Antitrust Law Daily Wrap Up, ANTITRUST—E. D. Mich.: Direct purchasers’ claims against seatbelt, bearings manufacturers survive motion to dismiss, (Sep 2, 2014)

By Greg Hammond, J.D.

Direct purchasers of occupant safety restraints and bearings that were installed in automobiles stated sufficient price fixing claims against automotive parts manufacturers and a parent company. In denying multiple motions to dismiss, the federal district court in Detroit determined that the direct purchasers adequately alleged: antitrust conspiracy; standing to bring a claim for money damages under the Sherman Act; sufficient facts to toll the statute of limitations under the fraudulent concealment doctrine; and sufficient facts to establish a real or immediate threat that direct purchasers will be harmed again (In re: Automotive Parts Antitrust Litigation (OSS), August 29, 2014, Battani, M.); (In re: Automotive Parts Antitrust Litigation (Bearings), August 29, 2014, Battani, M.); (In re: Automotive Parts Antitrust Litigation (OSS Parent Company), August 29, 2014, Battani, M.); (In re: Automotive Parts Antitrust Litigation, August 29, 2014, Battani, M.).

Background. Direct Purchaser Plaintiffs (DPPs), including Beam’s Industries, Inc. and Findlay Industries, Inc., filed suit against a number of occupant safety systems (OSS) and bearings manufacturers, alleging that the manufacturers conspired to rig bids and to fix, raise, and maintain prices for automotive parts sold in the United States. OSS includes seat belts, airbags, steering wheels or steering systems, and safety electronic systems.

The bearings and OSS manufacturers filed motions to dismiss the DPPs’ consolidated amended class action complaint (CACAC) for four reasons: (1) the CACAC failed to meet the minimum requirements for pleading an antitrust conspiracy; (2) damages are unavailable, because the DPPs lack standing to bring a claim for money damages under the Sherman Act; (3) the statute of limitations bars claims accruing before July 3, 2008 for bearings and July 21, 2008 for OSS; and (4) the DPPs are not entitled to injunctive relief, because there are no plausible allegations of threatened future injury. TRW Automotive Holdings Corp.—the parent company of an OSS manufacturer—also moved to dismiss the CACAC, arguing that the DPPs failed to allege the company’s direct participation and role in the conspiracy.

Bearings and OSS manufacturers

Plausibility. In support of their motion to dismiss, the bearings and OSS manufacturers argued that the DPPs failed to adequately allege the status of the DPPs, the product definition, and the scope of previous guilty pleas. The court disagreed, however, finding that the DPPs satisfied their pleading requirement by alleging that they purchased OSS or bearings directly from one or more of the defendants. In addition, it was determined that the DPPs adequately alleged product definition and market allegations, as (1) the DPPs asserted they purchased the OSS and bearings, and stated what was included within the definition of OSS, and (2) the DPPs sufficiently alleged that the market is conducive to the type of collusive activity that took place, because the market is highly concentrated, with high barriers to entry, and inelastic pricing. Finally, the court concluded that the allegations involving various guilty pleas were sufficient, because the fact that the defendants did not plead guilty to wide-ranging conduct did not limit the civil action.

Damages. The court also determined that the DPPs could bring a claim for damages under the Sherman Act, as they demonstrated they have antitrust standing. Specifically, the court found that the complaint alleges that each DPP purchased OSS or bearings directly from one or more of the defendants during the relevant class period, and the alleged conspiracy impacted the prices DPPs paid for those products. Moreover, the court concluded that these allegations satisfied the DPPs’ burden of demonstrating: (1) a causal connection between the antitrust violation and harm to the DPPs; (2) the nature of the DPPs’ alleged injury including the status of the plaintiffs as consumers in the relevant market; and (3) that they were the direct victims of the alleged conspiracy.

Statute of Limitations. In opposition to the manufacturers’ motion to dismiss based on the statute of limitations, the DPPs argued that the four-year statute of limitations was tolled by the fraudulent concealment doctrine. To establish fraudulent concealment, the DPPs were required to demonstrate: the bearings and OSS manufacturers wrongfully concealed their actions; the DPPs failed to discover the operative facts that were the basis of their cause of action within the limitations period; and the DPPs acted with due diligence until the discovery of the facts.

The court concluded that the DPPs adequately alleged: (1) the manufacturers met and communicated in secret, and agreed to keep the facts from discovery; (2) there was no information regarding the rigged bids for OSS or bearings in the public domain until several manufacturers were raided; and (3) they could not have discovered the conduct earlier through the exercise of reasonable diligence. Consequently, the DPP set forth sufficient allegations to toll the statute of limitations.

Injunctive relief. The manufacturers also argued that the DPPs failed to assert the factual support necessary to demonstrate a real or immediate threat that they will be harmed again, and that injunctive relief is therefore inappropriate. The court disagreed, noting that there are sufficient facts to demonstrate a “cognizable danger of recurrent violation.” Specifically, the court gave weight to allegations that there was a decade-long conspiracy in the bearings and OSS market, with high barriers to entry; and a continuing conspiracy exists with a class period through the present, involving contracts that last for five or more years. Finally, the court noted that various guilty pleas in this case does “not obviate the threat that a conspiracy will persist or resume in the future.” Consequently, the bearings and OSS manufacturers’ motions to dismiss the CACAC were denied.

Parent company liability

TRW Automotive Holdings Corp, the parent company of TRW Deutschland Holding GmBH, also moved to dismiss the CACAC, alleging that the DPPs failed to adequately allege the company’s direct participation and role. The court found in favor of the DPPs, concluding that they properly alleged TRW Automotive’s direct participation in the conspiracy by asserting: “TRW Automotive – directly or through its subsidiaries, which it wholly-owned or controlled – manufacturers, marketed, or sold [OSS] that were purchased in the United States,” and TRW Automotive “directly participated in meetings and submitted rigged bids in furtherance of the conspiracy.” The court ultimately concluded that the allegations demonstrated the plausibility that TRW Automotive knowingly and directly participated in the alleged conspiracy to price-fix OSS. Consequently, the parent company’s motion to dismiss was denied.

The court also appointed Gene J. Esshaki (Abbott Nicholson PC) as Master. He will be responsible for facilitating the effective and expeditious coordination and management of discovery related issues in these proceedings, which includes twenty-nine pending component part cases.

The case number is 12-md-02311.

Attorneys: Darryl Bressack (Fink + Associates Law), Jayne Goldstein (Pomerantz Hufford Grossman Dahlstrom & Gross, LLP), and Julie A. Strother (Lockridge Grindal Nauen PLLP) for Beam's Industries, Inc. and Findlay Industries, Inc.

Companies: TRW Automotive Holdings Corp.; TRW Deutschland Holding GmBH; Beam's Industries, Inc.; Findlay Industries, Inc.

Cases: Antitrust MichiganNews