Antitrust Law Daily Wrap Up, ANTITRUST—EDCal: Stanislaus May Have Changed Liability Theory in Steel Industry Antitrust Litigation, (Jan 21, 2013)

By Tobias J. Gillett, J.D., LLM.

In an antitrust action brought by Stanislaus Food Products Company against steel producers for allegedly dividing the market for tin mill products, the federal district court in Fresno, California, has asked the parties to provide additional briefing concerning an apparent change in Stanislaus’s theory of liability and whether the steel producers would suffer prejudice from an amendment to the complaint that would reflect that change (Stanislaus Food Products Co. v. USS-POSCO Industries, January 18, 2013, O’Neill, L.).

Stanislaus Food Products is a tomato canning company that purchases tin-plated cans to can its tomatoes. The company buys the tin cans from a third party can manufacturer that purchases tin-plated steel from defendant USS-POSCO Industries (UPI) and produces cans out of the metal. UPI in turn purchases “hot band” steel from defendant U.S. Steel to make its tin mill products.

Stanislaus’s third amended complaint alleged that US. Steel had agreed with UPI and POSCO America Steel Corporation (POSCO) that it would exit the market for tin mill products in the western United States “by ending competitive pricing against UPI,” and POSCO agreed not to enter the market, thus granting a monopoly to UPI. U.S. Steel and POSCO, each of which owned 50% interests in UPI through holding companies, would profit when prices rose. The complaint argued that the purpose of a market allocation agreement “was to allocate the relevant market fully to UPI in order to create a monopoly and control price.”

The steel producers had moved for summary judgment, contending that U.S. Steel had continued to sell tin mill products in the western United States pursuant to national supply contracts during all relevant time periods, and hence that it had not fully abandoned the market to UPI. According to the court, Stanislaus responded by “de-emphasiz[ing] its allegations that U.S. Steel fully exited the relevant market and allocated it to UPI,” focusing instead “on its allegations that U.S. Steel agreed to not otherwise price its tin mill products competitively against UPI in the western United States.” The court viewed this as potentially constituting a change in Stanislaus’s theory of liability.

The court noted, however, that, even if Stanislaus had changed its theory of liability, the court would construe such a change as “a request pursuant to rule 15(b) of the Federal Rules of Civil Procedure to amend the pleadings.” This would require analysis of the same factors generally employed in addressing a request for amendment, including “(1) undue delay; (2) bad faith; (3) prior amendments; (4) prejudice to the opposing party; and (5) futility.”

Therefore, the court ordered the parties to conduct additional briefing on the issues of (1) whether Stanislaus had changed its theory of liability and (2) whether that change would cause any prejudice to the steel producers.

The case is No. 1:09-cv-00560-LJO-BAM.

Attorneys: Dean M. Harvey (Lieff, Cabraser, Heimann & Bernstein, LLP) for Stanislaus Food Products Company. Allan Steyer (Steyer Lowenthal Boodrookas Alvarez & Smith LLP) for USS-POSCO Industries. Alexander Y. Thomas (Reed Smith LLP) for United States Steel Corp. Reginald David Steer (Akin Gump Strauss Hauer & Feld LLP) for POSCO America Steel Corp.

Companies: Stanislaus Food Products Co.; USS-POSCO Industries; United States Steel Corp.; POSCO America Steel Corp.

Cases: Antitrust CaliforniaNews