Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Thomson Consumer Electronics wins dismissal from cathode ray tube litigation, (Sep 27, 2013)

By Peter Reap, J.D., LL.M.

In an action against manufacturers of cathode ray tubes (CRTs) for conspiring to fix prices, Thomson Consumer Electronics, Inc. was entitled to dismissal of the complaint of Sharp Electronics Corp. and Sharp Electronics Manufacturing Co. of America, Inc. (“Plaintiffs”) because the complaint failed to meet the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil Procedure, the federal district court in San Francisco has decided (In re: Cathode Ray Tube (CRT) Antitrust Litigation, September 26, 2013, Conti, S.). In addition, in a separate order, the Direct Action Plaintiffs’ (“DAPs”) motion to adopt the Interim Special Master’s (“ISM”) Report and Recommendation on the DAPs’ Motion for Leave to File Amended Complaints to add Thomson and Mitsubishi Electric US, Inc. and Mitsubishi Digital Electronics Americas, Inc. (collectively “Mitsubishi”) as defendants was denied.

Dismissal of Thomson. Thomson is a wholly owned subsidiary of the French corporation Thomson S.A. Thomson used to manufacture CRTs out of several United States-based plants, but in 2004, Thomson S.A. closed those plants, and in 2005, it sold its CRT business to Videocon Industries, Ltd. The Plaintiffs alleged that Thomson participated in an international conspiracy to fix the prices of CRTs, specifying that both Thomson Consumer and Thomson S.A. actually participated in conspiratorial meetings and joined the relevant price-fixing agreements “[b]etween at least 1996 and 2005.” According to the Plaintiffs, “[Thomson Consumer and Thomson S.A.] never effectively withdrew from this conspiracy.”

At this point in the litigation, the Plaintiffs simply failed to elucidate why and how Thomson should be part of the case, according to the court. In a 287-paragraph complaint, filed six years after the Multi-District Litigation’s (“MDL’s”) inception, the Plaintiffs failed to plead sufficient facts either to render their claims against Thomson plausible or to satisfy the heightened pleading standards of Rule 9(b). The Plaintiffs’ allegations about Thomson’s purportedly actionable behavior stated only that Thomson was involved in the CRT business from around 1995 until 2005, after which it sold its CRT business to a different entity, whose connections to Thomson were never made clear. Beyond that, the Plaintiffs provided only the barest possible pleadings that Thomson participated in the conspiracy to some extent, and that it purportedly “never withdrew” from these dealings.

So many years after the MDL’s inception, the Plaintiffs should be able to provide something more than boilerplate allegations about alleged conspirators, the court explained. In 2010 the court permitted other plaintiffs to proceed not with detailed, defendant-by-defendant allegations but with more general, but still plausible, contentions that each defendant participated in the alleged conspiracy. However, the situation that confronted the court’s judicial experience and common sense in 2010 was not entirely comparable to this case’s posture, presented three years later. The Plaintiffs participated in but opted out of other class actions in the MDL. Moreover, the Plaintiffs claimed to have “gained access to discovery” that led to “direct evidence that Thomson SA and Thomson Consumer participated in bilateral and multilateral meetings with CRT co-conspirators,” but, if these claims were true, the court could not see why the Plaintiffs did not plead anything beyond threadbare allegations and legal conclusions.

The Court recognized the difficulty of pleading certain facts in complex, global antitrust cases, but found that meeting the pleading standards of Rules 8 and 9(b) was not insurmountable when, according to the Plaintiffs’ own words, they had evidence of Thomson’s wrongdoing and had been involved in the case for years. Accordingly, Thomson’s motion to dismiss the Plaintiffs’ claims was granted.

Motion to amend DAP complaints. The DAPs filed their complaints in November 2011, the court noted. They did not name Thomson or Mitsubishi as defendants in those pleadings. The DAPs asserted that sometime after the Indirect Purchaser Plaintiffs (“IPPs”) filed their own motion for leave to file amended complaints in August 2012, the DAPs examined their files and learned of facts that, in their estimation, merited adding Thomson and Mitsubishi as defendants in the DAP complaints.

Thomson contended that the Special Master erred in recommending that the Court grant the DAPs leave to add Thomson as a defendant. Thomson argued that at this late date in the litigation, it would suffer undue prejudice because the scheduling order that was current during this round of briefing would give Thomson far less time than any other defendant to prepare for trial. Mitsubishi’s argument that the ISM erred was essentially the same as Thomson’s, the court observed.

The ISM erred in granting the DAPs’ request to add Thomson and Mitsubishi as defendants, the court held. Mitsubishi had never been connected with this case in any substantial way, and the court never adopted the IPP Motion’s Report and Recommendation. Discovery had proceeded apace, and forcing Mitsubishi to enter litigation now would put it at an unfair and prejudicial disadvantage. Therefore, the ISM’s recommendation to grant leave to add Mitsubishi as a defendant was not reasonably justifiable under the circumstances. The same held true as to Thomson: the DAPs had ample time to add Thomson to their complaints without delay or prejudice, but they did not. The DAPs and the ISM overstated the extent of Thomson’s involvement in the matter.

Thus, the court respectfully declined to adopt the ISM’s recommendation on this point and denied the DAPs’ motion as to Mitsubishi and Thomson.

The case is MDL No. 1917.

Attorneys: Bruce Lee Simon (Pearson Simon & Warshaw, LLP) for Crago Inc. Joel Steven Sanders (Gibson, Dunn & Crutcher LLP) for Chunghwa Picture Tubes Ltd. Christopher M. Curran (White & Case) for Hitachi Ltd.

Companies: Crago Inc.; Chunghwa Picture Tubes Ltd.; Hitachi Ltd.; Thomson Consumer Electronics, Inc.; Sharp Electronics Corp.; Sharp Electronics Manufacturing Co. of America, Inc.; Mitsubishi Electric US, Inc.; Mitsubishi Digital Electronics Americas, Inc.

Cases: Antitrust CaliforniaNews