In re Polyurethane Foam Antitrust Litig.

• Citation: 799 F.Supp.2d 777
• Decision Date: 15 September 2011
• Docket Number: MDL Docket No. 2196.Index No. 10 MD 2196(JZ).
• Parties: In re POLYURETHANE FOAM ANTITRUST LITIGATION.
• Court: U.S. District Court — Northern District of Ohio

799 F.Supp.2d 777

In re POLYURETHANE FOAM ANTITRUST LITIGATION.

MDL Docket No. 2196.Index No. 10 MD 2196(JZ).

United States District Court, N.D. Ohio, Western Division.

July 19, 2011.Opinion on Reconsideration and Certification Sept. 15, 2011.

ORDER

JACK ZOUHARY, District Judge.

Introduction

This matter is before the Court on a series of Motions to Dismiss the Direct Purchaser Plaintiffs' Consolidated Amended Complaint (“the CAC”) (Doc. Nos. 89; 91–92; 95–97; 99–103; 109), and the Indirect Purchaser Plaintiffs' (collectively with the Direct Purchaser Plaintiffs “Plaintiffs”) Consolidated Amended Complaint (“the ICAC” or collectively with the CAC “the Complaints”) (Doc. Nos. 120–22; 125–30) for failure to state a claim upon which relief may be granted.

The parties fully briefed the Motions, and responded in writing to questions propounded by the Court (Doc. Nos. 170–72). On July 1, 2011, the Court heard oral argument with respect to the Motions, and thereafter issued its ruling from the bench. This Order confirms and supplements that ruling.

As the Court indicated at oral argument, certain “housekeeping” duties remain to be resolved, including:

• Defendants' Motions to Dismiss the ICAC with respect to the Indirect Purchaser Plaintiffs' state consumer protection claims;

• An Entry of Appearance filed on behalf of Spring Air International LLC, Spring Air LLC, and Spring Air Ohio LLC (Doc. No. 165)

• Defendants' Motion to Vacate and Set Aside Federal Civil Rule 41(a)(1) Notices of Voluntary Dismissal (Doc. No. 168); and

• A discovery dispute arising from Plaintiffs' request for documents being produced by certain Defendants in their role as plaintiffs in other litigation.

This Order sets forth the Court's ruling on each such issue.

Motion to Dismiss

Federal Civil Rule 8 demands that a pleading contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” The pleading standard does not require “detailed factual allegations,” but it demands more than an unadorned legal accusation. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Id.

In the antitrust context, a complaint must contain sufficient factual matter that, taken as true, suggests an unlawful agreement was made. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A plaintiff may carry this pleading burden by offering allegations of either explicit agreements to restrain trade or sufficient circumstantial evidence “that reasonably tends to prove that the [defendant] and others had a conscious commitment to a common scheme designed to achieve an unlawful objective.” In re Travel Agent Comm'n Antitrust Litig., 583 F.3d 896, 907 (6th Cir.2009) (quoting Monsanto Co. v. Spray–Rite Serv. Corp., 465 U.S. 752, 768, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984)). For plaintiffs that follow the latter route, allegations of parallel behavior must do more than describe behavior consistent with independent responses to natural market forces. Twombly, 550 U.S. at 566, 127 S.Ct. 1955. The complaint in Twombly fell short of this requirement by failing to provide allegations beyond parallel behavior “pointing toward a meeting of the minds” among the competitor firms. Id. at 557, 127 S.Ct. 1955.

However, when a complaint sufficiently alleges an express conspiratorial agreement, a plaintiff need not worry about the varying inferences that may be drawn from the complaint's allegations so long as one such inference suggests a plausible conspiracy. As the Sixth Circuit recently explained in Watson Carpet & Floor Covering, Inc. v. Mohawk Indus., Inc., 648 F.3d 452 (6th Cir.2011), if a complaint specifically alleges both an express agreement to restrain trade and later conduct by defendants consistent with the agreement, a defendant cannot prevail at the pleading stage by offering alternative explanations for the allegedly unlawful behavior. Id. at 454–55. The plaintiff must set forth an alleged conspiratorial agreement as a plausible explanation of the defendant's conduct, not the probable or only explanation. Id. (emphasis added). Such a complaint must also plausibly allege that behavior or conduct characteristic of a conspiratorial agreement was undertaken in furtherance of the conspiracy. Id. at 457–58.

When viewed in isolation, the allegation that Defendants “contracted, combined, or conspired to fix, raise, maintain, and/or stabilize prices and allocate customers” rings conclusory (Doc. No. 46 at ¶ 3; Doc. No. 52 at ¶ 3). Alone, these paragraphs resemble the sort of “formulaic recitation” of an antitrust claim's elements rejected by Twombly. But relevant case law counsels this Court to view the individual allegations in context of the whole complaint. In re Packaged Ice Antitrust Litig., 723 F.Supp.2d 987, 1005–06 (E.D.Mich.2010) (quoting In re Se. Milk Antitrust Litig., 555 F.Supp.2d 934, 943–944 (E.D.Tenn.2008)). Moreover, by tying this key general allegation to those that follow, the Complaints make clear that Plaintiffs do not rely on labels alone to establish an express agreement—“Defendants and their co-conspirators contracted, combined, or conspired ... by the means and mechanisms described herein ” (Doc. No. 46 at ¶ 3; Doc. No. 52 at ¶ 3) (emphasis added).

The Complaints heavily rely on materials derived from criminal investigations being conducted by the U.S. Department of Justice (“DOJ”) and the Canadian Bureau of Competition (“CBC”) into certain potential antitrust violations. As a result, Defendants argue that to conclude the Complaints allege a plausible conspiracy, this Court must assume the as-yet unknown scope of these investigations correspond exactly with the Complaints' alleged conspiracy.

This Court disagrees. Defendants correctly note that some courts have determined the existence of a grand jury investigation into a defendant's potential criminal antitrust liability to be irrelevant to the task of alleging a Sherman/Clayton § 1 violation. E.g., In re Graphics Processing Units Antitrust Litig. (“ In re GPU ”), 527 F.Supp.2d 1011, 1024 (N.D.Cal.2007). But unlike the plaintiffs in In re GPU, Plaintiffs here do not merely couple the fact of ongoing criminal antitrust investigations with allegations of parallel conduct. Id. Rather, Plaintiffs extract specific admissions from Defendant Vitafoam employees to the DOJ and the CBC that directly support the existence of a conspiratorial agreement. These statements, by former and current Vitafoam leadership, name competitor employees with whom they engaged in conspiratorial discussions and conduct. Each such allegation is the kind of “smoking gun” that make Plaintiffs' Complaints plausible in alleging antitrust violations. Watson Carpet, 648 F.3d at 458; See also In re Text Messaging Antitrust Litig., 630 F.3d 622, 628 (7th Cir.2010) (describing one conspirator's admission of having met and agreed with competitors on pricing as direct evidence of a conspiracy).

Having alleged an express agreement, the Complaints must further allege subsequent price increases were undertaken pursuant to the conspiratorial agreement. Watson Carpet, 648 F.3d at 457–58. Defendants are alleged to have coordinated the amount and timing of flexible polyurethane foam price increases through telephone conversations, exchanging price increase letters, and in-person meetings (Doc. No. 46 at ¶ 65; Doc. No. 52 at ¶ 77). The Complaints contain examples of actions consistent with these methods of pricing coordination, including descriptions of phone calls in which alleged conspiracy members shared price increase levels with competitors before notifying customers (Doc. No. 42 at ¶ 108; Doc. No. 52 at ¶ 119), and email conversations stretching from 2000 to 2009 in which competitors shared draft pricing letters and discussed progress in coordinating price increases (Doc. No. 46 at ¶ 112; Doc. No. 52 at ¶ 123).

Drawing all reasonable inferences in Plaintiffs' favor, as this Court must, In re Travel Agent Comm'n Antitrust Litig., 583 F.3d at 903, the Court finds a sufficient connection alleged between the express agreement to fix prices and divide the market by allocating customers and the many references to discussions among competitors. The Complaints provide this Court sufficient factual allegations to “raise a reasonable expectation that discovery will reveal evidence of illegal agreement.” Twombly, 550 U.S. at 556, 127 S.Ct. 1955. Therefore, both the Direct and Indirect Purchaser Plaintiffs are found to have adequately alleged a conspiratorial agreement to fix prices and allocate customers.

Adequately alleging a conspiratorial agreement in general does not, however, indicate that a plaintiff has alleged each defendant's participation in that conspiracy. Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 437 (6th Cir.2008) (dismissing a complaint that, among other shortcomings, failed to allege the “who” of an alleged antitrust conspiracy). To the extent that a Defendant is captured in the Vitafoam employees' statements that form the heart of both the CAC and the ICAC, however, Plaintiffs adequately allege such a Defendant's participation. ¹ Certain Defendants are not mentioned in the Complaints, or argue that distinctions in how the Complaints describe their alleged involvement in the conspiracy compel this Court to find the Complaints fails as to them. The arguments of each such Defendant are considered in turn.

Otto Bock Polyurethane Technologies, Inc. and Plastomer Corp.

Otto Bock Polyurethane Technologies and Plastomer are identified by “Witness A,” a former Vitafoam Vice President whose statements provided the basis for a sworn Information prepared by the Canadian Commissioner of Competition in support of a search warrant, as among those companies with whom the...