Taylor v. Philip Morris Inc.
| Decision Date | 29 May 2001 |
| Docket Number | CUM CV-00-203 |
| Parties | JULIE TAYLOR, et al. Plaintiffs v. PHILIP MORRIS INCORPORATED, R.J. REYNOLDS TOBACCO COMPANY, BROWN & WILLIAMSON TOBACCO CORP., LORILLARD TOBACCO CO., LIGGETT GROUP, INC., and BROOKE GROUP, LTD. Defendants |
| Court | Maine Superior Court |
This is a class action lawsuit brought under Maine's antitrust and consumer protection laws. Plaintiffs are Maine consumers who bought cigarettes manufactured by Defendants. Plaintiffs allege that from at least January 1, 1988 to the present Defendants have participated in a systematic series of agreements to fix cigarette prices above competitive levels in violation of 10 M.R.S.A. § 1101 et seq and 5 M.R.S.A. § 205-A et seq.. Complaint ¶¶ 2-3, 101.114.
The crux of Plaintiffs' claims concerns an alleged agreement among Defendants to engage in lockstep, or parallel, pricing. Plaintiffs allege that the Defendants, through their directors, officers, employees and agents, participated in meetings at various times during the class period at which time future price increases for cigarettes were discussed agreed upon and implemented. According to Plaintiffs, these meetings included meetings of the Committee of Council, a group of high-level, in-house counsel employed by the Defendants. Id. ¶ 57. It is alleged that the Committee of Council held "executive sessions," at which time agreements were discussed and reached regarding future price increases for cigarettes for the United States as well as abroad. Id. With regard to the United States' cigarette market, the price increases were allegedly accomplished through the use of signals that would trigger a previously agreed upon increase. These signals allegedly came in the form of one of the Defendants announcing to their distributors that the distributors were restricted from purchasing cigarettes until further notice. Id. ¶ 58. After such a signal it is alleged that the other Defendants would raise the prices of their cigarettes. Id.
According to Plaintiffs, throughout the class period Defendants' distributors routinely received notification from each Defendant of a impending price increase within hours - and often within minutes - of each of the other Defendants' price increase notification. Id. ¶ 78. Moreover, Defendants allegedly created programs in which distributors received incentives to report to each respective Defendant the actual discounts and product promotions for all cigarette products sold, including those of competitors. Id. ¶ 79. The Complaint alleges this pricing and discounting information was forwarded to an electronic database clearinghouse in Pittsburgh, Pennsylvania, which Defendants accessed to monitor the actions of the other Defendants and ensured that all Defendants were honoring the mutually-agreed price levels. Id.
Plaintiffs allege dates and amounts of price increases during the class period. Id. ¶¶ 41, 44, 48, 50-54, 59, 60, 62, 63, 65-74, 76, 77. In addition, it is alleged that although the Defendants often cited increasing taxes as the basis for price increases, between 1980 and the mid-1990s, cigarette price increases were three times the amount of cigarette tax increases. Id. ¶ 48.
The Complaint further alleges that until recently, Plaintiffs had no knowledge of the alleged conspiracy "or of any facts that might have lead to the discovery thereof in the exercise of due diligence." Id. ¶ 88. Plaintiffs allege that they could not have discovered the conspiracy at an earlier date by the exercise of due diligence because of "the deceptive practices and techniques of secrecy employed by Defendants and their co-conspirators to avoid detection of, and to fraudulently conceal their contracts, combinations, and conspiracies." Id. Plaintiffs additionally allege that the conspiracy was, by its nature, self-concealing and they assert that Defendants' fraudulent concealment of the conspiracy tolls the statute of limitations. Id. ¶¶ 90-91.
Defendants first argue that Plaintiffs have failed to state a claim under the Maine Antitrust Act because Plaintiffs' allegedly vague and conclusory allegations of price-fixing are not supported by any factual allegations that, if true, would support a conclusion that Defendants conspired to fix prices. They argue that the Complaint alleges merely that Defendants' prices rose at approximately the same time and that allegations of parallel price increases are insufficient because such conduct, without more, does not exclude the possibility that the alleged conspirators acted independently and lawfully. Defendants also argue that although the Complaint alleges in conclusory terms an "agreement" to fix prices it does not contain a single fact concerning the time or place of the alleged conspiracy.
Modern notice pleading practice requires Town of Stonington V. Galilean Gospel Temple, 1999 ME 2, ¶ 14, 722 A.2d 1269, 1272 (citations omitted). A complaint "should not be dismissed unless it is beyond doubt that no relief can be granted under any facts that might be proved to support the plaintiff's claim." Munjoy Sporting & Athletic Club
v. Dow, 2000 ME 141, ¶ 16, 755 A.2d 531, 539. There are no Maine cases addressing the sufficiency of a complaint in an antitrust action. A review of federal law indicates that antitrust complaints are not subject to especially stringent or heightened pleading requirements. Mountain View Pharmacy v. Abbott Laboratories, 630 F.2d 1383, 1386 (10th Cir. 1980)("[T]he liberal rules of pleading are as applicable to antitrust cases as any other case."). However, while the pleading standard does not vary, what constitutes sufficient notice to enable a defendant to formulate a responsive pleading does change from case to case. Id. A complaint in a complex, multi-party suit may require more information than a simple single party case. Id. at 1386-87.
Moreover, in the context of alleged price-fixing conspiracies, plaintiffs must plead more than mere parallel price increases. Theatre Enterprises v. Paramount Film Distributing Corp., 346 U.S. 537, 541 (1954)("[T]his Court has never held that proof of parallel business behavior conclusively establishes agreement or . . . that such behavior itself constitutes a Sherman Act offense."). "The fact that competitors may see proper, in the exercise of their own judgment, to follow the prices of another manufacturer, does not establish any suppression of competition or show any sinister domination." United States v. International Harvester Co., 274 U.S. 693, 708-09 (1927). However, although parallel behavior alone does not set out a claim of an antitrust conspiracy, "parallel behavior may support such a claim when augmented by 'additional evidence from which an understanding among the parties may be inferred.'" Monument Builders of Greater Kansas City, Inc. v. American Cemetery Ass'n of Kansas, 891 F.2d 1473, 1481 (10 Cir. 1989).
Based on the aforementioned principles of pleading, the Complaint sufficiently and adequately gives fair notice to Defendants of what the Plaintiffs' claim is and the grounds upon which it rests. In addition to parallel price increases, the Plaintiffs have alleged the methodology, mechanisms and motives behind the price increases. More specifically, the pleadings specify that a series of meetings took place, the persons in attendance, the topics discussed and the impact of the meetings on the alleged conspiracy. The pleadings also specify how a previously agreed upon price increase was signalled to other Defendants and monitored. "[T]he pleadings are sufficient if they set forth facts from which an inference of unlawful agreement can be drawn." Brett v. First Federal Savings & Loan Ass'n, 461 F.2d 1155, 1158 (5th Cir. 1972). Plaintiffs have set forth ample information from which an unlawful agreement could be inferred.
Furthermore, the cases cited by the Defendants can be distinguished from the present case. In Mountain View Pharmacy v. Abbott Laboratories, 630 F.2d 1383 (10th Cir. 1980), "the original complaint used statutory language to describe the alleged antitrust violations without including any factual allegations whatsoever. . . . the [amended] complaint was longer and better organized, but aside from allegations relating to one specific drug and one specific manufacturer, no facts had been added to support the alleged statutory violations." Id. at 1385. In Commonwealth of Pennsylvania v. Pepsico, Inc., 836 F.2d 173, 181 (3rd Cir. 1988), the Third Circuit found it significant that "Pennsylvania did not allege any meetings between [the defendants], any communications between them, or any other means by which their alleged conspiracy came about." As well, in Pepsico, the Court noted that because the soft drink industry was involved, and hence the Soft Drink Act, the plaintiffs had a pleading burden "much higher than that in a mine-run antitrust complaint." Id. The complaint in Estate Construction Co. v. Miller & Smith Holding Co. Inc., 14 F.3d 213, 221 (4th Cir. 1994) "lack[ed] completely any allegations of communications, meetings, or other means through which one might infer the existence of a conspiracy." In Estate Construction, the plaintiffs "merely reiterat[ed] mechanically the words of the Sherman Act. . ." Id. at 222.
In short, the present case is not analogous to the cases cited by the Defendants and the Complaint sufficiently alleges facts from which an unlawful agreement can be inferred and...
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