WILLIAM H. ORRICK, United States District Judge.
On July 12, 2012, the Korean Fair Trade Commission found that four Korean companies conspired to fix the prices of Korean Noodles in Korea. The following year, direct and indirect purchaser plaintiffs filed the present suits in the United States against the four Korean companies and their purported distributors in the United States, alleging that they conspired to fix the prices of Korean Noodles sold in the United States. Defendants move to dismiss on the grounds that plaintiffs have not plausibly pleaded a conspiracy to fix prices of Korean Noodles in the United States.
Plaintiffs have plausibly pleaded that the conspiracy to raise prices in Korea also related to Korean Noodles imported to, and sold in, the United States. But plaintiffs have not plausibly pleaded that all of the American distributors were controlled by their purported Korean counterparts or that all of defendants' Korean Noodles in fact increased in price in the United States. Plaintiffs have therefore not plausibly pleaded that all defendants were involved in the conspiracy and defendants' motions are GRANTED IN PART and DENIED IN PART.
The motions of defendants Sam Yang USA, Yakult Korea, and Paldo Company LTD. are GRANTED and all claims against Sam Yang USA, Yakult Korea, and Paldo Company LTD. are DISMISSED WITH LEAVE TO AMEND. The motions of Nongshim Korea, Nongshim USA, Ottogi Korea, Ottogi USA, and Samyang Korea are GRANTED with respect to the state-law claims for which no named plaintiff has standing. The indirect purchaser plaintiffs' claims under the laws of Arkansas, Arizona, the District of Columbia, Hawaii, Iowa, Kansas, Maine, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oregon, Rhode Island, South Dakota, Tennessee, Utah, Vermont, West Virginia and Wisconsin are DISMISSED WITH LEAVE TO AMEND.
The motions of defendants Nongshim Korea, Nongshim USA, Ottogi Korea, Ottogi USA, and Samyang Korea are GRANTED with respect to the claims under New York's Deceptive Practices Act and unjust enrichment under Michigan and New York law and DENIED with respect to the Sherman Act claims and state-law antitrust and consumer protection claims under the laws California, Massachusetts, Michigan, Florida, and New York, and with respect to the unjust enrichment claim under Massachusetts law.
Defendants Nongshim Co., Ltd., Ottogi Co. Ltd., Samyang Foods Co. Ltd., and Korea Yakult Co. Ltd. (collectively, the "Korean Defendants") manufacture Korean Noodles in Korea.
Following the K FTC's order, between July and September 2013, various direct and indirect purchasers of defendants' Korean Noodles filed price-fixing conspiracy actions against the Korean Defendants and their alleged American counterparts: Nongshim America, Inc., Ottogi America, Inc., Sam Yang (USA), Inc., and Paldo Company, Ltd.
The direct purchaser plaintiffs are food retailers and distributors that purchased Korean Noodles directly from defendants. DPCC ¶¶ 11-16. The direct purchaser plaintiffs are The Plaza Market, Plaintiff Pacific Groservice, Inc. d/b/a/Pitco Foods, Summit Import Corporation, Rockman Company U.S.A. Inc., Seoul Shopping,
DPCC ¶ 43.
The indirect purchaser plaintiffs, Stephen Fenerjian, Joyce Beamer, Kendal Martin, Nicholas Halloran, Anthony An, Eleanor Pelobello, Jill Bonnington, Kenny Kang, Christina Nguyen, and Thu-Thuy Nguyen, are individuals who purchased Korean Noodles manufactured by defendants from non-party food retailers in California, Massachusetts, Michigan, Florida, and New York. IPCC ¶¶ 10-19. They allege causes of action for (i) price-fixing conspiracy in violation of Section 1 of the Sherman Act,
The indirect purchaser plaintiffs seek to represent the following class for their causes of action for price-fixing conspiracy in violation of the Sherman Act and California's Cartwright Act (first and second causes of action):
DPCC ¶ 34(a). The indirect purchaser plaintiffs seek to represent various subclasses in connection with their state-law claims in the alternative, in the event that I determine that the California Cartwright Act does not apply to the class identified above. See DPCC ¶¶ 35-36, 193, 199.
Nongshim Co., Ltd. ("Nongshim Korea") is a leading food company in Korea. It has had a high market share of Korean Noodles in Korea since the 1990s. Since 2010, its sales represent approximately 70% of the Korean Noodles business in Korea. DPCC ¶ 17; IPCC ¶ 20.
Nongshim Korea owns Nongshim Holdings USA, which in turn owns Nongshim America, Inc. Plaintiffs allege that Nongshim America is wholly owned and controlled by, and under the direction of, Nongshim Korea. DPCC ¶ 19; IPCC ¶ 25. There is overlap between the leadership of Nongshim Korea and Nongshim America. Mr. Dong Wong Shin is vice chairman of the board and co-chief executive officer of Nongshim Korea and also chairman of the board of Nongshim America. DPCC ¶ 20. Mr. Jun Park is president and co-chief executive officer of Nongshim Korea and is director of Nongshim America. DPCC ¶ 21; IPCC ¶ 25. Nongshim America, Inc. is headquartered in Rancho Cucamonga, California, and has other locations in California, Texas, New Jersey, Illinois, Georgia, and Maryland. DPCC ¶ 19; IPCC ¶ 25.
During the Class Period, May 1, 2001 to December 31, 2010, Nongshim Korea manufactured Korean Noodles in Korea and exported Korean Noodles to the United States, where they were sold to plaintiffs. DPCC ¶ 26; IPCC ¶ 20. In 2005, Nongshim Korea established a factory in Rancho Cucamonga, California, to manufacture Korean Noodles. DPCC ¶ 27; IPCC ¶ 25
Ottogi Co., Ltd. ("Ottogi Korea") is headquartered in Korea. DPCC ¶ 28; IPCC ¶ 21. Ottogi America, Inc. was formed in 2005 and is headquartered in Gardena, California. Ottogi Korea owns 100% of Ottogi America's stock. DPCC ¶ 29; IPCC ¶ 27. Plaintiffs allege that Ottogi America is under the direction and control of Ottogi Korea. DPCC ¶ 29; IPCC ¶ 29. The Korean Noodles sold by Ottogi America in the United States were manufactured by
Ottogi Korea in South Korea and imported into the United States, where they were sold to plaintiffs. DPCC ¶¶ 30, 32; IPCC ¶ 21.
Samyang Foods Co., Ltd. (Samyang Korea) is headquartered in Korea. DPCC ¶ 33; IPCC ¶ 22. Sam Yang (USA), Inc. is headquartered in Santa Fe Springs, California. DPCC ¶ 34; IPCC ¶ 29. Sam Yang USA sells and distributes Samyang Korea's Korean Noodles throughout the United States. Plaintiffs allege, upon information and belief, that Sam Yang USA has a long-term exclusive distributorship agreement with Samyang Korea. DPCC ¶ 34. Plaintiffs contend that "[a]n entry on yellowpages.com indicates that Sam Yang (USA) is `a part of Sam Yang Foods Co., LTD who manufactures soy sauce products, ice cream and fresh milk.'" DPCC ¶ 34; IPCC ¶ 29. Plaintiffs allege that Sam Yang USA is under the direction and control of Samyang Korea. DPCC ¶ 34; IPCC ¶ 29. The Korean Noodles sold by Sam Yang USA in the United States were manufactured by Samyang Korea in Korea and imported into the United States, where they were sold to plaintiffs. DPCC ¶¶ 30, 32; IPCC ¶ 22.
Korea Yakult Co., Ltd. ("Yakult Korea") is based in Korea. DPCC ¶ 37; IPCC ¶ 23. The Korean Noodles sold by Yakult Korea in the United States were manufactured by Yakult Korea in South Korea and imported into the United States, where they were sold to plaintiffs. DPCC ¶ 39; IPCC ¶ 23. Indirect purchaser plaintiffs allege that Paldo Company, Ltd. has imported and distributed Korean Noodles manufactured by Korea Yakult into the United States since 2012 and that Paldo is a wholly owned and controlled subsidiary of Korea Yakult.
Plaintiffs allege that starting at the end of 2000 or the beginning of 2001, defendants agreed to a specific protocol to raise factory-level (wholesale) prices for their Korean Noodles. DPCC ¶ 66; IPCC ¶ 55. Nongshim,
The Korean Defendants provided each other non-public pricing information to promote the conspiracy. DPCC ¶ 67; IPCC ¶ 55. They exchanged sensitive management and price-related information, including sales results, business support strategies, plans for new product releases, sales promotion and advertisement plans, in order to ensure that each company would agree to the price increases. DPCC ¶ 67; IPCC ¶ 55. According to plaintiffs, the K FTC Order "lists 341 emails among Defendants that detail the exchanges of information related to prices and sales." DPCC ¶ 67; IPCC ¶ 55.
The price increase was first discussed in December 2000 or January 2001 when representatives of each of the Korean Defendants met in the Renaissance Seoul Hotel and agreed to raise the prices of Korean Noodles. DPCC ¶ 75; IPCC ¶ 63. OO Choi,
Plaintiffs allege that the six price increases agreed to by the Korean Defendants led to price increases of Korean Noodles in the United States. DPCC ¶¶ 104, 114, 126, 146, 160; IPCC ¶¶ 82, 95, 107, 126, 139. Plaintiffs have provided charts and tables reflecting the alleged correlation between prices increases in Korea and price increases in the United States.
Representatives of Nongshim America noted the connection between price increases in Korea and price increases in America. In February 2004, Mr. Yong-Hoon Lee of Nongshim America stated,
Plaintiffs allege that the price increases in Korea were also reflected in the Korean Noodles manufactured by Nongshim America in the United States. In February 2008, Yong-Hoon Lee of Nongshim America announced, "As for the products manufactured in the United States, rather than the inflation in Korea, but in response to the increase in price for the main ingredients including flour and palm oil, the price will be increased before April at the latest." DPCC ¶ 160. The following day, Nongshim America's manager for the East Coast, Mr. Myung-Chul Shin, stated, "Right now we are waiting for the announcement from the parent company in Korea. In Korea, the price increase becomes effective immediately after the announcement. But, in the United States, there should not be any sudden price increase because, customarily, there is usually one or one and a half month of waiting period. But, we expect the price increase to become effective [in the United States] in March or April." DPCC ¶ 161.
Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. The court must "accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party," drawing all "reasonable inferences" from those facts in the non-moving party's favor. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir.2008). A complaint may be dismissed if it does not allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). However, "a complaint [does not] suffice if it tenders naked assertions devoid of further factual enhancement." Id. (quotation marks and brackets omitted). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.
If the court dismisses the complaint, it "should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation
Defendants move to dismiss the direct purchaser and indirect purchaser complaints on the grounds that (i) plaintiffs have not plausibly pleaded a conspiracy to fix prices in the United States; (ii) the claims are barred by statutes of limitation; (iii) the Court lacks subject matter jurisdiction over plaintiffs' claims pursuant to the Foreign Trade Antitrust Improvements Act; (iv) the indirect purchaser plaintiffs lack standing to assert claims under the laws of states in which they did not reside or purchase products; (v) the indirect purchaser plaintiffs' state-law consumer protection and unfair competition claims fail because the underlying price-fixing claims fail; (vi) the indirect purchaser plaintiffs' claim under New York's Deceptive Acts Law fails because they have not pleaded deceptive conduct; (vii) the unjust enrichment claims fail because the indirect purchaser plaintiffs did not confer a direct benefit on defendants, unjust enrichment is not a cause of action, and unjust enrichment is not available where there are adequate remedies at law. See Dkt. No. 83 (defendants' motion to dismiss federal claims); Dkt. No. 80 (defendants' motion to dismiss state-law claims).
Defendant Sam Yang USA separately moves to dismiss on the additional grounds that it is solely a distributor of Korean Noodles, not a manufacturer, and therefore could not have been involved in a conspiracy to fix "factory-level" prices. Dkt. No. 87. Defendant Samyang Korea separately moves to dismiss the direct purchaser plaintiffs' claims on the additional grounds that no plaintiff purchased Korean Noodles directly from Samyang Korea. Dkt. No. 89.
For the reasons stated below, defendants' motions to dismiss are GRANTED IN PART and DENIED IN PART.
Section 1 of the Sherman Act prohibits the creation and maintenance of any "contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations." 15 U.S.C. § 1. Stating a Section 1 claim requires "a complaint with enough factual matter (taken as true) to suggest that an agreement was made." Twombly, 550 U.S. at 556, 127 S.Ct. 1955. However, "[a]sking for plausible grounds to infer an agreement does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement." Id. Moreover, "a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and "that a recovery is very remote and unlikely." Id. A conspiracy may result in parallel conduct by conspirators, but "an allegation of parallel conduct and a bare assertion of conspiracy will not suffice" to state a Section 1 claim. Id. at 556-57, 127 S.Ct. 1955 ("Without more, parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality."). Rather, "when allegations of parallel conduct are set out in order to make a § 1 claim, they must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action." Id. at 557, 127 S.Ct. 1955.
Defendants argue that plaintiffs' allegations of correlated and parallel price increases are insufficient to plausibly plead the existence of a conspiracy to raise prices on Korean Noodles sold in the United States.
Except as noted below, plaintiffs further allege that the U.S. Defendants are owned, controlled and directed by the Korean Defendants; that the prices of defendants' Korean Noodles in the United States did in fact rise in correlation with the price increases in Korea; and that representatives of the U.S. Defendants provided false public explanations for the price increases. See, e.g., DPCC ¶¶ 19-21, 29-30, 66, 214; IPCC ¶¶ 25-29, 150, 154, 164.
Defendants also contend that the Korean Noodles sold in Korea, which were the subject of the KFTC order, could not be sold in the United States because of United States laws on packaging and ingredients. Dkt. No. 83 at 8. Plaintiffs contradict that contention and allege that the same Korean Noodles that were price-fixed in Korea were shipped to the United States.
As the foregoing demonstrates, plaintiffs have placed their pricing allegations "in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action," as Twombly requires. Twombly, 550 U.S. at 557, 127 S.Ct. 1955. Whether plaintiffs can actually prove these allegations, even if improbable, is a separate matter not before me at this stage. See id. ("a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable").
Defendants contend that courts in In re Graphics Processing Units Antitrust Litig., 527 F.Supp.2d 1011 (N.D.Cal.2007), In re Travel Agent Comm'n Antitrust Litig., 2007 WL 3171675 (N.D.Ohio Oct. 29, 2007) aff'd, 583 F.3d 896 (6th Cir.2009), and In re Late Fee & Over-Limit Litig., 528 F.Supp.2d 953 (N.D.Cal.2007), dismissed Section 1 conspiracy claims based on allegations containing significantly more details than are alleged here. I disagree. In Graphics Processing Units, the plaintiffs alleged that representatives of the defendants attended the same trade meetings, but there were no allegations that the representatives actually met or spoke with each other, and the plaintiffs' mere allegations of parallel action were insufficient to state a claim. Graphics Processing, 527 F.Supp.2d at 1023. Likewise, the plaintiffs in Travel Agent and Late Fee relied on allegations of parallel pricing and conclusory characterizations of the defendants' conduct, but did not place their allegations in a context which suggested a preceding agreement rather than independent action. Travel Agent, 2007 WL 3171675, at *7-12; Late Fee, 528 F.Supp.2d at 962-65.
Unlike Graphics Processing, Travel Agent, and Late Fee, here plaintiffs have placed their allegations in the context of a conspiracy between the Korean Defendants (which allegedly control and direct the U.S. Defendants) to raise factory-level (wholesale) prices of all Korean Noodles, irrespective of where those Korean Noodles were eventually shipped and sold to consumers. The conspiracy described in the KFTC Order does not by itself support a claim for an alleged conspiracy to raise the prices of Korean Noodles sold in the United States, but it provides context which was lacking in Graphics Processing, Travel Agent, and Late Fee lacked. In other words, defendants are correct that plaintiffs cannot rely solely on the K FTC Order, but nor can the K FTC Order be ignored.
However, the question remains whether plaintiffs have sufficiently pleaded that each defendant was involved in the conspiracy to raise prices of Korean Noodles sold in the United States.
Plaintiffs allege that representatives of Nongshim Korea met with representatives of the other Korean Defendants in late December 2000 or early January 2001 at the Renaissance Seoul Hotel and agreed to collectively raise the prices of Korean Noodles. DPCC ¶ 75; IPCC ¶ 63. The Korean Defendants agreed that Nongshim Korea would raise its prices first and the other Korean Defendants would follow suit. DPCC ¶¶ 76-77; IPCC ¶¶ 64-65. On March 28, 2001, this agreement was confirmed by representatives of Nongshim Korea and the other Korean Defendants at a meeting during the Regular General Assembly of Ramen Conference at the Capital Hotel in Seoul. DPCC ¶¶ 78-81; IPCC ¶¶ 66-69. Nongshim and the other Korean Defendants subsequently raised factory-level prices of its Korean Noodles on six occasions between 2001 and 2008. DPCC ¶¶ 85-163; IPCC ¶¶ 70-139. Plaintiffs claim that Nongshim Korea shipped its price-fixed Korean Noodles to the United States where they were sold to plaintiffs. See, e.g., DPCC ¶¶ 26, 173; IPCC ¶¶ 20, 151, 155. Plaintiffs further assert that the prices of Nongshim's Korean Noodles sold in the United States increased in correlation to the price increases in Korea. DPCC ¶¶ 174-77. Based on the foregoing, plaintiffs have sufficiently pleaded that Nongshim Korea was a member of the conspiracy to raise the prices of Korean Noodles sold in the United States.
Plaintiffs allege that Nongshim America participated in the conspiracy "by providing the same subterfuge for price increases in the United States (such as the increase in the price of raw materials) as the Korean Defendants offered for the price increases in Korea."
Plaintiffs allege that representatives of Ottogi Korea met with representatives of the other Korean Defendants in late December 2000 or early January 2001 at the Renaissance Seoul Hotel and agreed collectively to raise the prices of Korean Noodles. DPCC ¶ 75; IPCC ¶ 63. Ottogi Korea and the other Korean Defendants agreed that Nongshim Korea would raise its prices first and the other Korean Defendants would follow suit. DPCC ¶¶ 76-77; IPCC ¶¶ 64-65. On March 28, 2001, this agreement was confirmed by representatives of Ottogi Korea and the other Korean Defendants at a meeting during the Regular General Assembly of Ramen Conference at the Capital Hotel in Seoul. DPCC ¶¶ 78-81; IPCC ¶¶ 66-69. Ottogi Korea and the other Korean Defendants subsequently raised factory-level prices of their Korean Noodles on six occasions between 2001 and 2008. DPCC ¶¶ 85-163; IPCC ¶¶ 70-139. Plaintiffs allege that Ottogi Korea shipped its price-fixed Korean Noodles to the United States where they were sold to plaintiffs. DPCC ¶ 32, 173; IPCC ¶¶ 21, 151, 155.
Plaintiffs allege that Ottogi America participated in the conspiracy "by raising and otherwise conforming the prices of Korean Noodles in the U.S. to price levels similar to those set collusively in Korea pursuant to and at the direction of the Korean Defendants." DPCC ¶ 190; see also IPCC ¶ 154. Given the control which Ottogi Korea allegedly asserted over Ottogi America
Plaintiffs allege that representatives of Samyang Korea met with representatives of the other Korean Defendants in late December 2000 or early January 2001 at the Renaissance Seoul Hotel and agreed to collectively raise the prices of Korean Noodles. DPCC ¶ 75; IPCC ¶ 63. Samyang Korea and the other Korean Defendants agreed that Nongshim Korea would raise its prices first and the other Korean Defendants would follow suit. DPCC ¶¶ 76-77; IPCC ¶¶ 64-65. On March 28, 2001, this agreement was confirmed by representatives of the Korean Defendants at a meeting during the Regular General Assembly of Ramen Conference at the Capital Hotel in Seoul. DPCC ¶¶ 78-81; IPCC ¶¶ 66-69. Samyang Korea and the other Korean Defendants subsequently raised factory-level prices of their Korean Noodles on six occasions between 2001 and 2008. DPCC ¶¶ 85-163; IPCC ¶¶ 70-139. Plaintiffs have adequately pleaded that Samyang Korea was part of the conspiracy to raise prices of Korean Noodles in Korea.
However, as discussed in greater detail below, unlike with Nongshim Korea and Ottogi Korea, plaintiffs have not adequately pleaded that Samyang Korea owned, controlled or directed Sam Yang USA,
As noted, plaintiffs have plausibly pleaded that Samyang Korea participated in a conspiracy to fix factory-level prices of Korean Noodles. Plaintiffs further allege that Samyang Korea shipped its price-fixed Korean Noodles to the United States and that the prices of Samyang Korean Noodles in the United States did indeed increase in correlation to the price increase in Korea.
Plaintiffs allege that Sam Yang USA participated in the conspiracy "by providing the same subterfuge for price increases in the United States (such as the increase in the price of raw materials) as the Korean Defendants offered for the price increases in Korea." DPCC ¶ 189. Plaintiffs further allege that Sam Yang USA participated in the conspiracy "by raising and otherwise conforming the prices of Korean Noodles in the U.S. to price levels similar to those set collusively in Korea pursuant to and at the direction of the Korean Defendants." DPCC ¶ 190. However, plaintiffs have not adequately pleaded that Samyang Korea owned, controlled or directed Sam Yang USA. Plaintiffs' reference to a questionable entry on yellowpages.com is not compelling.
Plaintiffs allege that representatives of Yakult Korea met with representatives of the other Korean Defendants in late December 2000 or early January 2001 at the Renaissance Seoul Hotel and agreed to collectively raise the prices of Korean Noodles. DPCC ¶ 75; IPCC ¶ 63. Yakult Korea and the other Korean Defendants agreed that Nongshim Korea would raise its prices first and the other Korean Defendants would follow suit. DPCC ¶¶ 76-77; IPCC ¶¶ 64-65. On March 28, 2001, this agreement was confirmed by representatives of the Korean Defendants at a meeting during the Regular General Assembly of Ramen Conference at the Capital Hotel in Seoul. DPCC ¶¶ 78-81; IPCC ¶¶ 66-69. Yakult Korea and the other Korean Defendants subsequently raised factory-level prices of their Korean Noodles on six occasions between 2001 and 2008. DPCC ¶¶ 85-163; IPCC ¶¶ 70-139.
Plaintiffs allege only that the prices of Yakult Korea's Korean Noodles in the United States "were expected to increase in the United States shortly following price increases in Korea," not that they actually increased. DPCC ¶ 186. Nor do plaintiffs plausibly allege that Yakult Korea participated in the conspiracy to fix prices of Korean Noodles in the United States in some other fashion. The mere allegation that Yakult Korea conspired to fix prices in Korea is insufficient to plausibly plead that Yakult Korea participated in the conspiracy to fix prices of Korean Noodles sold in the United States. Yakult Korea's motion to dismiss is GRANTED. All causes of action against Yakult Korea in both the direct purchaser plaintiffs' and indirect purchaser plaintiffs' complaints are DISMISSED WITH LEAVE TO AMEND.
Indirect purchaser plaintiffs allege that Paldo Company, Ltd
The Sherman Act has a four-year statute of limitations. 15 U.S.C. § 15(b). Defendants contend that the Sherman Act
The discovery rule tolls the running of the statute of limitations until a plaintiff "knows or has reason to know of the injury which is the basis of the action." Trotter v. Int'l Longshoremen's & Warehousemen's Union, Local 13, 704 F.2d 1141, 1143 (9th Cir.1983). The rule requires a plaintiff to inquire into the existence of a cause of action when the plaintiff has access to information that would prompt a reasonable party to do so. See Aloe Vera v. United States, 699 F.3d 1153, 1159 (9th Cir.2012). The discovery rule applies broadly to federal litigation, including Sherman Act claims. See, e.g., Mangum v. Action Collection Serv., Inc., 575 F.3d 935, 940-41 (9th Cir.2009) ("We have made it clear that, in general, the discovery rule applies to statutes of limitations in federal litigation."); In re Copper Antitrust Litig., 436 F.3d 782, 789 (7th Cir. 2006) (applying discovery rule to Sherman Act claims).
Plaintiffs argue that the discovery rule tolled the otherwise applicable statute of limitations until the KFTC's order on July 12, 2012 because no facts known before then should have informed plaintiffs of the alleged conspiracy or prompted them to inquire into its existence. DPCC ¶¶ 195-198; IPCC ¶ 162. Defendants counter that public information reasonably informed plaintiffs of the conspiracy before then. Specifically, defendants point to the following as evidence that plaintiffs had sufficient knowledge to "discover" the alleged conspiracy before the KFTC announcement: (i) plaintiffs' allegations that the conspiracy formed at a public industry meeting around the beginning of 2001; (ii) defendants' public announcements of price increases; (iii) defendants' public filing of business reports, including data on price increases, with the Korean government in 2002 and 2003; (iv) plaintiffs' knowledge of price increases in the ramen market in 2003; and (v) the publication of newspaper articles "at least since June 2008" covering the KFTC's antitrust investigation. Dkt. No. 94 at 16-17.
The information referenced by defendants is insufficient to demonstrate that plaintiffs knew or should have known of alleged conspiracy before the K FTC's July 2012 announcement. First, plaintiffs' contention that the conspiracy was formed at a public event, the General Assembly of Ramen Conference, does not mean that plaintiffs or members of the public had access to the conspiratorial discussions. Second, knowledge of price increases alone, whether based on public announcements or corporate filings, does not inform
Fraudulent concealment tolls otherwise applicable statutes of limitation where (i) affirmative acts by defendants conceal their wrongful conduct from plaintiffs, (ii) plaintiffs are actually ignorant of the wrongful conduct, and (iii) there was reasonable diligence by the plaintiff to discover the misconduct in response to any information it may have about that conduct. Conmar, 858 F.2d at 502-03; Rutledge v. Boston Woven Hose & Rubber Co., 576 F.2d 248, 250 (9th Cir.1978). It is often inappropriate to reject fraudulent concealment allegations at the pleadings stage because of the fact-intensive analysis. See, e.g., In re Cathode Ray Tube (CRT) Antitrust Litig., 738 F.Supp.2d 1011, 1024 (N.D.Cal.2010); In re Rubber Chemicals Antitrust Litig., 504 F.Supp.2d 777, 789 (N.D.Cal.2007).
Plaintiffs have adequately pleaded that defendants' alleged pretextual public statements about Korean Noodles price increases constitute affirmative acts to mislead the public about the price-fixing scheme. Specifically, plaintiffs point to public statements that defendants made about the rising costs of Korean Noodles ingredients. See DPCC ¶¶ 189, 201-15; IPCC ¶¶ 154, 164. The fact that costs of manufacturing Korean Noodles may actually have been rising does not mean that those statements were not intended to conceal
For the same reasons stated above with respect to the discovery rule, plaintiffs have sufficiently pleaded that they were not aware of the alleged conspiracy, and should not reasonably have been aware of it, until the K FTC's announcement in July 2012. The Sherman Act claims are therefore tolled by defendants' fraudulent concealment of the alleged conspiracy.
The Foreign Trade Antitrust Improvements Act, 15 U.S.C. § 6a ("FTAIA"), limits the Sherman Act's application to foreign commerce. F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 169, 124 S.Ct. 2359, 159 L.Ed.2d 226 (2004). It provides that:
15 U.S.C. § 6a.
The Supreme Court has explained that "[t]his technical language initially lays down a general rule placing all (nonimport) activity involving foreign commerce outside the Sherman Act's reach."
Defendants argue that FTAIA applies to, and bars, plaintiffs' claims because the only conspiracy that has been properly alleged relates to price-fixing in Korea, not in the United States, and therefore the conduct at issue was not "directed at", and does not involve, import commerce market. Defendants further argue that the conduct at issue does not fit within the "direct, substantial, and reasonably foreseeable effect" exception in subsections (1) and (2).
I am not persuaded.
The cases cited by defendants, Turicentro, S.A. v. American Airlines, Inc., 303 F.3d 293 (3d Cir.2002) and Kruman v. Christie's International, PLC, 284 F.3d 384, 395 (2d Cir.2002), are inapposite. In those cases, the plaintiffs alleged that the defendants manipulated foreign markets for services rendered by foreign entities with minimal or no effect on U.S.-based markets. See, e.g., Turicentro, 303 F.3d at 303 ("Defendants were allegedly involved only in unlawfully setting extra-territorial commission rates. Their actions did not
In their reply brief, defendants argue that the import commerce exclusion only removes plaintiffs' claims from the scope of the FTAIA if the alleged conspiracy "adversely affected" imports to the United States. Defendants contend that plaintiffs have not satisfied this requirement because the "conclusory, speculative and ambiguous allegations" insufficiently allege that the price-fixing conspiracy in Korea spread across the Pacific to "adversely affect" U.S. imports. This argument dovetails with defendants' principal argument: that plaintiffs have insufficiently pleaded a conspiracy to fix prices in the United States. My analysis likewise dovetails with that analysis. As stated above, plaintiffs have adequately pleaded a conspiracy to fix prices of Korean Noodles sold in the United States with respect to Nongshim Korea, Nongshim USA, Ottogi Korea, Ottogi USA, and Samyang Korea. Accordingly, accepting defendants' contention that the alleged conduct must "adversely affect" import commerce to fall outside of the FTAIA, that requirement is met with respect to those defendants.
The named indirect purchaser plaintiffs are residents of, and purchased defendants' Korean Noodles, in California, Massachusetts, Michigan, Florida, and New York. IPCC ¶¶ 10-19. They nonetheless assert antitrust, consumer protection, and unjust enrichment claims under the laws of 24 other states where no plaintiff resides or purchased Korean Noodles.
Class allegations are typically tested on a motion for class certification, not at the pleading stage. However, the Ninth Circuit has stated that standing should be addressed before class certification. See, e.g., Easter v. Am. W. Fin., 381 F.3d 948, 962 (9th Cir.2004) ("The district court correctly addressed the issue of standing before it addressed the issue of class certification."); Lee v. State of Or., 107 F.3d 1382, 1390 (9th Cir.1997) ("Standing is a jurisdictional element that must be satisfied prior to class certification.") (citation omitted); Nelsen v. King Cnty., 895 F.2d 1248, 1250 (9th Cir.1990) (If the litigant fails to establish standing, he may not `seek relief on behalf of himself or any other member of the class.'") (quoting O'Shea v. Littleton, 414 U.S. 488, 494, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974)). Accordingly, where it is clear from the pleadings that class representatives lack standing to assert class claims, courts in this District routinely dismisses those claims at the pleadings stage.
In this case, it is clear from the pleadings that the indirect purchaser plaintiffs lack standing to assert claims for which no named plaintiff has standing. As the Supreme Court explained, "[t]hat a suit may be a class action adds nothing to the question of standing, for even named plaintiffs who represent a class must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent." Lewis v. Casey, 518 U.S. 343, 357, 116 S.Ct. 2174, 135 L.Ed.2d 606 (1996) (internal citation and punctuation omitted). In addition, "at least one named plaintiff must have standing with respect to each claim the class representatives seek to bring." In re Ditropan XL Antitrust Litig., 529 F.Supp.2d 1098, 1107 (N.D.Cal.2007) (citing Griffin v. Dugger, 823 F.2d 1476, 1483 (11th Cir. 1987)).
None of the named indirect purchaser plaintiffs resides in, or suffered an injury in, the 24 states identified above. The named indirect purchaser plaintiffs'
The parties agree that indirect purchaser plaintiffs' state-law unfair competition and consumer protection claims are based on the same allegations as the price-fixing conspiracy and therefore should face the same fate as those claims.
Indirect purchaser plaintiffs assert a claim under the New York Deceptive Acts and Practices Act, N.Y. Gen. Bus. Law § 349, et seq. IPCC ¶ 208(k). To satisfy the elements of a claim under Section 349, plaintiffs must plead that defendants' acts or practices (1) were materially misleading or deceptive, (2) were oriented or directed at consumers, and (3) caused actual harm to the plaintiff, whether pecuniary or otherwise. Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 623 N.Y.S.2d 529, 647 N.E.2d 741, 744-45 (1995). The plaintiff does not need to prove reliance on the deception, but the act or practice must have caused the plaintiff's harm. Small v.
Defendants move to dismiss the Section 349 claim on the grounds that (i) the conduct at issue was not deceptive within the meaning of Section 349; (ii) the alleged acts were not "directed at" consumers; and (iii) the indirect purchaser plaintiffs' alleged harm was caused by the alleged price-fixing, not any separate deception, as required under Section 349.
In their opposition, indirect purchaser plaintiffs argue that defendants' statements to media outlets that "misrepresented the reasons for price increases in the United States and concealed their price fixing conspiracy" constitute deceptive acts within the meaning of Section § 349. Dkt. No. 92 at 4-5.
The statements at issue were directed at consumers and satisfy the requirement that the conduct at issue be oriented or directed at consumers. Cf Oswego, 85 N.Y.2d at 25, 623 N.Y.S.2d 529, 647 N.E.2d 741 (to satisfy consumer-oriented requirement, plaintiffs "must demonstrate that the acts or practices have a broader impact on consumers at large"). However, the purported harm suffered by plaintiffs — paying extra for price-fixed Korean Noodles — was caused by the alleged price-fixing, not by the alleged misrepresentations that defendants made to media outlets, and is therefore not actionable under Section 349.
Small v. Lorillard Tobacco is instructive. In that case, New York's highest court rejected the argument that "consumers who buy a product that they would not have purchased, absent a manufacturer's deceptive commercial practices, have suffered an injury under General Business Law § 349." Lorillard Tobacco, 698 N.Y.S.2d 615, 720 N.E.2d at 898. The plaintiffs alleged that they would not have purchased cigarettes but for the defendants' concealment of the addictiveness of nicotine. The court explained, "Plaintiffs' definition of injury is legally flawed. Their theory contains no manifestation of either pecuniary or "actual" harm; plaintiffs do not allege that the cost of cigarettes was affected by the alleged misrepresentation, nor do they seek recovery for injury to their health as a result of their ensuing addiction." Id.
Likewise, in this case, indirect purchaser plaintiffs do not allege that prices of the Korean Noodles increased because of the pretextual statements to the media. Rather, the price increased because of the alleged price-fixing, and would have risen even if defendants had not made the allegedly pretextual statements to the press. Accordingly, under Lorillard Tobacco, which is controlling, plaintiffs' allegations cannot support a Section 349 claim because their alleged harm was not caused by the alleged misrepresentations.
Defendants' motion to dismiss the Section 349 claim is GRANTED. The Section 349 claim is DISMISSED WITHOUT LEAVE TO AMEND.
Indirect plaintiffs Fenerjian, Beamer and Halloran allege a cause of action for unjust enrichment on behalf of a Count V Subclass or, in the alternative, on behalf of Massachusetts, Michigan, and New York subclasses. IPCC ¶ 212. Defendants move to dismiss any unjust enrichment claims under Massachusetts, Michigan, or New York laws on the grounds that: (i) the Indirect Purchaser Plaintiffs did not confer a direct benefit on defendants, as required to state a claim for unjust enrichment in those states; (ii) adequate remedies at law preclude unjust enrichment under Massachusetts and New York law; (iii) unjust enrichment is not a cause of action under Massachusetts law; and (iv) plaintiffs may not circumvent antitrust laws by repackaging their antitrust theories as unjust enrichment claims.
The doctrine of unjust enrichment broadly provides that "a person who is unjustly enriched at the expense of another is subject to liability in restitution." Restatement (Third) of Restitution and Unjust Enrichment § 1 (2011). The availability and elements of a claim for unjust enrichment are governed by state law. I have accordingly looked to state law to determine the viability of plaintiffs' unjust enrichment claims under Massachusetts, Michigan, and New York law.
The parties dispute whether unjust enrichment under Massachusetts, Michigan, and New York law requires that the plaintiff confer a direct benefit on the defendant. For the reasons discussed below, I conclude that the relationship between defendants' increased revenues and the increased prices paid by the indirect purchaser plaintiffs is not too attenuated to state an unjust enrichment claim under Massachusetts law, but is too attenuated to state unjust enrichment claims under Michigan and New York law.
In Massachusetts, a claim for unjust enrichment requires "unjust enrichment of one party and unjust detriment to another party." Massachusetts Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., 552 F.3d 47, 57 (1st Cir.2009). The parties do not cite any cases addressing whether indirect purchasers' relationships to manufacturers of price-fixed products are too attenuated to state a claim for unjust enrichment under Massachusetts law.
None of the cases cited is analogous to this case, or even instructive. At best, they stand for the general proposition that some relationships are too attenuated to state a claim for unjust enrichment under Massachusetts law. Plaintiffs have pleaded unjust enrichment of defendants and unjust detriment to the indirect purchaser plaintiffs, which is what is required to state a claim for unjust enrichment under Massachusetts law, and there is apparently no case that holds the relationships as alleged are too attenuated under Massachusetts law. Accordingly, they should be allowed to proceed.
Defendants make two other arguments that fail. First, they contend that plaintiffs must allege that plaintiffs lack an adequate remedy at law, which they cannot do here because plaintiffs allege that they are entitled to remedies under the antitrust or consumer protection laws of Massachusetts and New York. Whether plaintiffs lack an adequate remedy at law remains to be seen. It is premature to dismiss the unjust enrichment claims on that basis at this point. Cf Massachusetts v. Mylan Labs., 357 F.Supp.2d 314, 324 (D.Mass.2005) ("[a] remedy at law cannot be considered adequate so as to prevent equitable relief, unless it covers the entire case made by the bill in equity") (citation omitted). In addition, as the cases discussed above demonstrate, plaintiffs may simultaneously state unjust enrichment and other legal claims. Plaintiffs may be required to elect a remedy eventually, but I will not force them to do so at this stage. See, e.g., id. ("The Court need not resolve these issues at this stage of the proceeding, since Massachusetts may have to elect only one theory of recovery eventually, and will not force Plaintiff to choose its remedy at this stage of the litigation.").
Second, defendants argue that unjust enrichment is not a cause of action under Massachusetts law. However, the cases discussed above demonstrate that courts do recognize a cause of action for unjust enrichment under Massachusetts law.
Defendants' motion to dismiss the unjust enrichment claim under Massachusetts law is DENIED.
The elements of unjust enrichment under Michigan law are (1) receipt of a benefit by the defendant from the plaintiff and (2) an inequity resulting to plaintiff because of the retention of the benefit by defendant. Dumas v. Auto Club Ins. Ass'n, 437 Mich. 521, 473 N.W.2d 652
In Lipov, a homeowner sued the manufacturer of a type of building trim that was allegedly defective. The plaintiff had the trim installed by builders who had purchased the trim through distributors or wholesalers. The court held that the plaintiff could not state a claim for unjust enrichment against the manufacturer because the manufacturer sold the trim through distributors and wholesalers to builders who then installed it, and "these indirect transactions do not state a claim that Plaintiff conferred a direct benefit on Defendant."
In A & M Supply Co. v. Microsoft Corp., 2008 WL 540883 (Mich.Ct.App. Feb. 28, 2008), the plaintiffs filed an indirect purchaser antitrust complaint, alleging that they were damaged by Microsoft's monopolistic pricing of its Windows operating systems and Internet Explorer software, which the plaintiffs indirectly purchased when they purchased computers pre-installed with Microsoft software.
Indirect purchaser plaintiffs respond that their injury and the defendants' benefit are sufficiently related to state an unjust enrichment claim. They cite two cases from this District, In re TFT-LCD (Flat Panel) Antitrust Litig., 599 F.Supp.2d 1179 (N.D.Cal.2009) and In re Static Random Access Memory (SRAM) Antitrust Litig., 2010 WL 5094289 (N.D.Cal.2010), in which indirect purchaser plaintiffs in price-fixing cases were allowed to state unjust enrichment claims under Michigan law. In turn, those cases relied on Kammer Asphalt Paving Co., Inc. v. East China Tp. Schools, 443 Mich. 176, 504 N.W.2d 635 (1993), Morris Pumps v. Centerline Piping, Inc., 273 Mich.App. 187, 729 N.W.2d 898 (2006), and In re Cardizem CD Antitrust Litig., 105 F.Supp.2d 618, 670-71 (E.D.Mich.2000). Neither Kammer nor Morris Pumps involved indirect purchaser antitrust claims and the parties have not cited any cases in which Michigan courts allowed indirect purchaser plaintiffs to state unfair enrichment claims based on price-fixing or other antitrust claims.
In Kammer, the plaintiff was a subcontractor who performed construction and renovation work for defendant school district's facilities. Kammer, 443 Mich. at
Similarly, in Morris Pumps, the plaintiff a subcontractor conferred a direct benefit to defendant by specially delivering equipment and supplies to defendant's construction site, which defendant then used to complete its construction project without paying for them. Morris, 273 Mich.App. at 196-97, 729 N.W.2d 898.
In In re Cardizem CD Antitrust Litig., 105 F.Supp.2d 618, 670-71 (E.D.Mich. 2000), indirect purchasers of heart medication were allowed to state unjust enrichment claims against the manufacturer based on allegations of collusion between manufacturer and prospective manufacturer of cheaper generic version of the heart medication. Cardizem jointly analyzed unjust enrichment claims under 10 states' laws and, like the federal courts in TFT-LCD (Flat Panel) and Static Random Access Memory (SRAM), did not cite any Michigan state cases involving unjust enrichment claims by indirect purchaser plaintiffs based on price-fixing or other antitrust claims.
Lipov and A & M Supply are instructive and persuasive as they involved plaintiffs whose interactions or transactions with the defendants were indirect. In contrast, the cases cited by defendants, Kammer and Morris Pumps, are less instructive because they involved situations where the parties' contacts or transactions with each other were direct. Cardizem is not instructive because did it not cite any Michigan state authority involving indirect purchasers or transactions. Under the reasoning of Lipov and A & M Supply, the transactions and relationships between the indirect purchaser plaintiffs and the defendants are too attenuated to state an unjust enrichment claim under Michigan law. Defendants' motion to dismiss the unjust enrichment claim under Michigan law is GRANTED and the unjust enrichment claim under Michigan law is DISMISSED WITHOUT LEAVE TO AMEND.
To state a claim for unjust enrichment under New York law, a plaintiff must show that (i) the defendant was enriched, (ii) at the plaintiff's expense, and (iii) that it is against equity and good conscience to permit the defendant to retain what is sought to be recovered. Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182, 919 N.Y.S.2d 465, 944 N.E.2d 1104 (2011) (citation omitted). As with the unjust enrichment claim under Michigan law, defendants argue that indirect purchaser plaintiffs' injury and defendants' benefit are too attenuated to state a claim for unjust enrichment claim under New York law.
Defendants cite two New York state cases involving indirect purchasers in antitrust actions. In Sperry v. Crompton Corp., 8 N.Y.3d 204, 215, 831 N.Y.S.2d 760, 863 N.E.2d 1012 (2007), New York's highest court stated that unjust enrichment under New York law does not require privity between the parties. Sperry nonetheless held that the relationship between indirect purchasers of tires and defendants
In opposition, plaintiffs cite Cox v. Microsoft Corp., 8 A.D.3d 39, 40, 778 N.Y.S.2d 147 (2004), in which the court held that indirect purchasers of Microsoft's software products, pre-installed on computers purchased by the plaintiffs, could state an unjust enrichment claim against Microsoft based on allegations that Microsoft's monopolistic practices caused plaintiffs to pay artificially inflated prices for its products. However, Cox predates Sperry and Daicel and is contradicted by them. In addition, Cox was issued by New York's intermediate court while Sperry was issued by the Court of Appeals of New York, which is New York's highest court and is controlling.
Plaintiffs also argue that Sperry and Daicel do not bar plaintiffs' unjust enrichment claim because in those cases the indirect purchasers purchased products that merely contained the price-fixed product, whereas in this case the indirect purchasers purchased the price-fixed product itself: Korean Noodles. In support, plaintiffs cite Waldman v. New Chapter, Inc., in which a federal court in New York held that "a product's indirect purchaser cannot assert an unjust enrichment claim against an entity that manufactured one of that product's ingredients. But the indirect purchaser can assert such an unjust enrichment claim against the manufacturer of the product itself." 714 F.Supp.2d 398, 403-04 (E.D.N.Y.2010) (emphasis in original, citations omitted). However, Waldman does not cite any persuasive authority for distinguishing Sperry or Daicel on that basis. Waldman relies on Cox, which, as I have stated above, predates Sperry and Daicel and appears contrary to those cases. Moreover, the relevant discussion in Cox comprises one sentence and Cox itself did not reference any distinction between price-fixed products and price-fixed ingredients of products.
Defendants argue that all the unlawful enrichment claims fail because indirect purchaser plaintiffs "appear to be merely seeking an alternative remedy for their antitrust claims." Dkt. No. 80 at 9. But the only unjust enrichment claim going forward is under Massachusetts law, which allows for recovery by indirect purchasers. See, e.g., Ciardi v. F. Hoffmann-La Roche, Ltd., 436 Mass. 53, 66-67, 762 N.E.2d 303 (2002) ("We read the language of G.L. c. 93A as a clear statement of legislative policy to protect Massachusetts consumers through the authorization of such indirect purchaser actions."). Indirect purchaser plaintiffs are therefore not circumventing antitrust laws.
Defendants' motions to dismiss are GRANTED IN PART and DENIED IN PART.
All the direct purchaser plaintiffs' and indirect purchaser plaintiffs' claims against Sam Yang USA, Yakult Korea, and Paldo Company LTD. are DISMISSED WITH LEAVE TO AMEND. The indirect purchaser plaintiffs' claims under the laws of Arkansas, Arizona, the District of Columbia, Hawaii, Iowa, Kansas, Maine, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oregon, Rhode Island, South Dakota, Tennessee, Utah, Vermont, West Virginia and Wisconsin are DISMISSED WITH LEAVE TO AMEND. The indirect purchaser plaintiffs' claims under the New York Deceptive Acts and Practices Act are DISMISSED WITHOUT LEAVE TO AMEND. The indirect purchaser plaintiffs' unjust enrichment claims under New York and Michigan law are DISMISSED WITHOUT LEAVE TO AMEND.
The motions are DENIED with respect to the Sherman Act claims, the state-law antitrust and consumer protection claims under the laws of California, Massachusetts, Michigan, Florida, and New York
A case management conference is set for Tuesday, November 25, 2014 at 2:00 pm. The parties shall file a joint case management statement proposing a case management schedule (or competing schedules if agreement cannot be reached) by November 20, 2014. If plaintiffs choose to amend either or both of the consolidated complaints, they shall do so by December 3, 2014.
United States v. Hui Hsiung, 758 F.3d 1074, 1086 (9th Cir.2014)
