Supreme Auto Transport LLC v. Arcelor Mittal et al
Filing
204
MEMORANDUM Opinion and Order. Signed by the Honorable Manish S. Shah on 3/3/2017: defendants' motion to dismiss #175 is granted. [For further detail see attached order.] Status hearing is set for 3/14/2017 at 09:30 a.m. Notices mailed.(psm, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
SUPREME AUTO TRANSPORT LLC, et al.,
Plaintiffs,
v.
ARCELOR MITTAL, et al.,
No. 08 CV 5468
Judge Manish S. Shah
Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiffs allege that domestic steel manufacturers reduced steel production
in a concerted effort to drive up the price of steel. Direct purchasers of steel then
passed on the higher prices to downstream customers like the plaintiffs, who bought
consumer products made with steel as well as other materials. Plaintiffs filed suit
against the defendants, the steel manufacturers, for the indirect harm allegedly
caused by the illegal reduction in supply. Defendants move to dismiss the amended
class action complaint. [175].1 For the following reasons, defendants’ motion is
granted.
I.
Legal Standard
A motion to dismiss under Fed. R. Civ. P. 12(b)(6) does not test the merits of
a claim, but rather the sufficiency of the complaint. Fed. R. Civ. P. 12(b)(6); Gibson
v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In deciding a 12(b)(6)
motion, a court accepts all well-pleaded facts as true and draws all reasonable
1
Bracketed numbers refer to entries on the district court docket.
inferences in favor of the plaintiff. Id. at 1521. To survive a 12(b)(6) motion, “a
complaint must contain sufficient factual matter, accepted as true, to state a claim
to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In
addition to the complaint, a court may also consider documents attached to or
referenced in the complaint. Levenstein v. Salafsky, 164 F.3d 345, 347 (7th Cir.
1998) (quoting Wright v. Associated Ins. Cos., Inc., 29 F.3d 1244, 1249 (7th
Cir.1994)). “A complaint should not be dismissed for failure to state [a] claim unless
it appears beyond doubt that the plaintiff is unable to prove any set of facts which
would entitle the plaintiff to relief.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
546 (2007).
II.
Facts
Plaintiff Supreme Auto Transport LLC, based in Michigan, and fifteen
individual plaintiffs from ten states represent a purported class of indirect
purchasers of steel products. In 2008, Supreme Auto filed suit as the sole plaintiff
representing a purported class. The original complaint alleged that defendants
orchestrated a scheme to artificially increase the price of steel through coordinated
production cuts between January 2005 and September 2008. Plaintiffs filed an
amended complaint adding the fifteen individual plaintiffs in April 2016.
Plaintiffs allege that defendants, who are among the largest producers of
steel in the U.S. market, instituted a plan to improve “industry discipline” and
increase both prices and profit in the United States steel market. At the forefront of
this plan was Mittal Steel USA, the predecessor of defendant ArcelorMittal USA,
2
who allegedly orchestrated a concerted cutback in steel production with the other
defendants. As a result of this illegal market restraint, the price of steel was
substantially higher than defendants’ cost of production, the domestic demand for
steel was well in excess of defendants’ production, and there was a shortage of steel
on the U.S. market. Consequently, plaintiffs allege that the price of steel was
artificially inflated and this additional cost was passed along from the direct
purchasers of steel to the purchasers of a panoply of consumer products containing
steel, including refrigerators, dishwashers, ovens, automobiles, air conditioner
units, lawn mowers, and farm and construction equipment.
The first amended complaint contains three counts: (1) violation of state
antitrust laws, (2) violation of state consumer protection and unfair competition
laws, and (3) unjust enrichment claims under the common law of “each of the fifty
states, excluding Ohio and Indiana, and including the District of Columbia.”
Defendants now move to dismiss each of the counts.
III.
Analysis
A.
Article III Standing
To bring a claim in federal court, a plaintiff must suffer an injury in fact that
is fairly traceable to the alleged conduct of the defendant and likely to be redressed
by a favorable judicial decision. See Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547
(2016), as revised (May 24, 2016). The burden is on the plaintiff to establish all of
these elements of Article III standing. Id. Defendants argue that plaintiffs have not
established Article III standing in any states except those in which they reside, and
3
they urge this court to address plaintiffs’ standing before addressing issues of class
certification. Plaintiffs argue that the standing inquiry should be postponed until
after matters of class certification have been decided.
Plaintiffs have met their individual Article III standing requirements. They
properly alleged an injury in fact (payment of “supracompetitive” prices) that could
be fairly traced to defendants’ alleged scheme and that would be redressed by a
favorable judicial decision. Whether Article III poses an obstacle to adjudicating
this case as a class action should be evaluated later.2 In Payton v. County of Kane,
308 F.3d 673 (7th Cir. 2002), the Seventh Circuit said that “once a class is properly
certified, statutory and Article III standing requirements must be assessed with
reference to the class as a whole, not simply with reference to the individual named
plaintiffs.” Payton, 308 F.3d at 680 (emphasis added). In Arreola v. Godinez, the
court addressed the question of standing before it addressed class certification;
however, in that case it was the standing of the individual named plaintiff that was
being addressed—no inquiry was being made into the named plaintiff’s ability to
serve as a class representative at that time. Arreola v. Godinez, 546 F.3d 788, 794–
95 (7th Cir. 2008). For now, whether named plaintiffs can bring claims under the
laws of other states and whether plaintiffs are adequate class representatives do
not pose Article III barriers to subject-matter jurisdiction. See Morrison v. YTB Int’l,
Inc., 649 F.3d 533, 536 (7th Cir. 2011).
2
Or not at all, if the complaint otherwise fails to state a claim as discussed below.
4
B.
Antitrust Standing
In addition to Article III standing, an antitrust plaintiff must demonstrate
antitrust standing at the pleading stage. Although general “harm” to the plaintiff is
sufficient to satisfy the constitutional standing requirement, “the court must make
a further determination whether the plaintiff is a proper party to bring a private
antitrust action.” In re Aluminum Warehousing Antitrust Litig., 833 F.3d 151, 157
(2d Cir. 2016) (citing Associated Gen. Contractors of Cal., Inc. v. Cal. State Council
of Carpenters, 459 U.S. 519, 535 n.31 (1983)). A range of doctrines attempt to spell
out “the circumstances under which a particular party may recover from an
antitrust violator.” Loeb Indus., Inc. v. Sumitomo Corp., 306 F.3d 469, 480 (7th Cir.
2002). These “antitrust standing” doctrines have arisen primarily under federal law.
In Illinois Brick Co. v. Illinois, 431 U.S. 720, 735 (1977), for example, the Supreme
Court created a “direct purchaser” doctrine limiting treble damage actions under § 4
of the Clayton Act to direct purchasers, and in Associated Gen. Contractors of
California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 536–45
(1983) (“AGC”), the Court created a multi-factor “direct injury” doctrine to measure
the link between the defendants’ conduct and the plaintiffs’ injury in a federal
antitrust action. Those factors include “(1) the causal connection between the
violation and the harm; (2) the presence of improper motive; (3) the type of injury
and whether it was one Congress sought to redress; (4) the directness of the injury;
(5) the speculative nature of the damages; and (6) the risk of duplicate recovery or
complex damage apportionment.” Loeb, 306 F.3d at 484 (citing AGC, 459 U.S. at
5
537–45). The Illinois Brick direct-purchaser doctrine and the AGC direct-injury
doctrine “are analytically distinct.” Int’l Bhd. of Teamsters, Local 734 Health &
Welfare Trust Fund v. Philip Morris Inc., 196 F.3d 818, 828 (7th Cir. 1999) (citing
Blue Shield of Virginia v. McCready, 457 U.S. 465, 476, 102 S.Ct. 2540, 73 L.Ed.2d
149 (1982)).
The parties here focus their debate on (1) whether AGC is the governing test
for each of the state-law antitrust claims and (2) if so, whether the first amended
complaint in this case meets the multi-factor test laid out in AGC. I agree with
defendants that AGC is the appropriate test in each of the states for which resident
plaintiffs assert antitrust claims and that the complaint does not meet the AGC
test.
1.
State Applications of the AGC Test
Plaintiffs point out that the Supreme Court did not address whether the AGC
factors should govern questions of antitrust standing when plaintiffs bring state
antitrust claims to federal court. Plaintiffs cite a different Supreme Court case,
California v. ARC America Corp., 490 U.S. 93 (1989), for the proposition that
“standing to sue under state antitrust law is determined solely with reference to
state law.” Plaintiffs’ Response, [188] at 13 (emphasis in original). This is an
overstatement. Federal antitrust laws do not “expressly pre-empt state laws
permitting indirect purchaser recovery” and federal antitrust laws serve “to
supplement, not displace, state antitrust remedies.” ARC America, 490 U.S. at 101–
02. But the Supreme Court left open the possibility that states could choose to
6
follow AGC specifically or federal law generally, and defendants argue that the
states at issue in this case have done so. I agree.
Plaintiffs assert state antitrust violations in twenty-one states.3 Named
plaintiffs reside in nine of the twenty-one states. In eight4 of the nine namedplaintiff states, the state courts have adopted the AGC test or a modified version of
it to determine antitrust standing. See Defendants’ Appendix 4, [176-1] at 54–56.
The remaining named-plaintiff state, Tennessee, has not said outright that it would
apply AGC or something similar, but at least one Tennessee appellate court has
suggested that it might do so. See Tenn. Med. Ass’n v. BlueCross BlueShield of
Tenn., Inc., 229 S.W.3d 304, 311 (Tenn. Ct. App. 2007).
Likewise, courts in ten5 of the twelve states where no named plaintiffs reside
apply the AGC test in antitrust standing cases. See Defendants’ Appendix 4, [176-1]
at 57–58. Without mentioning the AGC standard by name, Utah and West Virginia
have also established that their courts shall look to federal law when interpreting
antitrust statutes. Utah Code Ann. § 76-10-3118 (when construing the state’s
antitrust laws, Utah state courts “will be guided by interpretations given by the
federal courts to comparable federal antitrust statutes and by other state courts to
comparable state antitrust statutes”); W. Va. Code § 47-18-16 (state antitrust laws
Arizona, California, the District of Columbia, Iowa, Kansas, Maine, Michigan, Minnesota,
Mississippi, Nebraska, Nevada, New Mexico, New York, North Carolina, North Dakota,
South Dakota, Tennessee, Utah, Vermont, West Virginia, and Wisconsin.
3
Arizona, California, Iowa, Kansas, Michigan, New York, North Carolina, and South
Dakota.
4
The District of Columbia, Maine, Minnesota, Mississippi, Nebraska, Nevada, New Mexico,
North Dakota, Vermont, and Wisconsin.
5
7
“shall be construed liberally and in harmony with ruling judicial interpretations of
comparable federal antitrust statutes”); Princeton Ins. Agency, Inc. v. Erie Ins. Co.,
690 S.E.2d 587, 592 (W. Va. 2009) (“The Legislature has directed that where our
state antitrust provisions track the Sherman Act’s provisions, federal decisional law
should be followed.”).
Thus it is appropriate to apply the AGC analysis to each of the state antitrust claims, as all of the states at issue either formally apply AGC in their own
state courts or have indicated that they would follow federal law on this point.
2.
Applying the AGC Test to the First Amended Complaint
The complaint alleges that “[s]teel products competition was restrained,
suppressed, and eliminated” in violation of state antitrust laws; “[s]teel products
prices were raised, fixed, maintained and stabilized at artificially high levels”;
defendants “intended and knew that their combination, collusion, and conspiracy
affected indirect purchasers of steel as well as direct purchasers”; plaintiffs were
“deprived of free and open competitions”; and plaintiffs “paid supra-competitive,
artificially inflated prices for Steel products” because price increases in raw steel
are often passed on to indirect purchasers, who may bear the brunt of such a
scheme. Plaintiffs argue that these allegations describe an injury that is
“inextricably intertwined” with defendants’ alleged restriction of the steel market.
Plaintiffs also contend that their injury is not speculative, as it can be calculated by
tracking the illegal overcharges that were passed on through the distribution line to
the customer.
8
This narrative is deficient. Most notably, AGC factors 1 (causal connection), 4
(directness of the injury), and 5 (non-speculative damages), all point toward no
applicable injury here. Although plaintiffs make conclusory assertions about causal
connections and the directness of the injury, the complaint does not acknowledge
the role of interceding parties who purchased and distributed the raw steel from
defendants or manufactured and sold the steel-containing consumer products that
plaintiffs eventually purchased. Nor does the complaint provide any basis to infer a
link between specific products and individual steel mills. It does not even identify
whether the steel in these products came from defendants’ steel mills at all.
Plaintiffs’ assertion that the steel is “identifiable” through the supply chain does not
answer the question of whether, having isolated which parts of a product are made
of steel, that steel can then be traced to a defendant’s mill.
Plaintiffs do assert improper motive (AGC factor 2), arguing that defendants
“intended and knew that their combination, collusion, and conspiracy affected
indirect purchasers of steel as well as direct purchasers.” Yet it is implausible to
claim that defendants’ motive was to inflate the price of steel-containing products
they do not sell and from which they do not profit. Iqbal, 556 U.S. at 678 (“To
survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’”). Finally,
while plaintiffs do not have to provide a full account of damages in their complaint,
see Fed. R. Civ. P. 54(c) (relief need not be demanded in the pleadings), the facts in
the complaint and the various letters from suppliers and manufacturers which are
9
referenced in the complaint suggest that calculating damages for these plaintiffs
would be a highly speculative task. The products that plaintiffs purchased
contained a wide variety of materials, each of which influences the retail price and
cannot easily be segregated and priced after the fact. See Loeb, 306 F.3d at 486
(“The fact that the [plaintiffs] here are further down the chain of copper users than
others also will increase the economic complexity of apportioning damages.”).
Two cases are especially instructive here. In Aluminum Warehousing, the
court found that indirect purchasers of aluminum products had not plausibly
established antitrust standing because the plaintiffs (consumers of aluminumcontaining products such as beverages sold in aluminum cans) were not
participants in the restrained aluminum market. Aluminum Warehousing, 833 F.3d
at 161 (“[T]o suffer antitrust injury, the putative plaintiff must be a participant in
[the defendant’s] market . . . but sometimes the defendant will corrupt a separate
market . . . in which case the injury suffered can be said to be ‘inextricably
intertwined’ with the injury of the ultimate target.”). Though the indirect
purchasers argued that they participated in the aluminum market by creating a
demand for aluminum, the court rejected the contention that this attenuated
relationship met the “inextricably intertwined” exception. Id. at 161–62.
Additionally, the indirect aluminum purchasers’ injuries were not “a necessary
step” in carrying out the alleged anti-competitive conspiracy, but rather a “purely
incidental byproduct of the alleged scheme.” Id. at 162. The court noted that
plaintiffs’ approach “would limitlessly increase the universe of potential plaintiffs”
10
by imposing a simple but-for test to show proximate cause in antitrust standing
cases. Id. Here, too, plaintiffs’ participation in the steel market is remote at best
and stretches the “inextricably intertwined” exception too far. Though they may
have paid inflated prices for steel-containing products, the alleged scheme would
have been just as effective from defendants’ point of view if direct purchasers of
steel paid supracompetitive prices for raw steel and never passed that cost on to
consumers.
The Seventh Circuit took a similar approach in Loeb, which dealt with
purchasers of scrap copper suing trading corporations for allegedly fixing the price
of copper at artificially high levels. The court found that the scrap purchasers failed
to meet the AGC factors, including the questions of causation and remoteness. Loeb,
306 F.3d 469. In part, this was because there were “more immediate victims . . . in a
better position to maintain a treble damages action,” which “diminishes the
justification for allowing a more remote party . . . to perform the office of a private
attorney general.” Id. at 484 (citing AGC, 459 U.S. at 542). This is true to an even
greater extent in this case. Whereas the Loeb plaintiffs did purchase raw copper,
albeit scrap copper left over from the refining process, the indirect purchasers here
are even further down the line, having purchased the steel only as a component part
of complex, mixed material products like appliances and construction equipment.
Cf. In re Dairy Farmers of America, Inc. Cheese Antitrust Litigation, 2013 WL
4506000, at *14 (N.D. Ill. Aug. 23, 2013).
11
Because plaintiffs’ injury is too remote from the alleged misconduct, their
damages too speculative, and defendants’ improper conduct not likely to be targeted
toward downstream purchasers of mixed material retail products, I find that
plaintiffs have not satisfied the AGC factors necessary to demonstrate antitrust
standing. Plaintiffs’ state antitrust claims are dismissed.
C.
Other State-Law Claims
Plaintiffs’ remaining claims, pleading violations of state consumer fraud
statutes and common law unjust enrichment, require a showing of proximate cause
or damages legally caused by the defendants’ conduct. In the case of the state
consumer fraud claims, each of the states requires that a consumer fraud action
demonstrate proximate cause—if not explicitly, then by implication by requiring
plaintiffs to be injured as a result of defendants’ wrongful conduct.6 Plaintiffs cite no
AS § 45.50.535 (authorizing anyone who has been injured as a result of a violation of AS
§ 45.50.471 to bring an action for damages); A.C.A. § 4-88-113 (authorizing Arkansas courts
to restore unlawfully acquired money or real or personal property to consumers who were
harmed by violators of this act); Cal. Bus. & Prof. Code § 17207 (directing courts to
calculate civil penalties for violation of this act based on various aspects of the defendant’s
conduct); Colo. Rev. Stat. § 6-2-111 (authorizing any party injured by a violator of the act to
recover damages); Del. Code Ann. 6 § 2524 (permitting “any person who has suffered
damages as a result of the use or employment of any such unlawful acts or practices and
submits proof to the satisfaction of the Court that that person has in fact been damaged” to
seek remedies); District of Columbia Code § 28-3905 (requiring the Office of Adjudication to
order redress or restitution from violators of the trade practices law to consumers injured
by those unlawful trade practices); Florida Stat. § 501.207 (empowering courts to reimburse
consumers found to have been damaged by violators of Florida’s Deceptive and Unfair
Trade Practices Act); Idaho Code § 48-607 (empowering courts to award damages or
restitution to consumers harmed by violators of Idaho’s Consumer Protection Act); Me. Rev.
Stat. Ann. 5 §§ 213 (permitting the award of damages to any person who “suffers any loss of
money or property, real or personal, as a result of the use or employment by another person
of a method, act or practice declared unlawful” by Maine’s Unfair Trade Practices Act);
Mass. Gen. Laws Ann. 93A § 9 (authorizing any person injured as a result of a violation of
Massachusetts’ Regulation of Business Practices for Consumers Protection Act to bring an
action for damages); Mich. Comp. Laws § 445.911(3) (authorizing damages actions by
6
12
authority from these states to suggest that a plaintiff can pursue a claim without
suffering legal injury, and proximate cause is how one identifies cognizable injuries.
See CSX Transp., Inc. v. McBride, 564 U.S. 685, 692 (2011) (“The term ‘proximate
cause’ is shorthand for a concept: Injuries have countless causes, and not all should
give rise to legal liability.”); Holmes v. Securities Investor Protection Corp., 503 U.S.
258, 268 (1992) (citing AGC in support of the concept that “proximate cause”
broadly refers to “the judicial tools used to limit a person’s responsibility for the
consequences of that person’s own acts”). The reasons behind plaintiffs’ failure to
meet the AGC factors equally apply to a proximate cause analysis. In particular, the
presence of many intermediate parties along the supply chain, the commingling of
steel with other materials during the manufacturing process, and the absence of
plausible evidence of any link between specific products and defendants’ steel mills
means that the defendants did not legally cause the harm allegedly suffered.
persons injured “as a result of a violation of” the Michigan Consumer Protection Act);
Montana Code § 30-14-133 (permitting “a consumer who suffers any ascertainable loss of
money or property, real or personal, as a result of” a violation of Montana’s Consumer
Protection Act to recover damages); Nebraska’s Uniform Deceptive Trade Practices Act
(Neb. Rev. Stat. § 87-303) does not provide a private right of action for damages at all,
Reinbrecht v. Walgreen Co., 16 Neb. App. 108, 742 N.W.2d 243 (2007), and because the First
Amended Complaint only seeks damages, which plaintiffs are not entitled to, the claim
under Neb. Rev. Stat. § 87-303 fails to state a claim; Nevada Rev. Stat. Ann. § 598.0999
(empowering courts to award damages to victims of violators of Nevada’s Deceptive Trade
Practices Act); N.H. Rev. Stat. §§ 358-A:10 and 358-A:10-a (authorizing any person or class
injured by a violation of New Hampshire’s Regulation of Business Practices for Consumer
Protection Act to bring an action for actual damages); New York Gen. Bus. Law § 349
(authorizing “any person who has been injured by reason of any violation of” this act to seek
damages); North Carolina Gen. Stat. § 75-1.1, et seq. (authorizing any person who has been
injured as a result of a violation of this act to seek damages); Vermont Stat. Ann. 9 § 2465
(authorizing anyone “who sustains damages or injury as a result of any violation of State
antitrust laws, including section 2453 of this title” to sue for damages); and Wisconsin Stat.
Ann. § 425.301, et seq. (authorizing any person who has been injured as a result of a
violation of this act to seek damages).
13
Plaintiffs’
primary
counterargument
is
a
conclusory
statement
that
supracompetitive prices were a direct and proximate result of defendants’ unlawful
acts. This is a legal conclusion and, without more, cannot survive a motion to
dismiss. Plaintiffs also argue that there is no “single case authority requiring an
independent showing of ‘proximate cause’ where . . . all AGC factors are satisfied,”
but as discussed above, the AGC factors have not been satisfied. The consumer
protection claim is dismissed.
In the context of unjust enrichment claims7, the benefit conferred from
plaintiff to defendant is the causal link between plaintiff’s harm and defendant’s
misconduct. Here, plaintiffs argue that they paid inflated prices to retailers for steel
products, generating profits that ultimately accrued to defendants. As discussed
above, the intervening chain of manufacturing and distribution renders plaintiffs’
injury too remote from defendants’ alleged price-fixing scheme. Plaintiffs’ inflated
payments are not appropriately cognizable as benefits conferred upon the
defendants—defendants’ material benefits from the plaintiffs’ purchases are too
speculative. The unjust enrichment claims are also dismissed.
D.
Tolling of the Statutes of Limitations
Defendants argue that the claims by each of the new named plaintiffs are
time barred. All fifteen new named plaintiffs first filed their claims on April 26,
2016, asserting violations of antitrust laws of eight states, consumer protection laws
of six states, and common law of unjust enrichment in nine states. The statute of
Plaintiffs allege violations of unjust enrichment statutes in all fifty states excluding Ohio
and Indiana and including the District of Columbia.
7
14
limitations for these claims range from two to six years,8 but plaintiffs’ claims
unquestionably accrued no later than September 24, 2008, when Supreme Auto’s
counsel filed the original complaint. Because the fifteen new named plaintiffs filed
their claims more than seven years after the latest possible accrual date, their
claims are barred unless they can show that they were properly tolled.
Plaintiffs argue that their new claims should be tolled under American Pipe
& Construction Co. v. Utah, 414 U.S. 538 (1974), which says that a statute of
limitations is tolled for purported class members when “class action status has been
denied solely because of failure to demonstrate that ‘the class is so numerous that
joinder of all members is impracticable.’” American Pipe, 414 U.S. at 552–53. The
parties’ key dispute here is whether the new named plaintiffs were purported class
members at the time of the original complaint. See In re Dairy Farmers of America,
Inc. Cheese Antitrust Litigation, 2015 WL 3988488, at *24 (N.D. Ill. June 29, 2015)
Ariz. Rev. Stat. Ann. § 44-1410(A) (antitrust statute of limitations (“SOL”) period of 4
years); Cal. Bus & Prof. Code § 16750.1 (same); Iowa Code § 553.16 (same); Kan. Stat. Ann.
§ 60-512(2) (antitrust SOL of 3 years); Mich. Comp. Laws § 445.781 (antitrust SOL of 4
years); N.Y. Gen. Bus. Law § 340(5) (antitrust SOL of 4 years); N.C. Gen. Stat. § 75-16.2
(same); S.D. Codified Laws § 37-1-14.4 (same); Tenn. Code Ann. § 28-3-105(3) (same); Cal.
Bus & Prof. Code § 16750.1 (consumer protection SOL of 4 years); Fla. Stat. § 95.11(3)(f)
(same); Mich. Comp. Laws § 445.911(7) (consumer protection SOL of 6 years); Mont. Code
Ann. § 27-2-211 (consumer protection SOL of 2 years); N.Y. C.P.L.R. 214(2) (consumer
protection SOL of 3 years); N.C. Gen. Stat. § 75-16.2 (consumer protection SOL of 4 years);
Ariz. Rev. Stat. Ann. § 12-550 (unjust enrichment SOL of 4 years); Fla. Stat. § 95.11(3)(k)
(same); Iowa Code § 614.1(4) (unjust enrichment SOL of 5 years); Kan. Stat. Ann. § 60-512
(unjust enrichment SOL of 3 years); Mich. Comp. Laws § 600.5813 (unjust enrichment SOL
of 6 years); Mont. Code Ann. § 27-2-202 (unjust enrichment SOL of 3 years); N.Y. C.P.L.R.
214(3) (same); N.C. Gen. Stat. § 1-52(1) (same); S.D. Codified Laws 15-2-13 (unjust
enrichment SOL of 6 years); Tenn. Code Ann. § 28-3-105(3) (unjust enrichment SOL of 3
years).
8
15
(citing Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983) (a class action lawsuit
tolls the statute of limitations only for “all putative class members.”)).
Plaintiffs argue that they were included in the original alleged class, citing
the unchanged class definition in both the original and amended complaints (“All
persons and entities residing in the United States who, from January 1, 2005 to
September 17, 2008, indirectly purchased steel products in the United States for
their own use and not for resale.” Compl., [1] at ¶ 26, Am. Compl., [152] at ¶ 33.).
Yet the first amended complaint redefined “steel products” so completely that
“purchasers of steel products” now describes an entirely different universe of
plaintiffs.
The original complaint defined “steel products” to mean:
any consumer steel product including but not limited to
produced flat steel sheets and coils; galvanized steel products;
tin mill products; steel plates; steel beams, rails and other
structural shapes; steel bars and rods; steel wire and wire rod;
steel pipes and other tubular products; and a variety of other
products derived from raw steel.
Compl., [1] at ¶ 3.
By contrast, the first amended complaint redefined the same term to mean:
any consumer steel product for end use and not for resale,
including clothes washers, clothes dryers, refrigerators, freezers,
dishwashers, microwave ovens, regular ovens, automobiles,
semi-tractor trailers, farm and construction equipment, room air
conditioner units, hot water heaters, snow blowers, barbeque
grills, lawn mowers, and reinforcing bars used in patios,
driveways, swimming pools and sidewalks.
Am. Compl., [152] at ¶ 3.
16
The amended definition implicates a new and broader set of putative class
members than the original definition. Relatively few people purchase raw steel
products in the industrial form described in the original complaint. The much
larger number of individuals who have purchased one or more of the consumer
products in the first amended complaint greatly expands the pool of putative
class members and deprives defendants of their right to notice. American Pipe,
414 U.S. at 554 (“The theory is that even if one has a just claim it is unjust not to
put the adversary on notice to defend within the period of limitation and that the
right to be free of stale claims in time comes to prevail over the right to prosecute
them.”) (citation omitted).
Plaintiffs argue that the downstream consumer products enumerated in
the first amended complaint are “simply a subset” of the “variety of other
products derived from raw steel” from the original complaint. In their reading,
the putative class always included retail purchasers because this vague, allencompassing phrase could be construed to include any product with steel parts
deriving from defendants’ steel mills. But the original complaint says nothing
about products like refrigerators, farm equipment, and air conditioner units,
which are “derived from raw steel” only in the loosest sense of the term. These
are products in which steel is only one of many component materials, and the
chain of manufacturing and distribution may be much longer and more complex
than it would be with steel bars, rods, and pipes. Rather than a subset of the
“variety of other products derived from raw steel,” these newly added claims
17
belong to a separate category of steel-containing retail products that are much
less closely linked and less easily traceable to defendants’ steel mills.
If the phrase “a variety of other products derived from raw steel” could be
construed as broadly as plaintiffs claim, the original complaint would have given
defendants the task of preserving evidence and accumulating witnesses from a
nearly unbounded universe of steel-containing products. Moreover, since the only
named steel products in the original complaint are industrial tools that scarcely
resemble the complex, mixed-material consumer products in the amended
complaint, it seems especially unlikely that this definition of “other products” is a
consistent reading of the original complaint.
Plaintiffs point out that the amended claims need only be “substantially
similar” to the original claims, not identical, in order to merit tolling. See In re
Linerboard Antitrust Litig., 223 F.R.D. 335, 351 (E. D. Pa. 2004). But even by this
standard, tolling is not appropriate. In this case, nearly eight years after filing
the initial complaint, defendants would be forced to incorporate new and
previously unidentified witnesses and evidence into their defense plan, including
an entirely new crop of manufacturers, distributors and retailers across the
country. Given this, the fifteen new plaintiffs’ claims do not share even a
“substantially similar” factual basis and legal nexus, and defendants would be
unduly prejudiced by tolling.
The amended claim of Supreme Auto—the original plaintiff—was also not
tolled by its original claim. During discovery based on the original complaint,
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Supreme Auto represented to defendants that its claim was based solely on its
purchase of $171.64 worth of steel tubing. Nearly six years later, after filing the
amended complaint, Supreme Auto provided a supplementary interrogatory
informing defendants for the first time that their claim is based on the purchase
of two semi-trucks, each costing over $100,000, and noted that the steel tubing
was no longer relevant because the “class definition no longer includes steel
tubing.” Aside from serving as evidence of how significantly the class definition
has changed, this maneuver has left Supreme Auto in the same position as its coplaintiffs. Michigan’s four-year statute of limitations, which governs Supreme
Auto’s claims, has now expired on anything other than the initial steel tubing
allegations. See Mich. Comp. Laws § 445.781. Like the fifteen new named
plaintiffs, Supreme Auto’s amended allegations do not warrant tolling and are
thus untimely.
E.
Relation Back of Amendments
Rule 15(c)(1)(B) provides that an amended pleading relates back to the
original where “the amendment asserts a claim or defense that arose out of the
conduct, transaction, or occurrence set out—or attempted to be set out—in the
original pleading.” Fed. R. Civ. P. 15(c). The touchstone of whether an amendment
relates back is whether the original complaint “gave the defendant enough notice of
the nature and scope of the plaintiff’s claim that he shouldn’t have been surprised
by the amplification of the allegations of the original complaint in the amended
one.” Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 573 (7th Cir. 2006)
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(citing Tiller v. Atlantic Coast Line R. Co., 323 U.S. 574, 581 (1945)). Relation back
is appropriate where the “two complaints refer to the same general set of facts” even
though the amended one alleges “a different cause of action and legal theory from
the original complaint.” Id.
The amendment does not arise from the same conduct, transaction, or
occurrence as the original pleading. Although the allegations of defendants’ plot to
reduce supply remain largely the same, the transactions at issue in the original
complaint involved products made at defendants’ steel mills, while those in the first
amended complaint involved consumer products that are not manufactured or
distributed by defendants. The transactions in the amended complaint were
purchased in different states and with wholly different chains of production and
distribution than the more limited transactions in the original complaint. Plaintiffs
argue that the changed product definition is insignificant, citing Schorsch v.
Hewlett-Packard Co., 417 F.3d 748 (7th Cir. 2005), which notes that “[i]dentity of
the consumable is a detail.” Schorsch, 417 F.3d at 750. But the consumables at issue
in Schorsch were fundamentally unchanged except in terms of their function. Where
the original complaint dealt with EEPROM chips in Hewlett-Packard toner or ink
cartridges, the amended complaint substituted EEPROM chips in Hewlett-Packard
drum kits. From the outset, the suit always involved EEPROM chips in HewlettPackard manufactured printers. The identity of the consumable was deemed
insignificant in that context because the proposed change was so slight and did not
fundamentally alter the product category at issue. Here, the change in product
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definition was much more meaningful, as it abandoned entire categories from the
old definition while introducing new ones and implicating a host of new witnesses
and potential evidence. Unlike in Schorsch, the amendment in this case made
extensive additions and substitutions to the consumable definition, vastly expanded
the universe of potential plaintiffs, and would radically alter the scope and focus of
discovery.
Allowing these amendments would deprive defendants of fair notice and
create undue prejudice. Plaintiffs claim that defendants face no prejudice because
the discovery process has just begun. But defendants had no reason to assume in
2008 that they should preserve or obtain discovery relating to the consumer
products now at issue. Meanwhile, in the intervening years, evidence may have
been destroyed or lost and witnesses’ memories may have faded. Defendants also
have an interest in certainty and finality that would not be served if an entirely new
pool of plaintiffs were permitted to attach their claims to a nearly eight-year-old
complaint. “At some point, defendants should have notice of who their adversaries
are.” Leachman v. Beech Aircraft Corp., 694 F.2d 1301, 1309 (D.C. Cir. 1982).
Because none of plaintiffs’ newly added claims relate back to the original
complaint or qualify for American Pipe tolling, they are untimely and are dismissed.
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IV.
Conclusion
For the foregoing reasons, defendants’ motion to dismiss [175] is granted.
ENTER:
___________________________
Manish S. Shah
United States District Judge
Date: 3/3/2017
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