Shock Absorbers - Dealership Actions
OPINION AND ORDER GRANTING IN PART AND DENYING IN PART 3 MOTION TO DISMISS THE END-PAYORS AND THE AUTO DEALERS CLASS ACTION COMPLAINTS. Signed by District Judge Marianne O. Battani. (KDoa)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
IN RE: AUTOMOTIVE PARTS
MASTER FILE NO. 12-md-02311
In Re: Shock Absorbers
HON. MARIANNE O. BATTANI
THIS DOCUMENT RELATES TO:
OPINION AND ORDER GRANTING IN PART AND DENYING IN PART
MOTION TO DISMISS THE END-PAYORS’ AND THE AUTO DEALERS’
CLASS ACTION COMPLAINTS
Before the Court is Defendants KYB Corporation, f/k/a/ Kayaba Industry Co.,
Ltd., (“KYB Industry) and KYB Americas Corporation (“KYB Corporation”) (collectively
“KYB Defendants”) Collective Motion to Dismiss the End-Payor Plaintiffs’ and Auto
Dealer Plaintiffs’ Class Action Complaints (Doc. No. 3 in 16-3302; Doc. No. 23 in 153303). In their motion, KYB Defendants challenge the sufficiency of the allegations of
the conspiracy pursuant to Fed. R. Civ. P. 12(b)(6). The Court has reviewed all of the
filings, The Court has reviewed all of the filings, and for the reasons that follow, the
motion is GRANTED in part and DENIED in part.
I. INTRODUCTION AND FACTUAL ALLEGATIONS
After the United States Judicial Panel on Multidistrict Litigation (“Judicial Panel”
or “Panel”) transferred actions sharing “factual questions arising out of an alleged
conspiracy to inflate, fix, raise, maintain, or artificially stabilize prices of automotive wire
harness systems” to the Eastern District of Michigan, (12-md-02311, Doc. No. 2), in
February 2012, the scope and extent of alleged antitrust conspiratorial conduct in the
automotive component parts industry grew significantly. In June 2012, the Judicial
Panel expanded MDL No. 2311 to include alleged conspiracies to fix the prices of three
additional component parts, and to date the number of component parts has reached
forty. Thereafter, Court entered a briefing order to streamline the resolution of motions
filed in the component parts cases, with a focus on eliminating duplicative discovery,
preventing inconsistent pretrial rulings, and conserving resources. (See Doc. No. 793 in
12-2311). In the briefing order, the Court instructed the parties to identify previously
uncited authority from the Supreme Court of the United States, the Sixth Circuit, or the
highest court of the state under which the claim was brought when addressing state law
Consequently, to the extent that no new authority is included, the Court relies on
the analysis set forth in its prior opinions resolving collective motions to dismiss Indirect
Purchaser Plaintiffs’ complaints. To the extent that the parties argue for a different
outcome on a particular claim, but provided no new authority, or provide new authority
to support a previous outcome, the Court declines to address these arguments.
Instead, the Court directs its attention to those claims where Defendants advance new
authority in asserting that the Court must dismiss assert that new case law requires a
different resolution from the Court’s prior decisions.
Automobile Dealer Plaintiffs (“ADPs”) and End-Payor Plaintiffs (“EPPs”)
(collectively “Indirect Purchaser Plaintiffs” or “IPPs” ) bring class actions against
Defendants under federal and state law based on Defendants’ alleged conspiracy to rig
bids, fix the prices, and allocate the market and customers of Shock Absorbers
manufactured or sold in the United States. (Doc. No. 1 in 16-11256, hereinafter “ADPs’
Complaint,” at ¶ 1; Doc. No. 1 in 15-14080, hereinafter, “EPPs’ Complaint,” at ¶ 1).
Defendants are manufacturers or sellers of Shock Absorbers that are manufactured or
sold in the United States. (ADP’s Complaint at ¶¶ 1, 4, 144, 145; EPPs’ Complaint at ¶¶
1, 4, 106). Shock Absorbers, also called dampers, “are part of the suspension system
on automobiles. They absorb and dissipate energy to help cushion vehicles on uneven
roads leading to improved ride quality and vehicle handling.” (ADPs’ Compl. at ¶ 3).
On September 16, 2015, the Department of Justice (“DOJ”) announced that
Defendant Kayaba Industry Co., Ltd. agreed to plead guilty to criminal Information and
to pay a $62 million fine for participation in a combination and conspiracy to suppress
and eliminate competition in the automotive parts industry. (ADPs’ Complaint at ¶ 7). It
agreed to fix the prices of Shock Absorbers sold in the United States and elsewhere.
(ADPs’ Complaint at ¶ 7). According to the DOJ, KYB Industries sold Shock Absorbers
“to Fuji Heavy Industries Ltd. (manufacturer of Subaru vehicles), Honda Motor Co., Ltd.,
Kawasaki Heavy Industries, Ltd., Nissan Motor Company Ltd., Suzuki Motor
Corporation, and Toyota Motor Company, and certain of their subsidiaries (collectively
“Vehicle Manufacturers”) in the United States and elsewhere from as early as the
mid-1990s and continuing until at least December 2012 in violation of the Sherman Act,
15 U.S.C. § 1.” (ADPs’ Complaint at ¶ 81; EPPs’ Complaint at ¶ 98).
According to IPPs, KYB Industries is the largest manufacturer of Shock
Absorbers. (See e.g. ADPs’ Complaint at ¶ 64). IPPs also allege that KYB Defendants
acted as a supplier to Original Equipment Manufacturers (“OEMs”) and rigged bids to
OEMs with their co-conspirators. (ADPs’ Complaint at ¶¶ 66, 67; EPPs’ Complaint at ¶
¶ 1, 120, 121).
In their complaints, IPPs allege that market conditions conducive to an antitrust
conspiracy exist. (ADPs’ Complaint at ¶ 70; EPPs’ Complaint at ¶ 123). Specifically,
the Shock Absorbers market has high barriers to entry, which facilitate the formation
and maintenance of a cartel. (ADPs’ Complaint at ¶ 162; EPPs’ Complaint at ¶ 88).
Those barriers include “costly and lengthy start-up costs, including multi-million dollar
costs associated with manufacturing plants and equipment, energy, transportation,
distribution infrastructure, and long-standing customer relationships.” (ADPs’ Complaint
at ¶ 72; EPPs’ Complaint at ¶ 89). Defendants own patents, another factor hindering
entry into the market. (ADPs’ Complaint at ¶ 73; EPPs’ Complaint at ¶ 90). IPPs further
allege inelasticity of demand. (ADPs’ Complaint at ¶¶ 75-77; EPPs’ Complaint at ¶¶ 9294).
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.”).
KYB Defendants argue that the facts, as alleged in the complaints, support
dismissal because they reveal that IPPs lack standing to bring the claims and they do
not meet the pleadings standards articulated in Twombly. The arguments are
The parties dispute whether Indirect Purchaser Plaintiffs have satisfied the
constitutional requirement for standing; specifically, whether IPPs alleged a personal
injury “fairly traceable” to the defendant’s allegedly unlawful conduct” that is “likely to be
redressed by a favorable judicial decision.” Lexmark Int’l, Inc. v. Static Control
, 134 S. Ct. 1377, 1386 (2014) (citation omitted). The
resolution of the dispute turns on the allegations advanced by IPPs.
In their complaints, IPPs allege that Defendants manufacture, market and sell
Shock Absorbers throughout and into the United States.” (ADPs’ Complaint at ¶ 4;
EPPs’ Complaint at ¶ 5). They allege that KYB Defendants and co-conspirators
“conspired to fix, raise, maintain and/or stabilize prices, and allocate market shares for
Shock Absorbers.” (Id.). IPPs also allege that as a direct result of the conduct, they
paid “artificially inflated prices for Shock Absorbers during the Class Period and . .
.suffered antitrust injury to their business or property.” (ADPs’ Complaint at ¶ 9; EPPs’
Complaint at ¶ 9). Finally, IPPs allege that Shock Absorbers are “identifiable, discrete
physical products that remain essentially unchanged when incorporated into a vehicle”
and “follow a traceable physical chain of distribution” and the costs likewise can be
traced through the chain of distribution. (ADPs’ Complaint at ¶ 139; EPPs’ Complaint at
According to KYB Defendants, IPPs cannot show they were harmed by KYB
Defendants because IPPs failed to allege they purchased Shock Absorbers
manufactured or marketed by KYB Defendants. Consequently, KYB Defendants
conclude that IPPs cannot meet pleading requirements. KYB Defendants analogize
these allegations to those found deficient in Sierra Club v. Morton, 405 U.S. 727, 72830, 735 (1972). The Supreme Court denied the plaintiff’s request for judicial review of
the defendant’s proposed extensive skiing development under the Administrative
Procedures Act, finding the plaintiff lacked standing. In Sierra Club, the plaintiff
asserted it had a special interest in the conservation of national parks. The Court held
that the plaintiff did not have a personal stake in the outcome because the Sierra Club
did not allege “that it or its members would be affected in any of their activities or
pastimes by the [ ] development. Nowhere in the pleadings or affidavits did the Club
state that its members use [land] for any purpose, much less that they use it in any way
that would be significantly affected by the proposed actions of the respondent.” Id. at
To the extent that IPPs did not explicitly allege that they purchased Shock
Absorbers manufactured by KYB Defendants, here, the allegations nevertheless place
IPPs among the injured. IPPs have alleged that KYB Defendants overcharged the
direct purchasers, and that some or all of the overcharge was passed on to them
through each of the various levels of the distribution chain. In re Graphics Processing
Units Antitrust Litig., 253 F.R.D. 478, 502 (N. D. Cal. 2008).
KYB Defendants’ reliance on the decision in In re Magnesium Oxide Antitrust
Litig., No. 10-5943, 2011 WL 5008090 (D. N.J. Oct. 20, 2011) likewise is misplaced. In
that case, the plaintiffs failed to identify which products they had purchased, and the
products were not only produced differently, they had different commercial applications.
The court held in that case that “without knowing which specific products’ the plaintiffs
purchased, it was ‘impossible to determine whether an increase in their price is the type
of injury that furthers the object of the alleged conspiracy.” Id. In contrast, here the
complaint makes clear the IPPs purchased one product–Shock Absorbers, which they
alleged could be identified during the distribution chain. (ADPs’ Complaint at ¶¶ 3, 18,
139; EPPs’ Complaint at ¶¶ 3, 18, 157).
In addition, under antitrust law, KYB Defendants may be held jointly and
severally liable for the conduct of their co-conspirators. Therefore, injury is not limited to
vehicles containing Shock Absorbers manufactured or sold by KYB Defendants. The
existence of the guilty plea reveals that KYB Industries conspired with another actor. In
addition, IPPs allege the likely existence of an applicant for amnesty under the Antitrust
Criminal Penalty Enhancement and Reform Act (“ACPERA”). (ADPs’ Complaint at ¶¶
86-87; EPPs’ Complaint at ¶¶ 103-104). Therefore, there is an inference that the Shock
Absorbers conspiracy affected OEMS other than those referenced in KYB Industries’
In the alternative, KYB Defendants argue in the absence of a named plaintiff in
each state where IPPs pursue a claim the claims under those laws must be dismissed
for lack of standing. The Court has repeatedly rejected this argument, and does so here
B. Plausible Conspiracy
The parties dispute whether IPPs allege sufficient facts to support their claim that
they indirectly purchased Shock Absorbers from Defendants or unnamed coconspirators. ADPs do not allege that they purchased Shock Absorbers, they merely
allege they purchased “Automotive Parts” from Defendants. Moreover, KYB
Defendants contend that IPPs’ failure to allege purchases from Japanese OEMs
renders their complaints subject to dismissal.
1. Purchase of Automotive Parts, Not Shock Absorbers
KYB Defendants are correct that ADPs only claim to have purchased “Vehicles
containing Automotive Parts. . . .” (ADP Complaint ¶¶ 19-56*). In addition, KYB
Defendants assert that ADPs fail to allege specific facts to support that unspecified
“Automotive Parts” were manufactured by KYB Defendants and/or their co-conspirators.
The Court, reading the complaint, as a whole and in the light most favorable to
ADPs, finds it clear that the allegations about Automotive Parts refers to Shock
Absorbers, which are mentioned almost 300 time in the ADP complaint, including the
class definition. (See also, ADPs’ Complaint at ¶ 18). KYB Defendants have notice of
the claims being advanced, and it would not serve justice to dismiss ADPs’ complaint
because of a “technical” pleading deficiency. Further, “[p]leadings must be construed
so as to do justice.” Fed. R. Civ. P. 8(e).
2. Failure to Allege Purchases from Japanese OEMs
KYB Defendants further challenge ADPs’ complaint because at least fourteen
ADPs do not even allege they were authorized dealers for the OEMs identified by KYB
Industries, in its plea, as targets of the conspiracy. In the absence of any allegation that
ADPs purchased vehicles manufactured by the identified OEMS, much less that they
purchased vehicles manufactured by identified OEMs that contained Shock Absorbers
manufactured or sold by KYB Defendants, the Court must dismiss the claims of any
ADPs that were not authorized dealers for Subaru, Honda, Kawasaki, Nissan, Suzuki,
or Toyota–those identified in the guilty plea.
Likewise, KYB Defendants assert that the Court must dismiss EPPs’ complaint
because discovery from EPPs in other component part cases shows that they did not
purchase vehicles from the OEMs identified in the complaints; therefore, they cannot be
liable for a conspiracy in the Shock Absorbers market. Although EPPs allege that
Defendants conspired with respect to Shock Absorbers sold to the same OEMS (EPPs’
Complaint at ¶ 98), EPPs never allege that they purchased a vehicle manufactured by
one of those OEMs. They merely plead that they “purchased at least one Shock
Absorber indirectly from at least one Defendant. (Id. at ¶¶19-73). EPPs failed to identify
what vehicle each EPP purchased, and, in the absence of this specific information, KYB
Defendants conclude that there is no way to identify how many EPPs did not purchase
vehicles containing Shock Absorbers manufactured or sold by KYB Defendants.
The Court disagrees with KYB Defendants’ assertion that IPPs must plead that
they purchased and/or leased new vehicles sold to specific OEMS that purchased
Shock Absorbers from KYB Defendants. In their complaints, IPPs allege that
Defendants, including KYB Defendants, conspired to fix the prices of Shock Absorbers
as defined in the complaints sold to OEMs by KYB Defendants and its co-conspirators.
IPPs need not confine the allegations in their complaints to the contours of KYB
Industries’ plea agreement. Defendants rarely plead guilty to all of the charges against
them, and limitations on government resources may play as much a role in any plea
agreement reached as the conduct giving rise to the guilty pleas. In re High Fructose
Corn Syrup Antitrust Litig., 295 F.3d 664-665 (7th Cir. 2002).
Moreover, reliance on information from consolidated discovery showing that
EPPs did not purchase vehicles manufactured by OEMS to whom KYB Defendants sold
Shock Absorbers goes beyond the scope of a Rule 12(b)(6) motion. KYB Defendants
have not provided any discovery, and IPPs have alleged the existence of coconspirators and an amnesty applicant. KYB Defendants’ position builds on a reading
of the complaints and KYB Industries’ Plea Agreement in the light most favorable to
themselves. The Court, however, must credit the allegations advanced by IPPs in the
light most favorable to IPPs. Other allegations in the complaints undermine the narrow
reading advocated by KYB Defendants. KYB Defendants’ argument builds on the
assumption that KYB Corporation’s guilty plea establishes immutable boundaries as to
its conduct. Again, case law does not support such confinement. See e.g. In re High
Fructose Corn Syrup Antitrust Litig., 295 F.3d at 664-665.
Further, the Court is mindful that KYB Corporation’s guilty plea is not the sole
basis for the allegations against KYB Defendants. IPPs’ complaints detail international
government investigations that resulted in the guilty pleas of other defendants for their
part in price-fixing and bid-rigging as well as the market conditions that facilitated the
conspiracy. The factual allegations create “a reasonable expectation that discovery will
reveal evidence of illegal agreement” beyond those parties that have pleaded guilty and
the conduct for which they pleaded guilty. 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”).
These are the type of allegations found to satisfy Twombly. At this stage in the
proceedings, the Court is required to read the complaints in the light most favorable to
IPPs. Here, the allegations suggest a broad industry-wide conspiracy. IPPs’
complaints, read in their entirety, reflect a conspiracy directed at OEMs, and KYB
Defendants’ reliance on a technical pleading deficiency by ADPs is misplaced. The
existence of inferences that undermine a conspiracy does not undermine the sufficiency
of the complaints here, provided one such inference suggests a plausible conspiracy.
C. State Law Claims
Pursuant to the parties stipulation, the state specific arguments have been
For the reasons discussed above, and pursuant to the parties’ stipulation, the
Court DENIES KYB Defendants’ request to dismiss the federal claims and GRANTS,
without discussion, the motion to limit damages under the laws of Utah and New
Hampshire based upon applicable statutes of limitation; DISMISSES, without
discussion, ADPs’ and EPPs’ South Carolina consumer protection class action, and
DISMISSES, without discussion, EPPs’ unjust enrichment claim under California law.
IT IS SO ORDERED.
Date: March 3, 2017
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 March 3, 2017.
s/ Kay Doaks
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