HIB Ballasts - Dealership Actions

Filing 117

OPINION AND ORDER DENYING MELCO DEFENDANTS MOTION 71 73 TO DISMISS THE END-PAYORS AND THE AUTO DEALERS CONSOLIDATED AMENDED CLASS ACTION COMPLAINTS. Signed by District Judge Marianne O. Battani. (KDoa) Modified on 4/22/2015 (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: HID Ballasts

HON. MARIANNE O. BATTANI

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

2:13-cv-01702
2:13-cv-01703

_________________________________/
OPINION AND ORDER DENYING MELCO DEFENDANTS’ MOTION TO DISMISS
THE END-PAYORS’ AND THE AUTO DEALERS’ CONSOLIDATED
AMENDED CLASS ACTION COMPLAINTS
Before the Court is MELCO Defendants’ Motion to Dismiss the Auto Dealer
Plaintiffs’ and the End-Payors Plaintiffs’ Consolidated Amended Class Action
Complaints (Case No. 13-1702, Doc. No. 71 (sealed), Doc. No. 73 (redacted); Case No.
13-1703, Doc. No. 51 (sealed) and 53 (redacted)). MELCO Defendants include
Mitsubishi Electric Corporation (“MEC”) and two subsidiaries, Mitsubishi Electric US
Holdings, Inc. (“MEUSH”), and Mitsubishi Electric Automotive America, Inc. (“MEAA”).
The Court scheduled a hearing on the motion for January 28, 2015; however, the
parties waived oral argument. For the reasons that follow, the motion is DENIED.

I. RELEVANT FACTS
A. Parties
Automobile Dealership Plaintiffs (“ADPs”), and End-Payor Plaintiffs (“EPPs”)
(collectively referred to as “Indirect Purchaser Plaintiffs” or “IPPs”) filed separate
consolidated class action complaints advancing federal and state law claims based
upon their allegations that Defendants “manufactured, marketed, and/or sold” HID
Ballasts in the United States to numerous Original Equipment Manufacturers (“OEMs”),
(Doc. No. 25 at ¶¶ 113-126; Doc. No. 9 at ¶¶ 83-95), and engaged in a conspiracy to
“unlawfully fix, artificially raise, maintain and/or stabilize prices, rig bids for, and allocate
the market and customers in the United States relative to HID Ballasts from July 1,
1998, through the present.” (See Doc. No. 25 at ¶ 2; Doc. No. 9 at ¶ 2). HID Ballasts
are electrical devices that limit the amount of electrical current flowing to a HID
headlamp. (Doc. No. 25 at ¶¶ 3, 130; Doc. No. 9 at ¶¶ 3, 99). ADPs include automobile
dealers that sell automobiles manufactured by various Original Equipment
Manufacturers. (See Doc. No. 25 at ¶¶ 23-112). EPPs include individuals that
purchased certain automobiles (See Doc. No. 9 at ¶¶ 25-82).
Defendants include DENSO Corporation and DENSO International America, Inc.,
Ichikoh Industries Ltd., Panasonic Corporation and Panasonic Corporation of North
America, which have entered into a proposed settlement, Stanley Electric Co., Ltd. and
Stanley Electric U.S. Co., Inc., Koito Manufacturing Co., Ltd. and its subsidiary, North
American Lighting, Inc., and MELCO Defendants; however, the Court has dismissed
Ichikoh Industries, Ltd. for lack of personal jurisdiction.

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B. Investigations and Guilty Pleas
Indirect Purchaser Plaintiffs’ complaints detail international government
investigations that resulted in the guilty pleas of many businesses for their part in the
price-fixing and bid-rigging of various automotive component parts. For example,
DENSO Defendants agreed to pay a $78 million criminal fine, based on antitrust
violations in the automotive component market, albeit not specifically for HID Ballasts.
The Japan Fair Trade Commission (“JFTC”) has raided the offices of several
Defendants, Stanley Electric Co., Ltd., and Koito Manufacturing Co., Ltd. The JFTC
fined Defendant Ichikoh Industries, Ltd. $13.1 million “for violating antitrust laws by
forming a cartel to fix automotive lamps” some of which “contain HID Ballasts as a
component part.” (Doc. No. 25 at ¶ 159; Doc. No. 9 at ¶ 125).
Three of the named Defendants have agreed to plead guilty and pay fines based
on their involvement in the HID Ballasts price-fixing conspiracy in the United States,
including Panasonic Corporation, Stanley Electric Co., and Koito Manufacturing Co.,
Ltd. Specifically, in July 2013, Panasonic Corporation agreed to plead guilty and pay a
$45.8 million criminal fine. (Doc. No. 25 at ¶ 6; Doc. No. 9 at ¶ 6). In November 2013,
the Department of Justice (“DOJ”) announced that Stanley Electric Co., Ltd. agreed to
plead guilty and pay a $1.44 million criminal fine for its role in the conspiracy. (Doc. No.
25 at ¶ 9; Doc. No. 9 at ¶ 9). In January 2014, the DOJ announced that Koito
Manufacturing Co., Ltd. agreed to plead guilty and pay a $56.6 million criminal fine for
its role in the conspiracy. (Doc. No. 25 at ¶ 10; Doc. No. 9 at ¶ 9).
Although MEC did not plead guilty to the same conspiracy, in September 2013, it
agreed to plead guilty for its role in the conspiracy to rig bids and fix prices of
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alternators, starters, and ignition coils, and to pay a $190 million criminal fine. (Doc. No.
25 at ¶ 207; Doc. No. 9 at ¶ 131). In addition, MEC and its subsidiaries have pledged to
cooperate in the DOJ’s automotive parts investigation. Pursuant to the guilty plea, in
exchange for the cooperation, the DOJ agreed to refrain from criminally prosecuting
MEC and its subsidiaries for price-fixing certain automotive parts, including HID
Ballasts. (Doc. No. 25 at ¶¶ 8, 167; Doc. No. 9 at ¶¶ 8, 131). MEC also admitted to
destroying and/or altering documents in an effort to cover up its unlawful activity after a
co-conspirator’s office was searched, conduct “approved by their senior managers in
Japan.” (Doc. No. 25 at ¶ 245; Doc. No. 9 at ¶ 206). In addition to the facts alleged in
the complaints, the Court has taken judicial notice of the September 18, 2014, Grand
Jury indictment filed in United States of America v. Ueda, et al, Case No. 14-20560, and
the September 18, 2013, DOJ Release entitled “Seven Mitsubishi Electric Corp. and
Hitachi Automotive Supply Ltd. Executives Indicted for Role in Conspiracy to Fix Prices.”
(See Doc. No. 106 in 13-1702; Doc. No. 85 in 13-1703).
According to IPPs, Defendants “employ[ed] measures to keep their conduct
secret, including, but not limited to, using code names and meeting at remote locations.”
(Doc. No. 25 at ¶ 242; Doc. No. 9 at ¶ 204); See Informations filed against Defendants
Panasonic Corporation, Stanley Electric Co., Ltd., and Koito Manufacturing Co., Ltd.,
Mitsubishi Electric Corporation. Defendants are alleged to have met on six occasions to
discuss the pricing of HID Ballasts.

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C. Market Conditions
IPPs allege the market for HID Ballasts has high barriers to entry and allege what
those barriers are. (Doc. No. 25 at ¶¶ 144-45, 147, 148-50; Doc. No. 9 at ¶¶ 111-12,
114, 155-17). In addition, IPPs allege that despite a decrease in the demand for
automobiles in the United States, Defendants increased the prices for HID Ballasts.
(Doc. No. 25 at ¶¶ 138-42; Doc. No. 9 at ¶¶ 105-109). According to IPPs, in a
competitive markets, falling or steady demand should not have yielded higher prices for
HID Ballasts. (Id.)
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’

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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.”).
In Twombly, the Supreme Court considered the pleading requirements needed 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.
In addition, the Court may consider those documents for which it has taken
judicial notice. See Rondigo, L.L.C. v. Twp. of Richmond, 641 F.3d 673, 680-81 (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 into a motion for summary
judgment) (citing Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir.
2008)).
III. ANALYSIS
In their motion, MELCO Defendants advance arguments raised in the
Defendants’ collective motions to dismiss the IPPs’ complaints, including the timeliness
of the claims, the viability of the requests for injunctive relief, standing, and the
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sufficiency of the allegations. Because the Court addresses those arguments in the
collective motion, it limits its discussion to the added grounds for dismissal put forth by
MELCO Defendants in their motion: whether Indirect Purchaser Plaintiffs have alleged
a plausible antitrust conspiracy when no MELCO Defendant has pleaded guilty to
collusion on HID Ballasts; and, whether IPPs have advanced a claim against the
MELCO subsidiaries.
A. Participation in the Conspiracy
According to MELCO Defendants, the claims against them are based on
threadbare allegations rendering the complaints deficient. The Court addresses the
sufficiency of the allegations below.
1. Participation in the Market
MELCO Defendants contend that dismissal of MEC is appropriate because,
even thought they participate in the market, mere involvement in an industry alleged to
be “rife” with antitrust violations does not state a claim. See Hinds Cnty v. Wachovia
Bank N.A., 620 F. Supp. 2d 499, 515 (S.D.N.Y. 2009). The Court agrees that a
conclusory allegation about the market, standing alone, is not enough. However, the
conspiracy alleged here involves allegations beyond those found deficient in Hinds
Cnty. Notably, MELCO Defendants’ alleged co-conspirators have pleaded guilty to
antitrust conduct in the HID Ballast market. Because there is concrete evidence of the
existence of the conspiracy, as well as other allegations giving rise to an inference the
MELCO Defendants participated, the Court finds this argument unpersuasive.

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2. Guilty Plea
MELCO Defendants next argue that the fact that MEC entered into a plea
agreement relative to different component parts does not establish liability. Doe v.
Aramark Educ. Res., inc., 206 F.R.D. 458, 463 (M.D. Tenn. 2002). The Court agrees,
but MEC’s plea agreement likewise does not dictate the parameters of the antitrust
claims alleged. See In re Packaged Ice Antitrust Litigation, 723 F. Supp. 2d 987, 101112 (E.D. Mich. 2010). The fact that MEC may not have pleaded guilty to price-fixing
HID Ballasts does not immunize it from conduct that falls outside the plea itself. See In
re Packaged Ice Antitrust Litigation, 723 F. Supp. 2d 987, 1011-12 (E.D. Mich. 2010)
(observing that “civil litigation” cannot be “circumscribed or defined by the boundaries of
the criminal investigations”) (citing In re Vitamins Litig., No. 99-misc-197, 2000 WL
1475705 at *11 (D. D.C. May 9, 2000) (rejecting the “notion that the guilty pleas and
cooperation agreements and the class settlement foreclose a broader conspiracy.
Guilty pleas are negotiated instruments which take into account not only the culpability
of the accused but the Justice Department's resources and other cases requiring the
government's attention.”).
Here, there are several guilty pleas specific to the HID Ballast market and
numerous guilty pleas by market participants of other component parts. In addition,
there is an overlap in the years of the HID conspiracy, and the conspiracies for which
MEC pleaded guilty. There is also an overlap in the OEMs targeted by MEC and its
alleged co-conspirators. Finally, the Court finds a strong inference of involvement
arises from MEC’s agreement to cooperate in the HID Ballasts investigation. MELCO
Defendants’ desire to confine any inference drawn from the guilty plea to the specific
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behavior admitted by MEC ignores the wide-ranging, ongoing investigation by
governmental authorities into the conspiracy and case law upholding the use of
admitted conduct to support the existence of the conspiracy beyond those entities that
have pleaded guilty. The factual allegations in the complaint creates “a reasonable
expectation that discovery will reveal evidence of illegal agreement” beyond those
parties that have pleaded guilty and beyond the extent admitted by some Defendants.
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”
as opposed to government investigations coupled with parallel conduct).
3. Economic Factors Conducive to Collusion
According to IPPs’ complaints, prices for vehicular lighting equipment rose even
as demand for vehicles fell in 2007-2009. (Doc. No. 25 at ¶¶ 138-142, Doc. No. 9 at ¶¶
105-109`). In addition, IPPs allege there are high barriers to entry, and demand is
inelastic. (Doc. No. 25 at ¶¶144-150. Doc. No. 9 at 111-117). The allegations create an
inference that the market was conducive to collusion. The inference is not undermined
by MELCO Defendants’ assertion that only a fraction of cars have HID Ballasts.
4. Vagueness
MELCO Defendants argue that the factual allegations tying them to the HID
Ballast market are boilerplate. Nevertheless, IPPs allege MELCO Defendants had
opportunities to conspire and that their alleged co-conspirators have provided examples
of meetings regarding particular customers.
In sum, the complaints, viewed in their entirety, meet IPPs’ pleading obligations
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relative to MEC. Therefore, the Court directs its attention to the arguments advanced
relative to the subsidiaries.
B. Participation of Subsidiaries
MELCO Defendants also argue that IPPs’ complaints fail to meet pleading
standards because there are no allegations regarding the involvement of MEUSH and
MEAA in the alleged conspiracy. The Sixth Circuit typically expects the plaintiffs alleging
a price-fixing conspiracy to “specify how [each] defendant [was] involved in the alleged
conspiracy.” Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 445 (6th Cir. 2012)
(quoting In re Travel Agent Comm’n Antitrust Litig., 583 F.3d 896, 905 (6th Cir. 2009)).
Nevertheless, the court in Carrier Corp. found that it is not necessary for the plaintiffs to
“delineate in the complaint the role each subsidiary played in the conspiracy,” where the
plaintiffs alleged that the parent sold the price-fixed product to the subsidiary in the
United States, that the parent exercised control over the subsidiary, and that the parent
held out the two companies as a single enterprise with overlapping executives. Id. at
445-46.
The Court is satisfied that the complaints comply with Carrier. IPPs allege that
the subsidiaries sold HID Ballasts in the United States during the Class Period. Notably,
once IPPs pleaded participation in the conspiracy, they did not need to differentiate
between participating defendants relative to the overt acts. They have met their burden
by alleging the subsidiaries joined the conspiracy and played a role in it, rather than
relying on an allegation that the subsidiaries are liable because MEC joined the
conspiracy.
This result is consistent with the Court’s holding in other component part cases.
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For example, in In re Automotive Parts Antitrust Litig., No. 2:12-cv-00102, 2013 WL
2456613 (E.D. Mich. June 6, 2013), the Court found that the plaintiffs’ allegations
regarding the parent company’s control over the subsidiaries along with the parent
company’s guilty plea were sufficient to withstand a motion to dismiss. Id. at *3.
Although the plaintiffs did not detail the specific conduct of the subsidiaries, the
allegations as a whole created an inference that the subsidiaries participated in the
conspiracy. Id. at *4. The same inference flows from the allegations in this case even
though neither subsidiary has pleaded guilty given the other allegations supporting the
existence of a conspiracy. The Court has taken judicial notice of the September 18,
2014, three-count indictment against current and former MEC employees for conspiring
to fix prices of other automotive parts. One of the employees was a former Vice
President of Sales for MEC and later the President of MEAA.
According to the Indictment, the FBI raided MEAA’s offices in July 2011. Finally
IPPs allege that senior managers in Japan approved the destruction of documents in
the United States and Japan. (Doc. No. 25 at ¶ 245; Doc. No. 9 at ¶ 206).
Consequently, viewed in their entirety, the allegations support an inference that the
subsidiaries participated in a price-fixing conspiracy aimed at the United States under
the direction of MEC.

IV. CONCLUSION
In sum, the Court finds that the allegations contained within IPPs’ complaints are
substantially similar to those alleged in other cases within this multidistrict litigation,
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which the Court found sufficient to defeat a Rule 12(b)(6) motion. See e.g. In re
Automotive Parts Antitrust Litig. [Bearings], 2014 WL 4209588, at *3-4 (E.D. Mich. Aug.
26, 2014); In re Automotive Parts Antitrust Litig. [Wire Harness], 2013 WL 2456013, at
*2-3 (E.D. Mich. June 6, 2013). The Court finds no reason to depart from its prior
rulings. Accordingly, MELCO Defendants’ motion is DENIED.

IT IS SO ORDERED.

Date: April 22, 2015

s/Marianne O. Battani
MARIANNE O. BATTANI
United States District Judge

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 April 22, 2015.
s/ Kay Doaks
Case Manager

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