Haley Paint Company v. E.I. Dupont De Nemours and Company et al
Filing
507
MEMORANDUM OPINION. Signed by Judge Richard D Bennett on 8/26/2013. (aos, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
IN RE: TITANIUM DIOXIDE ANTITRUST
LITIGATION
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THIS DOCUMENT RELATES TO:
ALL ACTIONS
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CIVIL ACTION NO.: RDB-10-0318
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MEMORANDUM OPINION
This class action concerns an alleged price-fixing conspiracy in the market for
titanium dioxide.1 The Plaintiff class representatives Haley Paint Company, Isaac Industries,
Inc., and East Coast Colorants, LLC, doing business as Breen Color Concentrates, and the
class of titanium dioxide purchasers whom they represent (together, “Plaintiffs”) claim that
Defendants Kronos Worldwide Inc. (“Kronos”), and Cristal USA Inc., formerly known as
Millennium Inorganic Chemicals, Inc. (“Millennium”), together with E.I. du Pont de
Nemours & Co. (“DuPont”), Huntsman International LLC (“Huntsman”), and Tronox Inc.
(“Tronox”), engaged in an unlawful conspiracy in violation of Section 1 of the Sherman Act,
15 U.S.C. § 1, to fix, raise, or maintain the price of titanium dioxide in the United States.
The Plaintiffs allege that as a consequence of the unlawful conspiracy, the Defendants were
successful in charging artificially inflated prices for titanium dioxide.
1
Titanium dioxide (“TiO2”) is a “dry chemical powder that is the world’s most widely used pigment
for providing whiteness, brightness, and opacity . . . to many products, particularly paints and other
coatings.” See Mem. Op. Granting Mot. for Class Certification 2, ECF No. 337 (internal quotation
omitted).
1
On August 6, 2013, this Court ordered a stay of all proceedings between the
Plaintiffs, DuPont, and Huntsman, as those parties have reached agreements in principle to
settle and release the class claims against DuPont and Huntsman. See Stay Order, ECF No.
484. In a Memorandum Opinion and Order issued on August 14, 2013 (ECF Nos. 498 &
499), this Court denied the Motions for Summary Judgment filed by Defendants Millennium
and Kronos. Presently pending before this Court is the Defendants’ Motion to Compel
Arbitration and Stay Proceedings, Motion to Dismiss for Improper Venue, Motion to Strike,
and Renewed Motion to Amend the Class Definition (ECF No. 423).
Defendants
Millennium and Kronos argue that approximately 320 members of the class are contractually
precluded from participating in this class action. They seek to enforce arbitration clauses,
class action and jury trial waivers, and forum selection clauses against the relevant class
members. They also ask this Court to amend its definition of the class to exclude any
titanium dioxide purchasers whose contracts contain these clauses.
The parties’ submissions have been reviewed, and a hearing was held on June 25,
2013. In addition, the Court has reviewed the supplemental memoranda regarding the
impact of the DuPont and Huntsman settlements.
For the reasons that follow, the
Defendants’ Motion to Compel Arbitration and Stay Proceedings, Motion to Dismiss for
Improper Venue, Motion to Strike, and Renewed Motion to Amend the Class Definition
(ECF No. 423) is GRANTED.
BACKGROUND
The facts of this case are fully set forth in the Memorandum Opinion on the
Defendants’ Motions for Summary Judgment, issued on August 14, 2013 (ECF No. 498).
2
For purposes of this Motion, the Court recites facts pertinent to the issue at hand: whether
arbitration clauses, forum selection clauses, and class action and jury waivers entered into by
some of the class members may be enforced against them, to the extent that they are
precluded from pursuing their claims as part of this class action litigation.
The Plaintiff class representatives, Haley Paint Company, Isaac Industries, and East
Coast Colorants, LLC, doing business as Breen Color Concentrates, are small purchasers of
titanium dioxide. They bring this case under Section 1 of the Sherman Act, alleging that the
Defendants Millennium and Kronos, as well as DuPont, Huntsman, and Tronox, which are
the market leaders in the production of titanium dioxide, conspired to fix prices during a
period from February 1, 2003 to the present (the “Class Period”). On February 9, 2010, the
Plaintiffs filed suit, and they submitted an Amended Consolidated Complaint (ECF No. 51)
on April 12, 2010, initiating this class action lawsuit.
On August 28, 2012, this Court issued a Memorandum Opinion (ECF No. 337)
certifying a class of titanium dioxide purchasers who are alleged to have sustained injury
when they paid artificially inflated prices for the product.2 The class is currently defined as
follows:
All persons and entities who purchased titanium dioxide in the United States
directly from one or more Defendants or Tronox, or from any predecessors,
parents, subsidiaries, or affiliates thereof, between February 1, 2003, and the
present (“Class Period”). Excluded from the Class are Defendants, their
coconspirators, parent companies, predecessors, subsidiaries and affiliates, and
all governmental entities.
The Defendants petitioned to appeal this Court’s decision certifying the class, and that petition was
denied by the United States Court of Appeals for the Fourth Circuit on November 14, 2012. See
Order, In re Titanium Dioxide Antitrust Litig., No. 12-320 (1:10-CV-00318-RDB) (4th Cir. Nov. 14,
2012).
2
3
In their opposition to class certification, the four original Defendants argued that some
putative class members purchased titanium dioxide pursuant to contracts containing
mandatory arbitration clauses, forum selection clauses, and class action and jury trial waivers,
all of which would contractually bar them from participating in this class action. See Class
Cert. Mem. Op. 40. Though these contractual provisions did not defeat class certification,
this Court left open the possibility of a later amendment to the class certification Order if
certain members’ contracts rendered them atypical of the class. Id.
On November 2, 2012, the four original Defendants moved to amend the class
definition (ECF No. 351). They asserted that the class should be defined to exclude any
putative class members who would be contractually precluded from participation in this class
action litigation. In a Memorandum Opinion and Order of November 27, 2012 (ECF Nos.
366 & 367), this Court denied the motion as not yet ripe for review.
Specifically, this Court
found that a determination regarding whether mandatory contractual provisions would be
enforceable against putative class members should await the expiration of the class opt-out
period, when the parties to this action would be known. See Nov. Mot. Amend Class Def.
Mem. Op. 6-7.
On March 18, 2013, the Court-appointed Notice Administrator reported that after
eleven persons properly opted out of the class, the final class was composed of 537 unique
entities.
See Sherwood Decl., ECF No. 403.
With that information, the remaining
Defendants Millennium and Kronos have moved this Court to enforce the contractual
provisions that they argue bar some 320 class members from participating in this class
action. They specifically request that this Court (1) order the class members with claims
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subject to an arbitration clause to proceed, if at all, in arbitration; (2) dismiss the claims of
class members whose purchases were subject to mandatory forum selection provisions that
render this Court an improper forum; and (3) strike the jury trial demands of class members
that have contractually waived their rights to a jury trial. The clauses asserted by the
Defendants are described herein.
DuPont: Approximately 215 titanium dioxide purchasers of DuPont signed contracts
with mandatory arbitration clauses, class action waiver clauses, or forum selection clauses.
See Defs.’ Ex. 3, ECF No. 460-2; Daney Decl. & DuPont Exs. 1-58, ECF No. 426 & 426-1
through 426-58. Some of these contractual clauses were individually negotiated. See Daney
Decl. ¶ 4 (listing thirty-one DuPont customers who agreed to formal written contracts
containing an arbitration clause); id. ¶ 17 (naming twenty-nine DuPont customers who
signed class action waivers as part of formal written agreements); id. ¶ 19 (identifying twelve
DuPont customers with forum selection clauses in their contracts). The majority of the
clauses, however, are part of DuPont’s Standard Conditions of Sale, which as of March 2007
include a mandatory arbitration clause and class action waiver.3 See id. ¶¶ 15, 17 (identifying
3
DuPont’s Standard Conditions of Sale, revised in March 2007, read in pertinent part:
Buyer and Seller agree to arbitrate all disputes, claims, or controversies whether based on
contract, tort, statute, or any other legal or equitable theory, arising out of or relating
to (a) this Agreement or the relationship which results from this Agreement, (b) the
breach, termination or validity of this Agreement, (c) the purchase or supply of any
product, service, or information provided by Seller, (d) events leading up to the
formation of Buyer’s and Seller’s relationship, and (e) any issue related to the creation
of this Agreement or its scope, including the scope and validity of this paragraph.
[...]
Buyer and Seller agree not to file or join any class action or class arbitration, seek or consent
to class relief, or seek or consent to the consolidation or joinder of its claims with
those of any third party.
Daney Decl. ¶¶ 7, 16 (emphasis added); DuPont Ex. 9, DUPTIO20375422 ¶ 11.
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180 DuPont customers who agreed to the arbitration provision and class action waiver in
DuPont’s revised Standard Conditions of Sale).
Huntsman: Approximately 109 Huntsman customers signed contracts containing
forum selection clauses, jury waivers, or arbitration clauses. See Defs. Ex. 3; Quinn Decl. &
Huntsman Exs., ECF No. 427 & 427-1 through 427-40. Many of Huntsman’s supply
agreements contain a set of “General Terms and Conditions,” including a jury waiver for
“any action, suit or proceeding arising out of or relating to” the agreement. See Quinn Decl.
¶ 5; Huntsman Exs. 1-5. Some supply agreements also provide that the parties “irrevocably
submit to the exclusive jurisdiction” of courts other than this Court—to wit, the United
States District Court for the Southern District of Texas; the Texas State District Courts of
Harris County, Texas; the United States District Court for the District of Delaware; or the
state Chancery Court in Wilmington, Delaware.
See id.
All in all, twenty-five supply
agreements contain these clauses. Id. Moreover, nine of Huntsman’s distributors agreed to
waive their right to trial by jury and submit to the exclusive jurisdiction of the District Court
for the Southern District of Texas or State District Courts in Harris County, Texas. See
Quinn Decl. ¶ 6; Huntsman Exs. 26-34.
Huntsman also sold titanium dioxide to the Guild CPO, Inc. (“the Guild CPO”), an
organization made up of paint and coatings manufacturers and providing cooperative
purchasing services for its members. See Quinn Decl. ¶ 7. A total of eighty-three Guild
CPO members agreed to waive “any right it may have to a trial by jury” and “irrevocably
submit to the exclusive jurisdiction” of the Southern District of Texas and the Texas state
courts of Harris County. See id. ¶ 8.
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Finally, Huntsman and titanium dioxide customer GAF agreed pursuant to their
contract that “[a]ny controversy or claim arising from or relating to this Agreement shall be
settled by final and binding arbitration by a single arbitrator.” See id. ¶ 9; Huntsman Ex. 38.
Kronos: Approximately nine Kronos customers entered into contracts for the
purchase of titanium dioxide that included jury waivers, mandatory arbitration clauses, or
forum selection provisions. See Defs.’ Ex. 3; Sanzalone Decl. & Kronos Exs. 1-21, ECF No.
428 & 428-1 through 428-21. Though Kronos’s standard supply agreements do not contain
these clauses, customers sometimes request that they be included. See Sanzalone Decl. ¶ 5
(identifying seven Kronos customers with arbitration clauses in their contracts); id. ¶ 7
(listing two Kronos customers who agreed to jury waiver provisions); id. ¶ 9 (identifying
three Kronos customers whose contracts contain forum selection clauses).
Millennium: Finally, an estimated seven entities who purchased titanium dioxide from
Millennium agreed to mandatory arbitration provisions or forum selection clauses. See Defs.’
Ex. 3; Clover Decl., ECF No. 425 & Millennium Exs., ECF No. 425 & 425-1 through 425-7.
For example, some Millennium contracts provide that all disputes between the parties should
be arbitrated at The Hague, Netherlands, see Millennium Exs. 1-2, or in Baltimore, Maryland,
see Millennium Ex. 7. Millennium’s contract with customer Weyerhauser Company includes
a forum selection clause requiring claims to be litigated in the State of Washington. See
Millennium Ex. 6.
7
In addition to asserting the subject contractual clauses against the 320 identified
current class members,4 the Defendants have renewed their Motion to Amend Class
Definition. They argue that the class is overly broad and improperly certified under Rule 23
of the Federal Rules of Civil Procedure for two reasons. First, they assert that the claims of
class members that cannot proceed in this class action litigation are atypical, and the class
representatives cannot adequately represent these members. See Fed. R. Civ. P. 23(a)(3)-(4).
Moreover, the Defendants contend that questions affecting individual class members now
predominate over the common questions, such that Rule 23(b) is no longer satisfied. See
Fed. R. Civ. P. 23(b)(3). To cure these Rule 23 deficiencies, the Defendants propose that the
current class definition be amended as follows:
All persons and entities who purchased titanium dioxide in the United States
directly from one or more Defendants or Tronox, or from any predecessors,
parents, subsidiaries, or affiliates thereof, between February 1, 2003, and the
present (“Class Period”), except those persons and entities who purchased titanium
dioxide in the United States directly from one or more Defendants or Tronox, or from any
predecessors, parents, subsidiaries, or affiliates thereof, during the Class Period pursuant to a
contract containing one or more of the following: (i) an arbitration clause, (ii) a clause
restricting the litigation of disputes to courts other than the U.S. District Court for the
District of Maryland, (iii) a class action waiver clause, or (iv) a provision waiving the right
to a jury trial. Also excluded from the Class are Defendants, their
coconspirators, parent companies, predecessors, subsidiaries and affiliates, and
all governmental entities.
Defs.’ Renewed Mot. to Amend Class Def. Mem. 4, ECF No. 424-2 (emphasis on proposed
amendment added).
4
Many of the customers who purchased titanium dioxide pursuant to asserted clauses entered into
more than one such clause, such that Defendants in their Exhibit 1, tables A through E, list more
than 320 contractual clauses that they argue preclude participation in this class action litigation. See
Defs.’ Ex. 1, ECF No. 424-1. Taking into consideration the customers who signed more than one
such clause, Defendants’ Exhibit 3 identifies the 320 separate class members subject to one or more
mandatory arbitration clauses, forum selection clauses, class action waivers, or jury trial waivers. See
Defs.’ Ex. 3, ECF No. 460-2.
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For the reasons stated below, the Defendants’ Motion to Compel Arbitration and
Stay Proceedings, Motion to Dismiss for Improper Venue, Motion to Strike Jury Trial
Demand, and Renewed Motion to Amend the Class Definition (ECF No. 423) is
GRANTED.
ANALYSIS
I. Enforcement by Nonsignatory Defendants Under a Theory of Equitable
Estoppel
At the outset, this Court finds that, based on principles of equitable estoppel,
Defendants Millennium and Kronos can enforce not only those arbitration clauses, forum
selection clauses, and class action and jury waiver provisions to which their approximately
sixteen customers agreed, but also the subject clauses contained in the contracts of the
settling parties DuPont and Huntsman. The question whether a nonsignatory may compel a
signatory to arbitrate claims is governed by state law. See Arthur Andersen LLP v. Carlisle, 556
U.S. 624, 630-31 (2009). Most of the contracts at issue in this case are governed by the law
of Delaware, while some contracts provide for interpretation under laws of Ontario, Canada;
Ohio; New York; or the United States, that is, federal law. See Supp. Mem. tbl. A-1, ECF
No. 485-1. The customer whose contract provides for interpretation under the law of
Ontario, Cascades Boxboard Group—Connecticut LLC, see DuPont Ex. 12, also entered
into an agreement governed by Delaware law, see DuPont Ex. 11; thus this Court need not
look to Ontario law. Delaware, Ohio, and New York apply the same equitable estoppel test
applied by the Fourth Circuit. See Wilcox & Fetzer, Ltd. v. Corbett & Wilcox, No. Civ.A.2037N., 2006 WL 2473665, *4-5 (Del. Ch. Aug. 22, 2006); I Sports v. IMG Worldwide, Inc., 813
N.E.2d 4, 8-9 (Ohio Ct. App. 2004); Hoffman v. Finger Lakes Instrumentation, LLC, 789
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N.Y.S.2d 410, 414-15 (N.Y. Sup. Ct. 2005). For this reason, this Court applies the equitable
estoppel test as recited by the Fourth Circuit.
The United States Court of Appeals for the Fourth Circuit has found that “a
nonsignatory to an arbitration clause may, in certain situations, compel a signatory to the
clause to arbitrate the signatory’s claims against the nonsignatory despite the fact that the
signatory and nonsignatory lack an agreement to arbitrate.” Aggarao v. MOL Ship Mgmt. Co.,
675 F.3d 355, 373 (4th Cir. 2010) (quoting Am. Bankers Ins. Grp. v. Long, 453 F.3d 623, 627
(4th Cir. 2006)). One such situation is when “the signatory is equitably estopped from
arguing that a nonsignatory is not a party to the arbitration clause.” Id. The doctrine of
equitable estoppel applies (1) when the signatory’s claims “arise out of and relate directly to
the written agreement,” see Am. Bankers, 453 F.3d at 627 (quoting Brantley v. Republic Mortg.
Ins. Co., 424 F.3d 392, 395-96 (4th Cir. 2005)); or (2) when the signatory raises allegations of
“substantially interdependent or concerted misconduct by both the nonsignatory and one or
more signatories to the contract,” see Brantley, 424 F.3d at 396 (quoting MS Dealer Serv. Corp.
v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999), abrogated on other grounds, Arthur Andersen LLP,
556 U.S. at 631 (holding that state law governs whether an arbitration clause is enforceable
against a nonsignatory under the FAA)).
In this case, almost all of the arbitration clauses that Defendants Millennium and
Kronos seek to enforce derive from contracts formed between class members and either
DuPont or Huntsman.
Indeed, the record reflects that there are only seven Kronos
contracts and seven Millennium contracts that contain arbitration clauses.
However,
DuPont and Huntsman have each reached agreements in principle with the Plaintiffs to
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settle the claims against them. Consequently, the Defendants, as nonsignatories, can enforce
the lion’s share of these contractual clauses only by relying on equitable estoppel to bar the
signatory class members from pursuing this litigation.
Assuming that the arbitration clauses at issue are enforceable,5 this Court determines
that the class members would be equitably estopped from avoiding the arbitration clauses
that they signed with DuPont and Huntsman. In other words, Millennium and Kronos can
compel the signatory class members to arbitrate their claims with the Defendants. The
doctrine of equitable estoppel applies in two cases—when the signatory’s claims arise out of
the agreement containing the clause, or when the signatory alleges concerted misconduct by
the nonsignatory and the signatory. See Brantley, 424 F.3d at 396 (internal citations and
quotation marks omitted). As the United States Court of Appeals for the Eleventh Circuit
has reasoned, equitable estoppel should bar the signatory from pursuing litigation when
concerted misconduct is alleged; “[o]therwise, the arbitration proceedings [between the two
signatories] would be rendered meaningless and the federal policy in favor of arbitration
effectively thwarted.” MS Dealer, 177 F.3d at 947 (internal citation and quotation marks
omitted).
In the Complaint, the Plaintiffs assert that the Defendants Millennium and Kronos,
along with DuPont, Huntsman, and Tronox, violated the Sherman Act through a
“continuing combination or conspiracy to unreasonably restrain trade and commerce” and
“concerted action among Defendants and their coconspirators.” Am. Consolidated Compl.
¶¶ 122, 125, ECF No. 51.
The signatories thus raise allegations of “substantially
5
In Section II.B of this Memorandum Opinion, this Court finds that the arbitration clauses are
enforceable.
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interdependent or concerted misconduct by both the nonsignatory and one or more
signatories to the contract.” Brantley, 424 F.3d at 396 (quoting MS Dealer, 177 F.3d at 947).
As in MS Dealer, the arbitration clauses entered into by the class members and DuPont and
Huntsman would be “rendered meaningless” if not for equitable estoppel, 177 F.3d at 947,
because the Plaintiffs proceed in this action under a theory of joint and several liability,
naming the four original Defendants as co-conspirators. Moreover, the “liberal federal
policy favoring arbitration agreements” weighs in favor of permitting the nonsignatories
Millennium and Kronos to enforce the arbitration clauses that govern the relevant class
members’ contracts for the purchases of titanium dioxide. Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 25 (1991); see also Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 24 (1983) (“[F]ederal law requires piecemeal resolution when necessary to give effect
to an arbitration agreement.”).
The Plaintiffs oppose the application of equitable estoppel, contending that the
doctrine cannot apply when the connection between Millennium, Kronos, DuPont, and
Huntsman is only their illegal concerted activity. The Plaintiffs cited Laumann v. National
Hockey League, Nos. 12 Civ. 1817 & 3704 (SAS), 2013 WL 837640, at *2 n.25 (S.D.N.Y.
2013), for the proposition that a “non-signatory to an arbitration agreement cannot enforce
an arbitration clause where its only relationship to the signatories is as a co-conspirator.”
Further, the United States Court of Appeals for the Second Circuit has found that a
nonsignatory could not avail itself of arbitration clauses under a theory of equitable estoppel
where there was no “relationship between [the nonsignatory] and the plaintiffs sufficient to
demonstrate that the plaintiffs intended to arbitrate this dispute with [the nonsignatory].”
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Ross v. Am. Express, Inc. 547 F.3d 137, 147 (2d Cir. 2008); see also JLM Indus., Inc. v. StoltNielsen SA, 387 F.3d 163, 178 n.7 (2d Cir. 2004) (noting that, while equitable estoppel
applied in the case at hand, “[w]e do not, in so holding, mean to suggest that a claim against
a co-conspirator of a party alleged to have engaged in antitrust violations will always be
intertwined to a degree sufficient to work an estoppel. The inquiry remains a fact-specific
one.”). The approach taken by the Second Circuit in Ross, as well as the court in Laumann,
reflects the Second Circuit’s concern that in the context of conspiracy allegations, the
application of equitable estoppel is “problematic.” Ross, 547 F.3d at 148.
While the Second Circuit indeed gives a narrower reading to the equitable estoppel
doctrine in the context of conspiracy claims, other courts—including the Fourth Circuit—
have recognized the application of equitable estoppel in such circumstances. The Fourth
Circuit in Aggarao held that for equitable estoppel to apply, there must be “allegations of
coordinated behavior between a signatory and a nonsignatory defendant,” and “the claims
against both the signatory and nonsignatory must be based on the same facts, be inherently
inseparable, and fall within the scope of the arbitration clause.” 675 F.3d at 374 (quoting MS
Dealer, 177 F.3d at 947-48, and Donaldson Co. v. Burroughs Diesel, Inc., 581 F.3d 726, 735 (8th
Cir. 2009)). Moreover, the Eleventh Circuit’s decision in MS Dealer, from which the Fourth
Circuit’s equitable estoppel test is derived, involved the application of equitable estoppel
where the plaintiff alleged a fraud claim based on the nonsignatory and signatory parties’
conspiracy to charge an excessive amount pursuant to a contract. Other courts have likewise
precluded a signatory plaintiff from avoiding an arbitration clause where the underlying
claim against the signatory and nonsignatory defendants involved allegations of
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conspiratorial conduct. See In re Universal Serv. Fund Tel. Billing Practices Litig., 300 F. Supp. 2d
1107, 1139 (D. Kan. 2003) (in the context of an antitrust claim alleging that three long
distance carriers fixed prices, holding that equitable estoppel prevented signatories from
litigating against any of the three defendant carriers); Positive Software Solutions, Inc. v. New
Century Mortg. Corp., 259 F. Supp. 2d 531, 540 (N.D. Tex. 2003) (“Since all of [the plaintiff’s]
allegations against the Nonsignatory Defendants concern their interdependent and concerted
misconduct with [the signatory defendant], the second independent basis for equitable
estoppel is met.”).
The Plaintiffs’ Complaint alleges coordinated behavior between signatories and
nonsignatories. Moreover, the claims are based on the same facts, are inherently inseparable,
and, as this Court explains in Section II.B of this Memorandum Opinion, fall within the
scope of the arbitration clauses at issue. Thus, the Aggarao factors are met in this case.
Moreover, that the signatory Defendants—that is, DuPont and Huntsman—are not seeking
to enforce their rights under the contracts does not preclude the application of equitable
estoppel in this case. See, e.g., Am. Bankers, 453 F.3d at 625 (permitting a nonsignatory to
enforce an arbitration clause in the absence of the signatory defendant). Accordingly, the
Defendants Millennium and Kronos may compel the class members who signed arbitration
clauses in their purchase agreements with DuPont or Huntsman to arbitrate, as those class
members are equitably estopped from avoiding their contractual agreements.6
6
Because the second scenario giving rise to the equitable estoppel doctrine applies in this case, this
Court need not determine whether the other ground for equitable estoppel—that the signatory’s
claims “arise out of and relate directly to the written agreement,” see Am. Bankers, 453 F.3d at 627—
would be satisfied.
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For the same equitable reasons, the forum selection clauses, jury waivers, and class
action waivers can be enforced by the nonsignatory Defendants. The purpose of equitable
estoppel is to preclude “a party from asserting his rights he otherwise would have had
against another when his own conduct renders assertion of those rights contrary to equity.”
Id. at 627 (quoting Int’l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411,
416 (4th Cir. 2000)). In this case, the Plaintiffs have brought suit alleging that the prices they
paid, pursuant to their agreements with Millennium, Kronos, DuPont, and Huntsman, were
artificially high as a result of the alleged price-fixing agreement among the pigment
producers. They cannot rely on their contracts to assert this Sherman Act claim, yet
repudiate the clauses within those contracts that preclude certain members from
participating in this class action litigation. To rule otherwise would in essence allow class
members to have their cake and eat it too—in other words, to “rely on the contract when it
works” to their advantage, while “repudiating it” when it works to their disadvantage. In re
Humana Inc. Managed Care Litig., 285 F.3d 971, 976 (11th Cir. 2002) (citation and quotation
marks omitted); see also Liles v. Ginn-La W. End, Ltd., 631 F.3d 1242, 1256-57 & n.23 (11th
Cir. 2011) (equitably estopping a signatory from avoiding enforcement of a forum selection
clause as to claims against nonsignatories and noting that precedent “strongly suggests that
any of the established theories for allowing a non-signatory to invoke a contract’s arbitration
clause should also be sufficient to allow a non-signatory to invoke a forum-selection clause”
(internal citation and quotation marks omitted)); Villanueva v. Barcroft, 822 F. Supp. 2d 726,
739 (N.D. Ohio 2011) (applying the equitable estoppel test derived from the Eleventh
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Circuit’s decision in MS Dealer, 177 F.3d at 947, to prevent a signatory from avoiding a
forum selection clause).
II. Enforceability of Asserted Clauses
Having found that the asserted arbitration clauses, forum selection clauses, and jury
and class action waivers that pertain only to DuPont and Huntsman may be enforced by the
Defendants Millennium and Kronos, this Court must now determine whether those clauses,
as well as the clauses entered into by Millennium, Kronos, and their customers, are
enforceable. Before turning to the individual arguments relating to enforceability, this Court
addresses the Plaintiffs’ argument based on waiver.
A. Plaintiffs’ Waiver Argument
The Plaintiffs claim that the Defendants have waived their rights to enforce the
arbitration and class action waiver clauses, because they have known about these clauses
since the early stages of this litigation, yet did not seek to enforce them until class
certification. In general, “a party waives arbitration by seeking a decision on the merits
before attempting to arbitrate.” In re TFT-LCD (Flat Panel) Antitrust Litig., No. M 07-1827
SI, MDL No. 1827, 2011 WL 1753784 (N.D. Cal. May 9, 2011); see also Fraser v. Merrill Lynch
Pierce, Fenner & Smith Inc., 817 F.2d 250, 252 (4th Cir. 1987) (“A litigant may waive its right to
invoke the Federal Arbitration Act by so substantially utilizing the litigation machinery that
to subsequently permit arbitration would prejudice the party opposing the stay.” (quoting
Maxum Founds. v. Salus Corp., 779 F.2d 974, 981 (4th Cir. 1985))).
In the context of a class action, however, the Defendants could not have waived their
rights to enforce the contractual clauses at issue until the class composition was final. See
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Flat Panel, 2011 WL 1753784, at *4 (holding that “putative class members are not parties to
an action prior to class certification” (internal quotation omitted)); cf. Muhammad v. Giant Food
Inc., 108 F. App’x 757, 765 n.5 (4th Cir. 2004) (per curiam) (noting that pre-class certification
dismissal binds only the named parties, and not putative class members); Shelton v. Pargo, Inc.,
582 F.2d 1298, 1314-15 (4th Cir. 1978) (same).7 As a result, the Defendants moved to
enforce their arbitration rights against the class members at the proper stage—at class
certification and subsequently in a Motion to Amend Class Definition (ECF No. 351). In
both circumstances, this Court indicated that it might entertain the Defendants’ argument at
a later time. See Class Cert. Mem. Op. 40, ECF No. 337 (“[T]o the extent certain putative
class members’ contacts render them atypical of the class as a whole, this Court will exercise
its discretion to amend its class certification Order as necessary.”); Nov. Mot. Amend Class
Def. Mem. Op. 6 (anticipating a ruling on this issue once “the parties to this class action
litigation are known and the record presented by the parties is fully developed”). The
Plaintiffs themselves suggested that this issue be deferred until after the class opt-out period
had expired. See Nov. Mot. Amend Class Def. Mem. Op. (heeding the Plaintiffs’ suggestion
that this issue be resolved only after “notice has been issued to the class and the opt-out
period has expired”). Accordingly, the Defendants have not waived their rights to enforce
the asserted arbitration clauses and class action waivers, and their Motion is timely.
B. Mandatory Arbitration Provisions
The “liberal federal policy favoring arbitration agreements,” Gilmer, 500 U.S. at 25,
extends to the antitrust context. The Supreme Court recently held in American Express Co. v.
7
It is noteworthy that the Defendants have not attempted to assert any arbitration clauses entered
into by the named party Haley Paint Company.
17
Italian Colors Restaurant, 133 S. Ct. 2304 (2013), that an arbitration clause could be enforced to
preclude class litigation of a Sherman Act claim. The Fourth Circuit has likewise ruled that
“domestic antitrust claims, as a class, are suitable for arbitration.” In re Cotton Yarn Antitrust
Litig., 505 F.3d 274, 282 (4th Cir. 2007); cf. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614 (1985) (holding that antitrust claims arising from international transactions
are suitable for arbitration).
The Defendants Millennium and Kronos argue that the
arbitration clauses signed by class members should be enforced, such that the relevant class
members must pursue their claims, if at all, in arbitration.
Section 2 of the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1, provides as follows:
[A] contract evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such contract or transaction,
or the refusal to perform the whole or any part thereof, or an agreement in
writing to submit to arbitration an existing controversy arising out of such a
contract, transaction, or refusal, shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the revocation of any
contract.
Id. § 2. The FAA “establishes that, as a matter of federal law, any doubts concerning the
scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at
hand is the construction of the contract language itself or an allegation of waiver, delay, or a
like defense to arbitrability.” Moses H. Cone Mem’l Hosp., 460 U.S. at 24-25. Despite this
presumption, “arbitration is a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit.” United Steelworkers of Am. v.
Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960). The Fourth Circuit has held that a
litigant can compel arbitration under the FAA if he can demonstrate “(1) the existence of a
dispute between the parties, (2) a written agreement that includes an arbitration provision
18
which purports to cover the dispute, (3) the relationship of the transaction, which is
evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or
refusal of [the signatory party] to arbitrate the dispute.” Whiteside v. Teltech Corp., 940 F.2d 99,
102 (4th Cir. 1991).
In this case, the arbitration agreements that the Defendants Millennium and Kronos
assert are enforceable against the signatory class members. It is undeniable that the parties
are involved in a dispute, that this dispute involves interstate commerce, and that the
Plaintiffs oppose arbitration, thus satisfying the first, third, and fourth elements of the
Fourth’s Circuit test in Whiteside. Id. The only question is whether the arbitration provisions
on which the Defendants rely purport to cover this dispute. This Court answers that
question in the affirmative.
The arbitration provisions asserted by the Defendants are broad and encompass the
Plaintiffs’ antitrust claim. Though the exact wording of each asserted clause varies, they
employ language indicating that the agreement is far-reaching.8 Broad arbitration clauses
such as the ones asserted in this case have been found to apply to Sherman Act claims. See,
e.g., Cotton Yarn, 505 F.3d at 278-82; JLM Indus. Inc. v. Stolt-Nielsen SA, 387 F.3d 163, 175 (2d
Cir. 2004) (finding that a broadly worded arbitration clause was expansive enough to apply
8
See, e.g., DuPont Ex. 1 at DUPTIO20376530 (“All disputes arising out of or in connection with the
present Agreement shall be finally settled under the Rules of Arbitration.”); DuPont Ex. 9
(DuPont’s “Standard Conditions of Sale”) ¶ 11 (“Buyer and Seller agree to arbitrate all disputes,
claims, or controversies whether based on contract, tort, statute, or any other legal or equitable
theory . . . .”); Huntsman Ex. 38 at HILLC006938362 (“Any controversy or claim arising from or
related to this Agreement shall be settled by final and binding arbitration.”); Kronos Ex. 5 at
KROWW00072493 (providing that “any dispute, claim, or controversy arising out of or relating in
any way to this Agreement . . . shall be submitted to the American Arbitration Association” if
resolution through good faith negotiations is not achieved); Millennium Ex. 2 at MIC04360873
(“[A]ll disputes arising from this Agreement will be settled exclusively by binding arbitration.”).
19
to Sherman Act claims). Bolstering this Court’s conclusion is the Supreme Court’s guidance
that “any doubts concerning the scope of arbitrable issues should be resolved in favor of
arbitration.” Moses H. Cone Mem’l Hosp., 460 U.S. at 24-25.
Moreover, the arbitration clauses apply retroactively to encompass even those
antitrust claims that arose prior to the execution of the relevant contracts. Many of the
asserted contracts explicitly state that they apply retroactively or supersede all previous
agreements.9 For those contracts where the retroactive application is not specifically stated,
the broad wording of each clause and the underlying federal policy in favor of arbitration
lead to the conclusion that these clauses apply retroactively. See Moses H. Cone Mem’l Hosp.,
460 U.S. at 24-25; Gilmer, 500 U.S. at 25.
The Plaintiffs challenge this argument, pointing out that some of the asserted
contracts are unsigned, see, e.g., Kronos Ex. 1, while others post-date the filing of this lawsuit,
see, e.g., Huntsman Ex. 38; Kronos Exs. 2, 6, 12; Millennium Ex. 7. Neither fact affects the
enforceability of the asserted arbitration clauses.
First, there is no requirement that
arbitration agreements must be signed to be enforceable. See Caley v. Gulfstream Aerospace
Corp., 428 F.3d 1359, 1369 (11th Cir. 2005) (“[T]he plain language of § 2 [of the FAA]
requires that the arbitration provision be ‘written.’ It does not, however, require that the
agreement to arbitrate be signed by either party; nor does any other provision of the FAA.”);
Tinder v. Pinkerton Sec., 305 F.3d 728, 736 (7th Cir. 2002) (same).
9
See, e.g., DuPont Ex. 9 (DuPont’s “Standard Conditions of Sale”) ¶ 11 (mandating arbitration of
“all disputes” relating to “the purchase or supply of any product” and “events leading up to the
formation of Buyer’s and Seller’s relationship”); id. ¶ 15 (“This Agreement supersedes all prior
agreements, representations, and understandings between the parties.”); Huntsman Ex. 38 at
HILLC006938362 (“This Agreement contains the entire agreement and understanding between the
parties hereto, and supersedes any previous communications, representations, or agreements.”).
20
As for the Plaintiffs’ second point of contention, the Defendants reply that the
contracts that post-date the Complaint were entered into during the normal course of their
business, thus there is no concern that the Defendants sought to solicit exclusions from the
class action. Even more convincing is the fact that some of these post-dated arbitration
clauses were requested by the class members themselves. See Kronos Ex. 2; Huntsman Ex.
38. In sum, the Plaintiffs put forward no evidence suggesting that the Defendants included
these arbitration clauses for coercive purposes.
Finally, the Plaintiffs contend that the Defendants failed to fulfill both contractual
conditions precedent and FAA procedure. They argue that some arbitration clauses, for
example, required the parties to attempt to resolve any dispute through good faith
negotiations before submitting it to arbitration. Moreover, the Plaintiffs claim that the
Defendants have failed to follow basic FAA requirements—namely, notifying the parties
against whom they intend to enforce arbitration clauses and serving the class members with
the relevant contracts. See 9 U.S.C. § 4 (requiring a party seeking an order to compel
arbitration to give “[f]ive days’ notice in writing of such application” upon the party “in
default”). These arguments, however, miss the mark. The Defendants’ Motion to Compel
Arbitration and Stay Proceedings is not meant to initiate arbitration; an order compelling
arbitration simply clarifies the forum in which the claim may be asserted. See, e.g., Horneffer v.
St. Joseph Med. Ctr., No. MJG-11-410, 2012 WL 983782, at *7 (D. Md. Mar. 21, 2012)
(“Plaintiff shall pursue his claims presented herein, if at all, in arbitration proceedings.”).
Thus the Defendants are not obligated to fulfill conditions precedent of individual
arbitration clauses. Moreover, the class members received written notice satisfying the
21
FAA’s requirement under Section 4. In particular, the class members were made aware of
the Defendants’ intention to enforce arbitration clauses by the Notice of Pendency of Class
Action, which was sent out to class members following class certification. See Ex. A, ECF
No. 386-1. The Defendants also put the class members on notice through their public
filings with regard to this issue, which were also served on Plaintiffs’ Counsel, who represent
the absent class members.
For all of these reasons, the arbitration clauses asserted by the Defendants
Millennium and Kronos are enforceable under the Federal Arbitration Act. Pursuant to
Section 4 of the Federal Arbitration Act, this Court compels the class members whose
arbitration clauses have been asserted by the Defendants to pursue their claims, if at all, in
arbitration.10
In addition to moving to compel arbitration, the Defendants Millennium and Kronos
seek a stay of trial of the proceedings as to class members who agreed to enforceable
arbitration clauses. Section 3 of the FAA provides that where a proceeding is brought in a
United States court upon an issue “referable to arbitration under an agreement in writing for
such arbitration,” the court “shall on application of one of the parties stay the trial of the
action until such arbitration has been had in accordance with the terms of the agreement.”
9 U.S.C. § 3. However, district courts in the Fourth Circuit have recognized that dismissal,
rather than a stay of trial pending arbitration, is appropriate where a court rules that all of a
plaintiff’s claims must be arbitrated. See, e.g., Payton v. Nordstrom, Inc., 462 F. Supp. 2d 706,
10
The class members whose titanium dioxide contracts contain valid and enforceable arbitration
clauses precluding them from this litigation are listed in the Defendants’ Exhibit 1, attached to their
Motion to Compel Arbitration and Stay Proceedings. See Defs.’ Ex. 1 tbl. A, ECF No. 424-1.
22
709 (M.D.N.C. 2006) (citing Webb v. Harris, 378 F. Supp. 2d 608, 613 (M.D.N.C. 2005)); see
also Lewis Tree Serv., Inc. v. Lucent Techs., Inc., 239 F. Supp. 2d 332, 340 (S.D.N.Y. 2002)
(dismissing a claim where “no useful purpose will be served by granting a stay” pending
arbitration). As the United States Court of Appeals for the Fifth Circuit held in Alford v.
Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992), Section 3 of the FAA “was not
intended to limit dismissal of a case in the proper circumstances,” that is, where all of the
issues raised must be submitted to arbitration. See id. (collecting authorities).
In the context of this class action, where certain absent class members’ claims are
subject to arbitration clauses, no useful purpose will be served by staying the pertinent
proceedings pending arbitration. In the wake of this Court’s decision, the class members
subject to enforceable arbitration clauses may decide not to proceed in arbitration. Yet for
the reasons recited above, those members’ Sherman Act claims—in their entirety—may not
be pursued in this forum. Because the entire claim of each relevant class member must be
resolved by arbitration, this Court finds that dismissal, rather than a stay of trial, is
appropriate. Accordingly, this Court dismisses the actions of those class members whose
arbitration clauses have been asserted by the Defendants and deemed by this Court to be
enforceable.11
11
All of the class action waivers asserted by the Defendants pertain to DuPont contracts. See Defs.’
Ex. 1 tbl. D, ECF No. 424-1. Moreover, each contract containing a class action waiver also includes
an arbitration clause. See id.; see also Daney Decl. ¶¶ 3, 15, 17-18. This Court has found those
arbitration clauses to be valid and enforceable. Accordingly, the class members that entered into
class action waivers are already excluded from the class on the basis of their mandatory arbitration
provisions, and this Court need not separately consider the enforceability of the asserted class action
waivers. However, this Court notes that the Plaintiffs present no reason for finding these class
action waivers invalid—apart from the issues they raised regarding the asserted arbitration clauses.
23
C. Forum Selection Clauses
Based on a similar rationale, Defendants Millennium and Kronos argue that the
asserted forum selection clauses should be held enforceable. All of the relevant clauses
provide that disputes shall be litigated in forums other than the United States District Court
for the District of Maryland.12 Accordingly, Millennium and Kronos move to dismiss the
claims of customers with forum selection clauses based on improper venue.
The United States Court of Appeals for the Fourth Circuit has held that “a motion to
dismiss based on a forum-selection clause should be properly treated under Rule 12(b)(3) as
a motion to dismiss on the basis of improper venue.” Sucampo Pharms., Inc. v. Astellas Pharma,
Inc., 471 F.3d 544, 550 (4th Cir. 2006); see also TECH USA, Inc. v. Evans, 592 F. Supp. 2d 852,
855 (D. Md. 2009). This Court has previously noted that under Rule 12(b)(3), “a court is
free to look at matters outside of the pleadings, however, the court still must draw all
reasonable inferences in the light most favorable to the” nonmoving party. Costar Realty Info.,
Inc. v. Field, 612 F. Supp. 2d 660, 672 (D. Md. 2009) (citation omitted).
In this case, the forum selection clauses limit litigation relating to the purchase
agreements to courts other than this Court. See supra note 12 & accompanying text. Because
the Sherman Act claims in this case involve each customer’s purchase of titanium dioxide
pursuant to their agreements, the forum selection clauses are triggered. Additionally, after a
review of the subject clauses, it is clear by their language that they are meant to be
12
See, e.g., DuPont Ex. 46 at DUPTIO20375190 (designating the forum of Delaware); DuPont Ex.
47 at DUPTIO20375647 (Illinois); DuPont Ex. 54 at DUPTIO20986844 (Geneva); Huntsman Ex. 2
at HILLC005139529 (District Court for the Southern District of Texas, Houston Division, or State
District Courts of Texas located in Harris County, Texas); Kronos Ex. 16 at KROWW00024416
(The Hague, Netherlands); Kronos Ex. 17 at KROWW00035655 (the state and federal courts in
Minnesota); Millennium Ex. 6 (any state or federal court within the State of Washington).
24
mandatory, not permissive. See, e.g., DuPont Ex. 46 at DUPTIO20375190 (“[T]he courts
within Delaware will be the only courts of competent jurisdiction.”); Huntsman Ex. 2 at
HILLC005139529 (“Buyer and Seller irrevocably submit to the exclusive jurisdiction of the
Federal courts of the United States of America located in the Southern District of Texas,
Houston Division, or the State District Courts of Texas located in Harris County, Texas.”).
These forum selection clauses do not “lose their force in the context of a class
action.” Wu v. Pearson Educ., Inc., 277 F.R.D. 255, 265 (S.D.N.Y. 2011). Nor are the clauses
stripped of enforceability because of the subject matter of this case. Indeed, courts have
enforced forum selection clauses in antitrust cases. See Bense v. Interstate Battery Sys. of Am.,
Inc., 683 F.2d 718 (2d Cir. 1982); Person v. Google Inc., 456 F. Supp. 2d 488, 497 (S.D.N.Y.
2006). In Wu, the District Court for the Southern District of New York confronted a similar
issue in a class action alleging copyright infringement, where some class members’ contracts
contained forum selection clauses. 277 F.R.D. 255. The district court explained that the
“best method for managing this issue is to exclude copyright holders whose licensing
agreements contain forum selection clauses or [arbitration provisions] from the class
definition.” Id. at 266.
The Plaintiffs contend that the Defendants failed to file a motion challenging venue
“before pleading,” as is required by Rule 12(b)(3) of the Federal Rules of Civil Procedure.
Moreover, the Plaintiffs argue that the Defendants failed to move to dismiss under Rule
12(b)(3), thereby waiving any challenges to venue. However, the Defendants have not
waived their right to enforce these clauses, for the same reason that they did not lose their
opportunity to challenge the arbitration clauses and class action waivers. See Section II.A
25
supra. In short, because the absent class members were not part of this case prior to class
certification, the Defendants did not have an earlier opportunity to enforce the forum
selection clauses. See Flat Panel, 2011 WL 1753784, at *4; cf. Muhammad, 108 F. App’x at 765
n.5; Shelton, 582 F.2d at 1314-15.
Third, the Plaintiffs contend that the claims in this case do not arise out of the
agreements to purchase titanium dioxide, thus the forum selection clauses do not hold force.
For example, courts have found that unfair competition claims under federal trademark law
were not governed by forum selection clauses in underlying contracts. See Altvater GesslerJ.A. Baczewski Int’l (USA) Inc. v. Sobieski Destylarnia S.A., 572 F.3d 86, 91 (2d Cir. 2009)
(holding forum selection clause in licensing contract did not encompass related unfair
competition claims, because the trademark claims “do not sound in contract and are not
based on rights originating from the licensing agreements”—that is, they “may begin in
court without any reference to the contract”) (quoting Phillips v. Audio Active Ltd., 494 F.3d
378, 392 (2d Cir. 2007)); Dearborn Indus. Mfg. Co. v. Soudronic Finanz AG, No. 95-4414, 1997
WL 156589, at *5 (N.D. Ill. Apr. 1, 1997) (same). The Plaintiffs likewise rely on a case in
which the District Court for the Northern District of Ohio found that a forum selection
clause did not control because the allegations—violations of the federal Racketeering
Influenced and Corrupt Organizations Act (“RICO”) and state tort claims—were “broader
than the forum selection clause.” Gen. Envtl. Sci. Corp. v. Horsfall, 753 F. Supp. 664, 667–68
(N.D. Ohio 1990). That court’s reasoning relied mainly on the fact that the plaintiffs
brought no contract claims and sought no contract remedies. Id. However, these cases
involved causes of action—federal trademark or RICO violations—that did not depend on
26
the existence of a contract. By contrast, the class members of this case have a potential
cause of action only if they purchased titanium dioxide from one of the pigment producers,
and each member purchased pursuant to a contract.
More importantly, none of the cases cited by the Plaintiffs involve price-fixing
allegations under the Sherman Act. As already stated, some courts have enforced forum
selection clauses in the context of such claims. See Bense, 683 F.2d 718; Person, 456 F. Supp.
2d 488. Though the Fourth Circuit has not ruled specifically on this issue, it has permitted
the enforcement of arbitration clauses in the context of an alleged antitrust price-fixing
conspiracy. See Cotton Yarn, 505 F.3d at 278-82. Courts recognize that arbitration clauses
and forum selection clauses are similar and therefore admit of similar application. Scherk v.
Alberto-Culver Co., 417 U.S. 506, 519 (1974) (reasoning that an arbitration agreement “is, in
effect, a specialized kind of forum-selection clause”); see also Villanueva, 822 F. Supp. 2d at
739 (noting that “forum selection clauses and arbitration provisions are substantially
similar”). The purchase agreements at issue in Cotton Yarn were sufficiently related to the
Sherman Act claims to give rise to the enforcement of arbitration clauses, 505 F.3d at 27882; thus, the same reasoning suggests that forum selection clauses in the relevant titanium
dioxide purchase agreements encompass the Plaintiffs’ Sherman Act claims. For these
reasons, the forum selection clauses asserted by the Defendants control.
Finally, the Plaintiffs argue that the forum selection clauses in the Guild CPO
contracts, see Huntsman Exs. 35-37, cannot be enforced, because the Defendants have not
produced contracts for the eighty-three individual class members of the Guild CPO. They
also suggest that the contracts are not enforceable because the members did not sign them.
27
This argument gains no traction. As this Court earlier described, the Guild CPO is an
organization made up of paint and coatings manufacturers and providing cooperative
purchasing services for its members. See Quinn Decl. ¶ 7. The purpose of the Guild CPO
was to negotiate for its members favorable prices for titanium dioxide. See Defs. Ex. 5, Kerr
Dep. 35. Members paid a membership fee to purchase titanium dioxide under contracts that
the Guild CPO negotiated. Id. at 48-51. The Guild CPO contracts expressly indicate that
the agreement covers the Guild CPO members.
See, e.g., Huntsman Ex. 35 at
HILLC000581535. Thus, there is no question that the class members who participated in
the Guild CPO are bound by these contracts, including their mandatory forum selection
clauses.
For all of these reasons, this Court finds that the asserted forum selection clauses are
enforceable. Accordingly, this Court dismisses the claims of customers with forum selection
clauses for improper venue under Rule 12(b)(3) of the Federal Rules of Civil Procedure.13
D. Jury Trial Waivers
The final set of clauses asserted by the Defendants Millennium and Kronos are jury
trial waivers found in some of the class members’ contracts. Based on these clauses, the
Defendants move this Court to strike the jury trial demands of the relevant class members,
pursuant to Rule 39(a) of the Federal Rules of Civil Procedure.
13
The class members whose titanium dioxide contracts contain valid and enforceable forum
selection clauses precluding them from this litigation are listed in the Defendants’ Exhibit 1,
attached to their Motion to Compel Arbitration and Stay Proceedings. See Defs.’ Ex. 1 tbls. B & C,
ECF No. 424-1.
28
Though the right to a jury trial under the Seventh Amendment is a fundamental one,
it “can be knowingly and intelligently waived by contract.” Leasing Serv. Corp. v. Crane, 804
F.2d 828, 832 (4th Cir. 1986). There is, however, a strong federal policy favoring jury trials.
Mowbray v. Zumot, 536 F. Supp. 2d 617, 620 (D. Md. 2008). For this reason, courts have
typically “indulge[d] every reasonable presumption against waiver.” Aetna Ins. Co. v. Kennedy,
301 U.S. 389, 393 (1937). Accordingly, the Fourth Circuit has held that a party seeking to
enforce a contractual provision waiving the right to a jury trial must establish that the waiver
was knowing and voluntary. Leasing Serv. Corp., 804 F.2d at 833. Factors relevant to this
determination are (1) the relative bargaining power of the parties; (2) the conspicuousness of
the provision; and (3) whether the provision is comprehensible. Bank of Am., N.A. v. Jill P.
Mitchell Living Trust, 822 F. Supp. 2d 505, 530 (D. Md. 2011).
The Defendants assert that forty-three titanium dioxide customers participating in the
class signed contracts including enforceable jury trial waivers. See Defs.’ Ex. 1 tbl. E, ECF
No. 424-1. These clauses are found only in contracts involving Huntsman and Kronos. Id.
It is important to note that Kronos’s standard supply agreements did not contain these
clauses, but two Kronos customers requested that they be included. See Sanzalone Decl. ¶ 7.
Upon review of these clauses, this Court finds that the relevant class members
knowingly and voluntarily waived their jury trial rights. First, there is no concern in this case
about the relative bargaining power of the parties—the customers purchasing titanium
dioxide are either paint companies that individually negotiated with the pigment producers
or, in a few cases, members of the Guild CPO, who were represented by an organization
whose purpose was to negotiate for favorable contract terms on their members’ behalf.
29
Thus, the customers stood on par with Huntsman and Kronos. Moreover, the clauses are
conspicuous. In nearly all contracts at issue, the jury waiver language is printed in all capital
letters, so that the terms are readable and obvious.
See, e.g., Huntsman Exs. 27 at
HILLC000581439, 30 at HILLC1388027, 40 at HILLC583762; Kronos Ex. 18 at
KROWW00626614. The clauses are often set off as a separate paragraph in the contract.
See, e.g., Huntsman Ex. 35 at HILLC00581544; Kronos Ex. 18 at KROWW00626614.
Moreover, the headings in many of the asserted contracts indicate that the contract section
contains a jury trial waiver. See Huntsman Ex. 23 at HILLC006938487; Kronos Ex. 18 at
KROWW00626614. Finally, the jury waivers are comprehensible, clearly indicating that the
provision is a waiver of the parties’ rights to proceed in litigation before a jury. See, e.g.,
Huntsman Ex. 35 at HILLC00581544 (“EACH PARTY TO THIS AGREEMENT
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY”); Kronos Ex. 18 at KROWW00626614
(“THE PARTIES WAIVE ALL RIGHTS TO A JURY TRIAL IN CONNECTION WITH
OR ARISING FROM THIS PO.”).
The Plaintiffs do not contest that these jury waivers were knowing and voluntary.
Rather, they suggest that the Defendants have waived their right to challenge the jury trial
demands, as Rule 12(f) of the Federal Rules of Civil Procedure requires a party to move to
strike matters from a pleading at the initial stages of litigation. Moreover, the Plaintiffs
repeat their argument that the Sherman Act claims in this case do not arise out of the class
members’ purchase agreements, thus the jury waivers are not applicable. For the reasons
explained in Sections II.A through C of this Memorandum Opinion, these arguments fail.
30
First, because the absent class members were not part of this case prior to class certification,
the Defendants raised the issue of jury waivers at the appropriate time—once the relevant
titanium dioxide purchasers became members of the class. See Flat Panel, 2011 WL 1753784,
at *4; cf. Muhammad, 108 F. App’x at 765 n.5; Shelton, 582 F.2d at 1314-15. Second, because
the Plaintiffs’ price-fixing claims involve each class member’s agreements to purchase
titanium dioxide, the jury waivers control. Cf. Cotton Yarn, 505 F.3d at 278-82.
Accordingly, this Court finds that the jury trial waivers asserted by the Defendants
Millennium and Kronos are enforceable. Pursuant to Rule 39(a) of the Federal Rules of
Civil Procedure, this Court strikes the jury trial demands of the relevant class members.14
III. Amendment to the Class Definition under Rule 23
Finally, the Defendants argue that based on the effect of enforcing the contractual
provisions discussed in Section II this Memorandum Opinion, the class definition must be
amended. Rule 23(c)(1)(C) of the Federal Rules of Civil Procedure provides that “[a]n order
that grants or denies class certification may be altered or amended before final judgment.”
Fed. R. Civ. P. 23(c)(1)(C). This Court has previously held that a federal district court
possesses “broad discretion in determining whether to modify or even decertify a class.” Wu
v. MAMSI Life & Health Ins. Co., 256 F.R.D. 158, 162 (D. Md. 2008) (citing Gen. Tel. Co. of the
Sw. v. Falcon, 457 U.S. 147, 160 (1982) (“Even after a certification order is entered, the judge
remains free to modify it in light of subsequent developments in the litigation.”)). In fact
this Court has “an affirmative obligation to ensure that the class membership remains at all
14
The class members whose titanium dioxide contracts contain valid and enforceable jury trial
waivers precluding them from this litigation are listed in the Defendants’ Exhibit 1, attached to their
Motion to Compel Arbitration and Stay Proceedings. See Defs.’ Ex. 1 tbls. C & E, ECF No. 424-1.
31
times consistent with the underlying facts and procedural posture of the case.” Id. at 162-63
(citing Richardson v. Byrd, 709 F.2d 1016, 1019 (5th Cir. 1983) (“Under Rule 23 . . . the district
judge must define, redefine, subclass, and decertify as appropriate in response to the
progression of the case from assertion to facts.”)); Chisolm v. TranSouth Fin. Corp. 194 F.R.D.
538, 544 (E.D. Va. 2000) (same).
The Defendants argue that the class is improperly certified for two reasons. First, the
Defendants argue that many class members are differently situated in their contractual
relationships with the Defendants and their alleged coconspirators, such that the claims of
the representative Plaintiffs are not typical of the class. Second, individual issues related to
those contractual relationships predominate over any questions of law and fact that are
common to all class members, rendering a class action an inferior method by which to
adjudicate all asserted claims.
This Court concludes that, because various contractual
provisions put certain class members in different legal positions from the rest of the class,
the class definition must be amended.
Pursuant to Rule 23(a), a class may be properly certified only if “there are questions
of law or fact common to the class,” and “the claims or defenses of the representative
parties are typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(2)-(3). The
“commonality” and “typicality” requirements of Rule 23(a) both “serve as guideposts for
determining whether under the particular circumstances maintenance of a class action is
economical and whether the named plaintiff’s claim and the class claims are so interrelated
that the interests of the class members will be fairly and adequately protected in their
absence.” Gen. Tel. Co. of the Sw., 457 U.S. at 157 n.13. Some courts have held that where
32
certain members of a class are subject to contracts containing arbitration clauses, while other
class members are not, those differences in contractual relationships destroyed the
commonality and typicality of the class. See Pablo v. ServiceMaster Global Holdings Inc., No. C
08-03894, 2011 WL 3476473, at *3 (N.D. Cal. Aug. 9, 2011) (denying renewed motion for
class certification where litigation would be devoted to determining which portion of
putative class signed arbitration agreements); Renton v. Kaiser Found. Health Plan, No. C005370RJB, 2001 WL 1218773, at *5-6 (W.D. Wash. Sept. 24, 2001) (finding plaintiffs failed to
meet commonality and typicality requirements in part due to class members’ varying
contractual provisions requiring arbitration or exhaustion of administrative remedies).
In this case, the members of the current class that are subject to arbitration, forum
selection, or class action or jury waiver clauses are in a different legal position than those
class members whose contracts contain no such provisions. While the claims of the named
Plaintiffs are typical of the class, to the extent that all claims arise out of the purchases of
titanium dioxide from the Defendants and their alleged coconspirators, many of the current
class members are subject to contractual provisions that expressly foreclose their ability to
proceed in this case. The claims of the named Plaintiffs are not typical of the claims of
those class members against whom the Defendants now seek to enforce such contractual
provisions.15
15
The contract of named Plaintiff Haley Paint Company contains arbitration, forum selection, and
jury waiver provisions. However, the Defendants have expressly waived their right to enforce that
provision. Because the clauses in Plaintiff Haley Paint Company’s contracts are not being enforced,
its claim is not typical of other class members whose contractual provisions the Defendants seek to
enforce.
33
The Plaintiffs argue that, because no class member is subject to an arbitration clause
with all original Defendants, and no contract covers the entire Class Period, each member of
the current class has at least some purchases of titanium dioxide that are not covered by the
contractual provisions at issue. This argument rings hollow. The relevant inquiry is not
whether purchases of titanium dioxide are typical of one another, but rather whether the entities
that made the purchases meet the requirements for class certification. Therefore, the class as
currently defined does not meet the commonality and typicality requirements of Rule 23(a).16
Furthermore, Rule 23(b)(3) requires that “questions of law or fact common to class
members predominate over any questions affecting only individual members, and that a class
action is superior to other available methods for fairly and efficiently adjudicating the
controversy.” Fed. R. Civ. P. 23(b)(3). The likely difficulty in managing a class action may
be a pertinent factor in determining whether common issues predominate, and whether a
class action is a superior method of adjudication. Fed. R. Civ. P. 23(b)(3)(D). As the Court
of Appeals for the Ninth Circuit has held, issues regarding contractual provisions that vary
between class members may predominate over common questions of law or fact. Lozano v.
AT&T Wireless Servs., Inc., 504 F.3d 718, 728 (9th Cir. 2007) (finding that “predominance
[may be] defeated because [a defendant’s] intent to seek arbitration of the class would
necessitate a state-by-state review of contract [ ] jurisprudence.”).
16
The Defendants also argue that the named Plaintiffs cannot meet the requirement in Rule
23(a)(4) that “the representative parties will fairly and adequately protect the interests of the class.”
Fed. R. Civ. P. 23(a)(4). Because this Court finds that the class as currently defined fails to meet the
commonality and typicality requirements of Rule 23(a)(2)-(3), it need not address the Defendants’
second contention.
34
Here, individual questions of law and fact as to the enforcement of provisions of
class members’ contracts predominate over any common issues. The likely difficulties in
managing individual questions of contract formation and interpretation are especially
pertinent to this finding. See Fed. R. Civ. P. 23(b)(3)(D). For each class member who
challenges the applicability of one or more of the contractual provisions at issue, this Court
could be forced to conduct extensive analysis regarding choice of law, and contract
formation and interpretation, for each contract.
individual invoices.
This would likely total hundreds of
This is precisely the type of class-member-by-class-member and
contract-by-contract inquiry that the Ninth Circuit determined to be predominant over any
common questions of law or fact. See Lozano, 504 F.3d at 728 (affirming district court’s
finding that predominance was defeated because arbitration clauses would necessitate stateby-state review of contract unconscionability jurisprudence).
In sum, the class as currently defined does not meet Rule 23’s requirements of
commonality, typicality, and predominance.
Accordingly, the class definition will be
amended to read as follows:
All persons and entities who purchased titanium dioxide in the United States
directly from one or more of Defendants Millennium and Kronos, or nonparties DuPont, Huntsman, or Tronox, or from any predecessors, parents,
subsidiaries, or affiliates thereof, between February 1, 2003, and the present
(“Class Period”), except those persons and entities who purchased titanium
dioxide in the United States directly from one or more of Defendants
Millennium and Kronos, or non-parties DuPont, Huntsman, or Tronox, or
from any predecessors, parents, subsidiaries, or affiliates thereof, during the
Class Period pursuant to a contract containing one or more of the following:
(i) an arbitration clause, (ii) a clause restricting the litigation of disputes to
courts other than the U.S. District Court for the District of Maryland, (iii) a
class action waiver clause, or (iv) a provision waiving the right to a jury trial.
35
Also excluded from the Class are Defendants, their coconspirators, parent
companies, predecessors, subsidiaries and affiliates, and all governmental
entities.
Based on this amended class definition, all purchasers listed in Defendants’ Exhibit 1, tables
A through E, ECF No. 424-1, will be excluded from the class.
CONCLUSION
For the reasons stated above, the Defendants’ Motion to Compel Arbitration and
Stay Proceedings, Motion to Dismiss for Improper Venue, Motion to Strike, and Renewed
Motion to Amend the Class Definition (ECF No. 423) is GRANTED.
As a result, the class members whose titanium dioxide contracts contain valid and
enforceable arbitration clauses, as set forth in Table A of Defendants’ Exhibit 1, ECF No.
424-1, are ORDERED, pursuant to Section 4 of the Federal Arbitration Act, to pursue their
Sherman Act claims, if at all, in arbitration, and their claims in this litigation are hereby
DISMISSED. The claims of class members whose titanium dioxide contracts contain valid
and enforceable forum selection clauses, as set forth in Tables B and C of Defendants’
Exhibit 1, are DISMISSED for improper venue pursuant to Rule 12(b)(3) of the Federal
Rules of Civil Procedure. Further, the jury trial demands of class members whose titanium
dioxide contracts contain valid and enforceable jury trial waivers, as set forth in Tables E and
C of Defendants’ Exhibit 1, are STRICKEN, and they are not members of the class as now
defined.
Finally, pursuant to Rule 23(c)(1)(C) of the Federal Rules of Civil Procedure, the class
definition is amended as set forth in the accompanying Order, as well as in Section III of this
Memorandum Opinion.
36
A separate Order follows.
Dated:
August 26, 2013
______/s/___________________________
Richard D. Bennett
United States District Judge
37
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