Wire Harness - End-Payor Actions

Filing 128

OPINION AND ORDER Denying re 72 MOTION to Dismiss the Auto-Dealer and End-Payor Complaints filed by G.S.W. Manufacturing, Inc., G.S. Electech, Inc., G.S. Wiring Systems, Inc.. Signed by District Judge Marianne O. Battani. (BThe)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
_________________________________
IN RE: AUTOMOTIVE PARTS
ANTITRUST LITIGATION

MASTER FILE NO. 12-md-02311

_________________________________
In Re: Wire Harness Cases

HON. MARIANNE O. BATTANI

_________________________________
THIS DOCUMENT RELATES TO:
Dealership Actions
End-Payor Actions

2:12-cv-00102
2:12-cv-00103

_________________________________/
OPINION AND ORDER DENYING GS ELECTECH DEFENDANTS’ MOTION TO
DISMISS THE AUTO-DEALER AND END-PAYOR COMPLAINTS
Before the Court is GS Electech Defendants’ Motion to Dismiss the Auto-Dealer
and End-Payor Complaints (Case No. 12-00102, Doc. No. 61; Case No. 12-00102,
Doc. No. 72). The Court heard oral argument on December 6, 2012, and at the
conclusion of the hearing took this matter under advisement. For the reasons that
follow, the motion is DENIED.
I. FACTUAL BACKGROUND
Automobile Dealer Plaintiffs and End-Payor Plaintiffs (collectively “Indirect
Purchaser Plaintiffs” or “IPPs”) filed class actions against various Defendants under
federal and state law based on Defendants’ alleged conspiracy to rig bids, fix prices,

and allocate the market for automotive wire harness systems and related products.
According to the complaints, Defendants are manufacturers or sellers of Wire Harness
Systems (“WHS”), which are the “central nervous systems” of automotive vehicles and
consist of wires or cables and data circuits that run throughout the vehicles. (Case No.
12-02311, Doc. No. 85 at ¶ 130, Doc. No. 174 at ¶ 124).
GS Electech Defendants, including G.S. Electech, Inc. (“GSE”), G.S. Wiring
Systems Inc. (“GS Wiring”), which is named as a Defendant only in the End-Payors’
complaint, and G.S.W. Manufacturing, Inc. (“GSW”), assert that the complaints against
them must be dismissed. GS Wiring and GSW are incorporated in Ohio, are wholly
“owned and controlled” subsidiaries of GSE, and manufacture, market, and sell
automotive wire harness systems. (Doc. No. 85 at ¶¶ 125-126; Doc. No. 174 at ¶¶
119-120). In addition to the allegations mentioning GSE, GS Wiring, and GSW
specifically, the complaints also contain allegations relating to all Defendants.
Included in those allegations, Indirect Purchaser Plaintiffs assert that market
conditions suggest the existence of a conspiracy. For example, although costs
remained steady, the prices for WHS increased. (Doc. No. 85 at ¶¶ 152-155; Doc. No.
174 at ¶¶ 151-153). In addition, market conditions make the WHS market “particularly
attractive” to collusion, (Doc. No. 85 at ¶ 156; Doc. No. 174 at ¶ 154), given factors
such as high start-up costs that hinder new entrants to business,(Doc. No. 85 at ¶ 158;
Doc. No. 174 at ¶¶ 155-157), inelastic demand, (Doc. No. 85 at ¶¶ 161-163; Doc. No.
174 at ¶¶ 158-160), and a heavily concentrated market (Doc. No. 85 at ¶¶ 164-165;
Doc. No. 174 at ¶¶ 161-162). In addition to market conditions favorable to collusion,
Defendants regularly attended industry events, which provided an opportunity to meet
2

“under the guise of legitimate business.” (Doc. No. 85 at ¶¶ 166-167; Doc. No. 174 at ¶
163).
II. STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) allows district courts to dismiss a
complaint which fails “to state a claim upon which relief can be granted.” To survive a
motion to dismiss for failure to state a claim under Rule 12(b)(6), the plaintiff must show
that his complaint alleges facts which, if proven, would entitle him to relief. First Am.
Title Co. v. DeVaugh, 480 F.3d 438, 443 (6th Cir. 2007). “A complaint must contain
either direct or inferential allegations with respect to all material elements necessary to
sustain a recovery under some viable legal theory.” Weiner v. Klais & Co., 108 F.3d 86,
88 (6th Cir. 1997).
When reviewing a motion to dismiss, the Court “must construe the complaint in
the light most favorable to the plaintiff, accept all factual allegations as true, and
determine whether the complaint contains enough facts to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although
the federal procedural rules do not require that the facts alleged in the complaint be
detailed, “‘a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief’
requires more than labels and conclusions, and a formulaic recitation of a cause of
action's elements will not do.' ” Twombly, 550 U.S. at 555; Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (“Threadbare recitals of the elements of a cause of action, supported
by mere conclusory statements, do not suffice.”).

3

III. ANALYSIS
GS Electech Defendants raise various challenges to the sufficiency of the
complaints. Because the Court addressed several of the challenges in resolving the
Collective Defendants’ Motion to Dismiss the Indirect Purchasers’ Complaints, it limits
its discussion to those arguments specific to GS Electech Defendants.
A. Plea Agreement
The parties disagree as to the import and scope of the plea agreement of GSE.
Although neither the plea nor the transcript of the hearing was attached to the
complaints, the parties agrees that the GSE plea agreement may be considered by the
Court for purposes of this motion. See Rondigo, L.L.C. v. Twp of Richmond, 641 F.3d
673, 680-681 (6th Cir. 2011) (court may consider public records if referred to in the
complaint and are central to its claims without converting a motion to dismiss to a
motion for summary judgment) (citing Bassett v. Nat’l Collegiate Athletic Ass’n, 528
F.3d 426, 430 (6th Cir. 2008)).
According to GS Electech Defendants, the guilty plea, entered into by GSE is
limited to GSE and one unnamed company; it is limited to sales of one product--speed
sensor wire assemblies--to one automaker customer; and the conspiracy only covers
the period 2003 through 2010. In contrast, the allegations in IPPs’ complaints cover a
longer period of time, from 2000 through 2010, and a greater number of participants,
customers, and parts: thirty-four supplier-participants; fifteen automakers; and thirteen
unrelated auto parts. Moreover, GSE admitted to being an assembler of speed sensor
wire assemblies, not a manufacturer. (See e.g. Case No. 12-00102, Doc. No. 61,

4

Exhibit A, ¶ 4(1)). Based upon these differences, GS Electech Defendants conclude
that the plea cannot form the predicate for any claim of participation in a “global”
conspiracy.
The May 16, 2012, Guilty Plea and Sentencing Hearing, (see e.g. Case No. 1200102, Doc. No. 61, Ex. B), further supports their position. At the hearing, counsel for
GSE stated on the record:
available evidence neither indicates nor suggests that [GSE] was a party
to any overarching wire harness conspiracy involving the companies
which have been previously changed or have pled guilty in this Court,
including Furukawa and Yazaki, and certain other major suppliers. The
government has not alleged and is not alleging that [GSE] was involved in
that overarching conspiracy. The plea agreement makes it clear that
[GSE] was involved with only one other co-conspirator. So it is a two
company conspiracy.
Id. The United States agreed that the statement was “consistent with the evidence.”
(Id. at 6).
Although GSE did not plead guilty to a conspiracy as long lasting as the one
alleged by IPPs, the plea does not place a limit on what claims the IPPs may bring.
Plea agreements do not create the boundaries of civil litigation. In re Packaged Ice
Antitrust Litig., 723 F. Supp. 2d 987, 1011 (E.D. Mich. 2010). GSE admitted to
conspiring with a competitor involved in “the manufacture and sale of wire speed sensor
wire harness assemblies.” (Id. at 13). Despite Defendants’ characterization of GSE as
a mere “assembler,” GSE admitted during the plea hearing that it was engaged in the
sale of speed sensor wire assemblies in the United States and elsewhere, and that it
manufactured and sold “speed sensor wire assemblies.” (Id. at 12). Here GSE’s guilty
plea demonstrates that it entered into an express agreement that existed to fix prices
5

and allocate customers in a market with conditions ripe for conspiratorial conduct. The
factual allegations create “a reasonable expectation that discovery will reveal evidence
of illegal agreement” beyond the admissions of GSE. Twombly, 550 U.S. at 556.
Accord In re Polyurethane Foam Antitrust Litig., 799 F. Supp. 2d 777, 782 (N.D. Ohio
2011) (relying on “specific admissions” made during a governmental investigation that
supported the “existence of a conspiratorial agreement”). Accordingly, the guilty plea,
in and of itself, provides no basis for dismissing GS Electech Defendants, and the Court
turns to their alternate argument.
B. Piercing the Corporate Veil
Next, G.S. Electech Defendants contend that the complaints lack sufficient
factual allegations to attribute GSE’s plea agreement to its subsidiaries. They argue
that reliance on GSE’s plea agreement to advance claims against GS Wiring and GSW,
is nothing more than guilt by association of affiliated corporate entities.
Under Michigan law, to pierce the corporate veil and hold the parent company
liable for acts of a subsidiary, the evidence must show there is “such a complete identity
between the defendant and the corporation as to suggest that one was simply the alter
ego of the other.” Pettaway v. McConaghy, 116 N.W.2d 789, 790 (Mich. 1962). In the
alternative, “[t]here must be evidence that the use of the corporation was improper.”
Mattner v. Jennaro & Assocs., Inc., No. 89-2366, 1991 WL 159452 at *3 (6th Cir. Aug.
20, 1991) (internal citation omitted) (applying Michigan law); accord Precision, Inc. v.
Kenco/Williams, Inc., 66 Fed. Appx. 1, 4 (6th Cir. 2003).
Here, IPPs have pleaded facts relating to GS Electech Defendants’ corporate
affiliation. Notably, GSE is alleged to have sold the price-fixed product in the United
6

States through its two subsidiaries, which GSE is alleged to have “controlled.” (Case
No. 12-02311, Doc. No. 85 at ¶¶ 16, 125; Doc. No. 174 at ¶¶ 16, 113). These
allegations create an inference that GSW and GS Wire participated in the conspiracy
aimed at the United States. Moreover, in the plea agreement, the subsidiaries are
required to cooperate with the Department of Justice by producing documents in their
control and providing their “directors, officers and employees. . .[for] interview and the
provision of testimony in grand jury, trial, and other judicial proceedings.” (See e.g.
Case No. 12-00102, Doc. No. 61 at Ex. A at 9(a) and (b)). GE Electech Defendants’
reading of the plea ignores the United States’ agreement that it would not bring “further
criminal charges against [GSE] or its subsidiaries for any act or offence committed
before the date of this Plea Agreement that was taken in furtherance of an antitrust
conspiracy involving the manufacture, assembly, or sale of speed sensor wire
assemblies.” (Id. at 12).
Because the complaints must be viewed as a whole, detailed allegations about
the involvement of each Defendant are not needed. At this stage of the litigation, these
allegations are sufficient to state a claim as to GS Electech Defendants. In addition to
the allegations that GSE coordinated and controlled the activities of GS Electech
Defendants, the IPPs have pointed to portions of the plea that create an inference
supporting control. In reaching this conclusion, the Court relies on the analysis set forth
in Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 446 (6th Cir. 2012), wherein the
appellate court observed that it was not necessary to “delineate in the complaint the
role each subsidiary played in the conspiracy.” A court may look past corporate form
when the complaint alleges that wholly owned and controlled subsidiaries were alter
7

egos of the parent corporation. Bhd. of Locomotive Eng’rs v. Interstate Commerce
Comm'n, 909 F.2d 909, 914 (6th Cir. 1990). Here IPPs have alleged GSE controlled
GS Wiring and GSW. The allegations create an inference sufficient to permit
imputation of the conspiracy to these subsidiaries.
IV. CONCLUSION
For the reasons discussed above, the Court DENIES the motion.
IT IS SO ORDERED.

s/Marianne O. Battani
MARIANNE O. BATTANI
UNITED STATES DISTRICT JUDGE
Date: June 6, 2013

CERTIFICATE OF SERVICE
I hereby certify that on the above date a copy of this Opinion and Order was served upon
all parties of record via the Court’s ECF Filing System.
s/Bernadette M. Thebolt
Case Manager

8