Dee-K Enterprises, Inc. v. Heveafil Sdn. Bhd

• Citation: 299 F.3d 281
• Decision Date: 30 July 2002
• Docket Number: No. 01-1894.,01-1894.
• Parties: DEE-K ENTERPRISES, INCORPORATED, a corporation of the Commonwealth of Virginia; Asheboro Elastics Corporation, a corporation of the state of North Carolina, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. HEVEAFIL SDN. BHD; Filmax Sdn. Bhd; Rubfil Sdn. Bhd; Filati Lastex Sdn. Bhd, corporations of Malaysia; Rubfil USA, Incorporated, a corporation of the State of North Carolina, Defendants-Appellees, and Rubberflex Sdn. Bhd; Filati Lastex Elastofibre USA, Incorporated, a corporation of Rhode Island; Flexfil Corporation of Rhode Island, a corporation registered to do business in North Carolina; Flexfil Corporation, a corporation of the state of North Carolina; Pt Bakrie Rubber Industries; Pt Perkebunan III, corporations of Indonesia; Natural Rubber Thread Company, Limited; Longtex Rubber Industries Company, Limited, corporations of Thailand; Consortium International Corporation, a corporation of the state of Texas; JPS Elastomerics Corporation, a Corporation of the state of Delaware, Defendants.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

299 F.3d 281

DEE-K ENTERPRISES, INCORPORATED, a corporation of the Commonwealth of Virginia; Asheboro Elastics Corporation, a corporation of the state of North Carolina, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. HEVEAFIL SDN. BHD; Filmax Sdn. Bhd; Rubfil Sdn. Bhd; Filati Lastex Sdn. Bhd, corporations of Malaysia; Rubfil USA, Incorporated, a corporation of the State of North Carolina, Defendants-Appellees, and Rubberflex Sdn. Bhd; Filati Lastex Elastofibre USA, Incorporated, a corporation of Rhode Island; Flexfil Corporation of Rhode Island, a corporation registered to do business in North Carolina; Flexfil Corporation, a corporation of the state of North

Carolina; Pt Bakrie Rubber Industries; Pt Perkebunan III, corporations of Indonesia; Natural Rubber Thread Company, Limited; Longtex Rubber Industries Company, Limited, corporations of Thailand; Consortium International Corporation, a corporation of the state of Texas; JPS Elastomerics Corporation, a Corporation of the state of Delaware, Defendants.

No. 01-1894.

United States Court of Appeals, Fourth Circuit.

Argued: May 7, 2002.

Decided: July 30, 2002.

ARGUED: Joel Davidow, Miller & Chevalier, Chartered, Washington, D.C., for Appellants. Christopher M. Curran, WHITE & CASE, L.L.P., Washington, D.C., for Appellees. ON BRIEF: Alan I. Horowitz, Michael T. Brady, Miller & Chevalier, Chartered, Washington, D.C.; William T. Rikard, Jr., Parker, Poe, Adams & Bernstein, L.L.P., Charlotte, North Carolina; Daniel Small, Mary Strimel, Cohen, Milstein, Hausfeld & Toll, P.L.L.C., Washington, D.C., for Appellants. J. Mark Gidley, Jaime M. Crowe, Eric Grannon, White & Case, L.L.P., Washington, D.C., for Appellees.

Before WILKINS and MOTZ, Circuit Judges, and MICHAEL, Senior United States District Judge for the Western District of Virginia, sitting by designation.

Affirmed by published opinion. Judge DIANA GRIBBON MOTZ wrote the opinion, in which Judge WILKINS and Senior Judge MICHAEL joined.

OPINION

DIANA GRIBBON MOTZ, Circuit Judge.

Two United States companies that purchase rubber thread brought this private antitrust action, alleging a price-fixing conspiracy led by Southeast Asian producers of the thread. After an eight-day trial, the jury returned a special verdict, finding that although one or more of the producers engaged in a conspiracy to fix prices that was intended to affect United States commerce, that conspiracy had no "substantial effect" on this country's commerce. The district court then entered judgment on the verdict for the producers. The purchasers appeal, principally contending that the substantial-effect test applies only to "wholly" foreign conduct, and so does not govern this case because the rubber-thread conspiracy resulted in the sale of price-fixed goods directly into the United States. Because the conspiracy involved primarily foreign conduct, we hold that the district court did not abuse its discretion in applying the substantial-effect test. Accordingly, we affirm.

I.

In 1997, Dee-K Enterprises, Incorporated, and Asheboro Elastics Corporation (collectively Dee-K), United States corporations that purchase rubber thread to make elastic fabric, brought this class action, alleging a conspiracy to fix the price of rubber thread in the United States, in violation of the Sherman Act. See 15 U.S.C.A. § 1 (West 1997). Rubber thread, also called extruded rubber thread or elastic rubber thread, and sometimes abbreviated as "ERT," is manufactured in Southeast Asia and used to make elastic fabric, bungee cords, toys, and other products.

Dee-K named as defendants nine Southeast Asian producers of rubber thread and some of their subsidiaries and distributors in the United States. Five of the producers are Malaysian companies: Heveafil Sendirian Berhad, Filmax Sendirian Berhad, Rubfil Sendirian Berhad, Rubberflex Sendirian Berhad, and Filati Lastex Sendirian Berhad. (The suffix "Sendirian Berhad," used in Malaysia and abbreviated "Sdn. Bhd.," translates as "private limited company.") Two are Indonesian: PT. Bakrie Rubber Industries and PT. Perkebunan III. Two are Thai: Longtex Rubber Industries Company, Limited, and Natural Rubber Thread Company, Limited. Dee-K also named as defendants the United States subsidiaries of three Malaysian producers (Rubfil USA, Incorporated, Flexfil Corporation of Rhode Island, Flexfil Corporation, and Filati Lastex Elastofibre USA, Incorporated) and two United States independent distributors used by other producers (Consortium International and JPS Elastomerics).

In its complaint, Dee-K alleged that the members of the class it sought to represent, domestic purchasers of rubber thread, paid "artificially high and non-competitive prices" for rubber thread, that they "were deprived of free and open competition in the market" for rubber thread, and that "competition among defendants" in the United States sale of rubber thread "was restrained." As to injury, Dee-K contended that "plaintiffs ... purchased substantial quantities of extruded rubber thread from defendants."

Dee-K originally filed this action in the Eastern District of Virginia. Following a number of early rulings not relevant to our disposition of this appeal, the district court determined that venue did not lie in Virginia and transferred the case to the Western District of North Carolina. See Dee-K Enters. v. Heveafil Sdn. Bhd., 985 F.Supp. 640 (E.D.Va.1997). Prior to trial, that court denied class certification. After most defendants settled, declined to appear, or were dismissed, the case against the five Malaysian producers and the United States subsidiary of one of them (Rubfil USA), none of whom now contest personal jurisdiction, see Dee-K Enters. v. Heveafil Sdn. Bhd., 174 F.R.D. 376 (E.D.Va.1997), proceeded to trial before a jury.

Dee-K introduced substantial evidence at trial of horizontal price fixing among the producers. This price fixing apparently originated at least in part in reaction to 1991 threats by the United States government to punish Southeast Asian rubber-thread producers for violating antitrust prohibitions against "dumping." "Dumping" occurs when a foreign producer injures a United States producer by selling a product in the United States at less than what would be "fair value" in the foreign producer's home market. See 19 U.S.C.A. § 1673 (West 1999) (authorizing an "antidumping duty"). The United States Department of Commerce may impose tariffs on dumpers to bring the United States price into line with the price in the producer's home market. See id. Thus, if a product sells for $1 in the home market, it warrants dumping duties if it sells for less than $1 in the United States. Of course, avoidance of dumping penalties in itself does not provide foreign producers with a license to fix prices in violation of United States antitrust laws. Although to avoid dumping a company must price goods at or above the price in its own home market, it may not agree with its competitors to fix prices, restricting the market movement of prices in the United States market. See Dee-K Enters. v. Heveafil Sdn. Bhd., 982 F.Supp. 1138, 1156 & n. 45 (E.D.Va.1997); see also United States v. Nippon Paper Indus., 62 F.Supp.2d 173, 180 (D.Mass.1999) (noting that foreign companies threatened with anti-dumping provisions must "walk a fine line").

In December 1991, responding to the dumping accusations, officials of the Malaysian producers representing Heveafil, Rubfil, Rubberflex, and Filati Lastex met with a Malaysian government official and agreed to fix rubber-thread prices throughout the world. Later joined by other rubber-thread producers from Malaysia, Indonesia, and Thailand, they continued to meet for several years, at conventions and in other settings, to discuss and implement these and other efforts to fix prices. They met regularly between 1992 and 1995 — in Kuala Lumpur, in Columbo, in Bali, and in Penang. They never met in the United States.

Throughout the period during which they met to fix prices, the Malaysian producers sold their rubber thread around the world, distributing it to the United States market in three different ways. Heveafil and Filmax sold to the United States through a division of Heveafil based in the United States. Rubfil, Rubberflex, and Filati Lastex all sold to large United States customers directly and to smaller customers through wholly owned subsidiaries incorporated in the United States, all four of which were named as defendants. See Dee-K, 982 F.Supp. at 1142. The record does not disclose the United States share of the global market.

From 1991 to 1996, United States prices for rubber thread (adjusted for inflation using the producer price index) generally rose, with some decreases on various scales. Dee-K attributes these increases to the price-fixing conspiracy. The producers attribute them to an antidumping order entered by the United States Department of Commerce in 1992 that imposed a duty on rubber thread and to increases in the price of raw materials, particularly the price of latex.

At the conclusion of an eight-day trial, the district court submitted a special verdict form to the jury. The verdict form included two questions: (1) Was there "a conspiracy ... to fix the prices of extruded rubber thread, which was intended to have a substantial effect in the United States"? (2) If so, did "the conspiracy have a substantial effect in the United States"?

The jury answered the first question in the affirmative, finding a conspiracy to fix prices with the intent of affecting the United States. But the jury answered the second question in the negative, finding that the conspiracy did not have a substantial effect in the United States. In accordance with this verdict, the court entered judgment for the producers.

Dee-K moved for a new trial pursuant to Rule 59, arguing that the jury's verdict as to the lack of a substantial effect on United States commerce was...