In re Zinc Antitrust Litigation
155 F. Supp. 3d 337
S.D.N.Y.2016Background
- Five galvanizer purchasers sued warehouse operators (Pacorini, Metro, Henry Bath) and trading/financial affiliates (Glencore, Goldman Sachs, JPMorgan) alleging a conspiracy (since May 2010) to manipulate LME zinc warehouse services and zinc premiums, raising prices for physical zinc.
- Core allegations: defendants controlled LME warehouse capacity/ rules, synchronized warrant cancellations (a “Queue Order Agreement” in 2012), falsified bills of lading (Pacorini), offered incentives to store zinc, and used ‘‘shadow’’ warehousing to lengthen load-out queues and inflate the Platts MW SHG premium.
- Plaintiffs pleaded §1 conspiracy, §2 conspiracy to monopolize, and monopolization/attempted monopolization by Glencore Ltd. and Pacorini in the market for LME zinc warehousing services (and argued injury to the physical zinc market).
- Defendants moved to dismiss for lack of antitrust standing, failure to plausibly plead an agreement (§1), and failure to plead monopoly power or relevant anticompetitive conduct in the warehousing market (§2); group/corporate pleading deficiencies were also asserted.
- Court: accepted facts for Rule 12(b)(6) but required nonconclusory, specific allegations of concerted action; dismissed all claims — §1 and §2 conspiracy dismissed with prejudice; monopolization and attempted monopolization (Counts III & IV) dismissed without prejudice as to Glencore Ltd./Pacorini only; limited leave to replead Counts III & IV.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Antitrust standing for §1 claim | Plaintiffs (first-level purchasers) say their higher zinc prices are "inextricably intertwined" with defendants’ conspiratorial manipulation and thus allege antitrust injury and are efficient enforcers. | Defendants say plaintiffs are neither consumers nor competitors in the warehousing market and any injury is indirect/speculative. | Court: Standing for §1 satisfied — plaintiffs plausibly allege antitrust injury under McCready and are efficient enforcers at pleading stage. |
| Antitrust standing for §2 claims | Plaintiffs argue related harms in the zinc sales market flow from defendants’ conduct in the warehousing market; they claim monopoly power by Glencore/Pacorini. | Defendants argue plaintiffs lack standing because they are not participants in the alleged monopolized market (warehousing services) and injuries arise in a different market (physical zinc). | Court: Standing for §2 lacking — plaintiffs are too remote from the LME warehousing services market; §2 claims fail on standing and efficient-enforcer grounds. |
| Section 1 conspiracy plausibility | Plaintiffs rely on CW testimony re: Pacorini’s Queue Order Agreement, parallel conduct (acquisitions, LME roles, incentives, market trends), plus-factors, and market emails to infer a multi-year concerted scheme. | Defendants contend allegations show parallel, independent conduct and many factual assertions concern only Pacorini; Queue Order Agreement is limited, output-neutral, and insufficient to infer a broad agreement. | Court: §1 claim dismissed — allegations do not plausibly plead an unlawful agreement among the defendants (Twombly/Iqbal); Queue Order Agreement and other facts are insufficient plus-factors. |
| Section 2 monopolization/attempted monopolization plausibility | Plaintiffs assert Glencore/Pacorini monopolized LME zinc warehousing (and argue combined effects on physical zinc) and seek leave to replead market definitions. | Defendants say plaintiffs fail to plead market power or anticompetitive conduct in the warehousing market that caused plaintiffs’ injury; Glencore Ltd. does not itself compete in warehousing. | Court: §2 claims dismissed as pled; dismissed without prejudice for Glencore Ltd./Pacorini only and plaintiffs granted one opportunity to replead Counts III & IV narrowly (must plausibly allege monopoly power and standing). |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleading conspiracy)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (court need not accept conclusory allegations)
- Blue Shield of Va. v. McCready, 457 U.S. 465 (1982) (injury "inextricably intertwined" can confer antitrust standing)
- Associated Gen. Contractors v. Cal. State Council of Carpenters, 459 U.S. 519 (1983) (factors for antitrust standing/efficient enforcer analysis)
- Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752 (1984) (single-entity/corporate-family no §1 conspiracy rule)
- Gatt Commc’ns Inc. v. PMC Assocs. LLC, 711 F.3d 68 (2d Cir. 2013) (antitrust standing is pleading-stage inquiry)
- Anderson News LLC v. Am. Media, Inc., 680 F.3d 162 (2d Cir. 2012) (must plead facts, not legal conclusions, to infer agreement)
- PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101 (2d Cir. 2002) (monopolization requires market power — ability to raise price by restricting output)
- Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) (elements of attempted monopolization; "dangerous probability" standard)