Supreme Auto Transp., LLC v. Arcelor Mittal USA, Inc.

• Decision Date: 06 September 2018
• Docket Number: No. 17-2910,17-2910
• Citation: 902 F.3d 735
• Parties: SUPREME AUTO TRANSPORT, LLC, et al., Plaintiffs-Appellants, v. ARCELOR MITTAL USA, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

902 F.3d 735

SUPREME AUTO TRANSPORT, LLC, et al., Plaintiffs-Appellants,

v.ARCELOR MITTAL USA, INC., et al., Defendants-Appellees.

No. 17-2910

United States Court of Appeals, Seventh Circuit.

Argued February 16, 2018

Decided September 6, 2018

Christopher Lovell, Attorney, LOVELL STEWART HALEBIAN JACOBSON LLP, New York, NY, Marvin A. Miller, Attorney, MILLER LAW LLC, Chicago, IL, for Plaintiff-Appellant SUPREME AUTO TRANSPORT, LLC.

Christopher Lovell, Attorney, LOVELL STEWART HALEBIAN JACOBSON LLP, New York, NY, for Plaintiff-Appellant PETER KREUTZFELDT, DOUGLAS BAKER, CYNTHIA K. SELEY, MARK P. LYNCH.

Mark Leddy, Mark W. Nelson, Attorneys, CLEARY, GOTTLIEB, STEEN & HAMILTON LLP, Washington, DC, Andrew S. Marovitz, Thomas V. Panoff, Michael Anthony Scodro, Peter B. Baumhart, Attorneys, MAYER BROWN LLP, Chicago, IL, for Defendant-Appellee ARCELOR MITTAL USA, INC.

Daniel I. Booker, Michelle A. Mantine, Attorneys, REED SMITH LLP, Pittsburgh, PA, Jonathan S. Quinn, Attorney, NEAL, GERBER & EISENBERG LLP, Chicago, IL, for Defendant-Appellee UNITED STATES STEEL CORPORATION.

Todd Jay Ehlman, Attorney, WINSTON & STRAWN LLP, Chicago, IL, Robert DeRise, Robert J. Katerberg, Attorneys, ARNOLD & PORTER KAYE SCHOLER LLP, Washington, DC, for Defendant-Appellee NUCOR CORPORATION.

Nathan P. Eimer, Jacob Hamann, Attorneys, EIMER STAHL LLP, Chicago, IL, for Defendant-Appellee GERDAU AMERISTEEL CORPORATION.

Joel G. Chefitz, Michelle Lowery, Katharine M. O'Connor, Attorneys, MCDERMOTT, WILL & EMERY LLP, Chicago, IL, for Defendant-Appellee STEEL DYNAMICS, INCORPORATED.

Kevin J. Mahoney, Attorney, SEYFARTH SHAW LLP, Chicago, IL, Gregory A. Markel, Attorney, CADWALADER, WICKERSHAM & TAFT, New York, NY, for Defendant-Appellee AK STEEL HOLDING CORPORATION.

Scott D. Stein, John W. Treece, Attorneys, SIDLEY AUSTIN LLP, Chicago, IL, for Defendant-Appellee SSAB SWEDISH STEEL CORPORATION.

Christine C. Levin, Attorney, DECHERT LLP, Philadelphia, PA, Angela M. Liu, Attorneys, DECHERT LLP, Chicago, IL, for Defendant-Appellee COMMERCIAL METALS, INC.

Before Wood, Chief Judge, and Kanne and Rovner, Circuit Judges.

Wood, Chief Judge.

This putative class action rests on allegations of a massive antitrust conspiracy within the domestic steel industry. Plaintiffs, indirect purchasers of steel, assert that eight U.S. steel producers colluded to slash output in an effort to drive up the price of steel nationwide. Years after their initial complaint, however, the plaintiffs transformed their theory of liability. The original complaint, filed in 2008, charged that plaintiffs overpaid for steel sheets, rods, and tubing manufactured by the defendants at their steel mills. Eight years later, the plaintiffs amended their complaint, asserting instead that they overpaid for end-use consumer goods, such as vehicles, washing machines, and refrigerators, that were manufactured by third parties using steel. This new product definition greatly expanded the potential scope of the class.

The district court dismissed the suit for two reasons. First, it determined that plaintiffs’ amended complaint is time-barred because it redefines "steel products" in a way that gives rise to an entirely different, and exponentially larger, universe of plaintiffs. Second, in the alternative, the court held that the amended complaint does not plausibly plead a causal connection between the alleged antitrust conspiracy and plaintiffs’ own injuries.

Plaintiffs now appeal both rulings. We affirm.

I

According to the allegations in plaintiffs’ amended complaint, which we accept as true for the purposes of this appeal, defendant Arcelor Mittal is the largest integrated producer of steel in the United States, controlling 20–25 percent of total domestic raw steel capacity. Defendant U.S. Steel is the second largest integrated producer, controlling about 16 percent of total domestic raw steel capacity. Defendant Nuncor is the nation’s largest mini-mill producer, controlling 21 percent of total domestic raw steel capacity. Other major domestic steel producers include defendants Gerdau Ameristeel (10 percent), AK Steel (5 percent), Steel Dynamics (4 percent), IPSCO (2.5 percent), and Commercial Metals (2 percent). The remaining 15–20 percent of the steel market is controlled by firms that are not named defendants and are not alleged to have engaged in any anticompetitive behavior.

It can be difficult to organize and maintain a price-fixing cartel in a market with many competitors—including firms that are not party to the conspiracy—but that is what plaintiffs allege happened here. They theorize that sometime in early 2005, Arcelor Mittal organized a scheme to "improve industry discipline" by cutting raw steel output in order to drive up prices and reap supracompetitive profits. They point to a statement by a Mittal executive at an industry meeting in March 2005 criticizing the industry’s traditional business model on the grounds that it "ensured that most producers would cut price before reducing volume." The executive then called on his competitors to coordinate supply cuts: he asked them directly to "respond to market fluctuations" by cutting production at "marginal facilities" to avoid a "race to the bottom" in steel prices. A series of industry meetings followed in early-to-mid 2005; at those meetings, multiple defendants allegedly cautioned the industry against oversupplying the market and urged everyone to "adjust ... operating levels" to preserve high prices.

According to plaintiffs, the result of all this "urging" and "cautioning" was a series of major production cuts in mid-2005. Arcelor Mittal closed five of its twelve U.S. integrated blast furnaces and reduced production at U.S. mills to 55 percent of total capacity. U.S. Steel reduced output from 90 percent capacity in the first quarter of 2005 to 75 percent capacity in the second quarter, and closed at least two of its twelve domestic blast furnaces. Nuncor similarly reduced its output from 96 percent of capacity in 2004 to 79 percent capacity in the second quarter of 2005. The smaller defendants took comparable measures. After these cuts took effect, the price of a steel sheet increased by about 25 percent. The supply cuts allegedly remained in effect until mid-to-late 2007.

Plaintiffs insist that there is no procompetitive explanation for this huge reduction in output. They allege that from early 2005 to late 2007, "annual domestic demand for steel far exceeded the United States production capacity of Defendants and other domestic producers," and that as a result, "there was a shortage of steel in the United States market" through-out the relevant period. (We can assume that there was such a shortage. We observe, however, that neither the original nor amended complaint discusses input or energy costs, or what effect these costs might have had on steel prices. This is a troubling omission, especially given the fact that a separate section of plaintiffs’ complaint admits that the cost of energy, inputs, and many other commodities—including "aluminum, copper

, precious metals, resins, ... plastic, ... zinc and nickel"—increased substantially during the class period. The rising cost of inputs would provide an obvious innocent explanation for the increase in steel prices. Cf. Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). We will not address this possibility because the defendants did not raise it on appeal. Nor will we address the impact of steel imports on the market—an issue that also has not been discussed by the parties and that would take us down a deep rabbit-hole.)

In the end, the 2005 production cuts and subsequent increases in steel price led to two major antitrust class actions. The first suit, which we call the "direct-purchaser" suit, was filed in early September 2008, with Standard Iron Works as the lead plaintiff. Standard Iron filed that suit on behalf of a putative class. See Complaint at 1, 6, Standard Iron Works v. Arcelor Mittal , No. 08-cv-5214, 2008 WL 4376213 (N.D. Ill. Sept. 12, 2008), ECF No. 1. The complaint defined class members as those who purchased "steel products" directly from the defendants. In turn, it defined "steel products" as:

[A]ll products derived from raw steel ... including, but not limited to, steel sheet and coil products; galvanized sheet and other galvanized and/or coated steel products; tin mill products; steel slabs and plates; steel beams, blooms, rails, and other structural shapes; steel billets, bars, and rods; steel pipe and other tubular products; and all other products derived from raw steel.

Id. at 6.

The second suit, which we call the "indirect-purchaser" suit, is the one that gave rise to this appeal. It was brought by Supreme Auto in late September 2008, just weeks after the direct-purchaser action. The original complaint did not include a formal class definition. It simply alleged that Supreme Auto was injured when it "purchased several items of steel tubing [at an inflated price] indirectly from one or more of the defendants ... for end use" and indicated that Supreme Auto was bringing suit on behalf of "all others similarly situated." Supreme Auto’s original complaint included a definition of the types of steel products at issue. Its description mirrored the language from the direct-purchaser suit:

"Steel products" means any consumer steel product including but not limited to produced flat steel sheets and coils; galvanized steel products; tin mill products; steel plates; steel beams, rails and other structural shapes; steel bars and rods; steel wire and wire rod; steel pipes and other tubular products; and a variety of other products derived from raw steel.

Supreme Auto stated that it was seeking relief under federal antitrust law, as well as under the antitrust, consumer protection, and unjust enrichment laws of 28 states. The district court deferred proceedings on class certification in the indirect-purchaser suit until the court in the direct-purchaser suit...