In re Fla. Cement And Concrete Antitrust Litig. (direct Purchaser Action).In Re Fla. Cement And Concrete Antitrust Litig. (indirect Purchaser Action).

• Decision Date: 12 October 2010
• Docket Number: Array
• Citation: 746 F.Supp.2d 1291
• Parties: In re FLORIDA CEMENT AND CONCRETE ANTITRUST LITIGATION (Direct Purchaser Action).In re Florida Cement and Concrete Antitrust Litigation (Indirect Purchaser Action).
• Court: U.S. District Court — Southern District of Florida

746 F.Supp.2d 1291

In re FLORIDA CEMENT AND CONCRETE ANTITRUST LITIGATION (Direct Purchaser Action).In re Florida Cement and Concrete Antitrust Litigation (Indirect Purchaser Action).

Master Docket Nos. 09–23187–CIV

09–23493–CIV.

United States District Court, S.D. Florida.

Oct. 12, 2010.

ORDER

CECILIA M. ALTONAGA, District Judge.

THIS CAUSE is before the Court on Defendants' Motion[s] to Dismiss with Prejudice the Direct Purchaser Plaintiffs' Second Consolidated Amended Complaint and the Indirect Purchaser Plaintiffs' Third Amended Consolidated Complaint (the “Motions”) (Case 09–23187–CIV (“Direct”) [ECF No. 205]; Case 09–23493–CIV (“Indirect”) [ECF No. 111] ). The two Motions are identical and were filed by all Defendants in each action. The Court has carefully reviewed the parties' written submissions and applicable law.

I. BACKGROUND ¹

These two cases involve an alleged unlawful conspiracy in violation of section 1 of the Sherman Antitrust Act (the “Sherman Act”), 15 U.S.C. § 1, among vertically-integrated cement companies to fix, raise, stabilize or maintain prices of, and allocate customers and markets for, Portland cement, ² ready-mix concrete,³ and concrete block ⁴ in the State of Florida. In the Direct Purchaser Action, Plaintiffs ⁵ allege Defendants' actions in the cement and concrete markets were specifically aimed at eliminating Defendants' primary competitors in the concrete market, known as Independent Concrete Producers (“ICP[s]”), who directly purchase cement and concrete from Defendants; Plaintiffs allege the conspiracy resulted in supra-competitive prices for cement and concrete. In the Indirect Purchaser Action, Plaintiffs ⁶ allege the supra-competitive prices caused by the conspiracy were passed on to “indirect purchasers” of cement and concrete who were consequently injured by having overpaid for these products.

Defendants ⁷ are cement and concrete producers that control nearly all cement sales in Florida and own 90 percent of the concrete producers in the State. ( See id. ¶¶ 3, 157). Each Defendant is vertically integrated because it produces and sells—directly or through a corporate affiliate—both cement and concrete. ( See id. ¶ 3).

A. Procedural History

Direct Purchaser Plaintiffs filed a Consolidated Amended Complaint (“CAC”) (Direct [ECF No. 90] ) on January 7, 2010; Indirect Purchaser Plaintiffs filed a Second Amended Consolidated Complaint (Indirect [ECF No. 80] ) on March 5, 2010. On March 8, 2010, Defendants in both actions filed identical Motion[s] to Dismiss Amended Complaint[s] (the “MDACs”) (Direct [ECF No. 147]; Indirect [ECF No. 82] ). On June 18, 2010, Direct Purchaser Plaintiffs dismissed without prejudice their claims against then-Defendant Lafarge North America, Inc. ( see Notice of Voluntary Dismissal (Direct [ECF No. 196] )), and Indirect Purchaser Plaintiffs did the same on June 21, 2010 ( see Notice of Voluntary Dismissal (Indirect [ECF No. 196] )). On June 22, 2010, the Court held a joint hearing on the MDACs. ( See Direct [ECF Nos. 187, 200]; Indirect [ECF Nos. 99, 106] ). At the hearing, the Court expressed concerns about reviewing the sufficiency of a multi-defendant complaint containing allegations of a conspiracy involving a dismissed defendant ( see Hr'g Tr. 118:14–119:5 (Direct [ECF No. 202] )), and directed both the Direct and Indirect Purchaser Plaintiffs (collectively, “Plaintiffs”) to amend their complaints ( see id. 118:14–122:19). The Court then denied the MDACs as moot. ( See Direct [ECF No. 201]; Indirect [ECF No. 107] ).

In compliance with the Court's instructions, Direct Purchaser Plaintiffs filed the DSCAC on July 12, 2010 (Direct [ECF No. 203] ), and Indirect Purchaser Plaintiffs filed the ICTCAC ⁸ on August 5, 2010 (Indirect [ECF No. 109] ). On August 9, 2010, Defendants in both actions moved to dismiss the newly-amended complaints.

B. Factual Background

Between the early 1990s and the early 2000s, the cement and concrete markets in Florida underwent significant consolidation as Defendants ⁹ acquired cement and concrete suppliers. ( See DSCAC ¶ 81). Defendants' large investments in Florida were made, in part, to participate in the commercial construction boom which occurred during those years. ( See id. ¶¶ 81–82).

In 2004, starts of new commercial construction projects began to decline, while the residential construction boom (i.e., the housing bubble) continued to grow. ( See id.). Before this point, smaller construction projects, such as residential projects, were typically served by the ICPs. ( See id.). But in the face of the decline in commercial construction, Defendants sought out these smaller projects. ( See id.).

In 2004 and 2005, statewide cement shortages began to occur. ( See id. ¶¶ 84, 110). Defendants shut down cement factories, which reduced the amount of cement available to ICPs for purchase. ( See id. ¶¶ 84, 107–110). Around the same time, Defendants began to engage in a series of parallel price increases for the cement that remained for the ICPs to buy. ( See id. ¶ 104). Also in 2004 and 2005, a shortage of concrete block developed in the Orlando area ( see id. ¶ 111), which led Defendants to begin requiring construction companies that wanted to purchase concrete block from any Defendant to purchase ready-mix concrete from that Defendant as well ( see id. ¶ 113).

Around 2005, sales of cement and concrete began to decline. Then in 2007 and 2008, when the housing bubble burst, demand dropped precipitously. ( See id. ¶¶ 86, 175). Nevertheless, during this time, the market price of cement and concrete remained stable or continued to rise. ( See id. ¶¶ 86, 102, 104, 175). Moreover, between 2005 and 2007, the consolidation trend continued as several Defendants expanded their concrete operations by acquiring ICPs. ( See id. ¶ 85).

Plaintiffs allege that these price increases, the cement and concrete shortages, and Defendants' increased activity directed at the ICPs, all occurred pursuant to an unlawful price-fixing agreement between Defendants. ( See id. ¶ 5). Plaintiffs allege Defendants accomplished their price fixing by: (1) coordinated price increases for cement and concrete; (2) artificial shortages of cement; (3) coordinated block supply restrictions and tying; (4) the allocation of customers among Defendants; (5) the allocation of geographic areas among Defendants; and (6) swaps of cement settled up at below-market prices. Additionally, Plaintiffs allege certain statements made by Jorge Wagner (“Wagner”), the President of Prestige since late–2007 or early–2008, and Michael Lane (“Lane”), a former General Manager of Prestige, provide direct evidence of the existence of an unlawful agreement. In order to bolster the plausibility of the conspiracy, Plaintiffs also allege certain features of the cement and concrete markets in Florida, which make those markets susceptible to collusion.

1. Coordinated Price Increases for Cement and Concrete

Defendants engaged in parallel price increases for both cement and concrete throughout the Class Period, which set and maintained artificially high prices for both products. ( See id. ¶ 100). For example, in the summer of 2008, as the housing market collapsed, the country plunged into a recession, and demand for concrete dropped, certain Defendants each announced very similar 30 percent increases in the price of concrete. ( See id. ¶ 102). On August 4, 2008, Cemex announced it would increase its concrete price by $25 per cubic yard and eliminate its fuel surcharge. ( See id. ¶ 102(a)). Shortly thereafter, Prestige President Wagner, recently arrived from one of Prestige's parent companies, Votorantim Group, announced to his sales staff that Prestige would also be increasing its ready-mix concrete price by $25 per cubic yard, and that Prestige's competitors had agreed to go along with the increase. ( See id. ¶ 102(b)). The source of this information, according to Wagner, was Cemex. ( See id.). Sales personnel present at the meeting were well-aware that Prestige's most significant competitors in Florida at the time were Cemex, Tarmac, and Florida Rock. ( See id.). Wagner also stated Prestige sales staff who quoted customers less than the $25 per cubic yard price increase would be fired. ( See id.). Before this meeting, Prestige had been drafting price increase letters announcing a smaller $5 per cubic yard increase. ( See id.). In August and September of 2008, Tarmac, Florida Rock, and Prestige each announced concrete price increases nearly identical to Cemex's. ( See id. ¶¶ 102(c)-(e)). In addition to Prestige, other VCNA concrete producers in Florida also followed this increase. ( See id. ¶ 102(e).)

Throughout the Class Period, Defendants repeatedly engaged in parallel price increases for both cement and concrete, raising prices approximately twice per year. ( See id. ¶ 104).

2. Shortages of Cement

In 2004 and 2005, Defendants caused shortages of cement to occur. In spring 2004, Tarmac temporarily closed its Pennsuco, Florida plant to resolve a mechanical problem. ( See id. ¶ 107). The problem allegedly took six months to fix, much longer than typically necessary. ( See id.). While the Tarmac plant was closed, Rinker, Florida Rock, and Suwannee also shut down their plants for scheduled maintenance during the spring and summer—the peak building months of the year. ( See id. ¶ 108). These combined shutdowns reduced cement production capacity by about 33 percent for much of the second half of 2004. ( See id.). Defendants, including Florida Rock, Cemex, Rinker, and Suwannee, created a similar shortage during the peak season in 2005 by simultaneously taking their cement plants offline for cleaning. ( See id. ¶ 109).

These shortages allowed Defendants to rapidly increase cement prices; four price increases came into effect between July 1, 2004 and July 1, 2005. ( See id. ¶ 110). Defendants also reduced cement supplies to ICPs, diminishing the ICPs' ability to produce and sell...