Animal Sci. Prods., Inc. v. China Minmetals Corp.

• Decision Date: 24 July 2014
• Docket Number: Civ. No. 2:05–cv–04376 KM.
• Citation: Animal Sci. Prods., Inc. v. China Minmetals Corp., 34 F.Supp.3d 465 (D. N.J. 2014)
• Court: U.S. District Court — District of New Jersey
• Parties: ANIMAL SCIENCE PRODUCTS, INC., and Resco Products, Inc., Plaintiffs, v. CHINA MINMETALS CORP., et al., Defendants.

34 F.Supp.3d 465

ANIMAL SCIENCE PRODUCTS, INC., and Resco Products, Inc., Plaintiffs

v.CHINA MINMETALS CORP., et al., Defendants.

Civ. No. 2:05–cv–04376 KM.

United States District Court, D. New Jersey.

Signed July 24, 2014.

Amy Walker Wagner, David S. Stone, Robert A. Magnanini, Stone & Magnanini LLP, Short Hills, NJ, Richard E. Donovan, Kelley Drye & Warren LLP, Parsippany, NJ, for Plaintiffs.

Leda Dunn Wettre, Robinson, Wettre & Miller LLC, Newark, NJ, Robert J. Del Tufo, Shepard Goldfein, Skadden, Arps, Slate, Meagher & Flom, LLP, New York, NY, for Defendants.

OPINION

McNULTY, District Judge.

TABLE OF CONTENTS

TABLES OF PARTIES, CLAIMS AND MOTIONS	473
INTRODUCTION	474

I.	Procedural History	475
II.	Factual Background	477

A.	Plaintiffs	477
B.	Defendants	478
C.	Summary of the Claims	479

III. Legal Standards 480

A.	Sherman Act	480
B.	Clayton Act	481
C.	Motion to Dismiss	483

1.	Rule12(b)(6) standards in general	483
2.	Dismissal based on lack of antitrust standing	485
3.	Dismissal based on Foreign Trade Antitrust Improvements Act (“FTAIA”)	485

D. Motion to Compel Arbitration 487

IV. Discussion 488

A. Failure to State a Claim–Injury, Antitrust Standing and the Direct Purchaser Rule 489

1.	Antitrust standing in general	490
2	.Antitrust injury and causation	494
3.	Antitrust purchaser standing	496

a.	Statutory standing and the appropriate plaintiff	496
b.	The direct purchaser requirement as a bright-line standing rule	500

4. Analysis of Resco's direct purchaser standing 502

a.	Class members' standing not attributable to Resco	502
b.	Direct purchases from Defendants	503
c.	Direct purchases from Chinese “co-conspirators”	504
d.	Resco's acquisition of Worldwide Refractories	507
e.	Assignment of claims from Possehl to Resco	508

i.	The face of the complaint and the assignment	508
ii.	Allegations in other pleadings	513

5. Dismissal with or without prejudice 515

B.	Motion to Compel Arbitration	516
C.	Motions to Dismiss under the FTAIA	521

CONCLUSION 524

TABLES OF PARTIES, CLAIMS AND MOTIONS

Claim/Statute Brought by Against

Clayton Antitrust Act, 15 U.S.C. § 4 (for treble damages) seeking, inter alia, a decree that Defendants have entered into an “unlawful combination and conspiracy [that is] an unreasonable restraint of trade or commerce in violation of Section 1 of the Sherman Act,15 U.S.C. § 1”Import & ExportCo. Ltd. AC ¶¶ 1, 6, Prayer for Relief	Resco on behalf of itself and the direct purchasers class (“all persons or entities who have directly purchased magnesite or magnesite products or their co-conspirators from September 2001 to the date of the cartel is ended by injunction or otherwise”). AC ¶ 32.	Defendants moving to dismiss (ECF 98, 99) and to compel arbitration (ECF 37): 1. China Minmetals manufactured by any Defendant Corporation2.China National Minerals Co., Ltd.(the “Minmetals Defendants”)3.Sinosteel Corporation,4.Sinosteel Trading Company,5. Liaoning Jiayi Metals & Minerals Co, Ltd. (the “Sinosteel Defendants”)
Defendants moving to compel arbitration (ECF 37): 6. Haicheng HouyingCorp., Ltd.7. Haicheng Huayu Group Import & Export Ltd. (the “Haicheng Defendants”)
Inactive Defendants:
Xiyang Group, Xiyang (Pacific) Import & Export Ltd. Company, Xiyang Refractory Materials Ltd. Company, Xiyang Fireproof Material Co. Ltd., Liaoning Foreign Trade General Corporation, Liaoning Jinding Magnesite Group, Dalian Golden Sun Import & Export Corp., Haicheng Pailou Magnesite Ore Co. Ltd., Yingkou Huachen (Group) Co. Ltd.
Clayton Antitrust Act, 15 U.S.C. § 16(for injunctive relief)	Animal Science on behalf of itself and indirect purchasers (“all persons or entities who have purchased magnesite or magnesite products manufactured by any Defendant for delivery in the United States”) AC ¶ 31.	All Defendants(same as above)

“Co–conspirators” (identified in Complaint but not named as Defendants)

Shangawa Rongyuan Refractories Co., Ltd. Yingkou Sanhua Refractory Materials Co.,

Ltd. Shenyang Metals and Minerals CITIC Trading.

Motions	Brought on behalf of
Motion to Dismiss (DocketNo. 98)	The Sinosteel Defendants: Sinosteel Corporation, Sinosteel Trading Company, and Liaoning Jiayi Metals & Minerals Co, Ltd.
Motion to Dismiss (Docket No. 99)	The Minmetals Defendants: China Minmetals Corp. and China National Minerals Import and Export Corp.
Motion to Compel Arbitration (DocketNo. 37)	The Minmetals, Sinosteel, and Haicheng Defendants (collectively, the “Seven Defendants”): China Minmetals Corp., China National Minerals Import and Export Corp., Sinosteel Corporation, Sinosteel Trading Company, Liaoning Jiayi Metals 85 Minerals Co, Ltd., Haicheng Houying Corp., Ltd., and Haicheng Huayu Group Import 85 Export Co. Ltd.

INTRODUCTION

Plaintiffs seek to represent a putative class of U.S. purchasers of magnesite.They allege that sixteen Chinese corporations have conspired to fix prices and control the supply of magnesite and magnesite products exported to the United States.As a result, they say, magnesite prices have remained above market levels since at least April 2000.Defendants' cartel is alleged to constitute a per se violation of § 1 of the Sherman Act.PlaintiffResco Products, Inc., contends that it and similarly situated direct purchasers suffered damages amounting to $58.9 million, trebled pursuant to § 4 of the Clayton Act.PlaintiffAnimal Science Products, Inc., on behalf of indirect purchasers, seeks injunctive relief pursuant to § 16 of the Clayton Act.

This matter had a protracted history in this Court, interrupted by a reversal and remand by the Court of Appeals, before it was reassigned to me in August 2012.Currently before me are (1) two motions to dismiss the amended complaint for failure to state a claim, and (2) a motion to compel arbitration.I here find that Plaintiff Resco has not plausibly pleaded facts sufficient to establish its antitrust standing as a direct purchaser.Consequently, I will grant the motions to dismiss the Amended Complaint, without prejudice.

In light of that dismissal, I will not now determine whether the U.S. antitrust laws apply to Defendants' alleged foreign anti-competitive activity under the Foreign Trade Antitrust Improvements Act.I do briefly discuss that issue to provide guidance in the event that Plaintiffs file a Second Amended Complaint.Likewise, on the current state of the record, I cannot find that Plaintiffs must arbitrate their claims against Defendants, but again I discuss the issue briefly, in anticipation of a possible amended pleading.

Many of the defects in the Amended Complaint trace back to the antitrust standing requirement that the plaintiff(or the entity from which plaintiff obtained its claims by assignment) be a direct purchaser.The Complaint alleges direct purchases by an assignor, Possehl (US), but it does so in self-contradictory terms, and without supporting facts (such as, for example, the identification of even a single concrete purchase).It should be possible in a subsequent amended pleading to identify such purchase/sale transactions, and the agreements under which they were made.If that is done, the Court may determine whether Possehl (US) was a direct purchaser.The Court may also then ascertain whether such agreements contained arbitration clauses.(Defendants have made a suggestive demonstration that certain related agreements did contain such clauses.)Any subsequent pleading should also furnish a specific factual basis to assess the applicability of the “import exception” or the “effects exception” of the FTAIA.The relevant facts are, or should be, available to Plaintiffs, and they must be pleaded before I will permit this complex and expensive litigation to proceed.

I.Procedural History

The original complaint, filed on September 7, 2005, seeECF No. 1, named as Defendants sixteen Chinese entities.It also named one U.S. subsidiary, Minmetals, Inc.(“Minmetals USA”), alleged to be a New Jersey corporation with its principal place of business in Bergen County.Id.¶ 10.After Defendants failed to answer the complaint or move to dismiss, in May 2007 the Clerk of Court began making entries of default for failure to appear against the Chinese Defendants.On December 14, 2007, Plaintiffs moved for Default Judgment.SeeMotion for Default Judgment as to Defaulting Defendants, Dec. 14, 2007, ECF No. 28(MDJ, 28).Also on December 14, 2007, Defendant Minmetals USA moved to dismiss the Complaint.SeeECF No. 27.Several of the defaulting Chinese Defendants responded to Plaintiffs' Motion for Default Judgment.Relying on facts presented in Plaintiffs' moving papers, seven of the Chinese Defendants(collectively, the “Seven Defendants”) filed a Motion to Compel Arbitration.SeeMotion of Seven Defendants to Compel Arbitration, Feb. 5, 2008, ECF No. 37(“MTCA, 37”).Those Seven Defendants comprise the following: China Minmetals Corp., China Natl. Minerals Co., (together the “Minmetals Defendants”),¹Sinosteel Corp., China Metallurgical Import & Export Corp.(subsequently renamed Sinosteel Trading Company), Liaoning Jiayi Metals & Minerals Co., Ltd., (together, the “Sinosteel Defendants”), Haicheng Houying Corp., Ltd., and Haicheng Huayu Group Import & Export Co. Ltd.(Huaziyu), (together, the “Haicheng Defendants”).

In September 2008, the case was reassigned to Chief Judge Garrett E. Brown, Jr.In October 2008, Judge Brown heard oral argument on the three pending motions (Minmetals' Motion to Dismiss, Plaintiffs' Motion for Default Judgment and the Seven Defendants' Motion to Compel Arbitration).SeeECF No. 72; docket entry dated October 6, 2008.In December 2008, Judge Brown terminated without prejudice the three pending motions and dismissed the original complaint.ECF No. 74.The grounds for dismissal, raised sua sponte by the Court, were that the Court lacked subject matter jurisdiction to adjudicate the dispute pursuant to the Foreign Trade Antitrust Improvements Act.SeeAnimal Science Prods., Inc. v. China Nat'l Metals & Minerals Imp. & Exp. Corp.,596 F.Supp.2d 842(D.N.J.2008).

On March 30, 2009, ...