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In re Chocolate Confectionary Antitrust Litigation

September 21, 2010


The opinion of the court was delivered by: Judge Conner




This multidistrict matter arises from defendants' alleged attempts to fix the price of chocolate confectionary products in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, various state antitrust, consumer protection, and unfair competition statutes, and in contravention of the common law of several states. Plaintiffs consist of both direct and indirect purchasers of the products in question. One subset of plaintiffs is a putative class of indirect end users (hereinafter, the "IEU plaintiffs"): individuals that purchased defendants' confectionary products for their own use and not for resale. These plaintiffs contend that they paid an artificially inflated purchase price for the chocolate products as a result of defendants' collusive behavior. Presently before the court is a motion (Doc. 671) to dismiss certain claims appearing in the IEU plaintiffs' second amended complaint. For the reasons that follow, the motion will be granted in part and denied in part.

I. Factual Background*fn1

The factual allegations underlying this matter are well known to the parties and need not be reviewed in great detail herein.*fn2 Defendants are members of four multinational corporate families that produce chocolate confectionary products for markets around the globe.*fn3 From December 2002 to April 2007, defendants purportedly conspired to fix prices in the American chocolate candy market,*fn4 as evidenced by three allegedly synchronized price increases that occurred during the early- and mid-2000s. In August 2008, three putative subclasses of plaintiffs and a number of individual plaintiffs filed consolidated amended complaints against all defendants claiming injury under federal and state antitrust and consumer protection statutes, as well as the common law of numerous state jurisdictions.

One of the three putative subclasses is composed of indirect end users of chocolate products. Each indirect end user plaintiff allegedly purchased chocolate candy for personal use in his or her home state. (See Doc. 665 ¶ 11.) The second amended complaint identifies individual plaintiffs residing in twenty-five states, to wit: Arizona, Arkansas, California, Florida, Hawaii, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Rhode Island, South Dakota, Tennessee, Vermont, West Virginia, and Wisconsin. (Id. ¶¶ 12-49.) A twenty-sixth named plaintiff resides in the District of Columbia. (Id. ¶ 19.) Each of these indirect end users claims that the retail price he or she tendered for defendants' chocolate products was inflated as a result of defendants' price-fixing behavior.

In September 2008, defendants moved to dismiss the IEU plaintiffs' consolidated amended complaint. On March 4, 2009, the court granted this motion in part, dismissing, inter alia, claims levied pursuant to the statutory and common law of New York; claims raised under the consumer protection statutes of Kansas and Maine; and all claims for unjust enrichment. (See Doc. 582.) The IEU plaintiffs were permitted leave to amend, however, and filed a second amended complaint on August 26, 2009, (Doc. 665). Defendants thereafter moved to dismiss several state- law consumer protection and unjust enrichment claims.*fn5 (Doc. 671.) This motion has been fully briefed and is now ripe for disposition.

II. Standard of Review

Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for the dismissal of complaints that fail to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). When ruling on a motion to dismiss under Rule 12(b)(6), the court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir. 2009) (quoting Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)); see also Kanter v. Barella, 489 F.3d 170, 177 (3d Cir. 2007) (quoting Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005)). Although the court is generally limited in its review to the facts contained in the complaint, it "may also consider matters of public record, orders, exhibits attached to the complaint and items appearing in the record of the case." Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n.2 (3d Cir. 1994); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).

Federal notice and pleading rules require the complaint to provide "the defendant notice of what the . . . claim is and the grounds upon which it rests." Phillips, 515 F.3d at 232 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To test the sufficiency of the complaint in the face of a Rule 12(b)(6) motion, the court must conduct a two-step inquiry. In the first step, the factual and legal elements of a claim should be separated; well-pleaded facts must be accepted as true, while mere legal conclusions may be disregarded. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). Once the well-pleaded factual allegations have been isolated, the court must determine whether they are sufficient to show a "plausible claim for relief." Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1950 (2009) (citing Twombly, 550 U.S. at 556); Twombly, 550 U.S. at 555 (requiring plaintiffs to allege facts sufficient to "raise a right to relief above the speculative level"). A claim "has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, --- U.S. at ---, 129 S.Ct. at 1949. When the complaint fails to establish defendant liability, however, courts should generally grant plaintiffs leave to amend their claims before dismissing a complaint that is merely deficient. See Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002); Shane v. Fauver, 213 F.3d 113, 116-17 (3d Cir. 2000).

III. Discussion

The IEU plaintiffs advance claims under the Sherman Act and the antitrust statutes of seventeen states and the District of Columbia. In addition, the second amended complaint contends that defendants violated the consumer protection and unfair competition statutes of fourteen states and the District of Columbia, and further alleges that defendants are liable for unjust enrichment in twenty-three states. Defendants move to dismiss thirteen of the unjust enrichment claims, as well as the consumer protection claims arising under Hawaii, Massachusetts, Nevada, and New Hampshire law. The court will address each of defendants' arguments seriatim.

A. Consumer Protection & Unfair Competition Claims*fn6

1. Hawaii

Defendants move to dismiss the IEU plaintiffs' claim under Hawaii's consumer protection statute, which prohibits "unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." Haw. Rev. Stat. § 480-2. A separate provision of the act, section 480-13.3 sets forth specific procedures under which a putative class of indirect purchasers may proceed in order to vindicate alleged violations of the statute. Specifically, the class plaintiffs must serve a copy of their complaint and supporting materials upon the Hawaii attorney general within seven days of filing a lawsuit. See Haw. Rev. Stat. § 480-13.3(a)(1). The attorney general retains sole discretion to determine whether the state will pursue the action or file an action involving similar claims. See § 480-13.3(a)(4). In the event that the attorney general declines to pursue legal recourse, the class plaintiffs shall have the right to conduct the action. See § 480-13.3(a)(5)(C). The above-described procedure is mandatory for all unfair competition claims arising under the Hawaii Antitrust Act except those "based on unfair or deceptive practices declared unlawful by section 480-2." § 480-13.3(b).

Defendants argue that the IEU plaintiffs' § 480-2 claim is not ripe because they did not follow the service procedures mandated by § 480-13.3. In response, the IEU plaintiffs contend that their consumer protection claim falls within the exception set forth in § 480-13.3(b), which eliminates the attorney general notification requirement for actions based on unfair or deceptive practices in the conduct of trade or commerce. The IEU plaintiffs point to Count Three of the second amended complaint, which alleges that "[d]efendants have engaged in unfair competition or unfair, unconscionable, deceptive, or fraudulent acts or practices" in violation of several state laws, including § 480-2. (Doc. 665 ¶¶ 159, 164.) By its plain language, however, this count alleges that defendants engaged in both unfair competition and unfair or deceptive acts or practices. Under § 480-13.3(a), any action based upon unfair competition must adhere to the attorney general notification procedures enumerated by statute; the IEU plaintiffs' failure to comply with the statutory provision therefore warrants dismissal. See In re Flash Memory Antitrust Litig., 643 F. Supp. 2d 1133, 1158 (N.D. Cal. 2009) (dismissing indirect purchasers' claim under the Hawaii Antitrust Act when plaintiffs did not follow service requirements of § 480-13.3 and did not expressly limit their claim to unfair and deceptive acts).

The IEU plaintiffs acknowledge that the second amended complaint "does not explicitly limit [their] claim to unfair and deceptive acts and practices," but they explicitly disavow any intent to base the § 480-2 action on unfair competition. (See Doc. 701 at 10-11.) Notwithstanding this disclaimer, unfair competition allegations underpin the claim as it is now pled. Accordingly, the § 480-2 claim must be dismissed. See In re Flash Memory, 643 F. Supp. 2d at 1158. In light of the IEU plaintiffs' representations, however, the court will permit narrow amendment of the § 480-2 claim. The amended pleading must expressly limit the cause of action to the unfair and deceptive acts provision of § 480-2 or the claim shall be stricken as jurisdictionally barred.

2. Massachusetts

Defendants next seek dismissal of the claim raised pursuant to chapter 93A of the Massachusetts General Laws, a provision which renders it unlawful to engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce, see Mass. Gen. Laws ch. 93A, § 2. Prior to commencement of suit under this chapter, a plaintiff must tender a letter of demand to any prospective respondent, identifying the claimant, describing the complained-of acts, and setting forth the suffered injury. See id. § 9(3). Massachusetts courts have characterized the statutory notification requirement as "a prerequisite to suit," Spring v. Geriatric Auth. of Holyoke, 474 N.E.2d 727, 735 (Mass. 1985), and explained that it is a "special element" of the cause of action which must be alleged in the plaintiff's complaint, Entrialgo v. Twin City Dodge, 333 N.E.2d 202, 204 (Mass. 1975); see also Rodi v. S. N. Eng. Sch. of Law, 389 F.3d 5, 19 (1st Cir. 2004).

The demand requirement applies only to prospective respondents that maintain a place of business or keep assets within the state. See § 9(3). Thus, when a respondent is without assets or an in-state place of business, a plaintiff need not serve a demand or plead this special element to proceed under chapter 93A. See id.; see also Richards v. Arteva Specialties S.A.R.L., 850 N.E.2d 1068, 1078 n.13 (Mass. App. Ct. 2006) (explaining that the demand letter requirements of § 9 do not apply to respondents that lack an in-state place of business or assets within the Commonwealth). The IEU plaintiffs admit that they did not serve letters of demand upon any defendants, but claim that they are exempted from this requirement because no defendants maintain places of business in Massachusetts or keep assets within the state.

Defendants do not squarely address the applicability of the § 9 exemption, but instead argue that they bear no affirmative duty to identify their assets or places of business. In addition, defendants assert-in a footnote and without further detail-that both the Hershey Company and Nestlé USA "maintain assets or a place of business in Massachusetts." (Doc. 712 at 13 n.10.) After examining the pleadings and motion to dismiss papers, however, the court is unable to ascertain whether the § 9 notification exemption applies to any defendants. In other words, it is unclear whether any defendant maintains a place of business or keeps assets within the state of Massachusetts. Resolution of this inquiry must simply await further development of the factual record and, consequently, defendants' motion to dismiss this claim will be denied. The IEU plaintiffs may also elect to circumvent future § 9 disputes by amending their complaint and complying with the notification requirements. See Tarpey v. Crescent Ridge Dairy, Inc., 713 N.E.2d 975, 983 (Mass. App. Ct. 1999) (affirming trial court ruling allowing plaintiff to amend complaint despite failure to deliver demand letter prior to commencement of action); Lilly v. Turboprop East, Inc., No. Civ. A. 00-CV-05489, 2004 WL 540445, at *3 (E.D. Pa. Mar. 17, 2004) (excusing plaintiff's failure to serve demand letter thirty days prior to filing of third amended complaint).

3. Nevada

The IEU plaintiffs raise a consumer protection claim under Nevada's Deceptive Trade Practices Act (hereinafter, "NDTPA"). See Nev. Rev. Stat. §§ 598.0903-598.0999. A private civil action may be commenced under the NDTPA only by "an elderly person or a person with a disability." Id. § 598.0977; see also In re Wellbutrin XL Antitrust Litig., 260 F.R.D. 143, 163-64 (E.D. Pa. 2009). The Nevada class plaintiffs are not alleged to be either elderly ...

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