In re Class 8 Transmission Indirect Purchaser Antitrust Litig.

• Decision Date: 21 October 2015
• Docket Number: Civ. No. 11–00009–SLR
• Citation: 140 F.Supp.3d 339
• Parties: In re Class 8 Transmission Indirect Purchaser Antitrust Litigation
• Court: U.S. District Court — District of Delaware

140 F.Supp.3d 339

In re Class 8 Transmission Indirect Purchaser Antitrust Litigation

Civ. No. 11–00009–SLR

United States District Court, D. Delaware.

Signed October 21, 2015

Ian Connor Bifferato, Esquire and Thomas Francis Driscoll, Ill, Esquire of Bifferato LLC, Wilmington, Delaware. Counsel for Plaintiffs. Of Counsel: Lee Albert, Esquire and Gregory B. Linkh, Esquire of Glancy Binkow & Goldberg LLP, Joseph R. Gunderson, Esquire, Barbara C. Frankland, Esquire, Rex A. Sharp, Esquire and David E. Sharp, Esquire of Gunderson, Sharp LLP, Jason S. Hartley, Esquire and Jason M. Lindner, Esquire of Stueve, Siegel and Hanson LLP, Brian Penny, Esquire and Douglas Bench Jr., Esquire of Goldman Scarlato & Penny LLP.

Donald E. Reid, Esquire of Morris Nichols, Arsht & Tunnell, Wilmington, Delaware. Counsel for Defendant Eaton Corporation. Of Counsel: Joseph A. Ostoyich, Esquire, Erik T. Koons, Esquire, Julie B. Rubenstein, Esquire and William C. Lavery, Esquire of Baker Botts, LLP.

Richard L. Horwitz, Esquire and John A. Sensing, Esquire of Potter, Anderson & Corroon, LLP, Wilmington, Delaware. Counsel for Defendants Daimler Trucks North America LLC (f/k/a Freightliner LLC). Of Counsel: J. Robert Robertson, Esquire, Benjamin F. Holt, Esquire, Justin W. Bernick, Esquire, and Meghan C., E. F. Rissmiller, Esquire of Hogan Lovells US LLP and Corey W. Roush, Esquire of Akin Gump Strauss Hauer & Feld LLP.

Kelly E. Farnan, Esquire and Lisa A. Schmidt, Esquire of Richards, Layton & Finger, PA, Wilmington, Delaware and Jeffrey B. Bove, Esquire of Novak Druce Connolly Bove Quigg LLP, Wilmington, Delaware. Counsel for Defendant Navistar International Corporation (f/k/a International Truck and Engine Corporation). Of Counsel: Daniel E. Laytin, Esquire, James H. Mutchnik, Esquire, and Brian Borchard, Esquire of Kirkland & Ellis, LLP.

Jeffrey B. Bove, Esquire of Novak Druce Connolly Bove Quigg LLP, Wilmington, Delaware. Counsel for Defendants Kenworth Truck Company, Paccar Inc., and Peterbilt Motors Company. Of Counsel: Catherine S. Simonsen, Esquire, Cori G. Moore, Esquire, Eric J. Weiss, Esquire, and Thomas L. Soeder, Esquire of Perkins Coie LLC.

M. Duncan Grant, Esquire and James Harry Stone Levine, Esquire of Pepper Hamilton LLP, Wilmington, Delaware. Counsel for Defendants Mack Trucks Inc. and Volvo Trucks North America. Of Counsel: Daniel J. Boland, Esquire, Jeremy Heep, Esquire and Michael Hartman, Esquire of Pepper Hamilton LLP.

MEMORANDUM OPINION

ROBINSON

, District Judge

I. INTRODUCTION

Presently before the court is indirect purchaser plaintiffs'¹ ("plaintiffs") motion for class certification pursuant to Fed. R. Civ. P. 23(a), 23(b)(2) and 23(b)(3)

. (D.I. 184) Also before the court is plaintiffs' motion to substitute various parties as class representatives. (D.I. 180) Defendants to this action include Eaton Corporation ("Eaton"), Daimler Trucks North America LLC ("Daimler Trucks"), Freightliner LLC "Frightliner"), Navistar International Corporation ("Navistar"), International Truck and Engine Corporation ("International"), Paccar, Inc. ("Paccar"), Kenworth Truck Company ("Kenworth"), Peterbilt Motors Company ("Peterbilt"), Volvo Trucks North America ("Volvo"), and Mack Trucks, Inc. ("Mack") (collectively, "defendants").

Plaintiffs assert that defendants engaged in anticompetitive conduct. (D.I. 34 at ¶¶ 1-2) Specifically, defendants allege Eaton entered into exclusive dealing agreements with the Original Equipment Manufacturers ("OEMs") (Daimler Trucks, Freightliner, Navistar, International, PAACAR, Kenworth, Peterbilt, Volvo and Mack) of Class 8 trucks to maintain or enhance their monopoly power in the market for transmissions used the Class 8 trucks. (Id. ) Both direct² and indirect purchaser plaintiffs allege that such anticompetitive conduct resulted in the elimination of Eaton's biggest competitor ZF Meritor. (Id. ) The court has jurisdiction pursuant to 15 U.S.C. § 15

and 28 U.S.C. §§ 1331 and 1337.

II. BACKGROUND

A. The Parties

Plaintiffs purchased Class 8 trucks from one or more of defendants' authorized sales agents or dealers and, therefore, are indirect purchasers of Class 8 transmissions. (D.I. 34 at ¶¶ 9-12) Plaintiffs assert violations of 20 state antitrust laws and 2 state unfair competition laws in a total of 21 different states.

Defendants are involved in the manufacture and sale of Class 8 trucks. Eaton manufactures transmissions for Class 8 trucks. (Id. at ¶ 13) The OEM defendants manufacture and sell Class 8 trucks. (Id. at ¶¶ 14-21) In order to assemble and sell Class 8 trucks, OEMs purchase component parts, such as transmissions, from suppliers, such as Eaton. (Id. at ¶ 27)

B. Class 8 Trucks and Transmissions

There are eight recognized classes of vehicles, with Class 8 trucks being the heaviest. (Id. at ¶ 25) Examples of Class 8 heavy duty trucks include fire trucks, garbage trucks, and long-distance freighters. (Id. at ¶ 26) The purchase of Class 8 trucks is unique in the sense that buyers can essentially build a truck to their desired specifications. (Id. at ¶ 27) When purchasing a Class 8 truck, buyers can consult OEM "databooks," which list an OEM's standard and non-standard component offerings, ³ and designate the specific components they desire in their trucks. (Id. ) Since manufacturers of component parts in the Class 8 truck industry market products directly to potential customers, it is not uncommon for buyers to select non-standard options from a databook. (Id. )

C. Plaintiffs' Allegations

Plaintiffs contend that Eaton has been the dominant and most widely recognized American manufacturer of Class 8 transmissions, holding a near monopoly in the market since the 1950s. (Id. at ¶¶ 28, 42-45) In the 1990s, ZF Meritor established itself as a viable competitor to Eaton, producing desirable, competitive and innovative transmissions. (Id. at ¶¶ 28-29, 51-61) In response to this competition from ZF Meritor and a significant downturn in the Class 8 truck market which occurred in late 1999-early 2000, plaintiffs allege that Eaton and the OEMs conspired to put ZF Meritor out of business, thereby expanding Eaton's monopoly and permitting all defendants to share in the profits resulting from this monopoly. (Id. at ¶ 62)

This conspiracy was allegedly achieved by Eaton entering into Long Term Agreements ("LTAs") in the early 2000s with each of the four OEMs.⁴ (Id. at ¶¶ 62-68). While each Eaton-OEM LTA was separately negotiated and thus distinct, the LTAs shared a similar purpose and features. (Id. at ¶¶ 74-112) Each LTA contained a provision whereby the OEMs would receive sizable and lucrative rebates from Eaton assuming the OEMs utilized a certain percentage of Eaton transmissions annually. (Id. ) For example, under the Freightliner-Eaton LTA, Freightliner was required to purchase 92% of its Class 8 transmission needs from Eaton in order to receive the specified rebates. (Id. at ¶ 77) Aside from tying percentage requirements to rebates, the LTAs included other provisions designed to minimize ZF Meritor's market share. Examples of these provisions included eliminating ZF Meritor transmissions from databooks or removing them from the standard position, refusing to provide warranties on trucks with ZF Meritor transmissions, overcharging for ZF Meritor transmissions, and refusing to provide financing on vehicles with ZF Meritor transmissions. (Id. at ¶¶ 74-113) In essence, plaintiffs argue that the LTAs were defacto exclusive dealing contracts and the OEMs all agreed with each other to enter into these agreements in order to eliminate ZF Meritor and share in the profits of Eaton's monopoly. (Id. at ¶¶ 62; 66) In the end, plaintiffs allege that defendants' conspiracy was successful as the LTAs greatly diminished ZF Meritor's market share in the Class 8 transmission field and left it no opportunity for growth. (Id. at ¶¶ 115-117) In the face of these economic realities, ZF Meritor's market share declined to an insignificant level. (Id. ) Plaintiffs ultimately contend that they had to pay higher prices for transmissions and, in turn, for Class 8 trucks, as a result of defendants' actions; they also assert that "they had less choice and suffered from a decrease in innovation." (Id. at ¶¶ 4; 114)

III. STANDARD

A district court has broad discretion to grant or deny class certification.

See Eisenberg v. Gagnon, 766 F.2d 770, 785 (3d Cir.1985)

. The court does not inquire into the merits of a lawsuit when determining whether it may be maintained as a class action. See Eisen v. Carlisle and Jacquelin, 417 U.S. 156, 177, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974). However, the court must conduct a limited preliminary inquiry, examining beyond the pleadings, to determine whether common evidence could suffice to make out a prima facie case for the class. See General Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 160, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982) ("[T]he class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff's cause of action.") (internal citation omitted); Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 167 (3d Cir.2001) ("[C]ourts may delve beyond the pleadings to determine whether the requirements for class certification are satisfied.").

The party seeking class certification bears the burden of establishing that certification is warranted under the circumstances. Carrera v. Bayer Corp., 727 F.3d 300, 306 (3d Cir.2013)

. Rule 23 of the Federal Rules of Civil Procedure sets forth the requirements for certification of a class. Under Rule 23(a), these requirements are: (1) the class is so numerous that joinder of all members is impracticable ("numerosity"); (2) there are questions of law or fact common to the class ("commonality"); (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class ("typicality"); and (4) the representative parties will fairly and adequately protect the interests of the...