Animal Science Products v. China Nat. Metals

• Decision Date: 30 December 2008
• Docket Number: No. 05-4376 (GEB).,05-4376 (GEB).
• Court: U.S. District Court — District of New Jersey
• Parties: ANIMAL SCIENCE PRODUCTS, INC., et al., Plaintiffs, v. CHINA NATIONAL METALS & MINERALS IMPORT & EXPORT CORPORATION, et al., Defendants.

596 F.Supp.2d 842

ANIMAL SCIENCE PRODUCTS, INC., et al., Plaintiffs, v. CHINA NATIONAL METALS & MINERALS IMPORT & EXPORT CORPORATION, et al., Defendants.

Civ. No. 05-4376 (GEB).

United States District Court, D. New Jersey.

December 30, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

David S. Stone, Robert A. Magnanini, Esqs. (Boies, Schiller & Flexner LLP), and Richard E. Donovan, Esq. (Kelley Drye & Warren LLP), for Plaintiffs Animal

Science Products, Inc. and Resco Products, Inc.

Leda Dunn Wettre, Donald A. Robinson, Esqs. (Robinson, Wettre & Miller LLC), Jonathan S. Caplan, Robert M. Heller, Nicholas L. Coch, Thomas H. Moreland, Timothy J. Helwick, Esqs. (Kramer Levin Naftalis & Frankel LLP), and Gregory Karl Mueller, Esq., for Defendants China National Metals & Minerals Import & Export Co., Minmetals Inc., China National Minerals Import & Export Co., Sinosteel Co., China Metallurgical Import & Export Co., Liaoning Jiayi Metals & Minerals Co. Ltd., Haicheng Houying Co. Ltd., and Haicheng Huayu Group Import & Export Co. Ltd.

OPINION

BROWN, Chief Judge:

This matter comes before the Court upon Plaintiffs' motion for default judgment (Docket Entry No. 28, "Plaintiffs' Motion") and defendant Minmetals Inc.'s ("Minmetals") motion to dismiss Plaintiffs' complaint (Docket Entry No. 27, "Defendant's Motion"). For the reasons stated below, Plaintiffs' Motion will be denied. Defendant's Motion will be granted insofar that Plaintiffs' complaint will be dismissed without prejudice, and Plaintiffs will be granted leave to amend their complaint. All residual motions will be dismissed as moot.

                                             TABLE OF CONTENTS
                  I.  Procedural Background .................................................... 847
                 II.  Motion for Default Judgment .............................................. 848
                III.  Challenges to Subject Matter Jurisdiction ................................ 850
                 IV.  Plaintiffs' Allegations .................................................. 851
                      A. Assertions as to Trade and Commerce ................................... 851
                      B. Anticompetitive Conduct ............................................... 852
                      C. Additional Elaborations ............................................... 853
                  V.  Industry-Related Data .................................................... 854
                 VI.  Pertinent Legal Regime ................................................... 857
                      A. The Sherman Act ....................................................... 857
                         1. "Per Se" and "Rule of Reason" Analyses ............................. 857
                         2. Parallel Pricing ................................................... 859
                      B. The Foreign Trade Antitrust Improvements Act .......................... 859
                         1. Legislative History ................................................ 859
                         2. Methodology of the FTAIA Analysis .................................. 860
                         3. Direct, Substantial, and Reasonably Foreseeable Effect ............. 862
                         4. Additional Considerations .......................................... 863
                            a. Comity .......................................................... 863
                            b. "Mixed FTAIA" Scenario .......................................... 864
                VII. Discussion ................................................................ 866
                     A. Presumption as to Lack of Sovereign Action ............................. 866
                     B. As Drafted, Plaintiffs' Complaint Is Barred by the FTAIA ............... 868
                        1. Trade and Commerce .................................................. 869
                        2. Plaintiffs Failed to Assert Facts Showing a Link Between
                             Defendants' Alleged Illegal Actions and the United States
                             Commerce .......................................................... 870
                             a. Cost-of-Production Arguments ................................... 871
                

                             b. Currency- and Sale-Price-Based Arguments ....................... 873
                             c. Economic Arguments ............................................. 875
                         3.  The Complaint Indicates Lack of Subject Matter Jurisdiction ....... 876
                      C. As Drafted, Plaintiffs' Complaint Fails to State a Sherman Act Claim .. 877
                      D. Plaintiffs' Motion for Default Judgment Will Be Denied ................ 880
                VIII. Leave to Amend............................................................ 880
                      A. Grant of Leave Is in the Interests of Justice ......................... 880
                      B. Future Litigation ..................................................... 881
                IX.   Conclusion ............................................................... 882
                

I. PROCEDURAL BACKGROUND

At issue here is the extraterritorial scope of the Sherman Antitrust Act and its application to this case. The putative Plaintiffs' class comprises certain United States consumers of magnesite products who allege that a number of Chinese entities and their trade association conspired to keep prices on certain magnesite products artificially inflated worldwide, including in the United States.

On September 7, 2005, Plaintiffs Animal Science Products, Inc. and Resco Products, Inc. ("Animal Science" and "Resco," collectively, "Plaintiffs") filed a civil complaint naming the following seventeen entities as Defendants in this matter: China National Metals & Minerals Import & Export Corporation; China National Minerals Import & Export Corporation; Sinosteel Corporation; China Metallurgical Import & Export Corporation; Liaoning Jiayi Metals & Minerals Co. Ltd.; Haicheng Houying Co. Ltd.; Haicheng Huayu Group Import & Export Co. Ltd.; Minmetals; Xiyang Group; Xiyang Imoprt & Export Ltd. Co.; Xiyang Refractory Materials Ltd. Co.; Xiyang Fireproof Material Co. Ltd.; Liaoning Foreign Trade General Co.; Liaoning Jinding Magnesite Group; Dalian Golden Sun Import & Export Co.; Haicheng Pailou Magnesite Ore Co. Ltd.; and Yingkou Huachen Co. Ltd. See Docket Entry No. 1.

On October 17, 2005, an order extending Minmetals' time to file a responsive pleading was issued by Judge Harold A. Ackerman; that time was re-extended by Judge Ackerman on November 7, 2005, and then re-extended once again by Magistrate Judge Mark Falk on December 15, 2005. See Docket Entries Nos. 3, 5 and 6. No responsive pleading followed and, on May 4, 2007, Magistrate Judge Esther Salas (to whom the case was reassigned from Judge Falk) issued another order granting Minmetals two extensions to file such a pleading.¹ See Docket Entries Nos. 18 and 25. On December 14, 2007, Minmetals filed Defendant's Motion. See Docket Entry No. 27. Plaintiffs' filed their opposition on January 14, 2008, see Docket Entry No. 33, and Minmetals filed their reply on February 12, 2008. See Docket Entry No. 38.

Meanwhile, during 2007, Plaintiffs filed numerous motions for entries of default, see, e.g., Docket Entries Nos. 16, 19 (hence, causing the Clerk to enter corresponding defaults); Plaintiffs followed those applications by filing Plaintiffs' Motion on December 14, 2007. See Docket Entry No. 28. On February 5, 2008, certain Defendants filed their opposition to Plaintiffs' Motion, see Docket Entries Nos. 36 (supplemented by Docket Entry No. 41), together with Defendants motion to compel arbitration.² See Docket Entry No. 37. On February 25, 2008, Plaintiffs filed their reply to Defendants' opposition. See Docket Entry No. 42. Defendants' sur-reply was filed on March 6, 2008. See Docket Entry No. 48 (supplemented by Docket Entry No. 50). Since then, extensive briefing of the arbitration issue has taken place.

On September 15, 2008, the matter was reassigned to the undersigned. On October 6, 2008, this Court held oral arguments as to the pending motions.

II. MOTION FOR DEFAULT JUDGMENT

Default is governed by Federal Rule of Civil Procedure 55. See Fed. R.Civ.P. 55. "Pursuant to Rule 55(a), a plaintiff can request the clerk's entry of default against a party `against whom a judgment for affirmative relief is sought that has failed to plead or otherwise defend [and] that fact is made to appear by affidavit or otherwise.'" Doug Brady, Inc. v. N.J. Bldg. Laborers Statewide Funds, 250 F.R.D. 171, 177 (D.N.J.2008), (quoting Fed.R.Civ.P. 55(a)). "Thereafter, the plaintiff may seek the Court's entry of default judgment under either Rule 55(b)." Doug Brady, 250 F.R.D. at 177 (citing Nationwide Mutual Ins. Co. v. Starlight Ballroom Dance Club, Inc., 175 Fed.Appx. 519, 521, n. 1 (3d Cir.2006)). "The district court has the discretion to enter default judgment, although entry of default judgments is disfavored as decisions on the merits are preferred." Super 8 Motels, Inc. v. Kumar, No. 06-5231, 2008 WL 878426, at *3, 2008 U.S. Dist. LEXIS 28066, at *7 (D.N.J. April 1, 2008) (citing Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir.1984)). In other words, district courts must remain mindful that, like dismissal with prejudice, default is a sanction of last resort, see Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 867-68 (3d Cir.1984) ("We reiterate what we have said on numerous occasions: that dismissals with prejudice or defaults are drastic sanctions"), and district courts must resolve all doubt in favor of proceeding on the merits. See Zawadski de Bueno v. Bueno Castro, 822 F.2d 416, 420 (3d Cir.1987).

Moreover, "before imposing the extreme sanction of default, district courts must make explicit factual findings as to: (1) whether the party subject to default has a meritorious defense, (2) the prejudice suffered by the party seeking default, and (3) the culpability of the party subject to default." Doug Brady, 250 F.R.D. at *177 (quoting Emcasco Ins. Co. v. Sambrick, 834 F.2d 71, 74 (3d Cir.1987), stating "[W]e have further required the district court to make explicit findings concerning the factors it must consider in rendering judgment by default or dismissal, or in declining to reopen such judgment"). Hence, a litigant's failure...