In re Aluminum Warehousing Antitrust Litig.

• Citation: 520 F.Supp.3d 455
• Decision Date: 17 February 2021
• Docket Number: 15 Civ. 8307 (PAE),13 MD 2481 (PAE),14 Civ. 3116 (PAE), 14 Civ. 211 (PAE), 14 Civ. 217 (PAE), 14 Civ. 6849 (PAE)
• Parties: IN RE ALUMINUM WAREHOUSING ANTITRUST LITIGATION This Document Relates to: In re Aluminum Warehousing Antitrust Litigation (Direct Purchaser Plaintiffs), Agfa Corporation and AGFA Graphics, NV v. The Goldman Sachs Group, Inc., Mag Instrument, Inc. v. The Goldman Sachs Group, Inc., Eastman Kodak Company v. The Goldman Sachs Group, Fujifilm Manufacturing U.S.A., Inc. v. Goldman Sachs & Co.
• Court: U.S. District Court — Southern District of New York

520 F.Supp.3d 455

IN RE ALUMINUM WAREHOUSING ANTITRUST LITIGATION

This Document Relates to:

In re Aluminum Warehousing Antitrust Litigation (Direct Purchaser Plaintiffs),

Agfa Corporation and AGFA Graphics, NV v. The Goldman Sachs Group, Inc.,

Mag Instrument, Inc. v. The Goldman Sachs Group, Inc.,

Eastman Kodak Company v. The Goldman Sachs Group,

Fujifilm Manufacturing U.S.A., Inc. v. Goldman Sachs & Co.,

13 MD 2481 (PAE)

14 Civ. 3116 (PAE), 14 Civ. 211 (PAE), 14 Civ. 217 (PAE), 14 Civ. 6849 (PAE)

15 Civ. 8307 (PAE)

United States District Court, S.D. New York.

Signed February 17, 2021

OPINION & ORDER

PAUL A. ENGELMAYER, District Judge:

Plaintiffs in these actions¹ contend that defendants have violated section 1 of the Sherman Act, 15 U.S.C. § 1, by conspiring to inflate prices in the primary-aluminum market.² Specifically, they allege that defendants’ anticompetitive conduct increased regional premiums associated with primary-aluminum sales. This, plaintiffs contend, had the effect of inflating the prices they paid for such aluminum during the relevant period.

The present motion does not concern whether plaintiffs’ theory is right, but whether they are the right parties to bring this lawsuit. For the most part, plaintiffs did not buy aluminum from defendants or their co-conspirators. Instead, they overwhelmingly bought aluminum from unrelated third parties: generally, smelters of aluminum. Defendants argue that this fact, viewed in light of the operation of the aluminum market as revealed by the extensive discovery record, is fatal to the claims of such indirect-purchaser plaintiffs.

Specifically, given the causal distance between defendants’ conduct and plaintiffs’ harms, defendants contend that such plaintiffs are not efficient enforcers of the antitrust laws, and therefore lack antitrust standing. Plaintiffs counter that their aluminum purchases, even if made at some remove from any defendant, unavoidably incorporated the price component that defendants conspired to inflate. This debate draws upon a growing line of cases in this Circuit, in which courts have largely dismissed, for want of antitrust standing, plaintiffs’ claims that defendants with whom they did not directly do business manipulated benchmark prices. Plaintiffs here seek to distinguish this line of authority. They also maintain that prior decisions in this case, by the judge to whom this case was previously assigned and by the Second Circuit, have already resolved that they have antitrust standing.

With fact discovery complete as to the claims at issue, defendants move for summary judgment on those of plaintiffs’ claims that arise from purchases of primary aluminum from parties other than defendants. For the reasons below, the Court grants defendants’ motion.

I. Background³

A. The Parties

The First Level Purchaser plaintiffs are Ampal, Inc. ("Ampal"); Custom Aluminum Products, Inc. ("Custom"); Claridge Products and Equipment, Inc. ("Claridge"); and Extruded Aluminum Corporation ("Extruded"). TAC ¶¶ 44, 53, 60, 67.

The Individual Purchaser plaintiffs are Agfa, Mag, Kodak, and Fujifilm. See JAC ¶¶ 31–49; Fujifilm Compl. ¶¶ 34–39.

Plaintiffs seek damages arising from their purchases of aluminum at allegedly inflated prices. They have sued six sets of defendants, three of which traded in primary aluminum and primary-aluminum derivatives on the London Metals Exchange ("LME") during the relevant period ("Financial Defendants"), and three of which owned and operated LME-certified warehouses for the storage of metal during that period ("Warehousing Defendants"). See TAC ¶¶ 85–127; see also Aluminum VI , 936 F.3d at 89. The Financial Defendants are each affiliated with Goldman Sachs & Co., J.P. Morgan Securities plc, or Glencore Ltd. Each Warehousing Defendant became associated with one of the Financial Defendants during the relevant period.

Defendant Goldman Sachs & Co. is an international financial company headquartered in New York, New York. See TAC ¶¶ 86–87. Defendant J. Aron & Company, a commodities trading firm, is a New York corporation with the same headquarters as Goldman Sachs & Co. Id. ¶ 88. Defendant Goldman Sachs International is an international financial services provider headquartered in London, United Kingdom. Id. ¶ 89. Each of these entities (collectively, the "Goldman Sachs defendants") is a subsidiary of The Goldman Sachs Group, Inc. (together with the Goldman Sachs defendants, "Goldman Sachs"). Id. ¶¶ 85–89.⁴

Defendant J.P. Morgan Securities plc ("J.P. Morgan"), headquartered in London, provides securities brokerage services. Id. ¶ 97. J.P. Morgan is a wholly-owned subsidiary of J.P. Morgan Chase Bank, N.A. ("JPMCB"). Id.⁵

Defendant Glencore Ltd. ("Glencore"), headquartered in Stamford, Connecticut, trades aluminum and other metals, as well as financial derivatives tied to the underlying asset prices of such metals. Id. ¶¶ 113, 121.⁶

The Warehousing Defendants are Metro International Trade Services LLC ("Metro"), Mitsi Holdings LLC ("Mitsi"), Henry Bath LLC ("Henry Bath"), and Pacorini Metals USA LLC ("Pacorini"). Id. ¶¶ 92–93, 107, 122. Each Warehousing Defendant "owns and operates aluminum warehouses certified by the LME, and each was owned during the relevant time by one of the Financial Defendants—Henry Bath by J.P. Morgan, Metro [and Mitsi] by Goldman Sachs, and Pacorini by Glencore." Aluminum VI , 936 F.3d at 89 ; see Pl. 56.1 ¶ 62.

B. Factual Background

The Court assumes familiarity with the factual background of this case. See Aluminum VII , 336 F.R.D. at 10–22. It summarizes here only the background that is necessary context for the pending motion.

1. The Market for Primary Physical Aluminum

Primary aluminum is created by large, integrated producers (smelters) such as Alcoa, Inc. ("Alcoa"), UC Rusal ("Rusal"), and Rio Tinto Alcan, Inc. ("Rio Tinto Alcan"). Pl. 56.1 ¶¶ 3 & n.4, 4. Such producers generally sell primary aluminum to (1) manufacturers and processors ("industrial users" or "fabricators"), such as the FLPs and IPs, which use aluminum in either industrial processes or to fabricate finished products; and (2) traders and financial institutions, such as defendants, which hold and resell aluminum through various methods. Industrial users buy aluminum both under long-term contracts, which may include annual supply arrangements, and in one-off purchases on the spot market. See, e.g. , Def. 56.1 ¶¶ 12–13, 18–19, 23–24, 29, 45–46, 51, 58.

In most cases, contracts for the physical delivery of aluminum contain a purchase price comprised of at least two main components: (1) the LME settlement price for aluminum; and (2) a premium reflecting, inter alia , the costs of storing and delivering the aluminum. Def. 56.1 ¶ 54; Pl. 56.1 ¶ 54. Such contracts also may include another, smaller price component—a "conversion cost"—based the specifics of the purchased product, e.g. , metal grade or shape. Def. 56.1 ¶ 54; Pl. 56.1 ¶ 54. According to defendants, the LME settlement price is the largest component of the total price of aluminum, the regional premium is the second largest, and the conversion price is the smallest. See Dkt. 1311 ("Arg. Tr."). at 18–19; see also Def. 56.1 ¶ 56 (during the relevant period, the MWP ranged between five and 23 percent of the MWTP).

The LME settlement price represents the current value of the metal. It fluctuates in accord with, inter alia , the daily global intersection of supply and demand in LME trading. Pl. 56.1 ¶ 57. It does not reflect the costs of delivery from a seller to a buyer. Id.

The inclusion of a regional premium in the price of aluminum incorporates into the overall price of aluminum the costs of delivery, storage, financing, and other costs associated with the logistics of physical aluminum sales. Def. 56.1 ¶ 57; Pl. 56.1 ¶ 57. In the United States, the major benchmark regional premium is the Midwest Premium ("MWP") reported by the Platts publishing company. (Despite its name, the MWP is the predominant benchmark throughout the country.) To calculate the MWP, Platts first surveys the all-in prices paid on the spot market for aluminum to be delivered in the midwestern United States on a given day. Def. 56.1 ¶ 54. That surveyed price, known as the Midwest Transaction Price ("MWTP"), reflects the "[d]aily all-inclusive or ‘all-in’ price for spot physical 99.7% high-grade P1020A aluminum." Id. The MWP, in turn, represents the mathematical difference between the MWTP and the LME settlement price for aluminum on any given day. Id. ¶¶ 54–55; Pl. 56.1 ¶¶ 54–55. During the relevant period, the MWP ranged between about five and 23 percent of the overall MWTP. Def. 56.1 ¶ 56. As discussed below, however, not all contracts for primary aluminum explicitly refer to the LME settlement price, MWP, or MWTP.

2. The LME System

The LME is the world's leading exchange for non-ferrous industrial metals, including aluminum. Dkt. 1014 ("Liu Decl."), Ex. 1 ("First Hausman Decl.") ¶ 8. Its trading and clearing platform allows buyers and sellers to trade standardized futures contracts that provide for the physical delivery of metal on specified maturity dates. Id. The LME also certifies warehouses around the world, including in Detroit, Baltimore, and New Orleans in the United States, and Vlissingen in the Netherlands. Id. ¶ 9.

LME futures contracts can be settled either through an offsetting trade or through the delivery of "warrants" issued by LME-certified warehouses. Id. ¶¶ 9–10. An LME warrant entitles its bearer to a specified lot of metal stored at one of the LME warehouses. Id. The vast majority of LME aluminum trading occurs among traders and financial institutions who speculate on price movements and have no expectation of taking delivery of the actual physical metal. And the overwhelming majority of physical aluminum never passes through an LME warehouse. Generally, industrial users buy physical aluminum directly from smelters, not through the LME. Id. ¶ 19. As a result, the aluminum stored in LME warehouses usually...