Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Titanium dioxide price fixing claims tossed, (Aug 13, 2015)

By Greg Hammond, J.D.

State and federal antitrust claims have been dismissed against five manufacturers accused of conspiring to fix the prices of titanium dioxide. The federal district court in San Jose, California, determined that it lacked personal jurisdiction over a Saudi Arabian company, and the proposed class, which consists of indirect purchasers of “architectural coatings” that contain titanium dioxide, lacked Article III and antitrust standing (Los Gatos Mercantile, Inc. v. E.I. DuPont Nemours and Co., August 11, 2015, Freeman, B.).

E.I. DuPont De Nemours and Co., Huntsman International, LLC, Kronos Worldwide, Inc., Cristal USA Inc., and newly added defendant National Titanium Dioxide Co, Ltd. manufacture and sell titanium dioxide, a chemical that is used as an ingredient in various products, including paint, paper, plastic, inks, pharmaceutical coatings, toothpaste, sunscreen, cosmetics, food, rubber, and ceramic. Similar to direct purchaser claims, which were previously settled, the indirect purchaser plaintiffs, consisting of seven paint retailers, allege that the manufacturers engaged in a titanium dioxide price fixing conspiracy. The first complaint was dismissed for lack of standing, but the court allowed the indirect purchasers to amend the claims. The defendants now move to dismiss the second amended complaint.

Personal jurisdiction. National Titanium is a privately held Saudi Arabian corporation with its principal place of business in Jeddah, Saudi Arabia. The company seeks dismissal for lack of personal jurisdiction. The court granted the motion, rejecting: (1) the plaintiffs’ agency or alter ego theory, claiming that the actions of subsidiary Millennium Inorganic Chemicals, Inc. may be imputed to National Titanium; and (2) the theory that National Titanium’s own contacts with the United States were sufficient to give rise to personal jurisdiction.

Specifically, the court found that the plaintiffs’ alter ego or agency theory failed because the mere fact of a parent-subsidiary relationship is insufficient to attribute the contacts of Millennium to National Titanium. Further, the court found that the SAC failed to allege any independent contacts between National Titanium and the United States. There was no evidence that National Titanium was displaced from its corporate headquarters in Jeddah, or that the company’s president is running National Titanium from the United States. The court therefore did not have specific or general jurisdiction over National Titanium. Because it was unlikely that further discovery would result in any useful new evidence concerning personal jurisdiction over National Titanium, the court denied the plaintiffs’ request for jurisdictional discovery.

Article III standing. The remaining four domestic defendants also moved to dismiss, but for lack of Article III standing. Although the plaintiffs alleged facts sufficient to make out a claim that the defendants conspired to and did artificially inflate the price of titanium dioxide, the court concluded that the plaintiffs failed to allege facts demonstrating that the resulting overcharges to manufacturers of architectural coatings were passed down the thousands of distribution chains at issue to plaintiffs. Nevertheless, the court dismissed with leave to amend, noting that the plaintiffs may be able to amend their complaint to show Article III standing for a more limited market—architectural paint.

Antitrust standing. The court next determined that the AGC factors weighed against a finding of antitrust standing for the plaintiffs’ Section 1 Sherman Act claim. First, the court found that the market for architectural coatings is too vast and ill-defined to be considered inextricably linked to the market for titanium dioxide. Second, because the market of architectural coatings is so broad, and the array of products covered by the term is so varied, the plaintiffs could not plausibly assert an ability to trace the alleged overcharges through the distribution chains with regard to each of the products at issue, the court concluded. Nevertheless, because the plaintiffs might be able to allege antitrust standing by limiting the relevant market to architectural paint, the motion to dismiss was granted with leave to amend.

The plaintiffs also brought antitrust claims under the laws of 16 states, which the domestic defendants sought dismissal of. Only Iowa, Nebraska, New Mexico, and New York, however, adopted the AGC factors. The court consequently granted the motion to dismiss those four state antitrust claims, with leave to amend. The motion to dismiss was denied with regard to the other 12 state antitrust claims.

Consumer protection. Finally, the domestic defendants moved to dismiss the consumer protection claims brought under ten different states’ laws. Only the consumer protection claims brought under Missouri’s Merchandising Practices Act and New York’s consumer protection statute were dismissed. The court found that the Missouri Merchandising Practices Act only confers standing on purchasers of property for their own personal, family, or household purposes. Because the plaintiffs did not purchase “architectural coatings” for personal, family, or household purposes, they lacked standing under Missouri law. In addition, unlike the other state consumer protection statutes, New York requires allegations of “deceptive” acts. Because the plaintiffs allege price fixing caused their injury, not misrepresentations made to cover the defendants’ tracks, the plaintiffs failed to state a claim under New York law.

The case number is 13-cv-01180-BLF.

Attorneys: Don Barrett (Barrett Law Group), Jonathan W. Cuneo (Cuneo Gilbert and LaDuca, LLP), and Ben F. Pierce Gore (Pratt & Associates) for Los Gatos Mercantile, Inc., Lexington Home Center, LLC, R.F. Cole, Inc., The Carpet Shoppe, Inc., Morgan Tanner, and 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) for Millennium Inorganic Chemicals, Inc.

Companies: Los Gatos Mercantile, Inc.; Lexington Home Center, LLC; R.F. Cole, Inc.; The Carpet Shoppe, Inc.; Ace Hardware of South Walton, Inc.; E.I. DuPont De Nemours and Co.; Huntsman International, LLC; Kronos Worldwide, Inc.; Millennium Inorganic Chemicals, Inc.

Cases: Antitrust ConsumerProtection CaliforniaNews