In re New Motor Vehicles Canadian Export

• Decision Date: 04 March 2004
• Docket Number: No. MDL 1532.,MDL 1532.
• Parties: In Re NEW MOTOR VEHICLES CANADIAN EXPORT ANTITRUST LITIGATION
• Court: U.S. District Court — District of Maine

Page 136

307 F.Supp.2d 136

In Re NEW MOTOR VEHICLES CANADIAN EXPORT ANTITRUST LITIGATION

No. MDL 1532.

United States District Court, D. Maine.

March 4, 2004.

Robert S. Frank, Harvey & Frank, Portland, ME, for Plaintiffs.

William J. Kayatta, Jr., Pierce Atwood, Portland, ME, for Defendants.

MEMORANDUM DECISION AND ORDER ON DEFENDANTS' FED. R. CIV. P. 12(b)(6) MOTION TO DISMISS

HORNBY, District Judge.

Can retail purchasers and lessees of new vehicles sue manufacturers, distributors and dealers' associations for conspiring to prevent less expensive Canadian vehicles from entering the American market? The consumers claim that these defendants have thereby prevented a discount distribution channel from operating in the United States, causing new vehicle retail prices to rise to artificially high levels. The defendants move to dismiss, arguing that the consumers are indirect purchasers because they all bought from American dealers who are not defendants, and that they are therefore barred from recovery under the United States Supreme Court's holding in Illinois Brick. I conclude that retail purchasers and lessees are not barred from seeking injunctive relief, but are barred from recovering damages unless they join as named defendants the dealers from whom they purchased or leased and prove that those dealers joined in the conspiracy. I therefore GRANT IN PART AND DENY IN PART the defendants' Fed.R.Civ.P. 12(b)(6) motion to dismiss.

I. FACTS ACCORDING TO THE AMENDED COMPLAINT¹

The plaintiffs are consumers who have bought or leased new motor vehicles from American dealers in the United States since January 2001 ("the consumers"). They allege that American and Canadian motor vehicle manufacturers, distributors dealers (whom they have not sued) and dealers' associations entered into agreements to prevent emergence of a discount distribution channel in the United States. Amended Compl. ¶¶ 1, 6 (Docket Item # 32); Pls.' Mem. in Opp'n at 2 (Docket Item # 73). Apparently, particular brand models sell at retail in Canada for much less than in the United States, even after accounting for currency exchange rates. Amended Compl. ¶ 52. To halt the movement of these less expensive vehicles into the United States, manufacturers and distributors, with the help of dealers' associations, allegedly obtained agreement from American dealers not to honor warranties² or replace metric odometers with mileage odometers on vehicles purchased in Canada and brought into the United States. Id. ¶¶ 3, 5. They required Canadian dealers to agree not to sell to anyone who would take a new vehicle into the United States and imposed severe financial penalties for violating the requirement. Id. ¶¶ 4-5. The consumers argue that this conduct foreclosed a competitive discount distribution channel within the United States in violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1997), and that new car prices thereby rose to or stayed at artificially high levels. Id. ¶ 1. They seek damages on a class-wide basis³ and injunctive relief pursuant to sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26. Id. ¶¶ 1, 2, 7.

The remaining defendants are American Honda Motor Company, Inc.; Honda Canada, Inc.; BMW of North America, LLC; DaimlerChrysler Corporation; DaimlerChrysler Canada, Inc.; DaimlerChrysler Motors Co., LLC; Ford Motor Company; Ford Motor Company of Canada, Ltd.; General Motors Corporation; General Motors of Canada, Ltd.; Mercedes-Benz Canada, Inc.; Mercedes-Benz USA, LLC; Nissan North America, Inc.; and Toyota Motor Sales U.S.A., Inc., as well as the Canadian Automobile Dealers Association ("CADA") and the National Automobile Dealers Association ("NADA").

II. PROCEDURAL STATUS

The Multi-District Panel has transferred 26 antitrust cases to this District for pretrial management. Parallel cases are pending in a number of state courts. Earlier, I ruled on the motion of certain Canadian defendants to dismiss for lack of personal jurisdiction. In re New Motor Vehicle Canadian Export Antitrust Litig., Mem. Decision & Order on Defs.' Mot. to Dismiss for Lack of Personal Jurisdiction, MDL Docket No. 1532 (D.Me. Mar. 4, 2004). All defendants have moved to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. They argue that the plaintiffs are not entitled to relief in light of the United States Supreme Court's decision in Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977).

III. ANALYSIS

In Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 487-88, 491-92 88 S.Ct. 2224, 20 L.Ed.2d 1231 (1968), the Supreme Court addressed the question whether a plaintiff could recover damages for an antitrust violation if it successfully passed on to its own customers the higher prices resulting from the violation. The answer was yes because the Court concluded that a contrary ruling would (1) place an unreasonable burden on the courts in future cases to determine whether and how much of the price increase had been passed on, and (2) reduce the incentives of private plaintiffs to sue. See id. at 493-94, 88 S.Ct. 2224.

Nine years later in Illinois Brick, 431 U.S. at 745-46, 97 S.Ct. 2061, the Court reaffirmed that direct purchasers are entitled to recover damages, but held additionally that only the direct purchasers can recover, and that their customers (indirect purchasers) are precluded from maintaining a damages claim for illegal overcharges passed down through the distribution chain. The Court adopted this "direct purchaser rule" to avoid the risks of multiple recovery (pursued by more than one level of purchaser), to keep courts from having to perform the complex task of apportioning damages between direct and indirect purchasers, and to focus enforcement of antitrust laws by concentrating the full recovery on direct purchasers. Id. at 730-31, 740-42, 746, 97 S.Ct. 2061.

Thirteen years after Illinois Brick, in Kansas v. UtiliCorp United, Inc., 497 U.S. 199, 207-08, 110 S.Ct. 2807, 111 L.Ed.2d 169 (1990), the Court reaffirmed the vitality of the direct purchaser limitation. In UtiliCorp, the direct purchasers were public utilities that were required to pass on any cost increase, dollar for dollar, to their consumers. 497 U.S. at 208, 110 S.Ct. 2807. See also In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 605 (7th Cir.1997). Nevertheless, the Court refused to allow the consumers to recover the passed on overcharges. It ruled that a blanket rule prohibiting indirect purchaser recovery was preferable so as to avoid difficult inquiries in each case, and that the direct purchaser rule serves "to eliminate the complications of apportioning overcharges between direct and indirect purchasers," and "to eliminate multiple recoveries." UtiliCorp, 497 U.S. at 208, 212-213, 110 S.Ct. 2807 (citing Hanover Shoe, 392 U.S. at 493, 88 S.Ct. 2224; Illinois Brick, 431 U.S. at 730-31, 740-42, 97 S.Ct. 2061). See also ABA Section on Antitrust Law, Antitrust Law Developments 857 (5th ed.2002) (citations omitted) (stating that the direct purchaser is the appropriate plaintiff in virtually every case).

(A) The Claim for Damages under Illinois Brick

Hanover Shoe, Illinois Brick and UtiliCorp are the precedents against which I measure the consumers' claim in this case. I distill the following three theories of damage recovery from the Amended Complaint. But for the conspiracy, (1) existing American dealers would be able to purchase new motor vehicle models from Canadian dealers and resell or lease them in the United States at prices lower than those currently provided; (2) a hypothetical discount exporter/wholesaler would be able to purchase new motor vehicles from Canadian dealers and resell them in the United States to American consumers at prices lower than American dealers now offer; and (3) an American consumer would be able to travel to Canada and buy (for use in the United States) a new motor vehicle directly from a Canadian dealer at a price lower than in the United States. Amended Compl. ¶ 72. I conclude that (1) under the first theory consumers may be able to recover damages but only if they name as co-defendants the American dealers from whom they purchased and prove that those dealers joined the conspiracy (2) Illinois Brick bars the consumers from recovering damages under the second theory, the lost hypothetical discount distribution channel; (3) consumers may be able to recover damages under the third theory, but only if they name as co-defendants the Canadian dealers who refused to sell and prove that those dealers joined the conspiracy. (This third option may be impractical because of difficulties in establishing personal jurisdiction over such Canadian dealers.)⁴

(1) American Dealers. The consumers state that American dealers pay manufacturers 10-30% (after accounting for the exchange rate) more than Canadian dealers pay for the same vehicles. Amended Compl. ¶ 51. They argue that American dealers should be able to purchase new motor vehicle models from Canadian dealers at the lower Canadian price and resell or lease them to consumers in the United States at prices lower than current American prices. Id. ¶ 72. The manufacturers/distributors reply that the consumers are complaining about the pass-on of an overcharge, and that Illinois Brick generally prohibits recovery of pass-on overcharges by indirect purchasers like the consumers here. 431 U.S. at 737, 746, 97 S.Ct. 2061. Any injury and right to sue for damages, they say, lie only with the American dealers.

But the plaintiff consumers insist that there is no "overcharge" being "passed on." They accept the fact that there is a different price in Canada than there is in the United States. Their complaint is that manufacturers and distributors have conspired to stop American dealers from buying the less expensive vehicles from Canadian dealers and selling them in the United States. They claim...