July 23, 2013
The largest cartel investigation on record carried out by the Department of Justice involves alleged price-fixing on a variety of automobile parts. Since 2011, the DOJ has obtained guilty pleas that resulted in criminal fines for several corporations and prison sentences for several executives.
The criminal cases also generated 12 follow-on private treble-damage class actions, filed by both direct and indirect purchasers of wire harnesses, instrument panel clusters, fuel senders, heater control panels, bearings, occupant safety systems, radiators, alternators, windshield wipers, anti-vibration rubber parts, starters, and auto lights. The first cases filed (in 2011) were against wire harness manufacturers. All of the private cases were ultimately transferred to the United States District Court for the Eastern District of Michigan (Judge Marianne Battani). On June 6, 2013, the court issued its first significant ruling and denied the majority of motions to dismiss filed by the defendant wire harness manufacturers.1
The plaintiffs asserted three putative classes: Direct Purchasers, who purport to represent a class of direct purchasers of wire harnesses from one or more of the defendants; Automobile Dealers; and End-Payors. The dealers and end-payors purport to comprise classes of those who purchased or leased new cars containing wire harnesses or purchased wire harnesses as stand-alone replacement products.
Collective Motion to Dismiss Direct Purchaser Action. The court denied the defendants’ motion to dismiss the direct purchaser action in its entirety.2
Plaintiffs pled with adequate specificity. The court held that the Direct Purchaser Plaintiffs satisfied Twomley/Iqbal3 standards and stated a plausible federal antitrust claim. The plaintiffs stated a plausible antitrust claim by: 1) identifying the direct purchaser plaintiffs; 2) specifying which products were purchased (broadly “wire harness products”); 3) including the admissions contained in the guilty pleas of four corporate defendants and seven individuals, which identified the time frame of the conspiracy and the opportunities to conspire at automobile industry trade shows; 4) identifying the methods of communication used by the defendants and meetings between competitors; and 5) noting the investigations conducted by various government entities.4 The court held that detailed allegations about the involvement of each defendant were unnecessary, because the Consolidated Amended Class Action Complaint (CAC) against all defendants must be viewed as a whole.5 Hence, it was irrelevant that guilty pleas were entered by only four of nine defendants, did not identify co-conspirators, referred to different products, and were limited to certain carmakers. The court held that the allegations were sufficient at the pleading stage and “dismissal is not required merely because Plaintiffs failed to allege an overt act against each individual Defendant.”6 It sufficed that the plaintiffs cited certain defendants’ guilty plea admissions to meeting with competitors and agreeing to rig bids and fix prices, as well as market conditions that made collusion plausible.
Plaintiffs are direct purchasers and entitled to money damages. Primarily to eliminate the possibility of duplicative recovery, the US Supreme Court, in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) held that only direct purchasers may assert treble damage claims. The defendants argued that the plaintiffs were not actual direct purchasers in an economic sense, because they bought wire harness products from the defendants at prices that were separately negotiated between OEMs and defendants.7 The court rejected this argument and held that because the plaintiff suppliers bought wire harness products directly from the defendants, they are direct purchasers under the Illinois Brick standard even if the conspiracy was directed at OEMs. “Even though Direct Purchaser Plaintiffs purchased the offending Wire Harness Products at a price agreed to by the OEMs, the issue is not whether Direct Purchaser Plaintiffs controlled the price paid, merely whether they purchased directly.”8
Collective Motion to Dismiss Indirect Purchaser Actions. The court partially granted and partially denied the defendants’ motions to dismiss the automobile dealer plaintiffs’ and end-payor plaintiffs’ (Indirect Plaintiffs) CACs.9 All of the federal antitrust claims survived, while the court dismissed unjust enrichment claims and a few state law antitrust and consumer protection claims.
The court found that the Indirect Plaintiffs pled with adequate specificity to survive the motion to dismiss, holding that the CAC’s references to the guilty pleas sufficed to demonstrate an express agreement to fix prices and allocate customers.10 Further, the court found that the Indirect Plaintiffs had Article III constitutional standing to bring suit because they adequately pled that they suffered an injury that is connected to the alleged wrongdoing.11 The defendants argued that the Indirect Plaintiffs did not make this connection, because they did not plausibly allege that the defendants overcharged the OEMs, who then passed on the overcharge to the Indirect Plaintiffs. The court acknowledged that the Indirect Plaintiffs face a “difficult challenge in succeeding on their claims,” and confirmed that the Indirect Plaintiffs “must show that every reseller in the chain passed on some or all of the alleged overcharge to demonstrate that the price of their vehicle was higher than it would have been because of the overcharge on the wire harness system.”12 However, the court held that for purposes of the motion to dismiss stage, the defendants cited “no authority requiring an indirect purchaser to allege the detailed mechanics of the pass-through process to plead injury in fact and causation for purposes of constitutional standing.”13 The defendants also argued that the Indirect Plaintiffs lacked standing to pursue federal antitrust claims in states where no named plaintiff resides. Although the court acknowledged that there was no definitive Sixth Circuit authority on point for its reasoning, it held that this issue should proceed to the class certification stage, because plaintiffs do not seek relief for themselves under the laws of those states but rather for absent class members.
Lear Corp. Files Motion for Interlocutory Appeal. On June 20, 2013, defendant Lear Corp. (Lear) filed a motion for the court to certify the opinion and order denying Lear’s motion to dismiss for interlocutory appeal to the United States Court of Appeals for the Sixth Circuit.14 Lear had filed an individual motion to dismiss, in addition to joining in the collective motions to dismiss described above, on the grounds that the CACs failed to plausibly allege that Lear was a member of, or participated in, a conspiracy to rig bids and fix prices of wire harnesses.15 The issue for interlocutory appeal is whether a complaint sufficiently alleges that a defendant is part of a conspiracy when the complaint is based only on the defendant’s market share, purported opportunities to conspire, the structure of the industry, and guilty pleas of market participants other than the defendant in the suit.16 The plaintiffs’ responses to Lear and KL Sales’ motions are due on July 22, 2013.
While this is only the first decision in the complex In re Automotive Parts Antitrust Litigation civil cases in the Eastern District of Michigan, it will obviously set the parameters for other auto parts defendants’ efforts to dismiss their cases. Oral argument on motions to dismiss in the instrument panel clusters civil suit is expected in September 2013. In addition, on July 16, 2013, Ford Motor Co. entered the fray by filing a lawsuit in the Eastern District of Michigan against Fujikura Ltd. and Fujikura Automotive America LLC (collectively Fujikura), alleging that Fujikura participated in a conspiracy to rig bids and fix prices of wire harnesses.17 This is the first civil antitrust action filed by a major car manufacturer against an auto parts supplier and may usher in a new wave of OEM automobile company purchaser lawsuits.
- In re Automotive Parts Antitrust Litigation. In re Wire Harness Cases, No. 2:12-cv-00101, 2013 WL 2456584 (E.D. MI June 6, 2013); In re Automotive Parts Antitrust Litigation. In re Wire Harness Cases, No. 2:12-cv-00102, No. 2:12-cv-00103, 2013 WL 2456612 (E.D. MI June 6, 2013). The wire harness defendants are Furukawa, Denso, Delphi, Fujikura, Lear, Leoni, Sumitomo, Yazaki, Tokai Rika, and the US subsidiaries of each company.↵
- In re Automotive Parts Antitrust Litigation. In re Wire Harness Cases, No. 2:12-cv-00101, 2013 WL 2456584 (E.D. MI June 6, 2013).↵
- See Ashcroft v. Iqbal, 556 U.S. 662 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).↵
- In re Automotive Parts Antitrust Litigation. In re Wire Harness Cases, No. 2:12-cv-00101, 2013 WL 2456584, *5-6 (E.D. MI June 6, 2013).↵
- Id. at *7.↵
- Id. at *8.↵
- Id. at *9.↵
- Id. at *10.↵
- In re Automotive Parts Antitrust Litigation. In re Wire Harness Cases, No. 2:12-cv-00102, No. 2:12-cv-00103, 2013 WL 2456612 (E.D. MI June 6, 2013).↵
- Id. at *7.↵
- Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).↵
- In re Automotive Parts Antitrust Litigation. In re Wire Harness Cases, No. 2:12-cv-00102, No. 2:12-cv-00103, 2013 WL 2456612, at *8 (E.D. MI June 6, 2013).↵
- Id. ↵
- Defendant Lear Corp.’s Motion to Certify Order for Interlocutory Appeal Pursuant to 28 U.S.C. § 1292(b) and for a Stay of Proceedings Pending Appeal, In re: Automotive Parts Antitrust Litigation (No. 2:12-cv-00100).↵
- Defendant Lear Corp.’s Rule 12(b)(6) Motion to Dismiss, In re: Automotive Parts Antitrust Litigation (No: 2:12-md-02311).↵
- Defendant Lear Corp.’s Motion to Certify Order for Interlocutory Appeal Pursuant to 28 U.S.C. § 1292(b) and for a Stay of Proceedings Pending Appeal at 3, 11, In re: Automotive Parts Antitrust Litigation (No. 2:12-cv-00100).↵
- Complaint and Demand for Jury Trial, Ford Motor Co. v. Fujikura Ltd. and Fujikura Automotive America LLC, No. 2:13-cv-13055 (E.D. MI July 16, 2013), ECF No. 1.↵