Sickles v. Cabot Corp.

• Citation: 379 N.J. Super. 100,877 A.2d 267
• Parties: Louis SICKLES, Plaintiff-Respondent, v. CABOT CORPORATION, Phelps Dodge Corporation, Columbian Chemicals Company, Degussa Engineered Carbons, LP, Degussa AG, and Degussa Corporation, Defendants-Appellants.
• Decision Date: 07 July 2005
• Court: Superior Court of New Jersey

877 A.2d 267

379 N.J. Super. 100

Louis SICKLES, Plaintiff-Respondent, v. CABOT CORPORATION, Phelps Dodge Corporation, Columbian Chemicals Company, Degussa Engineered Carbons, LP, Degussa AG, and Degussa Corporation, Defendants-Appellants.

Superior Court of New Jersey, Appellate Division.

Submitted June 8, 2005.

Decided July 7, 2005.

Brown and Connery and Jennifer L. Merzon (Jones Day) of the Washington DC bar, admitted pro hac vice, attorneys for appellant Cabot Corporation (Michael J. Vassalotti and Ms. Merzon, Westmont, on the joint brief).

Dechert and Gary W. Kubek (Debevoise & Plimpton) of the New York bar, admitted pro hac vice, attorneys for appellants Phelps Dodge Corporation and Columbian Chemicals Company (Michelangelo Troisi, of counsel; Michelle Hart Yeary and Mr. Kubek, on the joint brief).

Campbell, Campbell, Edwards & Conroy and Hima Vatti (O'Melveny & Myers) of the Washington DC bar, admitted pro hac vice, attorneys for Degussa Engineered Carbons, LP, Degusssa AG, and Degussa Corporation (C. Scott Toomey, Turnerville, William A. Rupert and Ms. Vatti, on the joint brief).

Sufrin Zucker Steinberg Sonstein & Wixted, Krishna B. Narine, of the Pennsylvania bar, admitted pro hac vice, Steven E. Connolly (Schiffrin & Barroway) of the Pennsylvania bar, admitted pro hac vice, and Isaac L. Diel, admitted pro hac vice, of the Kansas bar, attorneys for respondent (Ms. Narine, Mr. Connolly and Mr. Diel, of counsel; David W. Sufrin, Camden, on the brief).

Before Judges NEWMAN, AXELRAD and BILDER.

The opinion of the court was delivered by

AXELRAD, J.T.C. (temporarily assigned).

A purchaser of Goodyear tires filed a class action suit against companies which produce, manufacture and sell carbon black, a primary ingredient in tires. At issue in this appeal is whether an indirect purchaser of an allegedly price-fixed product may state a claim for antitrust violations under the New Jersey Antitrust Act (ATA), N.J.S.A. 56:9-1 to -19, and the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20. We hold that neither statute provides a cause of action to a pass-through purchaser such as the putative class plaintiff, and reverse the order of the Law Division denying defendants' motion to dismiss plaintiff's complaint under Rule 4:6-2(e).

In November and December 2001, plaintiff Louis Sickles purchased from the Goodyear Auto Service Center in Cherry Hill, New Jersey, two Goodyear tires (P215/70R15 97S S1 Regatta 2 XNWRPTL) for his wife's vehicle and one Goodyear tire (P205/65 R15 92H S1 Eagle HP VSBLRPTL) for his vehicle. He then filed an action alleging violations of the ATA and CFA, seeking damages on behalf of

[a]ll persons residing in the state of New Jersey who purchased any product that was manufactured using Carbon Black sold by Defendants from January 1999 through November 2002.

Defendants are Cabot Corporation (Cabot); Phelps Dodge Corporation (Phelps Dodge); Columbian Chemicals Company (Columbian); Degussa Engineered Carbons, LP (DEC); Degussa AG; and Degussa Corporation. Cabot, a Delaware corporation with its principal place of business in Massachusetts, is the world's largest producer of carbon black, accounting for one-quarter of the worldwide production capacity and market share. Phelps Dodge is a New York corporation with its principal place of business in Arizona and wholly owns the subsidiary Columbian, which is engaged in the manufacture and sale of carbon black within the United States and throughout the world and maintains a carbon black facility in Ulysses, Kansas. DEC, a limited partnership with its principal place of business in New Jersey, is co-owned by Degussa AG and engages in the manufacture and sale of carbon black throughout the world.

Carbon black is a mixture of partially burned hydrocarbons produced by a combustion of natural gas. It is used as a reinforcing agent in rubber products such as tires, tubes, cables and conveyor belts and is the primary ingredient in car and truck tires. It is also used as an ingredient in countless other products such as dry-cell batteries, electrical conductors, and carbon brushes, and as a pigment in printing, carbon paper, typewriter ribbon inks, paints, photocopier toner and record discs.

The complaint alleged that defendants and their co-conspirators engaged in anti-competitive activities in violation of the ATA to artificially raise, stabilize, and maintain the price of carbon black sold by defendants from January 1999 through November 2002, resulting in plaintiff and other similarly situated consumers paying more for tires containing carbon black than they would have in the absence of defendants' alleged unlawful conduct. Plaintiff further claimed that defendants coordinated and cooperated with one another to implement output restrictions and price increases and agreed not to compete against one another to increase their respective market shares. Plaintiff also alleged these acts constituted an unconscionable practice under the CFA.

By order of November 29, 2004, the trial court denied defendants' motion to dismiss plaintiff's complaint for failure to state a claim. On February 24, 2005, we granted defendants' motion for leave to appeal. Defendants raise the following issues on appeal:

POINT I

THE [ATA] DISALLOWS INDIRECT PURCHASER CLAIMS.

1. The Harmonization Provision of the [ATA] Directs Conformity To Federal Antitrust Precedents, and Thus Prohibits Plaintiff's Claims.

2. The New Jersey Legislature Rejected An Illinois Brick Repealer Bill.

3. The Trial Court Erred in Failing To Follow Illinois Brick and in Misapplying ARC America.

POINT II

THE []CFA DOES NOT ALLOW PLAINTIFF'S CLAIM.

1. The []CFA Does Not Cover Any Antitrust Claims Whatsoever.

2. The []CFA Cannot Be Used To Make An End Run Around the [ATA's] Bar of Indirect Purchaser Claims.

We find these arguments persuasive.

I

We recognize the indulgent standard that applies to review of complaints in the context of a motion to dismiss for failure to state a claim. Printing Mart-Morristown v. Sharp Electronics Corp., 116 N.J. 739, 771-72, 563 A.2d 31 (1989). A motion to dismiss under Rule 4:6-2(e) should be "approach[ed] with great caution" and should only be granted in "the rarest of instances." Ibid. We must view the allegations with great liberality and without concern for the plaintiff's ability to prove the facts alleged in the complaint. Id. at 746, 563 A.2d 31.

However, a court must dismiss the plaintiff's complaint if it has failed to articulate a legal basis entitling plaintiff to relief. Camden County Energy Recovery Assocs., L.P. v. New Jersey Dep't of Envtl. Prot., 320 N.J.Super. 59, 64, 726 A.2d 968 (App.Div.1999). "A motion to dismiss a complaint under Rule 4:6-2(e) for failure to state a claim upon which relief can be granted must be evaluated in light of the legal sufficiency of the facts alleged in the complaint." Donato v. Moldow, 374 N.J.Super. 475, 482, 865 A.2d 711 (App.Div.2005). The plaintiff's obligation on a motion to dismiss is "not to prove the case but only to make allegations, which, if proven, would constitute a valid cause of action." Leon v. Rite Aid Corp., 340 N.J.Super. 462, 472, 774 A.2d 674 (App.Div.2001).

We review such a motion by the same standard applied by the trial court; thus, considering and accepting as true the facts alleged in the complaint, we determine whether they set forth a claim upon which relief can be granted. Donato, supra, 374 N.J.Super. at 483, 865 A.2d 711.

II

The ATA was passed in 1970 "to promote the unhampered growth of commerce and industry throughout the State by prohibiting restraints of trade which are secured through monopolistic practices and which act or tend to act to decrease competition between and among persons engaged in commerce and trade." N.J.S.A. 56:9-1 (Historical and Statutory Notes). Under the ATA, "[a]ny person who shall be injured in his business or property by reason of a violation of the provisions of this act may sue therefor and shall recover threefold the damages sustained by him, together with reasonable attorneys' fees, filing fees and reasonable costs of suit." N.J.S.A. 56:9-12.

We follow federal antitrust law in interpreting our own antitrust statute. See N.J.S.A. 56:9-18 ("This act shall be construed in harmony with ruling judicial interpretations of comparable Federal antitrust statutes and to effectuate, insofar as practicable, a uniformity in the laws of those states which enact it."). See also Pomanowski v. Monmouth County Bd. of Realtors, 89 N.J. 306, 313, 446 A.2d 83 (1982) (Because the ATA is patterned after the Sherman Antitrust Act, courts have "concluded that federal court interpretations of federal law constitute persuasive authority as to the meaning of the particular state enactments.") (quoting State v. Lawn King, Inc., 84 N.J. 179, 192, 417 A.2d 1025 (1980)).

Passed by Congress in 1890, the Sherman Act, 15 U.S.C.A. § 1, declares illegal "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations...." Section 4 of the Clayton Act, 15 U.S.C.A. § 15, provides a private right of action to "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws."

This private right, however, does not extend to indirect purchasers, as only overcharged direct purchasers, and not others in the chain of manufacture or distribution, are parties "injured in [their] business or property" within the meaning of the Clayton Act. Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707, reh'g denied, 434 U.S. 881, 98 S.Ct. 243, 54 L.Ed.2d 164 (1977). In Illinois Brick the State of Illinois, on behalf of itself and 700 municipalities who were indirect purchasers of concrete block, brought an antitrust action under Section 4 of the Clayton Act, alleging concrete block manufacturers and distributors had fixed...