In re Aluminum Warehousing Antitrust Litigation
2016 U.S. App. LEXIS 14579
| 2d Cir. | 2016Background
- Plaintiffs (three groups: Purchasers, Commercial End Users, Consumers) sued traders and affiliated LME-warehouse operators, alleging a conspiracy (2009–2012) to manipulate the Detroit-area regional premium (Midwest Premium) that factors into physical aluminum prices.
- Alleged misconduct: traders bought warehouse operators, then used warrant cancellations, ‘‘shuttling’’ of warrants, and slowed load-outs (exploiting LME rules) to create long queues and higher storage/exit costs in LME warehouses.
- The Midwest Premium equals Platts (local delivery-inclusive spot) minus LME Cash Price (global, delivery-excluded); plaintiffs assert warehouse manipulation inflated the Midwest Premium and thus downstream aluminum prices.
- Consumers and Commercials bought downstream aluminum products and semi-fabricated aluminum but did not trade futures, store aluminum, or buy aluminum that had been in defendants’ warehouses. Purchasers (direct buyers from producers) are a separate group whose amended complaint survived at district court.
- The district court dismissed all claims by Consumers and Commercials for lack of antitrust standing (no antitrust injury; not efficient enforcers) and for inadequately pleaded state consumer-protection/unfair-practices claims; denied leave to amend as futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Antitrust standing — antitrust injury | Consumers/Commercials: paying an inflated Midwest Premium is an antitrust injury "inextricably intertwined" with defendants’ scheme because demand for physical aluminum links markets. | Defendants: plaintiffs are downstream, not participants in the LME-warehouse/futures market where the alleged restraint occurred; injuries are remote/incidental. | Held: Plaintiffs lack antitrust injury — not participants in the directly restrained market and not "inextricably intertwined"; injury is incidental. |
| Antitrust standing — efficient enforcer | Consumers/Commercials: entitled to seek injunctive relief and enforcement despite being downstream purchasers. | Defendants: even if injured, other parties (market participants) are more direct and efficient enforcers. | Held: Court did not reach full efficient-enforcer analysis because antitrust injury is absent; denial of leave to amend as futile. |
| State consumer-protection and unfair-practices claims | Consumers/Commercials: state-law claims arise from the same alleged conduct and caused their injuries. | Defendants: complaints list statutes without pleading elements or proximate causation; injuries are too remote. | Held: State-law claims inadequately pleaded and premised on remote injury; dismissal affirmed and leave to amend denied. |
| Application of McCready "inextricably intertwined" exception | Plaintiffs: McCready allows recovery by non-market participants when their injury is closely tied to the conspirators’ objective. | Defendants: McCready is narrow — applies only when plaintiff’s injury is the means/fulcrum by which defendants achieve their illegal ends. | Held: McCready does not apply — plaintiffs’ injuries were collateral downstream effects, not the means used by defendants to achieve their scheme. |
Key Cases Cited
- Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982) (narrow exception to market-participant requirement where plaintiff’s injury is the necessary means by which the conspiracy works)
- Associated Gen. Contractors v. California State Council of Carpenters, 459 U.S. 519 (1983) (distinguishing McCready and emphasizing direct harm to market participants)
- Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) (antitrust injury must be of the type the laws intended to prevent and flow from unlawful acts)
- Crimpers Promotions v. Home Box Office, 724 F.2d 290 (2d Cir. 1983) (recognizing McCready-type standing where plaintiff’s injury was the precise means to defendants’ objective)
- Hanover 3201 Realty v. Village Supermarkets, 806 F.3d 162 (3d Cir. 2015) (McCready applied where plaintiff’s injury was essential to the defendant’s anticompetitive scheme)
- Gelboim v. Bank of Am. Corp., 823 F.3d 759 (2d Cir. 2016) (procedural context for appeals in multidistrict antitrust litigation)