In re Auto. Antitrust Cases

• Decision Date: 05 July 2016
• Docket Number: A134913
• Parties: IN RE AUTOMOBILE ANTITRUST CASES I AND II.
• Court: California Court of Appeals Court of Appeals

1 Cal.App.5th 127

204 Cal.Rptr.3d 330

IN RE AUTOMOBILE ANTITRUST CASES I AND II.

A134913

Court of Appeal, First District, Division 4, California.

Filed July 5, 2016

Counsel for Appellant: Zelle, Craig Carter Corbitt, Jiangxiao Athena Hou, Michael S. Christian, Saveri & Saveri, Guido Saveri, R. Alexander Saveri, Berman DeValerio, Joseph John Tabacco Jr., Todd A. Seaver, Matthew D. Pearson, Hausfeld, Michael Paul Lehmann, Michael D. Hausfeld, Christopher L. Lebsock, Cooper & Kirkham, Josef Deen Cooper, Tracy R. Kirkham, John D. Bogdanov, Berger & Montague, H. Laddie Montague, Jr., Lieff Cabraser Heimann & Bernstein, Michele Chickerell Jackson, Eric B. Fastiff, Cohen Milstein Sellers & Toll, Daniel A. Small, J. Douglas Richards, Kathleen M. Konopka, Emmy Levens, Alioto Law Firm, Theresa Driscoll Moore, San Francisco, Duane Morris, Paul S. Rosenlund, Blecher & Collins, Los Angeles, Maxwell M. Bleecher, Harold Runkle Collins Jr., Zwerling, Schachter & Zwerling, Robert S. Schachter, Dan Drachler, Joseph S. Tusa, Amamgbo & Associates, Oakland, Donald Chidi Amamgbo, Culver City, The Terrell Law Group, Oakland, Reginald Von Terrell, Blumenthal & Nordrehaug, Norman B. Blumenthal, Morris & Associates, San Diego, Stephen Bryan Morris, John Haslet Boone, San Francisco, Chimicles & Tikellis, Steven A. Schwartz, Concord, Glancy, Binkow & Goldberg, Susan Gilah Kupfer, Lionel Zevi Glancy, Los Angeles, John F. Innelli, Schubert Jonckheer & Kolbe, San Francisco, Robert C. Schubert, Willem F. Jonckheer, Miranda Kolbe, Bramson, Plutzik, Mahler & Birkhaeuser, Walnut Creek, Alan Roth Plutzik, Kyle Loyd Crenshaw, Newport Beach, Davis, Cowell & Bowe, Elizabeth Ann Lawrence, Philip F. Bowe, Finkelstein Thompson, Richard M. Volin, Rosemary Medellin Rivas, San Francisco, Green & Noblin, Larkspur, Robert Stanley Green, Gordon–Creed Kelley Holl & Sugerman, San Francisco, Kevin John Holl, James Dombroski, Petaluma, The Ekenna Law Firm, Chief Nnamdi Ekenna, Los Angeles, Hagens, Berman, Sobol & Shapiro, Steve W. Berman, Anthony D. Shapiro, Elaine Teresa Byszewski, Pasadena, Hallisey & Johnson, Jeremiah F. Hallisey, Gross Belsky Alonso, San Francisco, Terry Gross, The Mogin Law Firm, Daniel Jay Mogin, Lisa J. Frisella, Chad McManamy, Alexander Michael Schack, San Diego, Lawrence Genaro Papale, St. Helena, Joseph M. Patane, San Francisco, Jeffrey Kenneth Perkins, Tiburon, Trump, Alioto,

Trump & Prescott, San Francisco, Mario Nunzio Alioto, Reich Radcliffe, Marc Gene Reich, Newport Beach

Counsel for Respondents: Latham & Watkins, San Diego, Margaret M. Zwisler, Gregory G. Garre, Jason L. Daniels, San Francisco, Michael E. Bern, Katherine I. Twomey, Adam R. Thomas

REARDON, J.

In this coordinated proceeding, certain purchasers of new automobiles in California (plaintiffs) brought state law claims against a number of automobile manufacturers and dealer associations under the Cartwright Act (Bus. & Prof. Code, §§ 167201–6728) and the Unfair Competition Law (Bus. & Prof. Code, §§ 17200 –17210 ). Specifically, the plaintiffs allege that the defendant manufacturers and associations conspired to keep lower-priced, yet virtually identical, new cars from being exported from Canada to the United States, thereby keeping new vehicle prices in California higher than they would have been in a properly competitive market. After years of litigation, the trial court granted summary judgment in favor of the two remaining defendants in the case—Ford Motor Company (Ford U.S.) and its subsidiary, Ford Motor Company of Canada, Ltd. (Ford Canada) (collectively, Ford)—concluding that the plaintiffs had failed to produce sufficient evidence of an actual agreement among Ford and the other manufacturers to restrict the export of new vehicles from Canada to the United States.

On appeal, the plaintiffs challenge the trial court's grant of summary judgment in favor of Ford, arguing that the evidence presented in this case was more than sufficient to raise a triable issue of material fact as to the existence of an illegal agreement to curb exports. In addition, they claim that the trial court improperly excluded certain direct evidence of the alleged conspiracy. Based on our de novo review of this matter, we conclude that summary judgment was appropriately granted to Ford U.S. However, we agree with the plaintiffs that the admissible evidence presented was sufficient to demonstrate the existence of a material fact as to whether Ford Canada participated in an illegal agreement to restrict the export of automobiles from Canada to the United States in violation of the Cartwright Act.¹ We therefore reverse the trial court's grant of summary judgment in favor of Ford Canada.

I. BACKGROUND

A. Preliminary Matters

This litigation began over a decade ago when, in early 2003, more than a dozen different lawsuits were filed in California against various automobile manufacturers and trade associations, each alleging state law causes of action for antitrust conspiracy and unfair business practices and each filed as a class action on behalf of individuals who purchased or leased new vehicles in California that were manufactured or distributed within a certain period of time by one of the named defendants. The lawsuits were eventually coordinated into this proceeding. ( In re Automobile Antitrust Cases I and II (2005) 135 Cal.App.4th 100, 106, 37 Cal.Rptr.3d 258 (Automobile Antitrust Cases ).) Thereafter, in October 2003, the plaintiffs filed their consolidated amended class action complaint, the operative pleading in this matter.² In addition to Ford, the class action complaint named numerous other automobile manufacturers as defendants.³ Also designated as defendants were the Canadian Automobile Dealers Association (CADA)—a trade organization that represents, promotes, and protects the interests of franchised automobile dealers in Canada—and the National Automobile Dealers Association (NADA), CADA's United States counterpart. (See ibid. ) All told, the manufacturer defendants accounted for approximately 88 percent of automobile sales in the U.S. and Canada from 2001 to 2003. Sales by Ford, General Motors, and Chrysler—sometimes referred to as the “Big 3”—constituted approximately 67 percent of that market.

As indicated above, the complaint alleges that the defendant automobile manufacturers and dealer associations violated state antitrust and unfair competition laws by conspiring to restrict the movement of lower-priced Canadian vehicles into the U.S. market, thereby avoiding downward pressure on new vehicle prices in the United States. According to the plaintiffs, during the timeframe relevant to this litigation, the defendant automobile manufacturers typically charged their California dealers between 10 and 30 percent more than they charged their Canadian dealers for the same make and model vehicle. Ford Canada, for example, estimated that a 2000 Model F350 Crewcab 4x4 DRW Lariat could be imported from Canada and sold at a price $8,265 less than its United States counterpart ($29,569 as opposed to $37,834). Maintenance of this two-tiered pricing system required the continued segregation of the Canadian and U.S. automobile markets.

Beginning in the 1990's, however, trade policy between the United States and Canada made exporting simpler and less expensive. Moreover, after the safety and environmental regulations governing new vehicles sold in the United States and Canada were harmonized between 1998 and 2000, the vehicles sold in the two countries became virtually identical.⁴ Then, from at least 2001 through 2003, the currency exchange rate differential between the strong United States dollar and the cheaper Canadian dollar made export sales increasingly attractive. (See In re New Motor Vehicles Can. Export Anti. Lit. (1st Cir. 2008) 522 F.3d 6, 9–10.) Faced with this particularly advantageous arbitrage opportunity,⁵ exporters began buying more and more Canadian vehicles and selling them in the United States to franchised dealers, dealers of another brand, independent dealers, and used car dealers. This created a discount distribution channel, or “gray market” for Canadian vehicles in the United States.⁶

The plaintiffs claim that, in the face of this mounting activity by exporters, the manufacturer defendants illegally agreed that they would all hold firm, each doing their part to stamp out Canadian exports, rather than taking the profits available by permitting their Canadian dealers to sell Canadian cars freely into the U.S. market. According to the plaintiffs, this alleged conspiracy was created and implemented through a series of meetings and conference calls among the defendant manufacturers. These contacts were facilitated by a number of trade associations, including: CADA; the Canadian Vehicle Manufacturers' Association (CVMA), which represented the “key or leading” automobile manufacturers in Canada, including Ford Canada, Chrysler Canada, and GM Canada; and the Association of International Automobile Manufacturers of Canada (AIAMC), which represented international manufacturers such as Honda Canada, Toyota Canada, Nissan Canada, BMW Canada, and Volkswagen Canada.

The plaintiffs further contend that the manufacturers used a variety of different tools to discourage the export of new Canadian vehicles to the United States, thereby furthering the goals of their conspiracy. By the late 1980's, for example, Ford had modified its Canadian dealer franchise agreements (generally Franchise Agreements) to forbid export sales. The Franchise Agreements of other manufacturers contained similar provisions. In addition, manufacturers created and frequently updated “blacklists” of entities known to export vehicles for resale so that their Canadian dealers could consult the lists and refrain from selling to those entities. Additionally, the manufacturers began tracking every vehicle's unique Vehicle Identification Number (VIN) to determine which new vehicles made for sale in Canada had actually...