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

Filing 533

DECISION AND ORDER signed by Judge Lynn Adelman on 1/12/14 denying 487 Motion to Dismiss Plaintiff's First Amended Class Action Complaint. (cc: all counsel) (dm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
_____________________________________________________________________
FOND DU LAC BUMPER EXCHANGE, INC., on
behalf of itself and others similarly situated,
Plaintiffs,
v.

Case No. 09C0852

JUI LI ENTERPRISE COMPANY, LTD., ET AL.,
Defendants.

DZIDRA FULLER, et al.,
Plaintiffs,
v.

Case No. 13C0946

JUI LI ENTERPRISE COMPANY, LTD., ET AL.,
Defendants.

FIREMAN’S FUND INSURANCE, CO., on
behalf of itself and others similarly situated,
Plaintiff,
v.

Case No. 13C0987

JUI LI ENTERPRISE COMPANY, LTD., ET AL.,
Defendants.

NATIONAL TRUCKING FINANCIAL
RECLAMATION SERVICES, LLC, on behalf of
itself and others similarly situated,
Plaintiff,
v.

Case No. 13C0987

JUI LI ENTERPRISE COMPANY, LTD., ET AL.,
Defendants.
_____________________________________________________________________

DECISION AND ORDER
In 2009, a group of direct purchasers of aftermarket sheet metal products filed a
putative class action against defendants alleging a violation of the Sherman Act.
Subsequently, various indirect purchasers including Fireman’s Fund Insurance Company
(“plaintiff”) filed putative class actions alleging state law antitrust and unfair competition
claims which I consolidated with the direct purchasers’ action. Before me now is
defendants’ joint motion to dismiss several of plaintiff’s claims pursuant to Fed. R. Civ. P.
12(b)(6). To survive a Rule 12(b)(6) motion, a complaint must “state a claim to relief that
is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). I accept the
complaint’s factual allegations as true, but allegations in the form of legal conclusions are
insufficient. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
I. Statute of Limitations Issues
First, defendants argue that some of plaintiff’s claims are barred by statutes of
limitations. Generally, a statute of limitations bar is an affirmative defense, and it is
“irregular” to dismiss a claim as untimely on a motion to dismiss. Hollander v. Brown, 457
F.3d 688, 691 n.1 (7th Cir. 2006) (quoting United States v. N. Trust Co., 372 F.3d 886, 888
(7th Cir. 2004)). Under Fed. R. Civ. P. 8, a complaint need not anticipate or overcome
affirmative defenses such as the statute of limitations. Xechem, Inc. v. Bristol-Myers
Squibb Co., 372 F.3d 899, 901 (7th Cir. 2014). “[B]ecause the period of limitations is an
affirmative defense, it is rarely a good reason to dismiss under Rule 12(b)(6). Maybe [the
defendant] has itself done something that warrants tolling. Maybe plaintiffs will be unable
to prove that [defendant’s] acts justify tolling or estoppel. . . . It is best to await a final

2

decision rather than leap into a subject that evidence may cast in a new light.” Reiser v.
Residential Funding Corp., 380 F.3d 1027, 1030 (7th Cir. 2004).
As a result, a complaint does not fail to state a claim simply because it omits facts
that would defeat a statute of limitations defense. However, dismissal under Rule 12(b)(6)
is appropriate when the plaintiff effectively pleads herself out of court by alleging facts that
are sufficient to satisfy a statute of limitations defense. Hollander, 457 F.3d at 691 n.1. The
question at this stage is whether the complaint includes a set of facts that if proven would
establish a defense to the statute of limitations. Clark v. City of Braidwood, 318 F.3d 764,
768 (7th Cir. 2003).
A. Kansas Claims
Plaintiff’s complaint includes claims for unjust enrichment and restraint of trade
under Kansas law both of which are governed by three year limitation periods. See Stehlik
v. Weaver, 206 Kan. 629, 637 (1971) (Kansas unjust enrichment claims); McCue v.
Franklin, 156 Kan. 1, 7 (1942) (Kansas Restraint of Trade Act claims). Under Kansas law,
a claim generally accrues when the right to sue arises, i.e. when all the elements of the
claim are present. Estate of Draper v. Bank of Am., N.A., 288 Kan. 510, 534 (2009). An
element of both an unjust enrichment claim and a Restraint of Trade Act claim is that the
plaintiff confers some benefit to the defendant resulting in an injury. Id. at 518 (stating that
conferring “a benefit . . . upon the defendant” is an element of an unjust enrichment claim);
Bellinder v. Microsoft Corp., No. 00-C-0855, 2001 WL 1397995, at *4 (Kan. D.C. Sept. 7,
2011) (stating that a Kansas Restraint of Trade Act claim requires proof “that . . . the
Plaintiffs purchased products at prices which, as a result of the conspiracy, were higher

3

than they should have been”). Thus, both of plaintiff’s Kansas law claims accrued when a
purchase was made. Plaintiff filed its initial complaint on August 30, 2013, and alleged that
purchases occurred “from August 30, 2010 through the present.” Am. Compl. at 30. This
allegation puts both of plaintiff’s Kansas claims within the three-year limitation periods.
B. Arizona, Arkansas, Massachusetts, North Carolina, and Tennessee Claims
Plaintiff’s Arizona, Arkansas, Massachusetts, and North Carolina unjust enrichment
claims and its Tennessee Trade Practices Act claim allege injuries occurring from January
1, 2003 to present and are also governed by three-year limitation periods. Thus some of
the alleged injuries fall outside of the three-year periods. Nevertheless, I decline to dismiss
any of plaintiff’s claims without fact discovery because plaintiff plausibly alleges several
grounds on which the limitation periods should be tolled. Reiser, 380 F.3d at 1030.
First, plaintiff alleges that the limitation periods should be tolled under the continuing
violation doctrine, which applies in Arizona, Arkansas, North Carolina, and Tennessee and
which provides that where a plaintiff alleges a series of overt acts which inflict “new and
accumulating injury,” the statute of limitations runs from the last overt act. In re Skelaxin
Antitrust Litig., 12-md-2343, at *28 (E.D. Tenn. May 20, 2013). In the antitrust context, the
doctrine applies in situations where “a price-fixing conspiracy . . . brings about a series of
unlawfully high priced sales over a period of years,” and holds that “‘each overt act that is
part of the violation and that injures the plaintiff,’ i.e., each sale to the plaintiff, ‘starts the
statutory period running again, regardless of the plaintiff’s knowledge of the alleged
illegality at much earlier times.’” Klehr v. A.O. Smith Corp., 521 U.S. 179, 189 (1997)
(quoting 2 P. Areeda & H. Hovenkamp, Antitrust Law ¶ 338b, at 145 (rev. ed. 1995)). Here,

4

plaintiff alleges that from January 1, 2003 continuing to the present, defendants engaged
in price-fixing activity and that it indirectly purchased aftermarket sheet metal from
defendants from January 1, 2003 through the present in Arizona, Arkansas, North
Carolina, and Tennessee. Thus, plaintiff alleges ongoing sales inflicting new injuries, i.e.
overpayments, occurring within the limitation periods.
Plaintiff’s Arizona, Massachusetts, and Tennessee claims may also be tolled by the
discovery rule, which holds that a statute of limitations does not begin to accrue until the
plaintiff knew or should have known about its injury. Stewart v. Sterling Mobile Services,
Inc., No. 1 CA-CV 13-0221, 2014 WL 890370, at *3 (Ariz. Ct. App. Mar. 6, 2014); Vander
Salm v. Bailin & Assoc., Inc., CIV A 11-40180, 2014 WL 1117017, at *9 (D. Mass. Mar. 18,
2014); In re Lineboard Antitrust Litig., 22 F.R.D. 335, 343 (E.D. Pa. 2004) (applying the
discovery rule to a Tennessee Trade Practices Act claim). Plaintiff alleges that it “could not
have discovered the violations alleged herein until shortly before filing this Complaint,” and
that “[d]efendants and their co-conspirators conducted their conspiracy secretly, concealed
the nature of their unlawful conduct and acts in furtherance thereof, and fraudulently
concealed their activities through various other means and methods designed to avoid
detection.” Am. Compl. at 28. These allegations suggest that plaintiff could not have
reasonably discovered its injury until well after defendants’ alleged misconduct began.
Defendants argue that plaintiff was on constructive notice and therefore should have
discovered its injury when the direct purchaser plaintiffs filed their complaint in 2009.
Information in the public domain, however, does not necessarily put a plaintiff on
constructive notice of its injuries. See, e.g., In re Copper Antitrust Litig., 436 F.3d 782, 790

5

(7th Cir. 2006) (concluding that “a dispute of material fact exists regarding when a diligent
inquiry” by a plaintiff would have revealed its cause of action despite publicly available
information). When plaintiff should have reasonably discovered its injury is a fact issue not
amenable to resolution at the motion to dismiss stage.
Plaintiff’s Arizona, Arkansas, Massachusetts, North Carolina, and Tennessee claims
may also be tolled pursuant to the doctrine of fraudulent concealment, see, In re Copper
Antitrust Litig., 436 F.3d at 791, which requires a plaintiff to show that defendants took
“affirmative steps after the original wrongdoing to divert attention, mislead, or prevent
discovery.” In re Sulfuric Acid Antitrust Litig., 743 F. Supp. 2d 827, 854 (N.D. Ill. 2010).
Arizona, Arkansas, Massachusetts, North Carolina, and Tennessee recognize this doctrine
and require essentially the same elements: affirmative fraudulent conduct designed to
avoid detection of the conspiracy and the exercise of due diligence by the plaintiff to
uncover the claims. Mass. General Laws 260 § 12; Walk v. Ring, 202 Ariz. 310, 319–20
(2002); Martin v. Arthur, 339 Ark. 149, 154 (1999); Friedland v. Gales, 131 N.C. App. 802,
807–08 (Ct. App. 1998); In re Estate of Davis, 308 S.W.3d 832, 842 (Tenn. 2010). The
affirmative fraudulent act must be pled with particularity. See Fed. R. Civ. Pr. 9(b); Wigod
v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (applying Rule 9(b)’s heightened
pleading standard to fraudulent concealment). This requires a plaintiff to plead “the who,
what, when, where, and how” of the allegedly fraudulent act. Wigod, 673 F.3d at 569
(quotation omitted).
Plaintiff’s allegations of fraudulent concealment are sufficient to survive defendants’
motion to dismiss. Plaintiff pleads affirmative fraudulent conduct with particularity, alleging

6

the who (defendants), the what (falsely attributing the cause of price increases to other
causes and agreeing among themselves to keep their price-fixing secret), the when (as
early as January 2003 continuing to the present, but alleging at least one specific meeting
in March 2008), the where (in Taipei), and the how (via secret meetings and other methods
of communication). As to due diligence, a party is not required “to allege specific, detailed,
or even generalized so-called due diligence” if the complaint “plausibly suggests that a
plaintiff lacked inquiry notice of her claim.” In re Processed Egg Prods. Antitrust Litig., No.
08-md-2002, 2013 WL 4504768, at *4 (E.D. Pa. Aug. 23, 2013); see also In re Auto. Parts
Antitrust Litig., No. 12-md-2311, 2014 WL 2993753, at *13 (E.D. Mich. July 3, 2014)
(finding that a general pleading of due diligence was sufficient where “there was no
conduct that should have prompted [indirect purchaser plaintiffs] to investigate”).
Defendants argue that plaintiff’s allegation that it knew sheet metal prices were
increasing and that defendants misrepresented the reasons for price increases indicates
that plaintiff was on notice and thus obliged to plead reasonable due diligence with
specificity. I disagree. “Market conditions standing alone do not put a plaintiff on notice that
the prices it paid resulted from an illegal conspiracy.” In re Auto. Parts Antitrust Litig., No.
12-md-2311, 2014 WL 2993753 at *13 (E.D. Mich. July 3, 2014). Further, that defendants
allegedly lied about the reason for the price increases if anything, supports plaintiff’s
assertion that it had no reason to know about defendants’ conduct and thus no reason to
investigate. Defendants also argue that fraudulent concealment can only toll the statutes
of limitations until 2009 when the direct purchaser plaintiffs filed their complaint. After that
time, defendants argue, they could not have fraudulently concealed the information

7

because the lawsuit was in the public domain, putting plaintiff on constructive notice. As
previously discussed, however, when plaintiff should have reasonably discovered its
injuries is a fact issue.1
Because I have found that plaintiff’s claims survive defendants’ motion to dismiss
based on statutes of limitations, I need not address whether plaintiff’s claims are tolled by
the class action tolling doctrine.
II. Donnelly Act Claim
Plaintiff also brings a claim under New York’s Donnelly Act seeking treble damages.
Defendants argue that this claim fails because under New York’s Civil Practice Law and
Rules § 901(b), a plaintiff may not maintain a class action to recover a penalty, and the
Donnelly Act’s treble damages provision is a penalty. See Sperry v. Crompton Corp., 863
N.E.2d 1012, 1017 (N.Y. 2007). Plaintiff counters that § 901(b) does not apply in diversity
cases because it conflicts with Fed. R. Civ. P. 23. Generally, in a diversity action I apply
state substantive law and federal procedural law. Hanna v. Plumer, 380 U.S. 460, 466
(1965). When faced with a potentially conflicting federal procedural rule and state law, I
first determine whether the federal and state rules can be reconciled. Shady Grove
Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 410 (2010). If they cannot, then
I determine whether the federal rule runs afoul of 28 U.S.C. § 2072(b), which states that

1

Defendants cite Whirlpool Financial Corp. v. GH Holdings, 67 F.3d 605 (7th Cir.
2010), for the proposition that if information is available in the public domain,
constructive knowledge of its cause of action should be imputed to a plaintiff. Whirlpool
Financial, however, holds that “once a plaintiff has been put on notice regarding the
possibility of fraud,” constructive knowledge of publicly available information may be
imputed to it. Here, I have concluded that plaintiff did not plead facts which would have
put it on notice of defendant’s allegedly fraudulent conduct.
8

federal procedural rules “shall not abridge, enlarge, or modify any substantive right.” Id. As
long as the federal rule is procedural in nature and does not violate § 2072(b), it controls.
Id. at 407–08.
In Shady Grove, the Supreme Court addressed the relationship between Rule 23
and § 901(b). The Court first held that Rule 23 and § 901(b) directly conflict because both
address when a class action may be maintained. Id. at 401–02. It specifically noted that
§ 901(b) does not “limit[] the remedies available in an existing class action.” Id. Rather, the
statute “precludes a plaintiff from ‘maintain[ing] a class action seeking statutory penalties,”
thereby “prevent[ing] the class actions it covers from coming into existence at all.” Id. This
conflicts with Rule 23, which also determines when a class action may be maintained. The
Court then found that Rule 23 is procedural in nature because “it governs ‘only the manner
and the means’ by which the litigants’ rights are ‘enforced,’” and does not “alter[] ‘the rules
of decision by which [the] court will adjudicate [those] rights.’” Id. at 407 (quoting Miss.
Publ’g Corp. v. Murphree, 326 U.S. 438, 445 (1946)). It noted that Rule 23 “merely enables
a federal court to adjudicate claims of multiple parties at once, instead of in separate suits”
while leaving the parties’ legal rights intact. Id. at 408. Thus, the Court concluded that “Rule
23 unavoidably preempts” § 901(b)’s prohibition of the recovery of statutory penalties in
class actions. Id. at 445. (Ginsburg, J. dissenting). The Shady Grove analysis is applicable
here. Like statutory interest which was at issue in Shady Grove, treble damages are
considered a statutory penalty under § 901(b). The Shady Grove Court found that § 901(b)
and Rule 23 directly conflict and that Rule 23 is procedural in nature. Thus, Rule 23
controls, §901(b) is inapplicable, and plaintiff’s Donnelly Act claim for treble damages

9

survives.
III. Conclusion
THEREFORE, IT IS ORDERED that defendants’ joint motion to dismiss plaintiff’s
first amended class action complaint is DENIED.
Dated at Milwaukee, Wisconsin, this 12th day of January, 2015.
s/ Lynn Adelman
_____________________
LYNN ADELMAN
District Judge

10