruled for the farmers.

Writing for the panel, Edmonson ruled the farmers were not indirect purchasers, who are barred from making antitrust claims under the Supreme Court's Illinois Brick case. Instead, he wrote, the plaintiffs were "direct purchasers from a conspiring party." Lowell v. American Cyanamid Co., No. 98-6194 (11th Cir. June 9, 1999).

While Edmonson wrote the decision "makes no new law," others disagree.

Knoxville, Tenn., attorney Gordon Ball, a lawyer for the Tennessee plaintiffs, is among them.

"I think it changes things," he says of the 11th Circuit decision, certainly in his case.

Ball said he originally thought Illinois Brick barred claims by indirect purchasers in federal courts, so he didn't think the federal plaintiffs' case was worth very much, if anything. That's why he had no trouble including their claims in the Tennessee settlement, he says.


Now that the 11th Circuit-which officially interprets law only in Alabama, Georgia and Florida-has ruled Illinois Brick does not apply in the Cyanamid cases, Ball says he'll tell Maloan the settlement "needs to be re-examined."

That's what the federal plaintiffs lawyers did June 11 in an emergency motion to reconsider the settlement approval, according to John T. Crowder of Mobile's Cunningham, Bounds, Yance, Crowder & Brown.

Meanwhile, A. Stephen Hut, a partner in Cyanamid's Washington firm, Wilmer, Cutler & Pickering, says his client is considering its appeal options of the 11th Circuit decision.

The case officially has been remanded to the district court, and if it ends up there, Hut says he expects the Tennessee settlement "will have important implications."

Hut would not confirm this, but that presumably means Cyanamid would argue that the Tennessee court settlement bars the federal case.

Whether that issue comes before the Supreme Court is unclear, but it's not one unfamiliar to the justices.

In 1996, the high court ruled a Delaware court that approved a settlement releasing defendants from exclusively federal claims "was entitled to full faith and credit." Matsushita Electric Industrial Co. v. Epstein, 516 US. 367 (1996)

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