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

• Decision Date: 23 October 1997
• Docket Number: Civil Action No. 97-556-A.
• Court: U.S. District Court — Eastern District of Virginia
• Parties: DEE-K ENTERPRISES, INC., et al., Plaintiffs, v. HEVEAFIL SDN. BHD., et al., Defendants.

982 F.Supp. 1138

DEE-K ENTERPRISES, INC., et al., Plaintiffs, v. HEVEAFIL SDN. BHD., et al., Defendants.

Civil Action No. 97-556-A.

United States District Court, E.D. Virginia, Alexandria Division.

October 23, 1997.

COPYRIGHT MATERIAL OMITTED

Joel Davidow, Sturgis M. Sobin, Joel W. Rogers, Ablondi, Foster, Sobin & Davidow, P.C., Michael D. Hausfeld, Daniel A., Small, Paul T. Gallagher, Cohen, Milstein, Hausfeld & Toll, Washington, DC, for plaintiffs.

Walter J. Spak, Anne D. Smith, Carolyn B. Lamm, Denise L. Diaz, Washington, DC, for defendants Heveafill Sdn. Ghd., Filmax Sdn. Bhd., Rubfil Sdn. Bhd., Rubberflex Sdn. Bhd., Fliati Lastex Sdn. Bhd.,Filati Lastes Elastofibre USA, Inc., Filati Corp. of Rhode Island, Filati Corp. of North Carolina, Rubfil USA, Inc., and P.T. Bakrie Rubber Industry.

George L. Paul, Francis A. Vasquez, Jr., White & Case, Washington, DC, for defendant JPS Elastomerics Corp.

David M. Foster, Joseph T. Small, Jr., Christine P. Hsu, Fulbright & Jaworski LLP, Washington, DC, for defendant JPS Elastomerics Corp.

James A. West, James A. West. P.C., Houston, TX, for defendant Consortium Intern. Corp.

MEMORANDUM OPINION

ELLIS, District Judge.

In this antitrust action, two American purchasers of extruded rubber thread sue various foreign manufacturers and distributors of the thread, alleging an international conspiracy to restrain trade in, and fix prices of, the thread in the United States. Defendants' several motions to dismiss raise the following threshold issues:

(1) whether there is personal jurisdiction over an Indonesian manufacturer-defendant that consummates its sales of thread in Indonesia;

(2) whether venue is proper in the Eastern District of Virginia;

(3) whether, pursuant to Estate Construction Co. v. Miller & Smith Holding Co., 14 F.3d 213 (4th Cir.1994), the complaint contains sufficient facts to support an allegation of antitrust conspiracy among the distributor-defendants;

(4) whether Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977) bars plaintiffs from suing defendants for a price-fixing conspiracy; and (5) whether plaintiffs have suffered any antitrust injury as a result of defendants' alleged conduct, given the Department of Commerce's determination that defendants' U.S. price for extruded rubber thread is "below fair value."

I

According to the second amended complaint,¹ plaintiff Dee-K Enterprises, Inc. ("Dee-K") is a Virginia corporation, and plaintiff Asheboro Elastics Corporation ("Asheboro") is a North Carolina corporation. Both companies are "end users" of extruded rubber thread;² that is, they purchase extruded rubber thread for use in products they manufacture, rather than for resale. More specifically, plaintiffs and other end users, at the times relevant to the complaint, purchased extruded rubber thread from some of the defendants to manufacture various elasticized textiles such as hosiery and active wear, as well as other products, including children's toys and Bungee cords.

The named defendants fall into two groups. The first group consists of Malaysian, Indonesian, and Thai companies that produce extruded rubber thread. Specifically, defendants Heveafil Sdn. Bhd. ("Heveafil"), Filmax Sdn. Bhd. ("Filmax"), Rubfil Sdn. Bhd. ("Rubfil"), Rubberflex Sdn. Bhd. ("Rubberflex"), and Filati Lastex Sdn. Bhd. ("Filati Lastex") produce extruded rubber thread in Malaysia and are collectively referred to as the "Malaysian producers." Defendants PT. Bakrie Rubber Industry ("Bakrie") and PT. Perkebunan III ("Perkebunan") are the "Indonesian producers" of rubber thread; and defendants Natural Rubber Thread Co., Ltd. ("Natural Rubber Thread") and Longtex Rubber Industries Co., Ltd. ("Longtex") are the "Thai producers." Collectively, defendants and other unnamed co-conspirators supply approximately eighty percent (80%) of the extruded rubber thread sold in the United States.

The foreign producers employ a variety of methods of distributing and selling their thread in the United States. One such method includes the use of separate entities that act as domestic distributors for the foreign producers; it is these entities that comprise the second group of defendants. Not all thread, however, is sold through separate distributors. Thus, Heveafil sells its product directly to end users in this country through Heveafil Sdn. Bhd. USA, Branch Inc., a division of Heveafil registered to do business in North Carolina. Filmax, a subsidiary of Heveafil and also a Malaysian producer, sells its product in the United States through Heveafil. Rubber thread from Malaysian producers Rubfil, Rubberflex, and Filati Lastex finds its way to American end users via two routes. First, the producers sell directly to their larger American customers without using an intermediary. Second, smaller customers are served via wholly owned and fully controlled American subsidiaries, namely defendants Rubfil USA, Inc. ("Rubfil USA"), Flexfil Corporation of Rhode Island ("Flexfil (RI)"), Flexfil Corporation, a North Carolina Corporation ("Flexfil (NC)"), and Filati Lastex Elastofibre USA, Inc. ("FLE-USA").

Indonesian producer Bakrie sells its product through an exclusive distributor, Globe Manufacturing Company ("Globe"), which advertises Bakrie's name and product in the United States. Globe, which is not named as a defendant, owns 25% of Bakrie, and the two companies share some common officers and directors.³ It also appears that Bakrie executives travel to the United States at least once a year to meet with Globe officials. Perkebunan, the second Indonesian producer, uses an exclusive distributor, defendant Consortium International Corporation ("Consortium"), to sell to American end users.

Thai producer Longtex employs the services of distributor JPS Elastomerics Corporation ("JPS"), which is not a named defendant.⁴ And finally, Thai producer Natural Rubber Thread uses various unidentified distributors to sell to American end users.⁵

The class action complaint alleges a conspiracy among the producers, distributors,⁶ and other entities not named as defendants⁷ to fix prices and to restrain competition in the sale of extruded rubber thread throughout the world, including the United States, in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Plaintiffs seek damages and injunctive relief pursuant to §§ 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15(a) and 26.

Specifically, plaintiffs allege that the Malaysian producer-defendants first met in August 1992, along with RTI and Worldflex, and agreed (i) to raise rubber thread prices worldwide, (ii) to restrict rivalry for customers, and (iii) to discipline employees and distributors who discounted prices or otherwise violated the terms of the cartel. After 1993, the conspiracy was extended to include the Indonesian and Thai producer-defendants, plus other unnamed Indonesian and Thai producers. The Malaysian producers then induced the Thai and Indonesian producers to coerce their own American distributors into abiding by the terms of the cartel.

On December 9-11, 1994, all the producer-defendants, plus other unnamed co-conspirators, met in Bali, Indonesia at the ASEAN Rubber Thread Manufacturers Meeting, where they again agreed to the terms of the cartel. Then, in the spring of 1995, the producers met in Panang, Malaysia to confirm the details of the conspiracy and to raise prices charged to American end users further. A copy of the meeting minutes includes references to statements by the producers that they had met in Bali the prior year to set a uniform price for rubber thread; that they should endeavor to keep prices high and uniform; but that prices should not be so high as to provide non-cartel members with sufficient incentive to enter the market.⁸

The second amended complaint also describes the distributors' role and conduct in furtherance of the conspiracy. During 1992 and 1993, various distributors, wholly owned by Malaysian producers, reported to their parents that distributors of Thai and Indonesian thread were deviating from cartel prices. The Malaysian producers conveyed this information to the Thai and Indonesian producers, who, in turn, reined in their respective distributors and induced them to raise their prices to the cartel level. Specifically, Perkebunan transmitted such complaints to its distributor, Consortium, in 1993 and 1995, and Consortium thereafter agreed to — and in fact did — maintain its prices in line with the cartel price. Consortium also reported below-cartel pricing in the American market to Perkebunan and attended meetings with Perkebunan in 1995 to discuss the producers' earlier meeting in Panang. Moreover, Consortium concealed from its customers the true reason for the price increase, blaming it instead on the rise in prices for the latex used in the process of manufacturing extruded rubber thread.

FLE-USA was another of the distributors that reported price cutting by its American "competitors" to its parent. In addition, FLE-USA furthered the goals of the conspiracy by coordinating its price increases with other distributors in 1992, 1993, and 1995, and by refusing to offer discounts to end users when so instructed by other members of the conspiracy. FLE-USA knew of the existence of the cartel through its parent, Filati-Lastex, a participant in the Bali and Panang meetings.

Flexfil (RI) and Flexfil (NC), like their fellow distributor-conspirators, also implemented significant price increases in 1992, 1993, and 1995 to keep pace with the cartel price. Again, as did the other distributors, Flexfil (RI) and Flexfil (NC) reported instances of price cutting by other distributors to their Malaysian parent. Also in furtherance of the conspiracy, these entities refused requests for discounts from end users. And, like other distributor defendants, it is alleged that these distributors, too, knew they were acting on behalf and as part of a conspiracy because their corporate...