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THE LATEST: Court Nixes Indirect Purchaser Claims for Lack of Standing

To bring a claim for antitrust damages, indirect purchasers must show that they have antitrust standing. They must demonstrate that their injuries are sufficiently direct and intertwined with the alleged cartel conduct that they are entitled to recover an overcharge, despite being downstream – sometimes by several levels – from the direct purchasers.

  • In Supreme Auto Transport LLC, et. al. v. Arcelor Mittal, et al. (Supreme Auto), defendant steel producers defeated state antitrust, consumer protection, and unjust enrichment claims brought by a purported class of indirect purchasers of retail products containing steel. The court found that plaintiffs lacked antitrust standing to recover for their alleged indirect harm.
  • Plaintiffs alleged that defendant steel manufacturers conspired to restrict steel output, thereby raising the price of steel. Plaintiffs contended that direct purchasers of steel  passed on these price overcharges to the plaintiff purchasers of steel-containing products such as refrigerators, dishwashers, automobiles, and construction equipment.
  • The court found it appropriate to apply the Associated General Contractors (AGC) standard – the prevailing test for antitrust standing under federal law – to each of the state antitrust claims. AGC looks at factors including the causal connection between the violation and the harm, the directness of the injury, and the risk of speculative and duplicative damages to determine whether a plaintiff is a proper party to bring the antitrust action.
  • Though plaintiff retail customers described their injury as inextricably intertwined with the defendants’ alleged restriction of the steel market, the court held that plaintiffs’ injury was too remote to confer standing. The complaint failed to account for interceding steps in the distribution and manufacturing chain that occurred between defendants’ production of raw steel and plaintiffs’ purchase at retail of a product containing steel as a component. Nor did the complaint provide a basis to link the steel in an end-use product to that produced in any of defendants’ steel mills.
  • The court determined that remoteness similarly doomed the plaintiffs’ other state law claims because they could not establish proximate cause between plaintiffs’ harm and defendants’ alleged misconduct.
  • The court also found that plaintiffs’ claims were time-barred, rejecting class action tolling of the statutes of limitations or relation back of the amended claims.
  • Supreme Auto adds to a growing body of caselaw (see, e.g., In re Aluminum Warehousing Antitrust Litigation; In re Dairy Farmers of America, Inc. Cheese Antitrust Litigation) in which courts have found that indirect purchasers’ relationship to the alleged misconduct is too attenuated for plaintiffs to possess antitrust standing. Courts are rejecting attempts by indirect purchaser plaintiffs to justify standing based on their injury being “inextricably intertwined” with injuries of market participants.
  • A defendant facing antitrust claims by indirect purchasers should raise any gaps in the link between the alleged misconduct and the ultimate injury, highlighting interceding parties, steps in the manufacturing and distribution processes, and component traceability issues. This can be done in a [...]

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California Court Finds Lack of Antitrust Standing for Price-Fixed Component Parts

On Sept. 22, 2014, the U.S. District Court for the Northern District of California issued an important opinion regarding antitrust standing in Los Gatos Mercantile, Inc. v. E.I. DuPont de Nemours & Co. (DuPont), No. 13-cv-01180-BLF (N.D. Cal. Sept. 22, 2014).  The DuPont opinion is one of several recent opinions handed down on the topic by the Northern District of California in cases involving price-fixed component products.  In DuPont, the U.S. District Court for the Northern District of California granted in part and denied in part the defendants’ motion to dismiss for lack of constitutional and antitrust standing.

Much of the court’s analysis focused on whether the plaintiffs pleaded sufficient facts in their complaint to allege to demonstrate antitrust standing for certain claims.  The court held that the plaintiffs failed to establish antitrust standing.  The court analyzed antitrust standing using a well-known five-factor test promulgated by the Supreme Court in Assoc. Gen. Contractors v. Cal. State Council of Carpenters (AGC), 459 U.S. 519 (1983).

To assess standing under AGC, courts consider: (1) the nature of the alleged injuries and whether the plaintiffs were participants in the relevant market; (2) the directness of the alleged injury; (3) the speculative nature of the harm alleged; (4) the risk of duplicative recovery and (5) the complexity in apportioning damages.  Id. at 536-39.

Because the plaintiffs alleged a Sherman Act Section One claim for which damages are not available, two of the factors—risk of duplicative recovery and complexity in apportioning damages—did not apply. DuPont, No. 13-cv-01180-BLF, at *8.  Thus, the court considered whether the facts pleaded by the plaintiffs demonstrated: (1) that they were participants in the relevant market; (2) that they suffered a sufficiently direct injury and (3) that the harm alleged was not speculative.  Id. at *11-14.

First, the court found that the plaintiffs did not plead they were participants in the relevant market.  The plaintiffs’ complaint listed a broad array of products containing the price-fixed component.  Id. at *11-13.  Although courts have applied different tests—such as whether the market for the price-fixed component and the finished product were inextricably linked or whether the plaintiffs alleged they were participants in the same market as the price-fixed component—to analyze this factor in different price-fixing litigations, the DuPont plaintiffs failed to meet any of these tests because they listed such a broad array of products.  Id.

The court also emphasized that two recent price-fixing cases analyzing antitrust standing focused on the fact that the price-fixed component could be physically traced through the supply chain because they were “identifiable, discrete components that did not become indistinguishable parts” of the finished product.  Id.  In contrast, the price-fixed component in DuPont was a chemical ingredient.  The chemical became an indistinguishable part of the finished product.  Id.  The plaintiffs alleged that they were able to physically trace the price-fixed component through the distribution chain.  Id.  In contrast, in past decisions, courts have found the mere allegation of traceability to be sufficient.  Id.  However, the DuPont court stated this allegation [...]

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Judge Ends Indirect Purchaser Plaintiffs’ Case in Refrigerant Compressors

Last week, on April 8, 2014, the District Court for the Eastern District of Michigan dismissed the remaining claims of indirect purchaser plaintiffs (IPPs) in the ongoing Refrigerant Compressors litigation.  In re: Refrigerant Compressors, Case No. 2:09-md-02042 (E.D. Mich. April 8, 2014).  Almost exactly one year ago, the court dismissed most of the IPPs’ claims, mainly on the basis that the IPPs lacked antitrust standing to bring them.  In re: Refrigerant Compressors, Case No. 2:09-md-02042, Doc. 343  (E.D. Mich. April 9, 2013).  As a result of that decision, the IPPs’ case was limited to claims based on only two state statutes seeking damages against manufacturers of fractional compressors used in refrigeration devices, based on sales that occurred in only those two states.  The court’s decision dismissing the last two state claims was brief and resulted from a stipulation among the IPPs and those particular manufacturers to dismiss the claims.  The parties have not filed their agreement with the court, and it is not publicly available.   

Significantly, the court dismissed the IPPs’ claims with prejudice, eliminating these IPPs’ ability to refile their claims.  This order now ends the indirect purchaser litigation with respect to these IPPs in the refrigerant compressors litigation five years after the IPPs filed their initial complaint, but before the parties reached discovery.  It is unclear whether this agreement will bar any future claims by other potential indirect purchasers.  Typically, when a class plaintiff settles a litigation prior to the actual certification of a class, the parties seek to certify a settlement class.  By certifying a settlement class, the settlement becomes binding on all of the absent class members who do not opt out.  Accordingly, a settlement with a class of plaintiffs will bar any future litigation by members of that same class.  Here, there is no certification of a settlement class.  Therefore, it is possible that other indirect purchasers may be able to bring claims against these defendants in the future.

The court also ordered each party to bear its own costs and legal fees.  The court explicitly noted no one should consider its order and stipulation as an admission of liability against any defendant.  Such an order and stipulation likely means that the parties agreed to a settlement.  It is unclear whether the settlement involves some small payment to the IPPs or whether there was no payment, which is possible if the parties felt that the costs to all parties of litigating the case vastly exceeded the plaintiffs’ potential damages.

This settlement shows that if a defendant can eliminate a significant number of indirect purchasers’ state claims, the indirect purchaser plaintiffs may be more likely to settle prior to engaging in expensive discovery.  However, defendants should still consider moving the court to certify a settlement class in order to bar any future claims from all indirect purchasers.

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