In re Copper Antitrust Litigation
| Decision Date | 09 May 2000 |
| Docket Number | M.D.L. No. 1303.,No. 99-C-801-C.,99-C-801-C. |
| Parties | In re COPPER ANTITRUST LITIGATION. Ocean View Capital, Inc., f/k/a Triangle Wire & Cable, Inc., Plaintiff, v. Sumitomo Corporation of America, Sumitomo Corporation, Sumitomo Futures Corporation, Yasuo Hamanaka, Global Minerals and Metals Corporation, David Campbell, and Credit Lyonnais Rouse, Defendants. |
| Court | U.S. District Court — Western District of Wisconsin |
William R. Steinmetz, Reinhart, Boerner, Van Deuren, Norris & Rieselbach, S.C., Milwaukee, WI, for Loeb Industries, Inc.
David H. Weinstein, Weinstein, Kitchenoff, etc, Philadelphia, PA, for Los Angeles Scrap Iron & Metal C.
Arthur M. Kaplan, Fine, Kaplan & Black, Philadelphia, PA, for Metal Prep Company, Inc.
Jon P. Axelrod, Dewitt Ross & Stevens, Madison, WI, for CBS Corp., Emerson Electric Co., Westinghouse Electric Corp.
Sanford P. Dumain, Milberg, Weiss, Bershad, Hynes & Lerach, L.L.P., New York City, for Ocean View Capital, Inc.
Robert B. Bernstein, Kaye, Scholer, Fierman, Hays & Handl, New York City, for Metallgesellschaft AG, MGTS UK Holding, Ltd.
Alexandre De Gramont, Crowell & Moring LLP, Washington, DC, for So.Calif.Edison Co. (Prop Interv).
David R. Cross, Quarles & Brady, Milwaukee, WI, for Sumitomo Corporation, Sumitomo Corporation of America, Sumitomo Futures Corporation.
H. Peter Haveles, Jr., Cadwalader, Wickersham & Taft, New York City, for Carl R. Alm, R. David Campbell, Copper Antitrust Litigation, Global Minerals and Metals Corp.
Yasuo Hamanaka, Tokyo, Japan, for Hamanaka, Yasuo.
David J. Harth, Foley & Lardner, Madison, WI, for Merrill Lynch & Co., Inc., Merrill Lynch International Inc., Merrill Lynch Pierce Fenner.
Robert Horowitz, Stafford Rosenbaum LLP, Madison, WI, for Credit Lyonnais Rouse, Ltd.
John F. Cambria, Salans Hertzfeld Heilbronn Christy V, New York City, for Ashley Levett, Charles Vincent.
This is a civil action for monetary, declarative and injunctive relief brought pursuant to the Sherman Act, 15 U.S.C. § 1, and R.I.Gen.Laws § 6-36-4. Plaintiff Ocean View Capital, Inc. contends that defendants Sumitomo Corporation of America, Sumitomo Corporation, Sumitomo Futures Corporation, Yasuo Hamanaka, Global Minerals and Metals Corporation, David Campbell and Credit Lyonnais Rouse violated federal and state antitrust statutes by entering into a conspiracy to raise the price of copper to artificially high and noncompetitive levels through manipulation of the copper futures markets. (Plaintiff sued Ashley Levett and Charles Vincent in addition to the other defendants; its complaint was dismissed as to these two defendants for lack of personal jurisdiction.) Presently before the court is a joint motion to dismiss filed pursuant to Fed.R.Civ.P. 12(b)(6) by defendants Sumitomo Corporation of America, Sumitomo Corporation, Sumitomo Futures Corporation, Global Minerals and Metals Corporation and David Campbell. These defendants contend that plaintiff does not have antitrust standing to bring claims against them. Also before the court is a motion to dismiss filed pursuant to Fed.R.Civ.P. 12(b)(6) and 12(b)(1) by defendant Credit Lyonnais Rouse. Defendant Credit Lyonnais contends that plaintiff has not alleged facts sufficient to state a claim of conspiracy against it and alternatively, that plaintiff's claim against it is barred by the statute of limitations. All defendants urge this court to decline supplemental jurisdiction over plaintiffs state law claim. I conclude that plaintiff has alleged sufficient facts to defeat all of the pending motions.
For the sole purpose of deciding this motion, I find that plaintiffs complaint fairly alleges the following.
Plaintiff Ocean View Capital, Inc. is a corporation organized and existing under the laws of Delaware with its principal place of business in Rhode Island. During the period of time relevant to this complaint, plaintiff was known as Triangle Wire & Cable, Inc. Until October 31, 1996, Triangle Wire was engaged in the manufacture of copper wire and cable, for which it purchased refined copper at a cost of approximately $350 million in the years 1995 and 1996 alone. Until 1996, plaintiff was among the largest purchasers of refined copper for wire and cable manufacture in the United States.
Defendants Sumitomo Corporation (a foreign corporation) and its affiliates Sumitomo Corporation of America (a New York corporation) and Sumitomo Futures Corporation are, collectively, one of the world's largest refiners and sellers of physical copper as well as one of the world's biggest traders of copper futures. (Throughout this opinion, I will used the name "Sumitomo" to refer to all three Sumitomo defendants.) Sumitomo markets copper through the Copper Metals Section of its Non-Ferrous Metals Department, which engaged in both the purchase and sale of physical copper and hedging with futures. Sumitomo owns large amounts of the world's supply of physical copper and is one of the world's largest copper producers. Sumitomo has market power in the copper futures market and in the market for physical copper.
Defendant Yasuo Hamanaka headed Sumitomo's copper trading operations from August 1987 until about June 13, 1996. Defendant Hamanaka traded both physical copper and copper futures for Sumitomo. In February 1997, defendant Hamanaka pleaded guilty in a Japanese court to criminal charges related to the events at issue in this complaint.
Defendant Global Minerals and Metals Corporation is a Delaware corporation that is authorized to do business in New York. Defendant David Campbell was a principal of Global during the time relevant to this complaint. Defendant Global is a refiner and seller of physical copper and a trader of copper futures. Beginning at least as early as 1993, Global conspired with Sumitomo to manipulate the price of physical copper and copper futures. In furtherance of the conspiracy, Global maintained at least two brokerage accounts in Sumitomo's name that were used to coordinate market actions between Global and Sumitomo. Global and Sumitomo engineered a series of transactions by which Sumitomo bought copper and resold it immediately to Global's supplier for the express purpose of causing copper prices to appear to increase. Global and Sumitomo agreed by contract to share in any price appreciation for copper.
Former defendants Ashley Levett and Charles Vincent are principals of Winchester Commodities Group, Winchester Asset Management, Ltd., Winchester Holdings USA Inc. and Winchester USA Inc. The Winchester corporations are not named as defendants in this action because they are involved in pending bankruptcy proceedings in the United Kingdom. Levett and Vincent profited by forwarding instructions from Sumitomo to its broker, defendant Credit Lyonnais Rouse, for trading on the London Metal Exchange and elsewhere and provided other services that went beyond ordinary financial services and furthered Sumitomo's conduct. Levett and Vincent knew that they were helping Sumitomo act unlawfully. Winchester gave kickbacks or "gratuities" to defendant Hamanaka in order to keep defendant Sumitomo's business.
Defendant Credit Lyonnais Rouse acted as Sumitomo's dealer in copper, copper futures and copper options transactions. Defendant Credit Lyonnais made trades and undertook other acts and services for Sumitomo stock that went beyond ordinary financial services and furthered defendant Sumitomo's unlawful conduct. Defendant Credit Lyonnais was entitled to 20% of Winchester's profits, had an option to acquire 20% of Winchester's share capital and was a partner with Winchester in its wrongful dealings.
Copper is traded on various exchanges, including the Commodity Exchange, Inc. (COMEX) Division of the New York Mercantile Exchange and the London Metal Exchange (LME). From an economic standpoint, COMEX and LME function as a single market. Prices on one market vary with prices on the other. To the extent there are price discrepancies between the markets, physical copper can be shifted easily between the LME warehouse in Long Beach, California and COMEX warehouses in Arizona.
On the exchanges, copper futures contracts are traded along with physical copper. Futures contracts are firm commitments to make or accept delivery of a specified quality and quantity of copper during a specific month in the future at a price agreed upon at the time the commitment is made. Generally the price for futures varies directly with the price for physical copper, although the price for futures is usually higher because it includes financing, insurance costs and storing charges.
Plaintiff did not participate in the exchanges. It purchased all of its copper on the cash market, including copper sold to it by Sumitomo. Prices of copper on the cash market are set by reference to the price (or, in some cases, a monthly average price) of copper futures on the COMEX plus a "basis" price (a premium factor), determined at the time of contracting. Therefore, a manipulation of the price of copper futures on the COMEX or the LME would correlate directly and predictably with changes in copper prices on the cash market.
During the period from 1990 through June 13, 1996, defendant Sumitomo acted through its head trader, defendant Hamanaka, to become the markets' single largest participant in physical copper and copper futures. As part of its marketing of copper, Sumitomo engaged in futures and options transactions worth approximately $20 billion annually on world markets, including COMEX and LME.
Between 1990 and June 13, 1996, defendants conspired to manipulate and corner the market for physical copper and copper futures. Defendants limited the supply of copper and increased the demand for it, thereby causing copper prices to rise to...
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