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In Re: Processed Egg Products Antitrust Litigation

November 30, 2011

IN RE: PROCESSED EGG PRODUCTS ANTITRUST LITIGATION


The opinion of the court was delivered by: Gene E.K. Pratter,j.

THIS DOCUMENT APPLIES TO: ALL ACTIONS

OPINION

I. Introduction

The issue addressed here is whether the statute of limitations bars claims for damages occurring prior to September 24, 2004 in this civil antitrust litigation. Defendants dispute the contention that Plaintiffs adequately have alleged facts under the pleading standards of Federal Rules of Civil Procedure 12(b)(6) and 9(b) that would justify tolling the statute pursuant to the fraudulent concealment doctrine.*fn1 For the reasons set forth below, the Motion is granted without prejudice to Plaintiffs to seek leave to amend their pleading, if they in good faith believe they can, as to fraudulent concealment.

II. Background

This multidistrict litigation concerns an alleged conspiracy of various egg and egg product producers and trade groups to manipulate the supply of, and thereby fix prices for, domestically-sold eggs and egg products from 2000 to the present. Plaintiffs are directpurchasers of domestic eggs and egg products who claim that the Defendants' conduct violated Section 1 of the Sherman Act. In their Second Consolidated Amended Class Action Complaint (hereinafter, the "SAC"), Plaintiffs allege that Defendants advanced the conspiracy through eight alleged "collective actions," which included, inter alia, various flock reduction and early molting initiatives, the United Egg Producers Certification Program, and the United States Egg Marketers export program.

The Court references two of its prior decisions here for the parties' convenience and supplemental background. The Court described the SAC's core allegations in the September 26, 2011 Memorandum and Order, 2011 WL 4465355 (Doc. Nos. 562 and 563), which granted in part and denied in part six individual Defendants' motions to dismiss the SAC. Additional discussion concerning the SAC's allegations as to "eggs" and "egg products" is in the Court's Memorandum and Order issued on October 14, 2011, 2011 WL 4945864 (Doc. Nos. 581 and 582), which denied without prejudice the Defendants' motion to dismiss a distinct antitrust claim as to egg products. Consistent with that decision, the use of the term "eggs" in this litigation, until further order, shall conform with the SAC's definition, i.e., "eggs" is inclusive of "shell eggs" and "egg products." See SAC ¶ 1.

III. Discussion

A. Statute of Limitations

All parties agree that the Plaintiffs' antitrust claim is subject to the Clayton Act's four-year statute of limitations. See 15 U.S.C. § 15b. Under that Act, damages for antitrust claims are recoverable if the suit "commenced within four years after the cause of action accrued," Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338 (1971) (quoting 15 U.S.C. § 15b).

For a private antitrust suit, a "cause of action accrues and the statute begins to run when a defendant commits an act that injures a plaintiff's business." Id. In the case of a continuing price-fixing conspiracy "that brings about a series of unlawfully high priced sales over a period of years," which Plaintiffs contend is the product of the subject conspiracy here, Pls.' Resp. at 1

n.1, "each overt act that is part of the violation and that injures the plaintiff, e.g., 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) (citations omitted) (internal quotation marks omitted). Thus, on a given date when a plaintiff purchases a product, the price of which was anticompetitively fixed, "a cause of action immediately accrues to him to recover all damages incurred by that date and all provable damages that will flow in the future from the acts of the conspirators on that date. To recover those damages, he must sue within the requisite number of years from the accrual of the action." Zenith, 401 U.S. at 339.

Plaintiffs here are seeking damages for alleged injuries beginning in 2000 and continuing to the present. SAC ¶ 182 ("Defendants undertook a coordinated effort to restrict egg supply through various means that has artificially fixed, maintained and/or stabilized egg prices to supracompetitive levels throughout 2000 to the present."); see also id. ¶ 518(e) (". . . Defendants took significant steps throughout 2000-2008, which resulted in supracompetitive prices for eggs throughout this period."). Defendants have moved to dismiss, however, contending that the Plaintiffs' claims that accrued prior to September 24, 2004-a date which Plaintiffs appear not to dispute*fn2 -are barred by the four-year statute of limitations. Defendants have calculated this date based upon the filing date of the first direct purchaser suit consolidated in these proceedings. See Defs.' Mot. at 1 n.1.*fn3

Although generally a statute of limitations defense is ill-suited for a Rule 12(b)(6) motion, the Third Circuit Court of Appeals has recognized that "an exception is made where the complaint facially shows noncompliance with the limitations period and the affirmative defense clearly appears on the face of the pleading" Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n.1 (3d Cir. 1994) (citations omitted); see also Robinson v. Johnson, 313 F.3d 128, 135 (3d Cir. 2002) (recognizing that a statute of limitations defense is permissible on a Rule 12(b)(6) motion "but only if 'the time alleged in the statement of a claim shows that the cause of action has not been brought within the statute of limitations'" (quoting Hanna v. U.S. Veterans' Admin. Hosp., 514 F.2d 1092, 1094 (3d Cir. 1975)). This exception applies in the case sub judice. Based upon the operative statute of limitations and the SAC, it appears that the Plaintiffs' claims for damages that accrued prior to September 24, 2004 are untimely.*fn4

B. Fraudulent Concealment Doctrine

Ostensibly anticipating ruffled feathers over time-bar issues, Plaintiffs attempt in the SAC to preempt this defense by invoking the fraudulent concealment doctrine. The fraudulent concealment doctrine operates to stop the statute of limitations from running in circumstances when the accrual date of a claim has passed but the "plaintiff's cause of action has been obscured by the defendant's conduct." In re Linerboard Antitrust Litig., 305 F.3d 145, 160 (3d Cir. 2002); see Forbes, 228 F.3d at 486 (citing Oshiver, 38 F.3d at 1387). If a plaintiff pleads facts that demonstrate fraudulent concealment in satisfaction of the requisite pleading standards, the plaintiff may pursue antitrust claims for recovery of damages during the tolled period. See Zenith, 401 U.S. at 338 (recognizing that antitrust damages are recoverable outside the four-year statute of limitations for "any additional number of years during which the statute of limitations was tolled").

To invoke equitable tolling through fraudulent concealment at the pleading stage-to state a claim of fraudulent concealment, as it were-a plaintiff must allege particularized facts sufficient to suggest "(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 due diligence in attempting to uncover the relevant facts." Cetel v. Kirwan Financial Group, Inc., 460 F.3d 494, 509 (3d Cir. 2006) (citing Mathews v. Kidder, Peabody & Co., 260 F.3d 239, 256 (3d Cir. 2001)); see also Forbes, 228 F.3d at 487; Davis v. Grusemeyer, 996 F.2d 617, 624 & n.13 (3d Cir. 1993), overruled on other grounds by Rolo v. City Investing Co. Liquidating Trust, 155 F.3d 644 (3d Cir. 1998).*fn5

The first element of the fraudulent concealment standard goes to a defendant's alleged acts of concealment. This element is subject to considerable differences in treatment among the circuits and even among courts within the Third Circuit in civil antitrust suits. These differences have been chronicled elsewhere which the Court acknowledges by reference*fn6 but need not address at this time. Suffice to say, the legal questions and application of this element present subtle and difficult issues in civil antitrust cases. The Third Circuit Court of Appeals has not addressed these issues in the antitrust context and has provided only limited commentary on the issues implicated by this element in assessing fraudulent concealment in relation to other federal statutes. See, e.g., In re Unisys Corp. Retiree Medical Benefit "ERISA" Litig., 242 F.3d 497, 502-03 (2001) (discussing self-concealing acts and affirmative acts in relation to ERISA). Generally, however, this element embodies the concept that "if the defendant conceals any element of the offense, including, but not limited to, the injury itself, the four-year period will be tolled." Mathews, 260 F.3d at 256 n.26 (emphasis in original).

The second element as articulated by the court of appeals requires a plaintiff to "show that he actually was 'mis[led] . . . into thinking that he d[id] not have a cause of action.'"

Forbes, 228 F.3d at 487 (quoting Davis, 996 F.2d at 624). This element also is premised upon the principle that the "doctrine of fraudulent concealment does not come into play, whatever the lengths to which a defendant has gone to conceal the wrongs, if a plaintiff is on notice of a potential claim." Davis, 996 F.2d at 624; see also Forbes, 228 F.3d at 487 (recognizing that if "plaintiffs either knew or reasonably should have known the facts supporting their [cause] of action," then equitable tolling is unwarranted). It follows that a "key aspect of a plaintiff's case alleging fraudulent concealment is therefore proof that the plaintiff was not previously on notice of the claim he now brings." Davis, 996 F.2d at 624. Accordingly, in pleading this element of fraudulent concealment, Plaintiffs must allege facts sufficient to demonstrate that they "were not aware, nor should they have been aware, of the facts supporting their claim until a time within the limitations period measured backwards from when the plaintiffs filed their complaint." Forbes, 228 F.3d at 487.

With respect to the third element, the court of appeals has held that "the exercise of due diligence must be shown in the antitrust context." See Lower Lake Erie, 998 F.2d at 1179; cf. Klehr,521 U.S. at 195 (recognizing that "many antitrust cases," without contradictory authority, have found that fraudulent concealment can be "satisfied only if the plaintiff shows that he neither knew nor, in the exercise of due diligence, could reasonably have known of the offense" (citation omitted)). Indeed, the Supreme Court has observed that the purpose of the fraudulent concealment doctrine in antitrust cases is directed towards not only "compensat[ing] victims but also . . . encourag[ing] those victims themselves diligently to investigate and thereby to uncover unlawful activity." Klehr, 521 U.S. at 195 (citation omitted). In this respect the fraudulent concealment doctrine has long invoked the principle of laches. See generally Bailey v. Glover, 88 U.S. (21 Wall) 342, 349-50 (1874) ("[W]hen there has been no negligence or laches on the part of a plaintiff in coming to the knowledge of the fraud[,] . . . the statute does not begin to run until the fraud is discovered by, or becomes known to, the party suing, or those in privity with him."); Richard L. Marcus, Fraudulent Concealment in Federal Court: Toward a More Disparate Standard?, 71 Geo. L.J. 829, 875 (1983) ("A plaintiff who has not acted reasonably to protect his own interests may not cry foul when his belated claim is ...


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