As tariff-refund litigation expands, courts will confront novel questions concerning standing, traceability and pass-through theories outside the antitrust context, Steve Safranski and Alexander Rosselli of Robins Kaplan explain. Initial decisions may focus on the nexus of plaintiffs’ alleged injury and tariff refunds. If so, antitrust indirect-purchaser cases can be helpful for evaluating these claims’ viability.
Following the Supreme Court’s decision in Learning Resources, Inc. v. Trump, invalidating President Donald Trump’s tariffs imposed under the International Emergency Economic Powers Act and subsequent orders directing the refund of those tariffs to importers, consumer plaintiffs have filed numerous putative class actions against companies that paid the tariffs and allegedly passed them on to consumers. As of the time of this writing, at least 62 putative class actions have been filed in district courts across the country. Retailers, apparel companies, electronics manufacturers, shipping companies and grocery chains have all been named as defendants.
On the surface, the theory of these lawsuits is straightforward: Retailers and manufacturers passed tariff costs to consumers through higher prices but now stand to recover those same costs through government-issued tariff refunds. Plaintiffs claim this amounts to a “double recovery” for the importers, while consumers are left without recourse. Plaintiffs have asserted a variety of causes of action, including statutory deceptive trade practices, consumer protection claims and unfair competition claims as well as equitable theories like unjust enrichment.
Although these claims are framed under consumer protection, unfair competition and unjust enrichment theories, they confront a threshold problem that is quite familiar to the antitrust world. Specifically, the challenge of adequately alleging and proving that a particular cost increase that is subsequently remedied by a refunded tariff was actually passed through the distribution chain and borne by the plaintiff. While importer defendants will have an array of substantive defenses to tariff refund claims, the issue of Article III standing may prove to be one of the biggest obstacles to relief. On this issue, decades of antitrust authorities in the indirect-purchaser context will prove influential, if not instructive.
Standing issues & indirect-purchaser case lessons
To establish Article III standing, the plaintiffs must be able to show an actual concrete injury-in-fact that is fairly traceable to the defendant’s conduct. In tariff refund cases, that means plausibly alleging and then proving that they bore the economic burden of tariffs later refunded to the importer. This means that they must be able to show that some or all of the tariff surcharges were passed on through each level of the distribution chain.
These are not new problems. Indirect-purchaser antitrust cases repeatedly demonstrate the difficulty of isolating and apportioning costs across the distribution chain, and cases are frequently dismissed where the plaintiffs cannot trace their injury up the distribution chain. That is precisely the challenge here. Although this doctrine arose in the antitrust context, the reasoning supports a broader skepticism of pass-through theories and offers a strong basis for companies to defend against these cases.
The Supreme Court outlined the contours of the indirect-purchaser doctrine in Hanover Shoe, Inc. v. United Shoe Machinery Corp. (1968), Illinois Brick Co. v. Illinois (1977) and Kansas v. UtiliCorp United, Inc. (1990), in which the court rejected efforts to establish or defeat liability based on whether overcharges were passed through the distribution chain. The court’s concern was practical as much as doctrinal: The task of determining how much of the overcharge was passed on by the first purchaser to subsequent purchasers would turn any claim by members of the supply chain into massive damages apportionment proceedings.
Although several states have passed laws allowing indirect purchasers to pursue antitrust damages claims — so-called Illinois Brick repealer states — federal courts applying those statutes have said plaintiffs must still satisfy Article III standing. For indirect purchasers to satisfy Article III standing, they must show that the companies overcharged direct purchasers and some or all of that overcharge was passed on to indirect purchasers through each intermediate level of the distribution chain.
Although the plaintiffs are not required to quantify their damages to establish Article III standing, they must demonstrate that their injury is not speculative. Courts have regularly dismissed cases where the indirect-purchaser plaintiffs failed to adequately trace the overcharges through the chain of distribution to the plaintiff, including cases in which the plaintiffs failed to identify each participant in the chain of distribution. Cases involving products composed of multiple components are particularly difficult to evaluate. As one court explained, if a product contains three components, of which the problematic component is one, it is more likely that an increase in the problematic component’s price will affect the overall price of the product than if the product contained 30 components.
These cases demonstrate the impracticality of having courts isolate the amount of damages allegedly passed on to indirect-purchaser plaintiffs and establish a framework for arguing why non-antitrust claims pursuing the same theory must fail.
Indirect-purchaser doctrine & tariffs
Although tariff-refund plaintiffs have brought their cases under non-antitrust theories, the same issues animating the indirect-purchaser doctrine apply and establish a framework for arguing why non-antitrust claims pursuing the same passed-on theory must fail.
First, many complaints rely on generalized allegations that prices increased during the tariff period. But price increases do not establish that tariff costs were passed through to consumers, much less that the increase corresponded to the amount of any eventual refund. Companies adjust prices for a variety of reasons, and courts may be reluctant to infer pass-through based solely on temporal correlations or on public statements on company earnings calls, news articles and other public information concerning pricing and supply-chain impacts. These cases may be more vulnerable to dismissal, as courts may be particularly skeptical of trying to allocate unspecified amounts to each level of the distribution chain.
Even in cases where the importer listed the tariff amount being passed on, timing questions can still prevent courts from knowing at what moment costs were passed on to the customers. Some importers may have absorbed all or some of the tariffs initially but later decided to pass those prices on to consumers. And courts would still need to determine whether the listed amount accounts for all or only a portion of the tariffs paid by the importer.
Finally, indirect-purchaser cases involve an upstream wrongdoer whose illegal activities increased prices that were passed on to customers. In these tariff cases, companies paid tariffs that, at the time of payment, were lawful. They set prices based on competitive market conditions and are now pursuing lawful refunds. At no point did the companies commit any wrongdoing that should give rise to liability, whether under antitrust laws or otherwise.
These difficulties do not mean that Article III will be an insurmountable barrier to tariff-refund claims. Some plaintiffs may be able to point to itemized tariff surcharges that directly link price increases to tariffs. But even in those cases, questions about the amount, timing and scope of any pass-through could present substantial obstacles to proving injury and traceability.
Other issues with these cases
In addition to the complexities with apportioning costs, these cases face additional challenges. Plaintiffs began filing these cases before any refunds were paid, which present ripeness issues. In cases where the company accurately described the tariff-related charges, plaintiffs asserting consumer-protection and unjust-enrichment claims against companies that accurately described the tariff-related charges face significant issues because there was no deception; the plaintiffs paid the prices voluntarily, and companies have no duty to disclose the possibility that the tariff may later be invalidated.
As of the time of this writing, no court has issued an opinion in any of these cases. Additional cases continue to be filed, and companies should monitor these and take proactive steps to protect their interests and prepare for potential litigation exposure.
Steve Safranski
Alexander Rosselli
