In re Rubber Chemicals Antitrust Litigation

• Decision Date: 15 August 2007
• Docket Number: Master Docket No. C04-01648 MJJ.,No. C06-05700 MJJ.,C06-05700 MJJ.
• Citation: 504 F.Supp.2d 777
• Parties: In re RUBBER CHEMICALS ANTITRUST LITIGATION.
• Court: U.S. District Court — Northern District of California

504 F.Supp.2d 777

In re RUBBER CHEMICALS ANTITRUST LITIGATION.

Master Docket No. C04-01648 MJJ.

No. C06-05700 MJJ.

United States District Court, N.D. California.

August 15, 2007.

COPYRIGHT MATERIAL OMITTED

Daniel A. Sasse, Crowell & Moring LLP, Washington, DC, for Plaintiffs.

Ian Simmons, O'Melveny & Myers LLP, Washington, DC, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS

MARTIN J. JENKINS, District Judge.

INTRODUCTION

Before the Court are five motions to dismiss brought by Defendants Chemtura Corporation and Uniroyal Chemical Company (C 04-1648, Docket No. 433), Defendant Michael Duchesne (C 06-5700, Docket No. 71), Defendant Joseph B. Eisenberg (C 06-5700, Docket No. 65), Defendant Peter D. Welch (C 06-5700, Docket No. 77), and Defendant James J. Conway (C06-5700, Docket No. 90.)

For the following reasons, the Court GRANTS IN PART AND DENIES IN PART each of the Motions, as discussed below.

FACTUAL BACKGROUND

Plaintiffs Bridgestone Americas Holding, Inc., Bridgestone Firestone North American Tire LLC, Bandag, Inc., and Pirelli LLC (collectively "Plaintiffs") originally filed this antitrust action, against Defendants Chemtura Corporation and Uniroyal Chemical Company (collectively "Chemtura") on June 29, 2006 in the United States District Court for the Middle District of Tennessee. (Docket No. 1) On September 19, 2006, the action was transferred to this district for coordination or consolidation with MDL proceedings already before this Court in In Re Rubber Chemicals Antitrust Litigation, Case No. C-04-1648 MJJ. (Docket No. 1.)

On September 22, 2006, Plaintiffs filed an Amended Complaint. (Docket No. 8.) Plaintiffs' Amended Complaint added four new individual defendants: Michael Duchesne, Joseph B. Eisenberg, Peter D. Welch, and James J. Conway. Plaintiffs' Amended Complaint also newly demanded damages for injuries allegedly suffered in foreign commerce under the Sherman and Clayton Acts, and pleaded that the domestic-injury exception created by the Foreign Trade Antitrust Improvements Act ("FTAIA") applied. Generally, Plaintiffs allege that Defendants engaged in a conspiracy to fix prices for rubber chemicals in both domestic and foreign markets, and that Plaintiffs suffered injury by paying higher prices for rubber chemicals than they would have paid in the absence of the alleged conspiracy. Plaintiffs seek damages for alleged injuries beginning in 1993 and continuing into 2003. (Amended Complaint ¶¶ 1-2.) The named Plaintiffs seek damages not only on behalf of themselves, but on behalf of subsidiaries and affiliates of each named Plaintiff who purchased products from Chemtura in various locations around the world. (Id. ¶¶ 15-19.) Plaintiffs allege that these subsidiaries and affiliates have assigned any and all of their claims to the named Plaintiffs. (Id.)

Chemtura and the individual defendants now move to dismiss the bulk of Plaintiffs' Amended Complaint. Plaintiffs Bandag, Inc., and Pirelli LLC oppose the motion.¹

LEGAL STANDARD

A. Rule 12(b)(1).

Rule 12(b)(1) authorizes a party to move to dismiss a claim for lack of subject matter jurisdiction. Federal courts are courts of limited jurisdiction; thus, the Court presumes lack of jurisdiction, and the party seeking to invoke the court's jurisdiction bears the burden of proving that subject matter jurisdiction exists. See Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). A party challenging the court's jurisdiction under Rule 12(b)(1) may do so by raising either a facial attack or a factual attack. See White v. Lee, 227 F.3d 1214, 1242 (9th Cir.2000).

A facial attack is one where "the challenger asserts that the allegations contained M a complaint are insufficient on their face to invoke federal jurisdiction." Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir.2004). In evaluating a facial attack to jurisdiction, the Court must accept the factual allegations in plaintiffs complaint as true. See Miranda v. Reno, 238 F.3d 1156, 1157 n. 1 (9th Cir.2001). For a factual attack, in contrast, the Court may consider extrinsic evidence. See Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir.1987). Further, the court does not have to assume the truthfulness of the allegations, and may resolve any factual disputes. See White, 227 F.3d at 1242. Thus, "[o]nce the moving party has converted the motion to dismiss into a factual motion by presenting affidavits or evidence properly before the court, the party opposing the motion must furnish affidavits or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction." Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n. 2 (9th Cir. 2003).

B. Rule 12(b)(6).

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a claim. Navarro v. Block, 250 F.3d 729, 732 (9th Cir.2001). Because the focus of a Rule 12(b)(6) motion is on the legal sufficiency, rather than the substantive merits of a claim, the Court ordinarily limits its review to the face of the complaint. See Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir.2002). Generally, dismissal is proper only when the plaintiff has failed to assert a cognizable legal theory or failed to allege sufficient facts under a cognizable legal theory. See SmileCare Dental Group v. Delta Dental Plan of Cal., Inc., 88 F.3d 780, 782 (9th Cir.1996); Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988); Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984). Sufficient facts, however, must suggest a right to relief that is more than merely conceivable, but plausible on its face. See Bell Atlantic Corp. v. Twombly, ___ U.S. ___, ___, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). In considering a Rule 12(b)(6) motion, the Court accepts the plaintiffs material allegations in the complaint as true and construes them in the light most favorable to, the plaintiff. See Shwarz v. United States, 234 F.3d 428, 435 (9th Cir.2000).

ANALYSIS

A. Subject Matter Jurisdiction.

Defendants raise a facial Rule 12(b)(1) attack and contend that Plaintiffs foreign injuries must be dismissed under Rule 12(b)(1) because they are barred by § 6a of the Foreign Trade Antitrust Improvements Act ("FTAIA"). Defendants contend that Plaintiffs have not pled, and cannot plead, any facts establishing the "domestic-injury exception" created by § 6a.

The FTAIA sets forth a general rule that excludes from the scope of the Sherman Act all conduct involving non-import foreign commerce unless two conditions are met: (1) the alleged conduct has a "direct, substantial and reasonably foreseeable effect" on U.S. domestic commerce, and (2) that the domestic anti-competitive effect "gives rise to" a claim under the Sherman Act. Section 6a of the FTAIA provides, in relevant part, that:

Sections 1 to 7 of [the Sherman Act] shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless —

(1) such conduct has a direct, substantial and reasonably foreseeable effect—

(A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or

(B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and

(2) such effect gives rise to a claim under the provisions of sections 1 to 7 of this title, other than this section.

15 U.S.C. § 6a.

1. The domestic injury exception of the FTAIA requires that the foreign injury be proximately caused by the domestic effects of the anticompetitive conduct.

The parties fundamentally disagree on the application of this domestic-injury exception to the case before this Court. Both sides agree that Plaintiffs' alleged injury includes, in part, injury suffered domestically by purchasing rubber chemicals in the domestic market at inflated prices. Both sides agree that this Court has subject matter jurisdiction to resolve such allegations. However, Defendants contend that, notwithstanding this Court's subject matter jurisdiction over that "domestic" portion of Plaintiffs' claims, Section 6a of the FTAIA requires dismissal of Plaintiffs' claims of injury resulting from purchases in foreign markets to the extent Plaintiffs cannot establish a direct and proximate causal relationship between the domestic effect of the anti-competitive conduct and the purported foreign injury. Plaintiffs disagree, arguing that the appropriate analysis under Section 6a of the FTAIA does not require such "claim-splitting" and that, if a proper plaintiff has a valid claim premised on anti-competitive conduct that arises even in part from the domestic effects of that conduct, that plaintiff can recover all damages resulting relating to the anti-competitive conduct, whether foreign or domestic, under the Sherman Act.

At first glance, Plaintiffs' proffered interpretation of Section 6a of the FTAIA is a plausible reading of the statute. As Plaintiffs point out, Section 6a does not expressly speak in terms of excluding foreign injury or foreign damages from the jurisdiction of United States courts. Instead, Section 6a speaks in terms of foreign "conduct", placing such conduct outside the reach of the Sherman Act unless that conduct both has a "direct, substantial and reasonably foreseeable effect" on domestic markets, and that domestic effect "gives rise to" a Sherman Act claim. Plaintiffs argue that because there is no dispute that each Plaintiffs' claim arises, in part, directly from the charging of collusively-established prices in the United States, that is sufficient under Section 6a to place the entirety of Plaintiffs' claims within the purview of this Court. Plaintiffs contend that nothing in Section 6a explicitly requires all aspects of a claim to arise directly from domestic...