Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Korean noodle manufacturer denied dismissal of price fixing class action, (Apr 1, 2015)

By Edward L. Puzzo, J.D.

A Korean manufacturer of ramen noodle products should not be dismissed from an antitrust class action brought by American indirect purchasers against a number of manufacturers charged with a price fixing conspiracy in Korea, the federal district court in San Francisco has ruled (Fenerjian v. Nong Shim Company, Ltd., March 30, 2015, Orrick, W.).

Stephen Fenerjian and other indirect purchasers brought a class action against Samyang Foods Company, Ltd. (Samyang Korea) and other Korean noodle manufacturers, alleging that the class had incurred damages in the form of artificially-inflated prices for Korean ramen noodle products, which resulted from a price-fixing conspiracy engaged in by the defendant companies. The indirect purchaser plaintiffs were individuals who purchased defendants’ noodles from non-party food retailers in California and five other states.

Their complaint further alleged that the conspiracy had been revealed in a Korean Fair Trade Commission Order of July 12, 2012, which imposed a fine of $120 million after finding that Samyang Korea and the other defendants had colluded to increase and fix prices of Korean ramen noodle products.

The plaintiff class alleged that Samyang Korea and the other defendants had engaged in a price-fixing conspiracy in violation of the Sherman Act and California’s Cartwright Act, violated antitrust and restraint of trade laws in California and three other states, and violated state consumer protection laws in California and two other states.

Plausible allegations. Samyang Korea moved to dismiss the indirect purchasers’ federal and state antitrust and state consumer protection claims, on grounds that the plaintiffs had failed to plausibly allege that Samyang Korea was a member of a conspiracy to raise prices in the United States. Samyang Korea argued that, despite a conspiracy to raise prices for their product in Korea, it had no control over prices for its product in the United States.

The court found that these arguments did not render plaintiffs’ allegations implausible. Samyang Korea’s lack of control over prices charged by its American subsidiary had no bearing on the allegation that Samyang Korea shipped price-fixed noodles to the United States, the court stated. It was sufficient for plaintiffs to plausibly allege that Samyang Korea conspired to raise prices, did in fact raise prices and shipped its price-fixed goods to the United States where they were purchased by members of the class.

Nationwide class action. As to the indirect purchasers’ nationwide class action claims brought under California’s Cartwright Act, Samyang Korea contended that, under Phillips Petroleum v. Shutts, 472 U.S. 797 (1985), a nationwide class under the law of a particular state is constitutional only if both (1) the chosen state’s law does not conflict with the laws of other states that have an interest in the case and (2) the chosen state has significant contact or a significant aggregation of contacts to claims asserted by each member of the plaintiff class.

The court disagreed, stating that Shutts does not provide that a nationwide class under a particular state’s law is constitutional only if there is no conflict of law and the state has significant contacts with the claims of all class members. Rather, the court continued, Shutts teaches that there is no injury in applying out-of-state law if there is no conflict between the laws at issue. Accordingly, the second step of determining whether the forum state has sufficient contacts with the claims is only relevant if the laws at issue are in conflict. If the forum state has sufficient contacts with the claims, the nationwide class may be maintained even if the laws conflict., the court explained.

Choice of law. Since California law can be applied to non-residents constitutionally, the next step is to make a choice-of-law analysis. California’s three-step analysis, used to determine whether the interests of other states outweigh that of California, would be most appropriately addressed at the class certification stage, the court stated. At that point, if the indirect purchaser plaintiffs meet their burden of establishing sufficient contacts, the burden will then shift to Samyang Korea to demonstrate that California’s governmental interest test directs that foreign law, rather than California law, should apply to those claims.

Thus, the court denied Samyang Korea’s motion to dismiss, finding that plaintiffs’ allegations were sufficient at the pleading stage, and further finding that the issue of whether non-California plaintiffs could state a Cartwright Act claim was better resolved at the class certification stage.

The case is Civil Action No. 13-cv-04115-WHO.

Attorneys: Alan R. Plutzik (Bramson Plutzik Mahler & Birkhaeuser, LLP) for Stephen Fenerjian, Rockman Company (U.S.A.), Inc., M.T. Trading Corp., and The Plaza Co. Gregory Bradley Linkh (Glancy Binkow and Goldberg LLP) for California Market LLC, and The Plaza Market. Anne Choi Goodwin (Squire Patton Boggs (U.S.) LLP) for Nong Shim Company, Ltd., and Nongshim America, Inc. Joel Steven Sanders (Gibson, Dunn & Crutcher LLP) for Ottogi Company, Ltd., and Ottogi America, Inc. Elizabeth Dianne Mann (Mayer Brown LLP) for Samyang Foods Company, Ltd.

Companies: Rockman Company (U.S.A.), Inc.; M.T. Trading Corp.; The Plaza Co.; California Market LLC; The Plaza Market; Nong Shim Company, Ltd.; Nongshim America, Inc.; Ottogi Company, Ltd.; Ottogi America, Inc.; Samyang Foods Company, Ltd.

Cases: Antitrust CaliforniaNews