Antitrust Law Daily Wrap Up, ANTITRUST—EDPa: State Law Claims of Conspiracy to Restrict Supply of Eggs Dismissed on Statute of Limitations, (Mar 20, 2013)

By John W. Arden, J.D., LL.M.

Claims that egg producers and trade groups conspired to restrict the supply of eggs in the United States—brought by a class of indirect purchasers under the laws of 20 states and the District of Columbia—were dismissed with prejudice on statute of limitation grounds by the federal district court in Philadelphia (In re: Processed Egg Products Antitrust Litigation, March 19, 2013, Pratter, G.).

The defendants moved for partial dismissal of 41 claims that arose outside of the statute of limitations period of state antitrust, state consumer protection, and common law. The district court granted the motion and ordered that all claims for damages brought by indirect purchaser plaintiffs that arose before particular dates be dismissed with prejudice.

Statute of Limitations

While the class action plaintiffs did not dispute the statutes of limitations of the laws governing the claims, they contended that their claims should survive under (1) the discovery rules of 16 states and (2) the fraudulent concealment doctrines of 17 states.

Discovery rule. As a general matter, the discovery rule “postpones the accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.” However, in deciding whether the plaintiffs had adequately plead facts to invoke the discovery rule, a court must take undertake a state-by-state analysis and apply the substantive law of the state whose law governs the action.

Under the Rule 9(b) of the Federal Rule of Civil Procedure, the district court had to determine the sufficiency of allegations that the plaintiffs were not aware, nor should have been aware, of the facts supporting their claim until a time within the limitations period.

The Arizona discovery rule says that a cause of action does not accrue until the plaintiff knows, or in the exercise of reasonable diligence, should know the facts under the claim. A plaintiff cannot suggest that the discovery rule applies to a claim unless the plaintiff alleges the date on which the injury was discovered. A complaint that lacks such an allegation offers only mere speculation as to the applicability of the discovery rule and fails to suggest plausibly that the benefits of the rule extend to the plaintiff.

The plaintiffs made several arguments as to why they could forego pleading a tolling date. The first was that “the specificity requirements of Rule 9(b) do not apply to state discovery rules.” However, the inapplicability of Rule 9(b) did not exempt the plaintiffs from pleading facts that plausibly suggest that they may rely on the discovery rule, including facts pertaining to the date when the plaintiffs learned of their injuries. The second was that the court’s prior opinion concerned the pleading of fraudulent concealment under federal law and that the plaintiffs’ fourth amended complaint pled facts indicating that the plaintiffs could not discover the conspiracy. However, the state tolling doctrines discussed by the parties were similar to fraudulent concealment under federal law in that their benefit expires once a plaintiff discovers the claim.

The applicability of the Arizona discovery rule hinged on not merely whether it was difficult for the plaintiffs to learn of the facts underlying their causes of action, but also on when the plaintiffs learned of those facts. In the absence of a tolling date, the plaintiffs’ fourth amended complaint failed to suggest plausibly that such discovery did not occur until a time within the limitations period.

The discovery rules of the 15 other jurisdictions also tolled the statute of limitations only until a certain time. The failure to allege a tolling date meant that the plaintiffs’ complaint did not plausibly suggest the applicability of any of the discovery rules.

Fraudulent concealment. The plaintiffs’ attempt to rely on the fraudulent concealment doctrines of 17 states was also unavailing. The district court had previously held that they failed to meet the requirements of Rule 9(b) in pleading fraudulent concealment. Moreover, the tolling benefits of fraudulent concealment last only until the plaintiff knows or reasonably should be expected to know of the cause of action. Thus, the plaintiffs must plead a specific tolling date.

Both the Third and Eighth Circuits have established that plaintiffs must plead fraudulent concealment with particularity. In this case, every fraudulent concealment rule cited by the plaintiffs tolls the statute of limitations only until the date of discovery. The failure to allege a tolling date or to otherwise plead facts that plausibly suggest when the claims were discovered required the district court to dismiss the portions of claims that fall outside the applicable statutes of limitation.

Minnesota antitrust claim. Under Minnesota’s antitrust statute, a cause of action for a continuing violation is deemed to arise at any time during the period of the violation. The plaintiffs contended that this rule permitted them to recover damages from the start of the alleged conspiracy, notwithstanding the statute of limitations period. However, the district court held that the “continuing violation” language in the statute related to when a cause of action accrues, rather than to the recovery of damages. While Minnesota’s antitrust statute permits a suit for a continuing violation to take place at any time during which the violation was ongoing, the recovery was limited to the period prior to the filing of suit prescribed by the statute of limitations.

Leave to Amend

A motion for leave to amend the fourth amended complaint was denied by the district court, which held that the plaintiffs had ample opportunity to cure their pleading deficiencies in amendments previously allowed and that failure to plead tolling dates constituted an undue and unexplained delay. After more than four years of litigation and the filing of four amended complaints, the plaintiffs still failed to allege a tolling date.

The case is MDL No. 2002, 08-md-02002.

Attorneys: Steven A. Asher (Weinstein Kitchenoff & Asher LLC) for plaintiffs.

Cases: Antitrust PennsylvaniaNews