Antitrust Law Daily Wrap Up, ANTITRUST—D. Del.: Class action against truck transmission manufacturer and OEMs dismissed, (Sep 1, 2015)

By Edward L. Puzzo, J.D.

In a purported class action against a truck transmission manufacturer and original equipment manufacturers for alleged Sherman Act and Clayton Act violations, the named plaintiff did not have standing to bring the action and proposed intervenors did not qualify as plaintiffs, the federal district court in Wilmington, Delaware has ruled (Wallach v. Eaton Corporation, August 31, 2015, Robinson, S.).

Plaintiff trucking companies Performance Transportation Services (PTS), now in bankruptcy, and Tauro Brothers Trucking, both purchasers of trucks, alleged that Eaton Corporation, a manufacturer of transmissions for Class 8 trucks, engaged in anticompetitive conduct with original equipment manufacturers (OEMs) of Class 8 trucks. Eaton was accused of entering into exclusive dealing agreements with the OEMs—Daimler Trucks, Freightliner, Navistar, International, Paccar, Kenworth, Peterbilt, Volvo and Mack — in order to maintain or enhance their monopoly power in the market for transmissions used in Class 8 trucks, resulting in the elimination of Eaton's biggest competitor, ZF Meritor.

It is alleged that Eaton entered Long Term Agreements (LTAs) with the OEMs wherein the OEMs would receive lucrative rebates from Eaton if they used Eaton transmissions in a specified percentage of their trucks each year. The use of these LTAs, along with other tactics, marginalized Eaton’s primary competitor ZF Meritor and as a result, plaintiffs allege, they had to pay higher prices for transmissions and the trucks using them.

The plaintiffs asserted against Eaton a claim of monopolization of the Class 8 transmissions market in violation of Section 2 of the Sherman Act. The plaintiffs further asserted against Eaton and all OEMs: 1) conspiracy to monopolize in violation of Section 2 of the Sherman Act; (2) use of exclusionary contracts to substantially lessen competition in violation of Section 3 of the Clayton Act; (3) use of exclusionary contracts and other conduct in violation of Section 1 of the Sherman Act. Plaintiffs sought certification of a class including all purchasers in the United States of vehicles from the named OEMs containing Eaton transmissions since October 2002.

Standing. Defendants argued that the named class representatives were not direct purchasers and, therefore, lacked standing to bring suit. Plaintiff Tauro Brothers did not directly purchase Class 8 trucks from an OEM, but based its standing on an assignment of the antitrust claims from direct purchaser R&R. The defendants challenged the assignment, stating that assignor R&R received nothing in return for assigning the claims to Tauro Brothers. Tauro answered that R&R received “business goodwill,” but the court found that this was illusory, because evidence indicated that the parties had no discussion of future transactions during the signing of the assignment. Consequently, the court continued, there was no consideration for the assignment, rendering the assignment invalid and Tauro Brothers did not have standing to bring suit.

Intervention. In anticipation of the standing ruling regarding Tauro, truck purchasers Toledo Mack and JJRS also moved to intervene as class representatives. The court explained that a prospective intervenor in a class action had the burden, among other requirements, of proving that the application for intervention was timely, and that the potential intervenor’s interest was not already adequately represented by an existing party in the litigation.

Defendants challenged the timeliness of the motion to intervene. The intervening plaintiffs argued that there had been no improper delay, as they filed their motions to intervene approximately two months after defendants first raised the issue of Tauro’s lack of standing. But the court responded that the litigation had been pending for five years, during which time the parties briefed a motion to dismiss, completed extensive fact discovery, briefed a motion to certify the class, and deposed the parties’ certification economists. The court found that the intervening plaintiffs should have become aware of potential challenges to the standing of the named class representatives in August and November of 2014 when defendants questioned the sufficiency of consideration through an interrogatory and various depositions. Thus, the intervening plaintiffs had not offered a persuasive reason for the delay. As for prejudice caused by the delay, granting the motions would require re-opening discovery to explore the suitability of the intervening plaintiffs as a class representatives and re-briefing class certification issues specific to the intervening plaintiffs, resulting in further delays as well as burdensome costs to the defendants.

Considering the totality of the circumstances, the court found that the intervening plaintiffs did not carry their burden to demonstrate that the motions to intervene were timely and non-prejudicial under Fed. R. Civ. P. 24(a). The court further declined to exercise its discretion to allow permissive intervention. Due to the lack of representation of the proposed class, which resulted in the lack of a case or controversy under Article III, the court dismissed the case.

The case is Civil Action No. 1:10-cv-00260-SLR.

Attorneys: Peter Bradford deLeeuw (Rosenthal, Monhait & Goddess, PA) for Mark S. Wallach. Christopher T. Heffelfinger (Berman DeValerio) for Tauro Brothers Trucking Co. Donald E. Reid (Morris, Nichols, Arsht & Tunnell LLP) for Eaton Corp. Richard L. Horwitz (Potter Anderson & Corroon, LLP) for Daimler Trucks North America LLC, and Freightliner LLC. Kelly E. Farnan (Richards, Layton & Finger, PA) for Navistar International Corp., and International Truck and Engine Corp. Jeffrey B. Bove (Novak Druce Connolly Bove Quigg LLP) for Paccar Inc.

Companies: Tauro Brothers Trucking Co.; Eaton Corp.; Daimler Trucks North America LLC; Freightliner LLC; Navistar International Corp.; International Truck and Engine Corp.; Paccar Inc.

Cases: Antitrust DelawareNews