Fond du Lac Bumper Exchange Inc v. Jui Li Enterprise Company Ltd et al

Filing 305

ORDER signed by Judge Lynn Adelman on 9/5/12 denying 247 Motion to Dismiss for Failure to State a Claim. (cc: all counsel) (dm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
FOND DU LAC BUMPER EXCHANGE, INC., and
ROBERTS WHOLESALE BODY PARTS, on
behalf of themselves and others similarly situated,
Plaintiffs,
v.

Case No. 09-CV-00852

JUI LI ENTERPRISE COMPANY, LTD., et al.,
Defendants.

ARKANSAS TRANSIT HOMES, INC., OLIVIA LEE,
PATRICK TORREY, and MARY LOUISE FOWLER,
on behalf of themselves and others similarly situated,
Plaintiffs,
v.

Case No. 11-CV-00162

JUI LI ENTERPRISE COMPANY, LTD., et al.,
Defendants.

DECISION AND ORDER
Plaintiffs Arkansas Transit Homes, Inc. (“Arkansas Transit”), Olivia Lee, Patrick
Torrey and Mary Fowler, American purchasers of aftermarket sheet metal auto parts (“AM
parts”), bring putative class actions alleging that defendants, Taiwanese manufacturers of
AM parts and their American subsidiaries, violated Section 1 of the Sherman Anti-trust Act
and several state laws by entering into price-fixing and other anti-competitive agreements.
Defendants now move to dismiss plaintiffs’ second amended complaint.

I. BACKGROUND
AM parts are replacement parts for the body of a car that are not made by a car’s
original manufacturer. Because companies specialize in making AM parts and because
they are not certified by a car’s manufacturer, they are usually the cheapest parts available.
Defendants Taiwan Kai Yih Industrial Co., Ltd. (“TKY Industrial”), Gordon Auto Body Parts
(“Gordon”), Auto Parts Industrial, Ltd. (“API”), and Jui Li Enterprise Company, Ltd. (“Jui Li”)
are Taiwanese manufacturers of AM parts, defendant TYG Products, L.P. (“TYG
Products”) is an American distributor of such parts, both TKY Industrial and TYG Products
are subsidiaries of the Tong Yang Group (“TYG”), a Taiwanese conglomerate, and
defendant Cornerstone Auto Parts, LLC (“Cornerstone”) is an American subsidiary of API
and a distributor of AM parts.
Plaintiffs are indirect purchasers of AM parts. Defendants sell these parts to United
States distributors and body shops, which then sell them to plaintiffs for end use on their
own vehicles. Direct purchasers of AM parts have brought a separate suit against
defendants.
Plaintiffs allege that together defendants control over 95% of the U.S. AM parts
market, and that, sometime in 2003, they ceased competing with one another. According
to the complaint, defendants met secretly to agree on floor prices for certain AM parts,
beneath which no defendant would sell, and to establish penalties for defendants who did
not comply with the agreed-on terms. For example, defendants purportedly met in March
2004 and again in March 2008 to agree on price increases that they would implement
simultaneously. Plaintiffs also allege that defendants TKY Industrial, Jui Li, Gordon and

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API set up “strategic alliances” through which they divided up the market for certain AM
parts, and began sharing marketing costs and the cost of developing the tools required to
make AM parts. As a result, plaintiffs allege that defendants were able to charge artificially
inflated prices and that direct purchasers passed the higher costs on to plaintiffs and other
consumers. Plaintiffs allege that defendants were able to increase the price for AM parts
by as much as 100%.
As additional support for their claim, plaintiffs cite public statements from several of
defendants’ executives. For example, they cite a 2003 article from the Taiwan Economic
News in which TYG President Raymond Wu explained how the concentration of AM parts
manufacturers in Southern Taiwan allowed defendants to engage in coordinated pricing:
Now the world’s strongest AM auto-parts production citadel, according to [Raymond]
Wu, Taiwan comes close to monopolizing the global AM-parts market. . . . In the
past, Wu explains, most AM-parts makers competed with one another by cutting
prices no matter how strong the global demand was, to “steal” market share from
each other, but now the situation has changed, makers have abandoned this
approach, and the profit margins of major local AM-parts makers parallel or even
outstrip those of high-tech product makers on the island. . . . [TKY Industrial] closely
cooperates with local counterparts to escape the blood-shedding price competition,
thus achieving very high profitability, Wu explains.
(Second Am. Compl.¶ 33, ECF No. 218.) Plaintiffs further cite a 2004 article in the Taiwan
Economic News in which a representative of TYG acknowledged that in North America
TYG “does not compete with its major rivals—all from Taiwan, but has been trying to form
a strategic alliance to jointly develop the world’s largest single market.” (Id. at ¶ 34.)
Plaintiffs also cite a statement by Gordon’s vice president attributing Gordon’s considerable
revenues in 2004 and 2005 to defendants’ agreement which “effectively ended the pricecutting competition.” (Id. at ¶ 37.)

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Finally, plaintiffs allege that the nature of the AM parts market is highly conducive
to the kind of cooperative anti-competitive behavior in which they allege defendants
engaged. Plaintiffs allege that AM parts production is highly concentrated in the southern
part of Taiwan, that barriers to entry are very high, that AM parts are fungible and that there
are few substitutes for such parts.
II. DISCUSSION

Defendants move to dismiss plaintiffs’ complaint under Fed. R. Civ. P. 12(b)(6) for
failure to state a claim. To survive a Rule 12(b)(6) motion, the complaint must state a
plausible claim for relief that permits “the reasonable inference that defendant is liable for
the injury alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In assessing defendants’
motion, I take all of plaintiffs’ allegations as true and draw all reasonable inferences in
plaintiffs’ favor. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008).
A.

Sherman Act Claim
Plaintiffs first claim that defendants violated § 1 of the Sherman Act, 15 U.S.C. § 1,

by entering into a conspiracy to restrain trade or commerce, and they seek injunctive relief
under § 16 of the Clayton Act, 15 U.S.C. § 26. To state a claim under § 1 of the Sherman
Act, plaintiffs must allege sufficient facts to suggest that defendants entered into an
unlawful agreement, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007), and that
plaintiffs have “antitrust standing.” Associated Gen. Contractors of Cal., Inc. v. Cal. State
Council of Carpenters (“AGC”), 459 U.S. 519, 535 (1983). To determine whether a plaintiff
has antitrust standing, a court must consider whether the plaintiff is a proper party to bring
a private antitrust lawsuit. Id. Plaintiffs have antitrust standing to seek injunctive relief if
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they are threatened with an “antitrust injury,” loss or damage of the type the antitrust laws
were designed to prevent. Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 111 n.6
(1986).
Plaintiffs allege enough facts to plausibly suggest that defendants entered into an
unlawful agreement. See Fond du Lac Bumper Exchange, Inc. v. Jui Li Enterprise Co.,
Ltd., 753 F. Supp. 2d 792 (E.D. Wis. 2010). Plaintiffs allege that all of the defendants
participated in secret price-fixing meetings, that TKY Industrial, Gordon, API, and Jui Li
were parties to strategic alliances that allowed defendants to share resources and divide
up the market, and that TYG Products and Cornerstone distributed AM parts in the U.S.
at unlawfully established prices. Plaintiffs also offer direct evidence of the conspiracy in the
form of public statements made by defendants’ executive officers.
Plaintiffs also allege sufficient facts to suggest that defendants’ actions threaten
them with an antitrust injury. To establish antitrust injury, plaintiffs must prove they are
being injured because they are participants in the market where defendants are restraining
competition or that their injuries are “inextricably intertwined” with the injuries of market
participants. AGC, 459 U.S. at 538–39 (citing Blue Shield of Va. v. McCready, 457 U.S.
465 (1982)). Here, plaintiffs allege that they are participants in the relevant market, the U.S.
AM parts market, because they are end users of AM parts, and that they are being injured
because the higher prices defendants charge for AM parts are being passed on to end
users by direct purchasers and others in the chain of distribution. These allegations are
sufficient to establish that plaintiffs are threatened with an antitrust injury.

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Defendants argue that plaintiffs’ allegation that direct purchasers are passing price
increases on to end users is too speculative to survive a motion to dismiss. I disagree.
Since AM parts travel down the chain of distribution substantially unchanged, the price
charged by the manufacturer will largely determine the price paid by the end user. If, as
plaintiffs allege, defendants control over 95% of the U.S. AM parts market, it is easy for a
direct purchaser to pass a price increase on to its customers because the majority of
distributors are paying the same inflated price for AM parts. No one has to worry about
being undercut by a lower-cost competitor. Therefore, plaintiffs’ claim that they are being
injured as a result of defendants’ alleged conspiracy is plausible.
Finally, I reject defendants’ argument that plaintiffs’ claim should be dismissed
based on the four-year statute of limitations contained in 15 U.S.C. § 15b. Section 15b only
expressly applies to damages claims, but it creates a rebuttable presumption that a
plaintiff’s claim for injunctive relief is subject to a defense of laches if brought more than
four years after the alleged violation. Int’l Tel. & Tel. Corp. v. Gen. Tel. & Elec. Corp., 518
F.2d 913, 928–29 (9th Cir. 1975), overruled on other grounds by Cal. v. Am. Stores Co.,
495 U.S. 271 (1990). Here, plaintiffs allege that defendants’ price-fixing conspiracy was
ongoing at the time the complaint was filed. Thus, it is not clear from the face of the
complaint that plaintiffs’ federal claim is untimely.
B.

State Law Claims
Plaintiffs 15 remaining claims seek damages under various state laws. Plaintiffs

bring these claims because, as indirect purchasers, they are prohibited from seeking
damages under federal antitrust laws. Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977); see

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also Cal. v. ARC Am. Corp., 490 U.S. 93 (1989) (holding that rule prohibiting damages
claims by indirect purchasers under federal law does not preempt similar state law claims).
Defendants raise several specific objections to plaintiffs’ state law claims.
Defendants first contend that plaintiffs’ state law claims fail because plaintiffs do not
expressly allege that they purchased AM parts in the states under whose laws they seek
damages.1 However, as indicated, I must draw all reasonable inferences in plaintiffs’ favor,
and based on plaintiffs’ complaint, it is reasonable to infer such purchases. Each plaintiff
is alleged to have purchased AM parts “from one or more of the defendants or their
controlled subsidiaries,” and each plaintiff represents at least one class of consumers from
a particular state. Plaintiff Arkansas Transit, which “conducts business throughout the 48
contiguous states,” is alleged to have purchased AM parts “in many states,” and is bringing
class action claims on behalf of, “All people and entities that . . . indirectly paid for all or
part of the purchase price of AM Sheet Metal Parts for end use in [Arkansas, Florida,
Minnesota, New Mexico and Tennessee] . . . .” (Second Am. Compl. ¶¶ 10, 96.) The
remaining class action claims, under California, Massachusetts and Vermont law, are
brought by plaintiffs Lee, Fowler and Torrey, each of whom is alleged to be a resident of
the state under whose law he or she is suing. Based on these allegations, it is reasonable
to infer that the named plaintiffs purchased AM parts in the eight relevant states.

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Defendants improperly frame this argument as a challenge to plaintiffs’ standing
under Article III of the Constitution. However, plaintiffs do not need to allege that they
purchased AM parts in a particular state to establish Article III standing. All they need to
allege is that they were injured by defendants’ conspiracy and that the injury can be
redressed by a favorable judicial decision. See Lujan v. Defenders of Wildlife, 504 U.S.
555, 560–61 (1992). Plaintiffs have clearly alleged Article III standing in this case.
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Next, defendants’ challenge plaintiffs’ statutory claims in California, Massachusetts
and Minnesota arguing that plaintiffs fail to allege that defendants’ conspiracy caused
plaintiffs’ injury. See, e.g., Vinci v. Waste Mgmt., Inc., 36 Cal. App. 4th 1811, 1814 (Cal.
App. 1. Dist. 1995) (noting California antitrust statute requires “a direct causal connection
between the asserted injury and the alleged restraint of trade”). As noted in my discussion
of plaintiffs’ federal claim, the complaint contains sufficient allegations to plausibly suggest
that plaintiffs paid higher prices for AM parts as a direct result of defendants’ conspiracy.
Therefore, I reject defendants’ arguments on this point.
Next, defendants argue that plaintiffs’ claims under the antitrust and consumer
protection laws of Arkansas, California, New Mexico, Massachusetts and Vermont fail
because plaintiffs lack antitrust standing to sue for damages as required by federal law.
Defendants contend that each of these states would employ the federal standard for
determining antitrust standing because they interpret their laws in harmony with federal
antitrust laws. Since this appears to be correct in at least a couple of these states, I will
apply the federal standard. To determine whether a plaintiff has antitrust standing to seek
damages under federal law, a court weighs six factors (the “AGC factors”): “(1) the causal
connection between the violation and the harm; (2) the presence of improper motive; (3)
the type of injury and whether it was one Congress sought to redress; (4) the directness
of the injury; (5) the speculative nature of the damages; and (6) the risk of duplicative
recovery or complex damage apportionment.” Loeb Indus., Inc. v. Sumitomo Corp., 306
F.3d 469, 484 (7th Cir. 2002) (listing factors from AGC, 459 U.S. 519 (1983)).

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For the reasons stated in my discussion of plaintiffs’ federal claim, I conclude that
the first five AGC factors weigh in plaintiffs’ favor. Plaintiffs allege that they are participants
in the market being restrained and that they are paying higher prices for AM parts as a
direct result of defendants’ conspiracy. Therefore, they allege an antitrust injury and a
plausible claim for damages. The sixth factor also weighs in plaintiffs’ favor because the
states involved have rejected the Supreme Court’s reasoning in Illinois Brick barring
damage suits by indirect purchasers because they create a risk of duplicative recovery by
both direct and indirect purchasers and make the apportionment of damages too complex.
431 U.S. at 730–32 (noting defendants cannot use pass-on as a defense against a federal
claim by a direct purchaser); see also Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d
979, 987 (9th Cir. 2000); (finding “California law affords standing more liberally than does
federal law”); Fucile v. VISA U.S.A., Inc., No. S1560-03, 2004 WL 3030037, at *3 (Vt.
Super. Ct. Dec. 27, 2004) (applying the AGC factors only “to the extent that these factors
are consistent with allowing ‘indirect purchasers’ standing”). Therefore, plaintiffs allegations
are sufficient to establish antitrust standing to sue for damages.
Next, defendants seek dismissal of plaintiffs’ unjust enrichment claims under
Arkansas, Florida, Massachusetts, Minnesota, New Mexico and Vermont law. First,
defendants claim that plaintiffs’ unjust enrichment claims in Florida, Massachusetts,
Minnesota and New Mexico fail on the ground that statutes in each state provide plaintiffs
with an adequate legal remedy. Defendants argue that unjust enrichment is an equitable
claim and that plaintiffs cannot seek equitable relief in these states if they have a legal
remedy. See, e.g., Williams v. Bear Stearns & Co., 725 So. 2d 397, 400 (Fla. Dist. Ct. App.

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1998) (noting “the general rule is that if the complaint on its face shows that adequate legal
remedies exist, equitable remedies are unavailable”). Fed. R. Civ. P. 8(d), however, allows
a party to plead inconsistent claims in the alternative. Therefore, while plaintiffs’ statutory
claims may later preclude them from recovering for unjust enrichment, it would be
inappropriate to dismiss plaintiffs’ equitable claims at this stage.
Second, defendants seek dismissal of plaintiffs’ unjust enrichment claims in Florida,
Massachusetts and Minnesota on the ground that, inasmuch as the parties had no direct
contact, plaintiffs fail to allege that they conferred a benefit on defendants. See
Extraordinary Title Servs., LLC v. Fla. Power & Light Co., 1 So. 3d 400, 404 (Fla. Dist. Ct.
App. 2009) (holding that one element of unjust enrichment is that “plaintiff has conferred
a benefit on the defendant”); Johnson v. Johnson, 946 N.E.2d 157 (Mass. App. Ct. 2011)
(same); Schumacher v. Schumacher, 627 N.W.2d 725, 729 (Minn. App. 2001) (same).
However, plaintiffs’ complaint sufficiently alleges the conferral of a benefit. Plaintiffs allege
that, as the consumers of AM parts, they drive demand for such parts and that defendants
profit from the sale of AM parts as a direct result of their purchases. See Romano v.
Motorola, Inc., No. 07-CIV-60517, 2007 WL 4199781, at *2 (S.D. Fla. 2007) (allowing
consumers who purchased Motorola cellphones from a retail outlet to sue Motorola for
unjust enrichment because “Motorola is directly benefitted through profits earned from the
sale of the phone”).
Third, defendants argue that plaintiffs are not entitled to seek disgorgement of
defendants’ profits through their claims for unjust enrichment in Arkansas, Minnesota, New
Mexico and Vermont because the antitrust and unfair competition statutes in each of these

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states limit plaintiffs to compensatory damages. In these states, unjust enrichment is a
freestanding common law claim independent of any statutory cause of action. See
DePriest v. AstraZeneca Pharmaceuticals, L.P., 351 S.W.3d 168 (2009) (treating claim for
unjust enrichment as a stand-alone claim); Dahl v. R.J. Reynolds Tobacco, Co., 742
N.W.2d 186, 195–96 (Minn. App. 2007) (same); Heimann v. Kinder-Morgan CO2 Co., L.P.,
144 P.3d 111, 117–18 (N.M. Ct. App. 2006) (same); Winey v. William E. Dailey, Inc., 636
A.2d 744, 751 (Vt. 1993) (same). Thus, any limitations on damages for plaintiffs’ statutory
claims are inapplicable to plaintiffs’unjust enrichment claims. The goal of unjust enrichment
is to allow a plaintiff to recover profits that a defendant unjustly earned at plaintiff’s
expense, even if such profits exceed plaintiff’s actual damages.
Finally, defendants seek dismissal of plaintiffs’ Florida unjust enrichment claim on
the ground that Florida law prohibits an indirect purchaser plaintiff from suing a
manufacturer unless the plaintiff first seeks to recover damages from the person who sold
plaintiff the relevant product. Defendants rely on Commerce Partnership 8098 Ltd.
Partnership v. Equity Contracting Co., 695 So. 2d 383 (Fla. Dist. Ct. App. 1997). Assuming
defendants’ interpretation of Commerce Partnership is correct, which is doubtful, plaintiffs
satisfy this requirement by alleging that a suit against the retailers of AM parts would be
futile. Plaintiffs allege that everyone in the chain of distribution was forced to pay inflated
prices for AM parts as a result of defendants’ conspiracy. Thus, the parties who directly
sold AM parts to plaintiffs were not unjustly enriched by the transaction, and it would be
pointless for plaintffs to sue them.

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Next, defendants seek dismissal of plaintiffs’ claim under the Arkansas Deceptive
Trade Practices Act (“ADTPA”), Ark. Code § 4-88-107. Defendants argue that the ADTPA
does not authorize claims by indirect purchasers. To state a claim under the ADTPA,
plaintiffs must allege facts showing that defendants engaged in an “unconscionable, false,
or deceptive act or practice in business, commerce or trade.” Ark. Code § 4-88-107(a)(10).
An “unconscionable” act or practice is one “that affronts the sense of justice, decency, and
reasonableness.” Baptist Health v. Murphy, 226 S.W.3d 800 (Ark. 2006). No Arkansas
case addresses whether price-fixing constitutes an unconscionable act under the ADTPA,
but the Arkansas Supreme Court has noted that the ADTPA should be given a “liberal
construction” in order “to protect the interests of both the consumer public and the
legitimate business community.” State ex rel. Bryant v. R & A Inv. Co., Inc., 985 S.W.2d
299, 302 (Ark. 1999). Thus, I conclude that plaintiffs sufficiently allege an ADTPA claim.
See In re Chocolate Confectionary Antitrust Litig., 602 F. Supp. 2d 538, 583 (MD. Pa.
2009) (reaching same result); In re Dynamic Random Access Memory (DRAM) Antitrust
Litig., 516 F. Supp. 2d 1072, 1108–09 (N.D. Cal. 2007) (same); In re New Motor Vehicles
Canadian Export Antitrust Litig., 350 F. Supp. 2d 160, 178–79 (D. Me. 2004) (same).
Since I conclude that plaintiffs may bring a claim for price fixing under the ADTPA,
I also reject defendants’ argument that plaintiffs’ claim for unjust enrichment under
Arkansas law is an impermissible end run around the state’s prohibition on damages
claims by indirect purchasers. No Arkansas statute or case law prohibits claims by indirect
purchasers.

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Next, defendants seek dismissal of plaintiffs’ claim under the Florida Deceptive and
Unfair Trade Practices Act (“FDUTPA”), Fla. Stat. § 501.204. Defendants argue that
plaintiffs fail to satisfy the heightened pleading requirements for allegations of fraud under
Fed. R. Civ. P. 9(b). However, Rule 9(b) does not apply to this claim because plaintiffs do
not need to prove fraud to prevail under the FDUTPA. The statute allows challenges to
practices that are “unfair or deceptive,” and a deceptive practice is one that is likely to
mislead a reasonable consumer. Fla. Stat. § 501.204(1); State, Office of Atty. Gen., Dept.
of Legal Affairs v. Wyndham Int’l, Inc., 869 So. 2d 592, 598 (Fla. 1st D. Ct. App. 2004).
Plaintiffs do not need to prove they personally relied on defendants’ deception. Id. Thus,
detrimental reliance, one of the traditional elements of fraud, is not an element of a
FDUTPA claim. See 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 1297 (3d ed. 2012) (listing traditional elements of fraud).
Next, defendants seek dismissal of plaintiffs’ claim under the New Mexico Unfair
Practices Act (“NMUPA”), N.M. Stat. § 57-12-1 et seq., claiming the statute bars claims for
price-fixing. The NMUPA outlaws “unfair or deceptive” and “unconscionable trade
practices.” N.M. Stat. § 57-12-3. An “unconscionable trade practice” is “an act or
practice . . . that to a person’s detriment: (1) takes advantage of the lack of knowledge,
ability, experience or capacity of a person to a grossly unfair degree; or (2) results in a
gross disparity between the value received by a person and the price paid.” N.M. Stat.
§ 57-12-2(E). Thus, the statute authorizes a price-fixing claim as long as it alleges a “gross
disparity” between the price paid for a product and the value received. See Chocolate
Confectionary, 602 F. Supp. 2d at 585–86 (allowing a claim for price-fixing under the

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NMUPA); New Motor Vehicles, 350 F. Supp. 2d at 195–96 (same). Since plaintiffs allege
that defendants increased the price of some AM parts by as much as 100% while
simultaneously taking steps to cut costs, the complaint states a claim under the NMUPA.
Next, defendants argue that plaintiffs’ claim under the Tennessee Trade Practices
Act (“TTPA”), Tenn. Code § 47-25-101 et seq., should be dismiss because plaintiffs fail to
allege that defendants’ conspiracy had a “substantial effect” on commerce within the state.
See Freeman Indus., LLC v. Eastman Chemical Co., 172 S.W.3d 512, 523 (Tenn. 2005).
Since plaintiffs allege defendants engaged in a conspiracy to fix the price of AM parts sold
in Tennessee and forced consumers in the state to pay unreasonably high prices, I
conclude the complaint is sufficient to state a claim under the TTPA.
Finally, I reject defendants’ argument that plaintiffs have failed to state a claim under
the Vermont Consumer Fraud Act, Vt. Stat. tit. 9, § 2453. “[A]n agreement to fix prices is
unlawful per se” under § 2453. State v. Heritage Realty, 407 A.2d 509, 511 (Vt. 1979).
Therefore, plaintiffs’ allegation that defendants engaged in a price-fixing conspiracy is
sufficient.
III. CONCLUSION
THEREFORE, IT IS ORDERED that defendants’ joint motion to dismiss plaintiffs’
second amended complaint for failure to state a claim [DOCKET #247] is DENIED.
Dated at Milwaukee, Wisconsin, this 5th day of September, 2012.
s/ Lynn Adelman
_______________________
LYNN ADELMAN
District Judge

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