In re Automotive Refinishing Paint Antitrust

• Decision Date: 08 May 2007
• Docket Number: MDL Docket No. 1426.
• Citation: 515 F.Supp.2d 544
• Parties: In re AUTOMOTIVE REFINISHING PAINT ANTITRUST LITIGATION.
• Court: U.S. District Court — Eastern District of Pennsylvania

515 F.Supp.2d 544

In re AUTOMOTIVE REFINISHING PAINT ANTITRUST LITIGATION.

MDL Docket No. 1426.

United States District Court, E.D. Pennsylvania.

May 8, 2007.

COPYRIGHT MATERIAL OMITTED

MEMORANDUM & ORDER

R. BARCLAY SURRICK, District Judge.

Presently before the Court are Defendants Sherwin-Williams Company and PPG Industries, Inc.'s Renewed And Supplemented Motion To Dismiss The Complaint Of Atlantic Auto Collision, Inc. (Doc. No. 186, MDL No. 1426; Doc. No. 53, 01-CV-2830), Defendants E.I. du Pont de Nemours & Co., DuPont Performance Coatings, Inc., Akzo Nobel, Inc., Akzo Nobel Coatings Inc., and BASF Corporation's Motion To Dismiss Atlantic Auto Collision's Amended Complaint Or, In The. Alternative, To Ask The Court To Suggest To The MDL Panel That Atlantic Auto Collision's Claims Be Remanded To The U.S. District Court For The Eastern District Of New York (Doc. No. 188, MDL No. 1426; Doc. No. 2, 06-CV-2784). For the following reasons, Defendants' Motions to Dismiss will be granted.

I. BACKGROUND

The original action in this multidistrict litigation (MDL) was filed on behalf of all individuals and entities who purchased automotive refinishing paint in the United States directly from Defendants, their predecessors or their controlled subsidiaries from at least as early as January 1, 1993, to at least December 31, 2000. The Amended Complaint in the original MDL alleges that during that period, Defendants conspired to fix, raise, maintain or stabilize prices for automotive refinishing paint sold in the United States, thereby artificially inflating prices for automotive refinishing paint in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The Court certified a Class of direct purchasers by stipulation of the parties on October 9, 2002. (Doc. No. 74, MDL No. 1426.) Since that time, there has been extensive discovery, and the Court has approved preliminary or final settlements between the original Plaintiff class and all Defendants. (See Doc. Nos. 84, 108, 109, 122, 123, 135, 215, MDL No. 1426.)

On March 21, 2005, Plaintiff Atlantic Auto Collision, Inc. filed a Complaint in the Eastern District of New York against Defendants E.I. du Pont de Nemours & Co., DuPont Performance Coatings, Inc. (collectively "DuPont"), Akzo Nobel, Inc., Akzo Nobel Coatings Inc. (collectively "Akzo"), BASF Corporation, PPG Industries, Inc., and Sherwin Williams Inc. on behalf of themselves and all others similarly situated. (Doc. No. 1, 06-CV-2784.)¹ The Atlantic Auto Collision Complaint was filed in federal court pursuant to the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d), and involves claims brought on behalf of indirect purchasers of automotive refinishing paint. The Atlantic Auto Collision Complaint asserts claims under New York's antitrust statute (known as the Donnelly Act), General Business Law § 340, and New York's Consumer Protection Act, General Business Law § 349. (Id.) On June 16, 2006, the Judicial Panel on Multidistrict Litigation ordered the transfer of the Atlantic Auto Collision case to this District to be included in the consolidated pre-trial proceedings in MDL Docket No. 1426.² Defendants filed the instant Motions on August 22, 2006 and August 24, 2006, renewing and supplementing arguments that had originally been made in the Eastern District of New York. Defendants contend that both the Donnelly Act claim and the Consumer Protection Act claim must be dismissed for lack of subject matter jurisdiction and because the Complaint fails to allege facts sufficient to support the elements of the claims. Defendants supplemented their original pleading on March 2, 2007 with additional authority from the New York Court of Appeals on the Donnelly Act. (Doc. No. 9.)

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(1), a court must grant a motion to dismiss if it lacks subject matter jurisdiction over the case. Fed.R.Civ.P. 12(b)(1). The party asserting that jurisdiction is proper bears the burden of showing that jurisdiction exists. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Packard v. Provident Nat'l Bank, 994 F.2d 1039, 1045 (3d Cir.1993). In reviewing the merits of a Rule 12(b)(1) motion, a district court may consider evidence that is outside the pleadings. Graham v. United States, Civ. A. No. 97-1590, 2002 WL 188573, *2, 2002 U.S. Dist. LEXIS 1765, at *4 (E.D.Pa. Feb.5, 2002).

Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss a complaint for failure to state a claim. A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint. Johnsrud v. Carter, 620 F.2d 29, 33 (3d Cir.1980) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)); Swin Res. Sys., Inc. v. Lycoming County, 883 F.2d 245, 247 (3d Cir.1989) (citing Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)). In evaluating a motion to dismiss, all allegations in the complaint and all reasonable inferences that can be drawn therefrom must be accepted as true and viewed in the light most favorable to the nonmoving party. Rocks v. City of Phila., 868 F.2d 644, 645 (3d Cir. 1989) (citing Wisniewski v. Johns-Manville Corp., 759 F.2d 271, 273 (3d Cir. 1985)). The court may dismiss a complaint, "only if it is certain that no relief could be granted under any set of facts that could be proved consistent with the allegations." Swin Res. Sys., Inc., 883 F.2d at 247.

III. LEGAL ANALYSIS

A. Donnelly Act Claim

1. Application of N.Y. CPLR 901(b) to State Antitrust Class Actions

Plaintiff's Complaint alleges a violation of New York General Business Law § 340 ("Donnelly Act"), contending that Defendants and co-conspirators "engaged in a contract, combination and conspiracy in unreasonable restraint of ... foreign and interstate trade and commerce" by agreeing to "fix prices and allocate markets in the sale of automotive refinishing paint." (Doc. No. 1, 06-CV-2784, Am. Compl. at 5.) Plaintiff seeks to maintain this claim as a class action, praying for "threefold the damages each [plaintiff] sustained from the conduct of the defendants." (Id. at 6-7.) Defendants contend that this claim must be dismissed because under New York law, a Donnelly Act claim cannot be brought as a class action. (Doc. No. 186 at 6.)

The Donnelly Act provides:

Every contract, agreement, arrangement or combination whereby ... [a] monopoly in the conduct of any business, trade or commerce or in the furnishing of any service in this state, is or may be established or maintained, or whereby [c]ompetition or the free exercise of any activity in the conduct of any business, trade or commerce or in the furnishing of any service in this state is or may be restrained ... is hereby declared to be against public policy, illegal and void.

N.Y. Gen. Bus. Law § 340(1) (2004). The Act further provides that "any person who shall sustain damages by reason of any violation of this section, shall recover three-fold the actual damages sustained thereby." Id. at § 340(5). New York Civil Practice Law and Rules 901(b) states: "Unless a statute creating or imposing a penalty, or a minimum measure of recovery specifically authorizes the recovery thereof in a class action, an action to recover a penalty, or minimum measure of recovery created or imposed by statute may not be maintained as a class action." N.Y. CPLR 901(b) (2005). Defendants contend that because of the provision regarding treble damages in § 340, CPLR 901(b) bars Donnelly Act class actions.

Defendants cite a number of cases from New York appellate courts and federal district courts that support the argument that CPLR 901(b) applies to the Donnelly Act and precludes class actions under the Act. (Doc. No. 186 at 6-7.) In response, Plaintiff argues that CPLR 901(b) does not apply to New York antitrust class actions because the Donnelly Act's provision for treble damages does not constitute a "penalty" as specified by CPLR 901(b). In its October 16, 2006 brief, Plaintiff noted that a case was then pending before the New York Court of Appeals, New York's highest court, that specifically addressed this question. Plaintiff suggested that we should defer decision on the issue until the New York Court of Appeals decided the case. (Doc. No. 3 at 4; 06-CV-2784.) As Defendants point out in their Notice of Supplemental Authority (Doc. No. 9, 06-CV-2784), the New York Court of Appeals recently decided that case. The court issued a decision in Sperry v. Crompton Corp., 8 N.Y.3d 204, 831 N.Y.S.2d 760, 863 N.E.2d 1012 (N.Y.2007), on February 22, 2007 in which it held that "Donnelly Act threefold damages should be regarded as a penalty insofar as class actions are concerned." Id. at 214, 831 N.Y.S.2d 760, 863 N.E.2d 1012. This decision was in keeping with the great weight of authority in the New York state courts and the federal courts. See Paltre v. Gen. Motors Corp., 26 A.D.3d 481, 483, 810 N.Y.S.2d 496 (N.Y.App.Div. 2006); Leider v. Ralfe, 387 F.Supp.2d 283, 287-88 (S.D.N.Y.2005). As a federal court sitting in diversity, we must apply state substantive law as decided by the state's highest court. Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); see also Johnson v. Fankell, 520 U.S. 911, 916, 117 S.Ct. 1800, 138 L.Ed.2d 108 (1997) ("Neither this Court nor any other federal tribunal has any authority to place a construction on a state statute different from the one rendered by the highest court of the State."); Covington v. Cont'l Gen. Tire, Inc., 381 F.3d 216, 218 (3d Cir.2004) ("It is well established that a federal court exercising diversity jurisdiction must apply the substantive law of the appropriate state. In the absence of a definitive ruling by a state's highest court, we must predict how that court would rule if faced with the issue."). Accordingly, we conclude that CPLR 901(b) precludes class actions under the Donnelly Act.

2. Application of N.Y. CPLR...