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In re Hydrogen Peroxide Antitrust Litigation

March 31, 2010

IN RE: HYDROGEN PEROXIDE ANTITRUST LITIGATION
THIS DOCUMENT RELATES TO: CONOPCO, INC., ET AL.
v.
ARKEMA, INC., ET AL. AND CONOPCO, INC., ET AL.
v.
FMC FORET, S.A.



The opinion of the court was delivered by: Dalzell, J.

MDL DOCKET No. 1682

MEMORANDUM

Two direct purchasers of hydrogen peroxide and derivative persalts, Conopco, Inc. and Reckett Benckiser, Inc., here pursue opt-out claims against FMC Corp. and FMC Foret S.A. (collectively "FMC")*fn1 for purported price fixing in alleged violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.*fn2 These plaintiffs seek to recover damages for purchases of perborates that occurred in the United States and abroad during the time when the defendants allegedly engaged in price-fixing. On January 25, 2007, we denied the defendants' previous facial challenge to our subject matter jurisdiction. After lengthy discovery, FMC again questions our jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) and the Foreign Trade Antitrust Improvements Act of 1982 ("FTAIA"),*fn3 and moves to dismiss the plaintiffs' claims for perborates purchases made in foreign commerce ("Foreign Purchase Claims" or "FPC"). But this time FMC makes a factual challenge to our jurisdiction. For the reasons discussed below, we will grant FMC's motion to dismiss the FPC.*fn4

I. Factual Background

According to the Amended Complaint, hydrogen peroxide is an important ingredient of persalts, which include sodium perborate and sodium percarbonate. Persalts are used for, e.g., bleaching, cleaning, and producing products such as detergents and toothpaste. Persalts are said to be a "commodity product" for which producers "compete primarily on price." Am. Compl. at ¶¶ 42-43. The plaintiffs claim that the defendants dominated the production of persalts during the time of the alleged price-fixing conspiracy.

The defendants move to dismiss plaintiffs' Foreign Purchase Claims for lack of jurisdiction pursuant to Rule 12(b)(1). Such a motion may be a facial or factual attack on the plaintiff's assertion of our jurisdiction. Gould Electronics Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000). In reviewing defendants' present factual attack, we may consider evidence outside of the parties' pleadings. Id. Unlike a facial challenge, there is no presumption that the plaintiffs' factual allegations are true. Turicentro, S.A. v. American Airlines, Inc., 303 F.3d 293, 300 n.4 (3d Cir. 2002). The plaintiffs bear the burden of proving that we in fact have jurisdiction by a preponderance of the evidence. Doe v. Goldstein's Deli, 82 Fed. Appx. 773, 775 (3d Cir. 2003); Mortensen v. First Federal Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977), quoted in Petruska v. Gannon Univ., 462 F.3d 294, 302 n.3 (3d Cir. 2006).

As FMC asserts a factual attack on our jurisdiction, the parties have submitted many exhibits with their briefs. We need not take an extended tour of the disputed facts, however, because FMC contends that we should grant its motion to dismiss even if we assume plaintiffs' facts are true. We agree with FMC on this point. We will therefore briefly discuss the facts that the plaintiffs present in their response.

The plaintiffs claim that "the domestic and foreign effects on Plaintiffs of the conspirators'*fn5 anticompetitive conduct are interdependent and give rise to Plaintiffs' disputed damages."

Pl. Br. at 1. According to the plaintiffs, they paid "a single ex-works price established at the same time in global negotiations with each conspirator for sodium perborate delivered in the U.S. and Europe." Id. at 2. They state that "[t]he European price was used as the benchmark for the ex-works price in the parties' global negotiations, and then merely adjusted for transportation costs and currency differences and the like for product delivered to the U.S." Id.

FMC argues that the plaintiffs' expert found that there was a lag between when the harm from the purported antitrust overcharge occurred in Europe and when it affected the plaintiffs in the United States, but the plaintiffs contend that any lag "was simply a function of contract delivery terms and Plaintiffs' supply needs." Id. at 3. Plaintiffs claim that "anticompetitive conduct in the U.S. and Europe relating to sodium perborate would have an effect in both regions at the same time." Id. at 20 (emphasis added).

The plaintiffs claim that FMC acted on United States soil to further their price-fixing scheme. FMC purportedly met with co-conspirators in West Virginia where they "agreed to a collusive supply restriction." Id. at 15. Then FMC and another alleged co-conspirator allegedly closed hydrogen peroxide facilities in Texas "to reduce capacity." Id.

In resolving this motion, we will proceed on the assumption that the defendants were members of a conspiracy that set a single unified "European" price for perborates that they charged for sales in the United States and Europe, with small alterations made for currency differences and delivery costs but not for the price of the perborates. We also assume that the defendants overcharged the plaintiffs for their purchases of these chemicals both domestically and abroad, and that the defendants met in West Virginia to talk about reducing capacity and then closed hydrogen peroxide plants in Texas to work toward that goal.

II. Analysis

The question before us is whether, given these assumptions, we have jurisdiction under FTAIA over the Foreign Purchase Claims. FMC argues that we lack subject matter jurisdiction over the FPC because the plaintiffs have failed to show that the FPC meet FTAIA's requirements. According to the defendants' view, FTAIA mandates that two events occur seriatim for us to have jurisdiction: (1) there are first domestic effects of the defendants' antitrust conduct, and (2) those domestic effects then proximately cause an antitrust claim outside of the United States. The plaintiffs in essence respond that FTAIA does not require these two events to occur in order. They contend that we have jurisdiction over this case where the defendants caused domestic and foreign harm or effects at the same time.

As we extensively discuss below, we agree with the defendants that FTAIA imposes a two-step dance, first with one foot (the domestic effects) and then with the other (the foreign antitrust injury). We hold that under FTAIA the domestic effects must occur first and then proximately cause the foreign antitrust claim. The plaintiffs ask us to conclude that we have jurisdiction over the FPC because they say there is an exception to FTAIA's proximate cause requirement when defendants simultaneously cause foreign and domestic harm. We disagree that the Court has jurisdiction over that single hop with both feet.

A. FTAIA

FTAIA states in relevant part that Section 1 of the Sherman Act, on which plaintiffs rely, "shall not apply to conduct involving trade or 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 [i.e., domestic trade or commerce]... and (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 (emphasis added). We will refer to this provision as the "FTAIA exception."

There is no dispute that the FPC here are based on "conduct involving trade or commerce... with foreign nations." Whether plaintiffs have alleged a domestic effect that satisfies the first prong of the FTAIA exception ("Domestic Effect Prong") is also not in dispute at this time. But whether the plaintiffs' facts and theory of the case satisfy the second prong -- that the domestic effect "[gave] rise to" the Foreign Purchase Claims ("Causation Prong") -- is hotly contested.

B. Empagran I and II and Proximate Cause

Over twenty years passed before the Supreme Court first construed FTAIA. Specifically, in 2004 the Court observed that FTAIA "excludes from the Sherman Act's reach much anticompetitive conduct that causes only foreign injury" but that there is an exception to the rule "where (roughly speaking) that conduct significantly harms imports, domestic commerce, or American exporters." F. Hoffman-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 158 (2004) ("Empagran I"). The Supreme Court held that the FTAIA exception does not apply when a plaintiff's claim "rests solely on the independent foreign harm." Id. at 159. In Empagran I, the Court addressed a situation where the anticompetitive conduct at issue was foreign and there was an adverse domestic effect, so the case clearly came under FTAIA and met the Domestic Effect Prong. But the Supreme Court held that the plaintiffs did not satisfy the Causation Prong if, as the Court assumed, an "independent foreign effect" gave rise to the claim. Id. (emphasis added).

The plaintiffs here recognize that the FTAIA exception does not apply if the defendants' anticompetitive conduct causes only foreign injury or solely an independent foreign effect that "gives rise to" a foreign claim. Pl. Br. at 10. But they contend that Empagran I does not resolve the issue before us in the defendants' favor because the domestic and foreign effects of FMC's actions were interdependent and not ...


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