Bearings - Lead Case
Filing
160
OPINION AND ORDER DENYING DEFENDANTS' 117 MOTION TO DISMISS PLAINTIFFS' CONSOLIDATED AMENDED COMPLAINTS. Signed by District Judge Marianne O. Battani. (KDoa)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
__________________________________
IN RE: AUTOMOTIVE PARTS
ANTITRUST LITIGATION
MASTER FILE NO. 12-md-02311
__________________________________
In re: Bearings
HON. MARIANNE O. BATTANI
__________________________________
THIS DOCUMENT RELATES TO:
All Cases
_____________________________/
2:12-cv-00500
OPINION AND ORDER DENYING DEFENDANTS’ MOTION TO
DISMISS PLAINTIFFS’ CONSOLIDATED AMENDED COMPLAINTS
Before the Court is Defendants NTN Corporation (“NTN”) and NTN USA
Corporation’s (“NTN USA”) Motion to Dismiss the Direct Purchaser, Automobile Dealer,
and End-Payor Plaintiffs’ Consolidated Amended Complaints. (Doc. No. 117). The
Court heard oral argument on the motion on June 4, 2014, and at the conclusion of the
hearing took the matter under advisement. For the reasons stated below, Defendants’
motion is DENIED.
I.
STATEMENT OF FACTS
Direct Purchaser Plaintiffs (“DPPs”), Automobile Dealership Plaintiffs (“ADPs”),
and End-Payor Plaintiffs (“EPPs”) (collectively referred to as “Plaintiffs”) filed separate
consolidated class action complaints alleging several federal and state law claims
against Defendants. Plaintiffs allege Defendants engaged in a conspiracy to “inflate, fix,
raise, maintain, or artificially stabilize prices of Bearings sold in the United States” for
which they seek damages and other appropriate equitable relief. See e.g. (Case No.
12-501, Doc. No. 100
at ¶ 1).
Generally, Defendants are in the business of
manufacturing or selling Bearings, which are defined in Plaintiffs’ complaints as “frictionreducing devices that allow one moving part to glide past another moving part” and are
used in the manufacture of automobiles. See e.g. (Id. at ¶¶ 43, 44).
Defendant NTN Corporation (“NTN”) is a Japanese corporation with its principal
place of business in Osaka, Japan. (Case No. 12-501, Doc. No. 100 at ¶ 27; Case No.
12-502, Doc. No. 67 at ¶ 140; Case No. 12-503, Doc. No. 70 at ¶ 95). NTN is the 100%
owner of Defendant NTN USA Corporation (“NTN USA”), incorporated in Delaware with
its principal place of business in Mount Prospect, Illinois. (Id. at ¶ 28). On March 29,
2013, the Japan Fair Trade Commission (“JFTC”) issued cease and desist orders
against NTN and two of its co-conspirators for their involvement in a price-fixing
conspiracy related to the sale of Bearings. (Case No. 12-501, Doc. No. 100 at ¶ 73;
Case No. 12-502, Doc. No. 67 at ¶ 13; Case No. 12-503, Doc. No. 70 at ¶ 135).
The
JFTC fined NTN 7.2 billion yen, the largest amongst the conspirators. (Case No. 12501, Doc. No. 100 at ¶ 73; Case No. 12-503, Doc. No. 70 at ¶ 135).
During the
investigation, NTN admitted to its participation in the Japanese conspiracy. (Case No.
12-501, Doc. No. 100 at ¶ 66; Case No. 12-502, Doc. No. 67 at ¶ 191; Case. No. 12503, Doc. No. 70 at ¶ 130). NTN also confirmed that the Department of Justice issued
a subpoena to NTN USA requesting information related to the transaction of Bearings.
(Case No. 12-501, Doc. No. 100 at ¶ 78; Case No. 12-502, Doc. No. 67 at ¶ 182; Case.
No. 12-503, Doc. No. 70 at ¶ 139).
Plaintiffs allege that NTN USA was under the direction and control of NTN during
the relevant class period. (Case No. 12-501, Doc. No. 100 at ¶ 28; Case No. 12-502,
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Doc. No. 67 at ¶ 141; Case No. 12-503, Doc. No. 70 at ¶ 95). In their respective
complaints, Plaintiffs further allege that NTN, directly or through its subsidiaries
including NTN USA, manufactured, marketed or sold Bearings that were purchased in
the United States. (Case No. 12-501, Doc. No. 100 at ¶ 27; Case No. 12-502, Doc. No.
67 at ¶ 140; Case No. 12-503, Doc. No. 70 at ¶¶ 95, 96). NTN and NTN USA are also
alleged to have shared numerous executives. (Case No. 12-502, Doc. No. 67 at ¶ 142;
Case No. 12-503, Doc. No. 70 at ¶ 97). ADPs allege that NTNAmericas.com reflects
that NTN USA views itself as a part of NTN, not a separate entity. (Case No. 12-502,
Doc. No. 67 at ¶ 143).
According to DPPs, NTN exports approximately 55% of the Bearings it
manufactures to the United States and Europe. (Case No. 12-501, Doc. No. 100 at ¶
117). Plaintiffs further allege NTN is a member of the World Bearings Association.
(Case No. 12-501, Doc. No. 100 at ¶ 101; Case No. 12-502, Doc. No. 67 at ¶ 176; Case
No. 12-503, Doc. No. 70 at ¶ 160). In addition, EPPs allege that NTN, NTN USA, and
their co-conspirators met at industry events and trade shows to perform acts in
furtherance of the conspiracy. (Case No. 12-503, Doc. No. 70 at ¶ 159).
Plaintiffs further allege that the Bearings market is conducive to anticompetitive
conduct. Specifically, the market has high barriers to entry, has inelasticity of demand,
is highly concentrated, and provides numerous opportunities to conspire. (Case No. 12501, Doc. No. 100 at ¶ 49; Case No. 12-502, Doc. No. 67 at ¶ 166; Case No. 12-503,
Doc. No. 70 at ¶ 115). The complaints also allege that the market for Bearings is
controlled by a small number of manufacturers, including NTN and NTN USA. (Case
No. 12-501, Doc. No. 100 at ¶ 51; Case No. 12-502, Doc. No. 67 at ¶ 163; Case No. 12-
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503, Doc. No. 70 at ¶ 108). DPPs allege that eleven Defendants, including NTN and
NTN USA, control 60% of the global market share. (Case No. 12-501, Doc. No. 100 at
¶ 52). In addition, DPPs allege that during the past decade, “the number of [Bearings]
firms has been steadily decreasing and market share is continually shifting towards the
Bearings industry’s largest participants.” (Id. at ¶ 51).
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.
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662, 678 (2009) (“Threadbare recitals of the elements of a cause of action, supported
by mere conclusory statements, do not suffice.”).
In Twombly, the Supreme Court considered the pleading requirements necessary
to withstand a motion to dismiss relative to a Section 1 Sherman Act claim. It held that
the complaint must contain enough factual matter to “plausibly suggest” an agreement:
Asking for plausible grounds to infer an agreement does not impose a
probability requirement at the pleading stage; it simply calls for enough
facts to raise a reasonable expectation that discovery will reveal evidence
of illegal agreement. And, of course, a well-pleaded complaint may
proceed even if it strikes a savvy judge that actual proof of those facts is
improbable, and that a recovery is very remote and unlikely.
550 U.S. at 556.
III.
ANALYSIS
Defendants’ motion to dismiss sets forth two grounds for dismissal: (1) Plaintiffs’
complaints fail to specifically allege NTN’s involvement in the conspiracy, and (2)
Plaintiffs’ complaints fail to sufficiently allege that NTN USA is an alter-ego of NTN,
thereby implicating NTN USA in the alleged conspiracy. The Court first turns to the
sufficiency of the allegations against NTN.
A.
NTN
In analyzing a motion to dismiss, the Court must assume the veracity of
nonconclusory allegations in the complaint.
Twombly, 550 U.S. at 570.
Plaintiffs’
complaints describe a worldwide conspiracy to fix the price of automotive bearings,
which caused the price of bearings in the United States to increase and injure Plaintiffs.
NTN is alleged to have directly participated by selling price-fixed bearings through its
United States subsidiary, NTN USA. The complaint alleges that Defendants met at
various trade shows in furtherance of the conspiracy and sufficiently alleges that the
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bearings market was vulnerable to anticompetitive activity.
In addition, the JFTC
charged NTN and its co-conspirators with participating in a conspiracy to fix the price of
bearings in Japan, in which NTN admitted its guilt and received the largest fine.
Moreover, several co-conspirators of NTN pleaded guilty to participating in the
conspiracy or are under investigation in the United States, Europe, Australia, Canada,
Korea, and Japan. See (Case No. 12-501, Doc. No. 100 at ¶¶ 68-73, 81, 84, 85, 87, 88,
91-93, 98, 99).
NTN argues that in conjunction with Plaintiffs’ vague references to “Defendants”
throughout their complaints, Plaintiffs fail to allege a “specific time, place, or person
involved in the alleged conspiracies” or any single meeting or communication with any
co-Defendant. See Twombly, 550 U.S. at 564 n.10. In other words, NTN asserts there
are insufficient allegations to plausibly suggest that it participated in the alleged
conspiracy. In addition, NTN asserts that its involvement in foreign investigations does
not support its involvement in a conspiracy aimed at the United States.
Contrary to NTN’s argument, Plaintiffs need not identify the specific time, place,
or person involved in the conspiracy. See Starr v. Sony BMG Music Entm’t, 592 F.3d
314, 325 (2d Cir. 2010) (noting that where the plaintiffs relied on parallel conduct to
show an agreement, allegations of specific time, place, or person are unnecessary).
Although Plaintiffs in this case do not allege parallel conduct, NTN and several of its coconspirators, who are alleged to be major participants in the international bearings
market, pled guilty to a conspiracy to price-fix bearings in at least one country. This is
not merely the “if it happened there, it could have happened here” situation. See In re
Elevator Antitrust Litig., 502 F.3d 47, 52 (2d Cir. 2007) (“Allegations of anticompetitive
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wrongdoing in Europe – absent any evidence of linkage between such foreign conduct
and conduct here – is merely to suggest . . . that ‘if it happened there, it could have
happened here.’”).
Here, Plaintiffs alleged ample facts plausibly extending the
conspiracies uncovered in other countries to the United States.
This result is consistent with the Sixth Circuit’s decision in Carrier Corp. v.
Outokumpu Oyj, 673 F.3d 430 (6th Cir. 2012). In that case, the plaintiff alleged a
conspiracy directed at the United States based on the results of a European
Commission (“EC”) investigation that found the defendants liable for anticompetitive
conduct in Europe. Id. at 436. The EC investigation did not “address whether any
conspiracy extended beyond the European markets.” Id. In denying the defendants’
motion to dismiss, the appellate court noted that the “silence on the part of the EC
decision as to the U.S. markets may simply reflect the limited scope of the decision” and
that the plaintiff is not bound by the findings of a foreign investigation. Id. at 441.
Rather, the plaintiff may provide “additional circumstantial allegations that corroborate
its claim” that the conspiracy extended into the United States. Id. at 442.
Similar to Carrier Corp, Plaintiffs in this case provide a plethora of allegations
relating to the conduct of NTN and its co-conspirators, many of which have pleaded
guilty to price-fixing bearings in the United States and other countries. NTN’s argument
that its conduct was limited only to price-fixing bearing in the Japanese market seems to
ignore the fact that it faced the largest fine imposed by the JFTC among its coconspirators.
It stands contrary to reason that NTN played the largest role in the
conspiracy aimed at the Japanese market, but decided to exercise restraint in targeting
the United States market, where it operated a wholly-owned subsidiary capable of
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manufacturing and distributing bearings across the United States. The Court rejected
similar arguments from the defendants in the Wire Harness case, and it declines to
depart from the reasoning it articulated in those decisions. See In re Automotive Parts
Antitrust Litig., 2013 WL 2456013, at *3 (E.D. Mich. June 6, 2013) (Tokai Rika plead
guilty to price-fixing heater control panels, but not wire harness systems); In re
Automotive Parts Antitrust Litig., 2013 WL 2456610, at *3 (E.D. Mich. June 6, 2013)
(Leoni investigated by EC, but no investigation in United States); In re Automotive Parts
Antitrust Litig., 2013 WL 2456010, at *2 (E.D. Mich. June 6, 2013) (Lear investigated by
EC in Europe, but not in United States).
Consequently, Plaintiffs’ allegations certainly support the existence of global
anticompetitive cartel activity in the bearings market. NTN was a major participant in a
Japanese conspiracy and its co-conspirators have now pleaded guilty to antitrust
violations in the United States. NTN exported a substantial amount of bearings to the
United States market during the alleged conspiracy. Taken together, these allegations
nudge Plaintiffs’ claims from “conceivable to plausible,” Twombly, 550 U.S. at 570, and
Plaintiffs met their pleading burden with respect to NTN.
B.
NTN USA
Generally, “[a] parent corporation [ ] is not liable for the acts of its subsidiary,
even if its subsidiary is wholly-owned.” Corrigan v. U.S. Steel Corp., 478 F.3d 718, 724
(6th Cir. 2007) (citing United States v. Bestfoods, 524 U.S. 51, 61 (1998)). However,
under Michigan law, the corporate veil may be pierced if “the corporate entity [is] a mere
instrumentality of another individual or entity.” Rymal v. Baergen, 686 N.W.2d 241, 252
(Mich. Ct. App. 2004). In order for courts to treat the parent and subsidiary as a single
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entity, the “corporate entity must have been used to commit a wrong or fraud” resulting
in an “unjust injury or loss to the plaintiff.” Id. The question is whether the parent’s
“control over the [subsidiary] was sufficiently extensive to permit imputation of the
conspiracy to the [subsidiary].” Carrier Corp., 673 F.3d at 445.
NTN USA asserts that Plaintiffs failed to allege sufficient facts to support an
inference that it is an alter-ego of its parent company, NTN. It further argues that there
are no specific allegations made against it in the complaints. Instead, NTN USA is
grouped with NTN as the “NTN Defendants” and Plaintiffs do not specify the roles each
played in the conspiracy.
NTN USA asserts it is even farther removed from the
conspiracy because the JFTC never charged it with any wrongdoing and it is currently
not under investigation for anticompetitive conduct in any country.
Plaintiffs allege that NTN USA is wholly owned and controlled by NTN, which
controlled NTN USA’s policies, sales, and finances. (Case No. 12-502, Doc. No. 67 at ¶
141). It is alleged that NTN USA manufactured, marketed, and sold bearings in the
United States at the behest of NTN. Further, Plaintiffs allege that NTN USA is one of
NTN’s American entities, which “view themselves as NTN Corporation, their Japanese
parent, and not as separate entities.” (Id. at ¶ 143). Last, Plaintiffs allege that that NTN
and NTN USA have shared numerous executives.
NTN USA asserts that “the fact that no NTN company has pled guilty or been
charged in the United States after [receiving a DOJ subpoena two years ago] can only
weaken, not support, Plaintiffs’ claims.” (Doc. No. 117 at 11). However, the actions of
the DOJ do not operate to limit the scope of the alleged conspiracy.
See In re
Packaged Ice Antitrust Litig., 723 F. Supp. 2d 987, 1011-12 (E.D. Mich. 2010)
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(observing that “civil litigation” cannot be “circumscribed or defined by the boundaries of
the criminal investigations”). The investigation is ongoing, and there are several factors,
including government resources and strategy, which affect such decisions.
At this stage, the Court finds that Plaintiffs’ allegations against NTN USA are
sufficient. Viewed in their entirety, the allegations support an inference that NTN USA
participated in a price-fixing conspiracy aimed at the United States under the direction of
NTN. Again, the Sixth Circuit’s analysis in Carrier Corp. compels this result. There, the
plaintiff alleged that the defendant subsidiary sold the price-fixed product in the United
States under the direction of its parent company, that the parent and subsidiary were
held out as a single global enterprise, and that the companies shared key executives.
673 F.3d at 446. Similar to the instant case, the parent company pleaded guilty to
anticompetitive conduct in a foreign country, but not in the United States. Id. at 436
(“The EC’s findings, however, do not identify any conspiratorial agreements with respect
to U.S. markets.”). Nonetheless, the court found the allegations sufficient to state a
claim against the United States subsidiary under an alter-ego theory of liability. Id. at
445-46.
Here, Plaintiffs allege similar facts to those alleged in Carrier Corp., which
demonstrate the plausibility of NTN USA selling price-fixed bearings under the direction
and control of its parent, NTN. See also In re Cathode Ray Tube (CRT) Antitrust Litig.,
738 F. Supp. 2d 1011, 1020 (N.D. Cal. 2010) (finding allegations sufficient to state a
claim against subsidiaries where the plaintiffs alleged that the parent companies
“dominated and controlled the finances, policies, and affairs” of the subsidiaries).
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Consequently, accepting the allegations as true, the Court finds that Plaintiffs met their
pleading burden with respect to NTN USA.
C.
Foreign Trade Antitrust Improvements Act
Lastly, the Court addresses Defendants’ contention that Plaintiffs raised a new
theory of global United States antitrust jurisdiction prohibited by the Foreign Trade
Antitrust Improvements Act, 15 U.S.C. § 6a (“FTAIA”). During oral argument on the
instant motion, Plaintiffs’ counsel appeared to assert that if NTN participated in a pricefixing cartel in the common market and it sold bearings to the largest auto manufacturer
in the common market, this is sufficient to assume that NTN participated in a conspiracy
directed at the United States. Consequently, Defendants sought leave of the Court to
file a supplemental brief to address Plaintiffs’ argument. In essence, Defendants claim
that the FTAIA prohibits using NTN’s knowledge that some of its bearings sold in foreign
markets would enter the United States market to link NTN to a different conspiracy in
the United States.
Plaintiffs filed a timely response disputing Defendants’
characterization of their theory.
The FTAIA provides:
“Sections 1 to 7 of [the Sherman Act] shall not apply to conduct involving
trade or commerce (other than import trade or import commerce) with
foreign nations unless –
(1) such conduct has a direct, substantial, and reasonably foreseeable
effect –
(A) on trade or commerce which is not trade or commerce with foreign
nations, or on import trade or import commerce with foreign nations; or
(B) on export trade or export commerce with foreign nations, of a
person engaged in such trade or commerce in the United States; and
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(2) such effect gives rise to a claim under the provisions of sections 1 to 7
of this title, other than this section.
15 U.S.C. § 6a.
Enacted in 1982, the FTAIA “was intended to exempt from the
Sherman Act export transactions that did not injure the United States economy.”
Hartford Fire Ins. Co. v. California, 509 U.S. 764, 796 n. 23 (1993) (citing H.R. Rep. No.
97-686, at 2-3, 9-10 (1982)). “This technical language initially lays down a general rule
placing all (nonimport) activity involving foreign commerce outside the Sherman Act’s
reach.”
F. Hoffman-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 162 (2004)
(emphasis in original).
Importantly, the FTAIA imposes a substantive requirement
setting “forth an element of an antitrust claim, not a jurisdictional limit on the power of
the federal courts.” Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845, 852 (7th Cir. 2012).
As correctly pointed out by Plaintiffs, Defendants’ argument only applies to NTN,
a foreign corporation. NTN USA is specifically alleged to manufacture and sell bearings
in the United States. This type of economic conduct does not fall within the FTAIA’s
reach. With respect to NTN, Plaintiffs allege that NTN USA manufactured and sold
price-fixed bearings directly into the United States market at the direction of NTN, which
the Court must accept as true.
Certainly, such activity affects domestic trade and
commerce and is not merely foreign conduct that indirectly impacts the United States.
Next, Defendants mischaracterize Plaintiffs’ antitrust conspiracy theory. Plaintiffs
do not seek damages for conduct occurring entirely outside of the United States causing
only foreign injury. Likewise, they do not seek remedies for domestic exporters injured
in foreign ventures. Instead, Plaintiffs allege an antitrust conspiracy directed at the
United States by foreign and domestic corporations, many of which are United Statesbased subsidiaries engaged in the manufacturing and domestic sale of the price-fixed
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product at issue. For those foreign corporations without a domestic subsidiary, the
importation of their price-fixed goods is covered under the Sherman Act when “actual
and intended effects on U.S. commerce have been shown.” Minn-Chem., 683 F.3d at
855. Plaintiffs do not allege the existence of foreign investigations in order to recover
for conduct occurring in other countries, but merely to demonstrate the world-wide
scope of the conspiracy. As previously stated, the existence of foreign and domestic
investigations and guilty pleas of co-conspirators renders Plaintiffs’ claims of a
conspiracy directed at the United States plausible.
In sum, Defendants’ attempted use of the FTAIA to undermine Plaintiffs’ claims
against NTN and NTN USA fails. The conduct at issue in this case is not the type of
conduct Congress sought to exclude from the Sherman Act’s reach. See Empagran,
542 U.S. at 161 (noting that the FTAIA “remov[es] from the Sherman Act’s reach, (1)
export activities and (2) other commercial activities taking place abroad, unless those
activities adversely affect domestic commerce, imports to the United States or exporting
activities of one engaged in such activities within the United States.”) (emphasis in
original). Plaintiffs have sufficiently alleged an anticompetitive conspiracy directly aimed
at the United States automotive industry.
IV.
CONCLUSION
Accordingly, Defendants’ motion is DENIED.
IT IS SO ORDERED.
Date: August 26, 2014
s/Marianne O. Battani
MARIANNE O. BATTANI
United States District Judge
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CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing Order was served upon counsel of record via the Court's ECF System to their
respective email addresses or First Class U.S. mail to the non-ECF participants on August 26, 2014.
s/ Kay Doaks
Case Manager
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