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In Re Fasteners Antitrust

August 12, 2011

IN RE FASTENERS ANTITRUST LITIGATION


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

MEMORANDUM

Presently before the Court are Coats plc's Motion to Dismiss the Complaint for Lack of Personal Jurisdiction (ECF No. 69),*fn1 Defendants' Joint Motion to Dismiss the Complaint (ECF No. 70),*fn2 Defendant YKK Corporation's Motion to Dismiss for Lack of Personal Jurisdiction (ECF No. 71), and Coats plc's Motion to Dismiss the Complaint for Lack of Personal Jurisdiction (ECF No. 73). For the following reasons, Defendants' Joint Motion and YKK Corporation's Motion will be denied. Coats plc's Motion will be addressed after Plaintiffs have conducted jurisdictional discovery.

I. BACKGROUND

This multi-district litigation is based on allegations that four groups of corporate defendants engaged in a "conspiracy to fix prices and allocate customers and markets in the United States and worldwide for 'Fasteners,'" in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. (Consol. Class Action Compl. ¶ 1, ECF No. 61.) The term "Fasteners" includes zippers, snap fasteners, buttons, hooks, and other similar products used primarily in the textile, apparel, footwear, and luggage industries. (Id. at ¶ 35.) Three groups of Defendants filed the instant motions: (1) the "YKK Defendants," which include YKK Corporation, YKK Corporation of America, Inc., YKK (U.S.A.) Inc., and YKK Snap Fasteners America, Inc.; (2) the "Coats Defendants," which include Coats plc, Coats Holdings, Inc., Coats American, Inc., Coats North America de Republica Domicana, Inc., and Coats and Clark, Inc.; and (3) Scovill Fasteners, Inc.*fn3

Plaintiffs Fishman & Tobin, Greco Apparel, Inc., Jolna Apparel Group LLC, and Norman Shatz Co., U.S.A. (collectively, "Plaintiffs") bring this consolidated class action on behalf of themselves and others who purchased Fasteners in the United States from Defendants from January 1, 1991, until September 19, 2007 (the "Class Period"). (Id. at ¶ 2.)

Plaintiffs allege that during the Class Period, high-ranking members of Defendants' management participated in meetings during which they fixed prices, allocated markets and customers, and shared sensitive business information. (Id. at ¶ 37.) Plaintiffs further allege that Defendants' collusive communications, many of which occurred in Europe, both directly targeted and directly affected the United States Fasteners market. (Id.) Specifically, Plaintiffs allege that beginning in 1991, senior management of the Prym, Scovill, and YKK Defendants convened in "work circles" under the auspices of a German trade association. (Id. at ¶¶ 45-50.) Plaintiffs assert that during these meetings, Defendants attempted to distort competition. (Id. at ¶ 49.)

In addition, Plaintiffs cite a multitude of specific dates, between 1998 and 2003, on which Defendants purportedly colluded. (See id. at ¶ 44.) For example, on July 15, 1998, members of the Prym and Coats Defendants, including their chief executive officers, exchanged detailed information about their worldwide Fasteners businesses. (Id. at ¶ 44(b).) On August 13, 1999, members of the Prym and YKK Defendants discussed a worldwide price provision, YKK's global structure, and global cooperation. (Id. at ¶ 44(f).) In a meeting between the Prym and YKK Defendants on February 13, 2000, the participants discussed the sales of Fasteners in the United States as well as a "gentleman's agreement" between YKK and Scovill regarding customer allocation. (Id. at ¶ 44(i).) On March 15, 2001, members of the Prym, YKK, and Scovill Defendants discussed pricing and marketing strategy in the United States. (Id. at ¶ 44(m).) Further, Plaintiffs allege that an internal Prym document referenced a violation of the "Coats/Prym agreement" with respect to the marketing and sales of Fasteners in the United States and Mexico. (Id. at ¶ 44(p).)

Plaintiffs' allegations, at least in part, are based on a European Commission ("EC") investigation and decision implicating some of the Defendants in the operation of European and global cartels. (Id. at ¶ 53.) On September 19, 2007, the EC issued a press release that announced the imposition of fines totaling 328.644 million euros on members of the Prym, YKK, Coats, and Scovill Defendants for their illegal activities. (Id.)

In the next several months, thirty-five Plaintiffs filed complaints in four United States district courts alleging price-fixing conspiracies in the United States Fasteners market. These actions were subsequently consolidated and brought before this Court for pretrial proceedings.

Pending before the Court are three Motions. We will first address the issues raised in the Joint Motion to Dismiss. We will then consider the separate Motions to Dismiss for lack of personal jurisdiction filed by YKK Corporation and Coats plc.

II. LEGAL STANDARDS

Under Federal Rule of Civil Procedure 8, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Federal Rule of Civil Procedure 12(b)(6) provides that a complaint may be dismissed for "failure to state a claim upon which relief can be granted." "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).A complaint that merely alleges entitlement to relief, without alleging facts that show entitlement, must be dismissed. See Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009).This "'does not impose a probability requirement at the pleading stage,' but instead 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary elements." Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556).

In a recent opinion reversing a district court's Rule 12(b)(6) dismissal, the Third Circuit expressly repudiated the notion that a heightened pleading standard applies in antitrust cases. W. Penn Allegheny Health Sys. v. UPMC, 627 F.3d 85, 98 (3d Cir. 2010) (citing 5 Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure §1221 (3d ed. 2004) (noting that Rule 8's pleading standard applies with the same degree of rigor "in every case, regardless of its size, complexity, or the number of parties that may be involved")). The Court held that "it is inappropriate to apply Twombly's plausibility standard with extra bite in antitrust and other complex cases." Id.

When a defendant raises a jurisdictional defense under Federal Rule of Civil Procedure 12(b)(2), the plaintiff must show contacts with the forum state that are sufficient to give the court personal jurisdiction over the defendant. However, "the plaintiff is entitled to have its allegations taken as true and all factual disputes drawn in its favor." Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004); see BP Chems. Ltd. v. Formosa Chem. & Fibre Corp., 229 F.3d 254, 259 (3d Cir. 2000). Personal jurisdiction in federal antitrust litigation is evaluated "on the basis of a defendant's aggregate contacts with the United States as a whole." In re Auto. Refinishing Paint Antitrust Litig., 358 F.3d 288, 298 (3d Cir. 2004).

III. DISCUSSION

A. Statute of Limitations and Fraudulent Concealment

As an initial matter, DefendantsYKKCorporation of America, YKK (U.S.A.), YKK Snap Fasteners America, Coats Holdings, Coats American, Coats North America de Republica Dominicana, Coats and Clark, and Scovill Fasteners ("Joint Defendants") argue that Plaintiffs' claims are time barred. The Clayton Act provides that a private antitrust action must be commenced within four years after the cause of action accrued. 15 U.S.C. § 15b. In a price-fixing case, a cause of action accrues and the statutory period begins anew every time defendants commit an overt act that is part of the violation and that injures the plaintiff. See Klehr v. A.O. Smith Corp., 521 U.S. 179, 189 (1997). Joint Defendants argue that Plaintiffs filed their various complaints in 2007, more than four years after the last cause of action accrued. Plaintiffs anticipated this defense specifically alleging in their Complaint that the statute of limitations was tolled by Defendants' fraudulent concealment of the alleged conspiracy. According to Plaintiffs, the statute of limitations was tolled until September 19, 2007, the date on which the purported Fasteners conspiracy was revealed publicly in an EC press release. (Consol. Class Action Compl. ¶ 80.)

The equitable doctrine of fraudulent concealment is read into every federal statute of limitations. Holmberg v. Armbrecht, 327 U.S. 392, 397 (1946); In re Aspartame Antitrust Litig., No. 06-1732, 2007 WL 5215231, at *3 (E.D. Pa. Jan. 18, 2007). To sustain a fraudulent concealment allegation in this Circuit, a plaintiff must establish three elements: "(1) that the defendant actively misled the plaintiff; (2) which prevented the plaintiff from recognizing the validity of her claim within the limitations period; and (3) where the plaintiff's ignorance is not attributable to her lack of reasonable diligence in attempting to uncover the relevant facts." Cetel v. Kirwan Fin. Grp., Inc., 460 F.3d 494, 509 (3d Cir. 2006). Fraudulent concealment allegations must be pleaded with particularity under Federal Rule of Civil Procedure 9(b). In re Elec. Carbon Prods. Antitrust Litig., 333 F. Supp. 2d 303, 315 (D.N.J. 2004). However, so as not to allow "sophisticated defrauders to successfully conceal the details of their fraud . . . courts have relaxed the rule when factual information is peculiarly within the defendant's knowledge or control." Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628, 645 (3d Cir. 1989) (internal quotations and citations omitted).

1. Affirmative Act of Concealment

The first element of fraudulent concealment generally requires a plaintiff to establish that defendants did affirmative acts to conceal their wrongful conduct. In re Aspartame, 2007 WL 5215231, at *4. If a conspiracy is the underlying cause of action, courts have articulated three different approaches for determining whether the affirmative act element is satisfied. Id. The first and most difficult approach requires that plaintiff show that the defendants took "affirmative steps in addition to the original wrongdoing to prevent the plaintiff from discovering the wrong." Colorado v. W. Paving Constr. Co., 630 F. Supp. 206, 210 (D. Colo. 1986), aff'd en banc, 841 F.2d 1025 (10th Cir. 1988). Plaintiff must demonstrate an act of concealment that is extrinsic to the conspiracy. The second, "intermediate" approach, applied in the Fourth and Fifth Circuits requires that "plaintiff must prove that the defendants affirmatively acted to conceal their antitrust violations, but the plaintiff's proof may include acts of concealment involved in the antitrust violation itself." Supermarket of Marlington, Inc. v. Mead Gold Dairies, Inc., 71 F.3d 119, 122, 125 (4th Cir. 1995); see Texas v. Allan Const. Co., 851 F.2d 1526, 1532 (5th Cir. 1988). Under the third approach, adopted by the Second Circuit, a plaintiff satisfies her burden where the antitrust violation is self-concealing. New York v. Hendrickson Bros., 840 F.2d 1065, 1083-84 (2d Cir. 1988). The Third Circuit has not specifically endorsed any of these approaches.

Joint Defendants argue that Plaintiffs must allege affirmative acts of concealment. In re Unisys Corp. Retiree Med. Benefit "ERISA" Litig., 242 F.3d 497, 502-03 (3d Cir. 2001) (requiring affirmative independent act of concealment); Bucci v. Wachovia Bank, N.A., 591 F. Supp. 2d 773, 787 (E.D. Pa. 2008) (same). We agree with Joint Defendants that if Plaintiffs are required to articulate extrinsic acts of concealment, the allegations in the Complaint would fail. The Complaint identifies two affirmative acts of concealment. First, Plaintiffs allege that Defendants gave "false and pretextual reasons for increases in the prices of Fasteners sold by them during the Class Period, including falsely attributing such increases to increased raw material component costs as well as exchange rates." (Compl. ¶ 82.) A district court in this Circuit facing similar allegations about the defendants' public statements concluded that the plaintiffs did not plead an extrinsic act with sufficient specificity. In re Aspartame, 2007 WL 5215231, at *5 ("Plaintiffs do not state who made these statements, to whom they were made, when they were made, or what was said. While the Court is cognizant that many of the purported conspiracy's details were known only to its members, the same is not true for statements allegedly made to the public."). Second, Plaintiffs allege that during the spring and summer of 2003, the Prym and YKK Defendants met to discuss the EC's request for information. According to Prym, Plaintiffs allege that "a general defense strategy was discussed and the participants agreed to deny everything." (Compl. ¶ 82.) Assuming that this allegation is true, it fails to advance Plaintiffs' argument. The allegation refers to a joint defense strategy, which is confidential by its very nature. Moreover, Joint Defendants' legal strategy in response to an EC inquiry addressing harm in Europe is not necessarily relevant to an alleged conspiracy directed at the United States. If we applied either the strict or intermediate standard to Plaintiffs' fraudulent concealment allegation, Defendants would prevail.

A survey of district court cases reveals that, while there is some divergence, for the most part courts in this Circuit have applied the "self-concealing" standard to antitrust conspiracies. Compare In re Aspartame, 2007 WL 5215231, at *5-6 (applying self-concealing standard); In re Bulk [Extruded] Graphite Prods. Antitrust Litig., No. 02-6030, 2004 U.S. Dist. LEXIS 29586, at *10-11 (D.N.J. Oct. 26, 2004) (Bulk I) (same); Pennsylvania v. Milk Indus. Mgmt. Corp., 812 F. Supp. 500, 504 (E.D. Pa. 1992) (same); Bethlehem Steel Corp. v. Fischbach & Moore, Inc.,641 F. Supp. 271, 274 (E.D. Pa. 1986) (same); In re Mercedes-Benz Anti-trust Litig.,157 F. Supp. 2d 355, 371 (D.N.J. 2001) (recognizing the self-concealing and intermediate standards), with Pennsylvania v. Lake Asphalt & Petroleum Co. of Pa., 610 F. Supp. 885, 888 (M.D. Pa. 1985) (requiring an affirmative act independent of the alleged underlying conspiracy).

Where a plaintiff alleges a price-fixing conspiracy, the self-concealing standard is consistent with the principles of equitable tolling. "It is immaterial to the unsuspecting plaintiff whether defendants have effectively concealed their illicit conduct through an elaborate and secret conspiracy or through affirmative acts of deceit." In re Aspartame, 2007 WL 5215231, at *5. The notion of a self-concealing conspiracy dates back to Bailey v. Glover, 88 U.S. 342, 349 (1874) ("To hold that by concealing a fraud, or by committing a fraud in a manner that it concealed itself until such time as the party committing the fraud could plead the statute of limitations to protect it, is to make the law which was designed to prevent fraud the means by which it is made successful and secure."). See also In re Mercedes,157 F. Supp. 2d at 370. Price-fixing conspiracies are inherently self-concealing. See, e.g., In re Issuer Pl. Initial Pub. Offering Antitrust Litig., No. 00-7804, 2004 WL 487222, at *4 (S.D.N.Y. Mar. 12, 2004). To reward co-conspirators for the successful perpetuation of their secrecy furthers no equitable objectives.

Plaintiffs allege that Defendants maintained their conspiracy through surreptitious meetings and communications. Defendants' purported conspiracy would have been fruitless without a deliberate effort to conceal its substance. See In re Aspartame, 2007 WL 5215231, at *6 ("Plaintiffs were unable, and thus not required, to provide the inner workings of the conspiracy because, according to the complaint, that information was deliberately concealed from plaintiffs and the public."). We conclude that Plaintiffs have ...


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