Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Price fixing claims against titanium dioxide manufacturers scaled back, (Sep 23, 2014)

By Jeffrey May, J.D.

In a price fixing action brought against four manufacturers of titanium dioxide on behalf of purchasers of “products” containing titanium dioxide manufactured by the defendants or co-conspirators, Sherman Act claims, as well as claims under California and New York antitrust laws, were dismissed for lack of standing. The federal district court in San Jose, California, will, however, allow the indirect purchaser plaintiffs to amend their complaint to satisfy the standing requirements enunciated in the U.S. Supreme Court's 1983 decision in Assoc. Gen. Contractors v. Cal. State Council of Carpenters (AGC), 459 U.S. 519, and to allege standing to pursue claims under other state antitrust and consumer protection statutes. The defendants’ motion to dismiss antitrust claims under Mississippi and Tennessee law was denied (Los Gatos Mercantile, Inc. v. E.I. DuPont de Nemours and Co., September 22, 2014, Freeman, B.).

The defendants are E.I. DuPont de Nemours and Company, Huntsman International, LLC, Kronos Worldwide, Inc., and Millennium Inorganic Chemicals, Inc. They manufacture and sell titanium dioxide, a chemical that is used as an ingredient in numerous products, including paint, paper, plastic, inks, pharmaceutical coatings, toothpaste, sunscreen, cosmetics, food, rubber, and ceramic. This putative indirect purchaser class action brought by seven paint retailers followed a direct purchaser class action challenging the same conduct that has since been settled.

Article III standing. At the outset, the court dismissed some of the state law claims on the ground that the plaintiffs lacked Article III standing to assert claims under the laws of states in which no plaintiff resided or had purchased products containing titanium dioxide. The antitrust plaintiffs asserted claims under the antitrust laws of 25 states but were residents of just four: California, Mississippi, New York, and Tennessee. Because the plaintiffs lacked Article III standing to pursue claims under the laws of 21 states as non-residents, the court limited its antitrust standing analysis to the antitrust laws of the four states in which they resided: California, New York, Mississippi, and Tennessee.

Antitrust standing. Under AGC, courts consider the following factors to determine whether a plaintiff has antitrust standing: (1) the nature of the plaintiffs’ injuries and whether plaintiffs were participants in the relevant markets; (2) the directness of the alleged injury; (3) the speculative nature of the alleged harm; (4) the risk of duplicative recovery; and (5) the complexity in apportioning damages. The court ruled that the AGC factors applied to determine standing under the Sherman Act and the California and New York antitrust laws.

There was no dispute that the federal antitrust claim was subject to an AGC analysis. However, because it was a claim for injunctive relief only, the fourth factor (risk of duplicative recovery) and fifth factor (complexity in apportioning damages) did not apply, the court noted.

The parties disagreed on whether the AGC factors applied to the plaintiffs’ state law antitrust claims. The defendants argued that the states in question had adopted AGC, as evidenced by state court decisions or statutory provisions harmonizing state and federal antitrust laws. It was appropriate to apply the AGC factors to a state Illinois Brick repealer statute if the state legislature or a state court decision clearly indicated that federal law should be followed in construing the statute, the court decided. But the court noted that it would not apply AGC to a repealer statute based solely upon a general harmonization provision therein.

The court ruled that application of the AGC factors was appropriate with respect to claims asserted under California and New York antitrust law in light of earlier decisions of state courts. The motion to dismiss the claims asserted under Mississippi and Tennessee state antitrust law on AGC grounds was denied, however, since AGC did not apply these antitrust statutes.

Applying AGC, the court concluded that the plaintiffs’ federal, California, and New York antitrust claims, as currently framed, should be dismissed. The court noted that the plaintiffs might be able to cure the defects by alleging a more limited market of products containing titanium dioxide; showing how that market is “inextricably linked” to the primary, restrained market; and alleging facts demonstrating that titanium dioxide can be traced through the distribution chain. The court was concerned about the “absence of any facts indicating how the alleged overcharges for titanium dioxide could be traced through the hundreds or perhaps thousands of distribution chains implicated by the breadth of Plaintiffs’ market definition.” Thus, the plaintiffs were granted leave to amend.

State consumer protection statutes. The court also dismissed claims under the consumer protection laws of Arkansas, California, Florida, New York, and South Carolina—five states where the plaintiffs resided. In general, the plaintiffs failed to adequately allege that they suffered an injury or loss from the challenged conduct to pursue these claims.

This is Case No. 13-cv-01180-BLF.

Attorneys: Don Barrett (Barrett Law Group) and Jonathan W. Cuneo (Cuneo Gilbert and LaDuca, LLP) for Los Gatos Mercantile, Inc., Fred Swain, Inc., Lexington Home Center, LLC, R.F. Cole, Inc., Cusimano Carstar Collision, Inc. and The Carpetshoppe, Inc. Ben F. Pierce Gore (Pratt & Associates) for Ace Hardware of South Walton, Inc. Darin P. McAtee (Cravath, Swaine and Moore LLP) for E.I. DuPont De Nemours and Co. Erica L. Krennerich (Vinson Elkins LLP) for Huntsman International, LLC. Paul Edward Coggins (Locke Lord LLP) for Kronos Worldwide, Inc. James L. Cooper (Arnold and Porter LLP) for Millennium Inorganic Chemicals, Inc.

Companies: Los Gatos Mercantile, Inc.; E.I. DuPont De Nemours and Co.; Huntsman International, LLC; Kronos Worldwide, Inc.; Millennium Inorganic Chemicals, Inc.

Cases: Antitrust StateUnfairTradePractices CaliforniaNews