In re PACKAGED ICE ANTITRUST LITIGATION.
Indirect Purchaser Action.
United States District Court, E.D. Michigan, Southern Division.
*646 OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS THE INDIRECT PURCHASER COMPLAINT
PAUL D. BORMAN, District Judge.
This matter is before the Court on Defendants Reddy Ice Holdings, Inc. and Reddy Ice Corporation's ("Reddy Ice") Motion to Dismiss the Indirect Purchaser Plaintiffs' Consolidated Amended Complaint (Dkt. No. 207) and the joint motion of Defendants The Home City Ice Company ("Home City") and Arctic Glacier Income Fund, Arctic Glacier Inc. and Arctic Glacier International, Inc. ("Arctic Glacier") to Dismiss the Indirect Purchaser Plaintiffs' Amended Class Action Complaint (Dkt. No. 208). The Indirect Purchaser Plaintiffs filed a joint brief in opposition to both motions to dismiss. (Dkt. No. 222.) Both Reddy Ice (Dkt. No. 230) and Home City and Arctic Glacier (Dkt. No. 231) filed replies. The Court held a hearing on March 8, 2011. For the reasons that follow, the Court GRANTS IN PART and DENIES IN PART the Defendants' motions to dismiss.
I. BACKGROUND
This action is the lead case in the consolidated class action In Re Packaged Ice Antitrust Litig., No. 08-MD-01952. In this multidistrict litigation involving 68 consolidated actions, Plaintiffs are both direct purchasers (retail stores and gas stations who purchased from Defendants) and indirect purchasers (individuals who purchased from retail stores and gas stations) of packaged ice from Defendants in the United States. In this Opinion and Order, the Court addresses Defendants' motions to dismiss the Indirect Purchasers' Amended Class Action Complaint ("ACAC").
The Indirect Purchaser Plaintiffs ("IP Plaintiffs") allege that Defendants Reddy Ice, Arctic Glacier and Home City conspired to allocate customers and markets throughout the United States, in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. The IP Plaintiffs' ACAC seeks injunctive relief under the Clayton Act, 15 U.S.C. § 16, and also seeks compensatory damages (trebled where permitted) as well as punitivе, exemplary and statutory damages under the antitrust and consumer protection laws of 30 (thirty) different states, a disgorgement of profits and costs and attorneys' fees. The IP Plaintiffs also seek class certification pursuant to Federal Rule of Civil Procedure 23.
The Reddy Ice Defendants, and the Arctic Glacier and Home City Defendants now move to dismiss the IP Plaintiffs' ACAC under Federal Rule of Civil Procedure 12(b)(6). Arctic Glacier Income Fund and Arctic Glacier Inc. additionally move for dismissal under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction.
A. Procedural BackgroundThe Multidistrict Litigation
In 2008, a Department of Justice ("DOJ") criminal antitrust investigation into the packaged ice industry in the United States surfaced via a search warrant execution and prosecutions. Multiple civil antitrust actions were subsequently filed against Reddy Ice, Arctic Glacier and Home City. On June 5, 2008,
Of the total cases filed and consolidated, the majority are direct purchaser actions filed by retail stores and gas stations. On July 1, 2010, this Court issued an Opinion and Order denying the Arctic Glacier and Reddy Ice Defendants' motions to dismiss the direct purchaser class action, finding that the complaint stated a plausible claim for relief. In re Packaged Ice Antitrust Litig.,
On March 16, 2009, this Court held a hearing on motions to appoint interim lead counsel for both the direct (eleven motions) and indirect purchaser plaintiffs (two motions). On June 1, 2009,
B. Factual Allegations
1. The Parties and the Claims
Taking as true for purposes of this motion to dismiss the well-pleaded allegations of the IP Plaintiffs' September 15, 2009 ACAC, the following factual matters are established.[1] The named IP Plaintiffs and their state citizenship are: Linda Desmond *648 and James Feeney (CA); Ron Miastkowski (FL); Perry Peka (IN); Lawrence J. Acker, Patrick Simasko and Wayne Stanford (MI); Brian W. Buttars (N.Y.); Ainello Mancusi (a resident alien). The ACAC was filed approximately 18 months ago.
The ACAC alleges the following claims: Count I-Section 1 of the Sherman Act (for injunctive relief only); Count II-Violation of State Statutes (Various Antitrust and Consumer Protection/Deceptive Practices Acts/Consumer Fraud Statutes of 30 states): AZ (Antitrust & Consumer Protection Act); AK (Consumer Protection); CA (Cartwright Act-Antitrust/Restraint of Trade); DC (Antitrust and Consumer Protection); FL (Consumer Protection); ID (Consumer Protection Act); IA (Antitrust/Competition Law); KS (Antitrust and Consumer Protection); ME (Antitrust And Consumer Protection); MI (Antitrust and Consumer Protection); MN (Antitrust); MS (Antitrust); MT (Antitrust/Unfair Trade Practices and Consumer Protection); NE (Junkin Act-Antitrust, Consumer Protection Act); NV (Antitrust/Unfair Trade Practices); NH (Antitrust, Consumer Protection); NJ (Consumer Fraud); NM (Antitrust and Unfair Trade Practices); NY (Donnelly Act-Antitrust and Consumer Protection/Deceptive Practices); NC (Antitrust and Unfair and Deceptive Practices); ND (Antitrust and Fraud/Misrepresentation Deceptive Practices); PA (Consumer Protection); RI (Consumer Protection); SD (Antitrust and Consumer Protection); TN (Antitrust); UT (Consumer Protection); VT (Consumer Protection); WV (Antitrust); WI (Antitrust) WY (Antitrust); Count IIIUnjust Enrichment nationwide (no state statutes specified).[2]
The ACAC alleges that Reddy Ice is the largest manufacturer and distributor of packaged ice in the United States. According to the ACAC, Reddy Ice has over 80% of its packaged ice sales in territories where it is the leading manufacturer. ACAC ¶ 14. The ACAC alleges that Arctic Glacier is the second largest manufacturer and distributor of packaged ice in *649 the United States. Arctic Glacier is and has been the leading manufacturer and distributor of packaged ice in the territories in which it operates. ACAC ¶ 15. The ACAC alleges that Home City is third largest manufacturer and distributor of packaged ice in the United States with sales that have grown to more than $80 million per year. ACAC ¶ 16.
The IP Plaintiffs define the following proposed class of indirect purchasers: "All persons or other legal entities (excluding governmental entities, defendants, their officers, directors, subsidiaries or affiliates), who purchased packaged ice indirectly in the continental United States (except for the State of Ohio) and the District of Columbia between January 1, 2001 through March 6, 2008." ACAC ¶ 18. The class is believed to number in the millions and the class members complain that they purchased packaged ice at artificially inflated prices because of Defendants' wrongful conduct. ACAC ¶¶ 19-20.
2. The Structure of the Packaged Ice Industry
The structural characteristics of the packaged ice industry are alleged in ¶¶ 24-32 of ACAC. The ACAC complains that direct customers of packaged ice, retailers such as supermarkets, mass merchants and convenience stores, are in a fiercely competitive industry and operate on slim margins with the ability to change prices to their customers frequently and cheaply. They cannot afford to absorb price increases and remain profitable. Therefore, they typically pass on entire price increases to their customers, such as the IP Plaintiffs and the class, rapidly after they receive them from manufacturers. ACAC ¶ 33.
3. Allegations as to the Illegal Market Behavior of the Defendants
According to the ACAC, on June 7, 2008, Thomas E. Sedler, President and Chief Executive Officer of Home City, on bеhalf of Home City, pled guilty to violating Section 1 of the Sherman Act and swore under oath, before the Honorable Herman J. Weber, United States District Judge of the United States District Court for the Southern District of Ohio (Western Division) that:
[S]ince 2001, [defendant] participated in a conspiracy among packaged ice producers, the primary purpose of which was to allocate customers and territories of packaged ice sold in southeastern Michigan and the Detroit, Michigan metropolitan area. In furtherance of the conspiratorial activity, the defendant, through its officers and employees, primarily through its deceased vice president of sales and marketing, engaged in discussions and attended meetings with representatives of other packaged ice producers. During these discussions and meetings, agreements were reached to allocate customers and territories of packaged ice to be sold in southeastern Michigan and the Detroit, Michigan metropolitan area. ACAC ¶ 34.
The ACAC further alleges that on or about March 4, 2008, a United States Magistrate Judge of the United States District Court for the Northern District of Texas issued a warrant authorizing the Federal Bureau of Investigation to search Reddy Ice's headquarters in Dallas, Texas. On September 15, 2008, Reddy Ice announced that it had suspended Ben D. Key, the company's executive vice-president of sales and marketing, because the board found that Mr. Key "ha[d] likely violated Company policies and is associated with matters under investigation." ACAC ¶¶ 35-36. The ACAC also alleges that Arctic Glacier initiated an internal investigation into allegations regarding an alleged antitrust conspiracy and suspended *650 Frank Larson, Arctic Glacier's Executive Vice President, Operations, and Gary Cooley, Arctic Glacier's Vice President, Sales. ACAC ¶ 37.
The ACAC alleges that in August 2008, Martin G. McNulty filed an action against his former employer, Arctic Glacier, claiming he was fired because he had refused to participate in an antitrust conspiracy among manufacturers of packaged ice. McNulty had been Vice President of Sales at Party Time Ice, which was acquired by Arctic Glacier in late 2004. ACAC ¶ 38. McNulty claims that while employed by Party Time he heard that Party Time and other packaged ice manufacturers were conspiring to allocate markets and fix prices. McNulty's boss at Arctic Glacier, Keith Corbin, told him in January 2005 that Arctic Glacier was conspiring with Reddy Ice and Home City. McNulty claims in his complaint that Geoff Lewandowski a former colleague of McNulty'stold McNulty that he had spoken to an Arctic Glacier executive and that Arctic Glacier would rehire McNulty if he stopped cooperating with authorities. McNulty further claims that Joseph Riley, President of Tropic Ice (which was later acquired by Arctic Glacier) told him that Arctic Glacier, Home City and Reddy Ice had agreed that none of them would hire him. McNulty claims that Corbin told him that Arctic Glacier had a market allocation agreement with Home City and with Reddy Ice to geographically divide the United States. ACAC ¶¶ 38-41. Following his termination from Arctic Glаcier, McNulty informed the federal government of the collusion in the packaged ice industry and began working with the DOJ and the FBI. When McNulty began looking for work in 2005, he was unable to find employment because, he was informed by Joseph Riley, he had been blackballed in the industry. ACAC ¶¶ 42-43.
With regard to the business practices of the Defendants, the ACAC alleges that over the last several years, Arctic Glacier, Reddy Ice and Home City have grown through acquisitions and in doing so have agreed not to compete in their areas of expansion. According to the allegations of the ACAC, Arctic Glacier initially began entry into Reddy Ice and Home City territories in 1997 and shortly thereafter agreed that the three would not compete with each other in certain agreed upon territories. According to the ACAC, Reddy Ice agreed that Arctic Glacier could have California and that Reddy Ice could have Nevada. However, the ACAC alleges, in 2001 Reddy Ice withdrew from California, a market that had been profitable for it, and Arctic Glacier acquired six companies and expanded fully into California. By 2002 Arctic Glacier, who had a significant presence in Oklahoma and New Mexico, stopped competing in these two markets although it retained a production and distribution facility in the bordering states of Kansas and Texas. According the ACAC, the Defendants do not sell packaged ice in overlapping territories to this day, which would only be economically rational behavior if the firms had agreed to not compete throughout the country. ACAC ¶¶ 44-51.
The ACAC allеges that beginning in about January 1, 2001, the prices that direct purchasers have paid defendants for packaged ice have increased each year at a rate that cannot be explained by increased manufacturing costs. Reddy Ice has conceded that it EBITDA (earnings before interest, taxes, depreciation and amortization) has grown "substantially faster than revenue." The ACAC alleges that Defendants obtained significant excess capacity during the class period and were able to increase prices greater than their marginal costs because of the conspiracy and agreements not to compete. ACAC ¶¶ 52-53.
*651 The ACAC also alleges that Defendants memberships in several trade associations, in particular the International Packaged Ice Association ("IPIA") of which Ben Key served as chairman of the executive committee, facilitated opportunities to conspire. The board for the IPIA included executives from Reddy Ice and Arctic Glacier and Thomas Sedler of Home City sat on the IPIA's marketing committee. The IPIA holds regular meetings throughout the year. ACAC ¶¶ 54-55.
4. Allegations of Injury to the Class
The ACAC alleges that price competition has been restrained, suppressed or eliminated in every state in the continental United States and the District of Columbia, the price of packaged ice has been raised, fixed, maintained or stabilized at supra-competitive levels in each and every state and the District of Columbia, indirect purchasers of packaged ice have been deprived of free and open competition for the sale of packaged ice in each and every state and the District of Columbia. The ACAC alleges that the IP Plaintiffs paid more for packaged ice than they would have paid absent a conspiracy. ACAC ¶¶ 56-57.
The ACAC also alleges that Defendants' conspiracy was inherently self-concealing and that Defendants also undertook affirmative acts of concealment including attending secret meetings and engaging in secret conversations. The ACAC alleges that the Defendants issued or caused to be issued public statements which falsely attributed the price increases for packaged ice to factors other than the illegal market allocation scheme among the Defendants. These statements were directed to consumers (including plaintiffs and the class) in each and every state in the United States and the District of Columbia. The ACAC alleges that this information could not have been discovered before news of the search warrant execution on Reddy Ice became publicly known on or about March 5, 2008.
The IP Plaintiffs request the following relief: (1) Class Certification; (2) an Injunction preventing Defendants from continuing to implement their unlawful agreement; (3) Compensatory Damages under state statutes, trebled where permitted; (4) Punitive, exemplary, statutory under state statutes as permitted; (5) Disgorgement of profits; (6) Pre and post judgment interest; (7) Reasonable costs and attorneys fees.
II. STANDARDS OF REVIEW
A. Federal Rule of Civil Procedure 12(b)(6)
Fed.R.Civ.P. 12(b)(6) provides for the dismissal of a case where the complaint fails to state a claim upon which relief can be granted. When reviewing a motion to dismiss under Rule 12(b)(6), a court must "construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff." Directv, Inc. v. Treesh,
In Bell Atlantic Corp. v. Twombly,
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." [Bell Atlantic Corp. v. Twombly,550 U.S. 544 , 556, 570,127 S.Ct. 1955 ,167 L.Ed.2d 929 (2007)]. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. at 556,127 S.Ct. 1955 . The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of `entitlement to relief.'" Id., at 557,127 S.Ct. 1955 (brackets omitted).
Id. at 1948-50. A plaintiff's factual allegations, while "assumed to be true, must do more than create speculation or suspicion of a legally cognizable cause of action; they must show entitlement to relief." LULAC v. Bredesen,
In addition to the allegations and exhibits of the complaint, a court may consider "public records, items appearing in the record of the case and exhibits attached to defendant's motion to dismiss so long as they are referred to in the [c]omplaint and are central to the claims contained therein." Bassett v. NCAA,
B. Federal Rule of Civil Procedure 12(b)(2)
Plaintiffs bear the burden of establishing that personal jurisdiction exists. Neogen Corp. v. Neo Gen Screening, Inc.,
III. ANALYSIS
The Reddy Ice Defendants mоve to dismiss the IP Plaintiffs' ACAC arguing that: (1) the IP Plaintiffs' fail to plead their claims of a nationwide conspiracy with the specificity required by Bell Atl. Corp. v. *653 Twombly,
A. The Threshold Question of Standing
Both Reddy Ice in their motion and Arctic Glacier and Home City in their joint motion argue that the named IP Plaintiffs lack standing to bring suit under the laws of those states in which they do not reside. The named IP Plaintiffs reside in California, Florida, Indiana, Michigan and New York but bring claims under the antitrust and consumer protection statutes of thirty states, twenty five in addition to those in which they reside. The standing inquiry involves two issues: (1) whether the Court should address the standing issue at this stage of the proceedings or should defer its ruling on standing issues until after class certification; and (2) if the Court decides to address the standing issue now, whether the named IP Plaintiffs have standing to assert claims brought under the laws of states in which they do not reside.
1. The timing of the standing analysis.
Article III standing is a threshold question in every federal case and "determin[es] the power of the court to entertain the suit." Warth v. Seldin,
The IP Plaintiffs do not deny their burden of establishing Article III standing. See Lujan v. Defenders of Wildlife,
Federal courts are split on this issue. See generally Linda S. Mullenix, Standing and Other Dispositive Motions After Amchem and Ortiz: The Problem of "Logically Antecedent" Inquiries, 2004 Mich. St. L. Rev. 703, 729 (2004). The United States Court of Appeals for the Sixth Circuit has not ruled on the issue. Within this district, courts have issued conflicting opinions on the subject. Compare Hoving v. Transnation Title Ins. Co.,
Two Supreme Court opinions, Ortiz v. Fibreboard Corp.,
Ordinarily, of course, this or any other Article III court must be sure of its own jurisdiction before getting to the merits. Steel Co. v. Citizens for a Better Environment,523 U.S. 83 , 88-89,118 S.Ct. 1003 ,140 L.Ed.2d 210 (1998). But the class certification issues are, as they were in Amchem, "logically antecedent" to Article III concerns,521 U.S., at 612 ,117 S.Ct. 2231 , and themselves pertain to statutory standing, which may properly be treated before Article III standing, see Steel Co., supra, at 92,118 S.Ct. 1003 . Thus the issue about Rule 23 certification should be treated first, "mindful that [the Rule's] requirements must be interpreted in keeping with Article III constraints. . . ." Amchem, supra, at 612-613,117 S.Ct. 2231 .
This Court concludes, as the Ninth Circuit recognized in Easter v. American West Financial,
The district court correctly addressed the issue of standing before it addressed the issue of class certification. Borrowers contend that Ortiz v. Fibreboard Corp.,527 U.S. 815 ,119 S.Ct. 2295 ,144 L.Ed.2d 715 (1999) requires courts to consider class certification before addressing standing issues. Although the court in Fibreboard examined class issues before the question of Article III standing, it did so in the very specific situation of a mandatory global settlement class. Fibreboard does not require courts to consider class certification *655 before standing. See id. at 831,119 S.Ct. 2295 (noting that a "court must be sure of its own jurisdiction before getting to the merits").
Easter,
In In re Wellbutrin XL Antitrust Litig.,
In the midst of this circuit split and the divergence of opinion among district courts as to the application of Ortiz, no court explicitly states that Warth or Lewis has been overturned with respect to named plaintiffs' standing requirements. Those earlier precedents, combined with the constricting language of Ortiz and Amchem and the unique posture of those global settlement cases, demonstrate that a standing analysis should not be deferred in this case. Every circuit to address the question has agreed that a named plaintiff must have individual standing to pursue a class action claim, including the Payton Court. A ruling as to the named plaintiffs' standing depends in no way upon the standing of proposed class members. Thus, the named plaintiffs' standing is not "logically antecedent" to the issue of class certification. By its terms, the Ortiz method of avoiding the adjudication of constitutional questions does not apply to this case.
The alternative proposed by the plaintiffs would allow named plaintiffs in a proposed class action, with no injuries in relation to the laws of certain states referenced in their complaint, to embark on lengthy class discovery with respect to injuries in potentially every state in the Union. At the conclusion of that discovery, the plaintiffs would apply for class certification, proposing to represent the claims of parties whose injuries and modes of redress they would not share. That would present the precise problem that the limitations of standing seek to avoid. The Court will not indulge in the prolonged and expensive implications of the plaintiffs' position only to be faced with the same problem months down the road.
The IP Plaintiffs cite a string of cases holding that the issue of class certification may be addressed prior to the threshold issue of standing.[3] None of these cases is from the Sixth Circuit and none is binding on this Court. This Court chooses to follow what it finds to be the better-reasoned *657 opinions on this issue which recognize and refuse to abandon the fundamental prudential standing requirements of Article III. See, e.g., Easter and Wellbutrin. The Court concludes that many of those courts that have adopted the "but for" approach, and put off for another day this fundamental inquiry, ignore the limited context in which Ortiz and Amchem permit the Article III standing analysis to be deferred. As in Wellbutrin, "[t]his case does not present an issue that is "logically antecedent" to a standing inquiry. The standing issue in Ortiz and Amchem related to proposed class members, i.e., persons whо were not yet parties to the case. It would be illogical to find that a non-party lacks standing to pursue a claim precisely because they are not pursuing a claim. Thus, the question of whether the proposed class members could become parties to the case was logically antecedent to the question of whether they had standing to make claims against the defendants in those cases. In this case, however, the Court reviews the standing of actual, not proposed, plaintiffs." Wellbutrin,
2. The Named IP Plaintiffs Lack Standing to Assert Claims Under the Laws of States in Which They Do Not Reside
The named IP Plaintiffs in the instant case reside in California, Florida, Indiana, Michigan and New York, yet they assert claims in 26 additional states in which admittedly none of them resides. To demonstrate standing, "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,
The IP Plaintiffs do not appear to seriously contest the injury requirement (although they urge the Court to defer ruling *658 on it, along with Article III standing, until after class certification) but attempt to distinguish these cases by arguing that the ACAC does in fact assert injury in each and every state whose laws they seek to invoke with the following single paragraph in their Complaint: "Plaintiffs purchased packaged ice indirectly from one or more of the defendants at retail establishments throughout the United States, including but not limited to their home states." (Compl. ¶ 13; Pls.' Resp. 10).
The Court concludes that this sole allegation, stated in a conclusory manner in paragraph 13 of the ACAC, cannot withstand a Twombly challenge to the sufficiency of the allegations of injury suffered by these IP Plaintiffs in states other than their home states. These named IP Plaintiffs apparently would have the Court infer that they roved the United States during the class period, purchasing packaged ice along the way, covering among them each of the 30 states whose laws they seek to invoke in their claims. This is simply not plausible. The allegation on which they rely"including but not limited to thеir home states"gives no suggestion in which of the states, other than their home states, they might have made such purchases. There simply is not enough factual matter asserted regarding injury allegedly suffered by these IP Plaintiffs in their non-home states to plausibly suggest a viable claim in those states.
In the absence of such an allegation as to each and every state whose laws they seek to invoke, the IP Plaintiffs lack standing in states other than their "home states." In In re Wellbutrin, the court addressed this issue, concluding that plaintiffs residing in one state may not, absent allegations of individual injury in those states, assert the rights of unidentified plaintiffs in other states:
The allegations of injury are described above. These allegations present no facts that would connect injuries specific to the plaintiffs, as opposed to injuries against competitors and purchasers nationwide, to any cause arising in states where no named plaintiff is located and where no member of a named plaintiff purchased Wellbutrin XL. The amended complaint, therefore, provides no facts on which to find a connection between an alleged injury and some wrongful conduct that would implicate the laws of those states in which no plaintiff, or any of their reimbursed members, resides.
Despite this lack of facts demonstrating injury, causation and redressability, the plaintiffs argue that they may properly assert claims of proposed class members who were injured in those states regardless of their own standing to assert the same claims. This is essentially a recasting of the argument that the Court need not make a determination of the parties' standing at this stage of the litigation.
The IP Plaintiffs simply cannot establish the necessary "connection" through the conclusory allegation that they purchased ice in a number of non-specified states in which admittedly they do not reside. This allegation fails to "nudge" their claims of injury in the states in which they do not reside from "conceivable" to "plausible." Twombly,
The IP Plaintiffs' claims under the laws of the states of Arizona, Arkansas, District of Columbia, Idaho, Iowa, Kansas, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, West Virginia, Wisconsin and Wyoming are dismissed.
B. The IP Plaintiffs Have Plausibly Plead a Nationwide Conspiracy Under Twombly
The Arctic Glacier and Reddy Icе Defendants make the same arguments in the instant motions that they made in their motions to dismiss the direct purchasers' complaint and in fact incorporate their briefs in support of those motions by reference. For the same reasons that the Court rejected those arguments in denying the motions to dismiss the direct purchaser complaint, it rejects them here and concludes that the IP Plaintiffs have plausibly pled a nationwide conspiracy under Twombly and that the indirect purchasers' claims are not subject to dismissal on this basis. See In re Packaged Ice Antitrust Litig.,
Defendants argue, however, that "much has changed" since this Court denied the Defendants' motions to dismiss the direct purchaser's Complaint on this basis, referring principally to the decision of the Department of Justice to close its investigation into the packaged ice industry without further indictments. However, the DOJ investigation was but one consideration of many which led this Court to conclude that the direct purchasers had stated a plausible claim of a nationwide conspiracy. The government's decision not to pursue further criminal charges against any of the Defendants does not substantially alter this Court's conclusion that the civil claims in these related cases are supported by a plausibly pled theory of a nationwide conspiracy. The Court denies Defendants' motions to dismiss the IP Plaintiffs' claims for failure to allege a plausible nationwide conspiracy.
C. The Implications of Shady Grove on the IP Plaintiffs' Claims in Thosе States That Prohibit Class Actions Under Their Antitrust and/or Consumer Protection Laws
Defendants argued in their motions to dismiss that class actions are prohibited under the antitrust laws of Mississippi and New York (Reddy Ice Br. at 6) and under the consumer protection laws of Idaho, Kansas, Montana and Utah (AG Br. at 14). Subsequent to the parties' filing of their original briefs, the Supreme Court decided Shady Grove Orthopedic Assoc., P.A. v. Allstate Ins. Co., ___ U.S. ___,
Justice Scalia authored an opinion in which Justices Roberts, Thomas and Sotamayor joined. Justice Ginsburg filed the dissenting opinion, in which Justices Kennedy, Breyer and Alito joined. Justice Stevens concurred in the opinion of Justice Scalia thereby creating a 5 Justice majority, but not a majority opinion. Justice Stevens wrote separately to express his opinion that the plurality opinion had erred in focusing solely on the issue of whether § 901(b) regulated procedure. "Justice Scalia believes that the sole Enabling Act question is whether the federal rule `really regulates procedure,' which means, apparently, whether it regulates `the manner and the means by which the litigants' rights are enforced.' I respectfully disagree." Id. at 1452 (internal citations omitted).
Justice Stevens urged a different approach which would instruct courts to consider whethеr the federal rule would work to displace a state law that while procedural in title "is so intertwined" with the right or remedy that it defines the scope of the right. Justice Stevens agreed with the dissent that there are some state procedural rules "that federal courts must apply in diversity cases because they function as part of the State's definition of substantive rights and remedies."
Courts interpreting the Shady Grove decision, and searching for guidance on this issue, have concluded that Justice Stevens' concurrence is the controlling opinion by which interpreting courts are bound. See McKinney v. Bayer Corp.,
Thus, after Shady Grove, state laws that categorically prohibit the maintenance of class action lawsuits no longer will be an effective bar to such suits if the state law that prohibits them is procedural in nature and is not "so intertwined" with the right or remedy that it defines the scope of the right. Because the Court has dismissed on standing grounds the IP Plaintiffs' claims in five of the six states in which Defendants claim class actions are barred, i.e. Idaho, Kansas, Mississippi, Montana and Utah, the Court еxamines only Defendants' claim that class actions are prohibited under New York law.
The IP Plaintiffs claim that Defendants have violated the New York antitrust laws, N.Y. Gen. Bus. Law § 340(1), ("the Donnelly Act"). Defendants respond that New York Civil Practice Rule § 901(b), which prohibits class actions in suits seeking penalties or statutory minimum damages, bars a private litigant from maintaining a class action under the Donnelly Act. Cox v. Microsoft Corp.,
While Defendants' argument was well taken when their brief was filed, it has since been undermined by the Supreme Court's decision in Shady Grove. Under a Shady Grove analysis, the IP Plaintiffs' class action claim asserted in federal court under the New York antitrust laws is no longer barred by § 901(b). See In re Wellbutrin,
*662 D. The IP Plaintiffs' Florida, Michigan and New York State Law Antitrust and Consumer Protection Claims
The IP Plaintiffs assert claims under numerous states' antitrust and consumer protection/deceptive trade practices laws.[5] The Court has dismissed a majority of those claims on the grounds that the named IP Plaintiffs lack Article III standing to assert claims under the laws of those states in which they do not reside or in which they have not plausibly alleged an injury. See supra discussion at pp. 657-59. The Court will address the IP Plaintiffs' state antitrust and consumer protection act claims in those states where named Plaintiffs reside and are plausibly alleged to have suffered injury, i.e. California, Florida, Michigan and New York.[6]
1. The IP Plaintiffs' State Law Antitrust Claims
The IP Plaintiffs have pled state antitrust violations only in California, Michigan and New York (the ACAC does not allege state law antitrust violations in Florida or Indiana, the only other states in which named IP Plaintiffs reside).
California
The IP Plaintiffs allege that Defendants have violated the California antitrust laws, Cal. Bus & Prof.Code §§ 16722 & 16726 ("the Cartwright Act"). Defendants challenge the IP Plaintiffs' Cartwright Act claim only on the grounds (1) that the allegations fail to meet the pleading standards of Twombly, and (2) that the claims are barred by the applicable statute of limitations. Defendants' argument that the state law antitrust claims fail under Twombly is an extension of the argument that the ACAC fails to plead the "who, what, when and where" of a plausible antitrust claim. The Court has already rejected this argument, see discussion supra at 659-60, and reaches the same conclusion, for the same reasons, with respect to the antitrust claims asserted under the Cartwright Act. In addition to pleading sufficient facts to plausibly allege a nationwide conspiracy, the ACAC alleges that IP Plaintiff Desmond resides in and purchased packaged ice in California, that as a result of the nationwide conspiracy each of the IP Plaintiffs has suffered injury in that they have paid more for packaged ice than they would have paid absent the conspiracy *663 and that they have thereby suffered an injury. Thеse facts are sufficient under Twombly to sustain the IP Plaintiffs' burden at the pleading stage to plausibly suggest a claim under the Cartwright Act.
The Court also rejects Defendants' claim that the IP Plaintiffs' Cartwright Act claim is barred by the applicable statute of limitations. See discussion infra at 669-70. The Court therefore denies Defendants' motions to dismiss the IP Plaintiffs' claims under the Cartwright Act.
Michigan
The IP Plaintiffs allege that Defendants have violated the Michigan Antitrust Reform Act, Mich. Comp. Laws Ann. § 445.772 ("MARA"). Defendants challenge the IP Plaintiffs' MARA claim only on the grounds (1) that the allegations fail to meet the pleading standards of Twombly, and (2) that the claims are barred by the applicable statute of limitations. Defendants' argument that the state law antitrust claims fail under Twombly is an extension of the argument that the ACAC fails to plead the "who, what, when and where" of a plausible nationwide antitrust claim. The Court has already rejected this argument, see discussion supra at 659-60, and reaches the same conclusion, for the same reasons, with respect to the antitrust claims asserted under MARA. In addition to pleading sufficient facts to plausibly allege a nationwide conspiracy, the ACAC alleges that IP Plaintiffs Acker, Simasko and Stanford reside in and purchased packaged ice in Michigan, that certain of the individual Defendants pleaded guilty to conspiracy to allocate customers in Southeastern Michigan, that as a result of the nationwide conspiracy each of the IP Plaintiffs have suffered injury in that they have paid more for packaged ice than they would have paid absent the conspiracy and that they have thereby suffered an injury. These facts are sufficient under Twombly to sustain the IP Plaintiffs' burden at the pleading stage to plausibly suggest a claim under MARA.
The Court also rejects Defendants' claim that the IP Plaintiffs' MARA claim is barred by the applicable statute of limitations. See discussion infra at 669-70. The Court therefore denies Defendants' motions to dismiss the IP Plaintiffs' claims under MARA.
New York
The IP Plaintiffs allege that Defendants have violated the New York antitrust laws, N.Y. Gen. Bus. Law § 340(1) ("the Donnelly Act"). Defendants challenge the IP Plaintiffs' Donnelly Act claim on the grounds (1) that the allegations fail to meet the pleading standards of Twombly, and (2) that the claims are barred by the applicable statute of limitations. Defendants' argument that the state law antitrust claims fail under Twombly is an extension of the argument that the ACAC fails to plead the "who, what, when and where" of a plausible nationwide antitrust claim. The Court has already rejected this argument, see discussion supra at 659-60, and reaches the same conclusion, for the same reasons, with respect to the antitrust claims asserted under the Donnelly Act. In addition to pleading sufficient facts to plausibly allege a nationwide conspiracy, the ACAC alleges that IP Plaintiff Buttars resides in and purchased packaged ice in New York, that as a result of the nationwide conspiracy each of the IP Plaintiffs has suffered injury in that they have paid more for packaged ice than they would have paid absent the conspiracy and that they have thereby suffered an injury. These facts are sufficient under Twombly to sustain the IP Plaintiffs' burden at the pleading stage to plausibly suggest a claim under the Donnelly Act.
*664 The Court also rejects Defendants' claim that the IP Plaintiffs' Donnelly Act claim is barred by the applicable statute of limitations. See discussion infra at 669-70. The Court therefore denies Defendants' motions to dismiss the IP Plaintiffs' Donnelly Act claim on these bases.
Defendants also argue that the IP Plaintiffs' claim under the Donnelly Act fails to adequately allege intrastate effects. Several courts have found that the "intrastate effects" requirement is met at the pleading stage by allegations, like those in the instant case, claiming that the anticompetitive conduct caused supracompetitive price effects nationwide. See Sheet Metal Workers,
*665 2. The IP Plaintiffs' Consumer Protection/Unfair Trade Practices Claims
In essence, Defendants' оbjections to all of the IP Plaintiffs' consumer protection claims are based on the premise that these consumer-oriented acts seek to prohibit unfair practices aimed directly at consumers in the context of a true consumer transaction, where buyer and seller interact and the seller somehow takes advantage of, or misleads, the buyer through deceptive conduct. Consequently, Defendants argue, these statutes should not be read to apply to an indirect purchaser claim, where admittedly the purchaser's seller made no such misrepresentations to him in the sale transaction, based upon inflated prices passed on by his seller resulting from some type of underlying antitrust conspiracy. Nakajima All Co. v. SL Ventures Corp., No. 00C6594,
Florida
Defendants argue that to state a claim under the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"), Fla. Stat. § 501.204, the allegations must be pled with the particularity required under Rule 9(b). Defendants rely on Sunoptic Technologies, LLC v. Integra Luxtec, Inc., No. 08-cv878,
While indirect purchasers may sue under the FDUTPA, see, e.g. Mack v. Bristol-Myers Squibb Co.,
Michigan
Defendants argue that the IP Plaintiffs' claims under the Michigan Consumer Protection Act, Mich. Comp. Laws 445.903 ("MCPA") must be dismissed for failure to allege an intent to deceive on the part of the Defendants, relying on Rodriguez v. Berrybrook Farms, Inc.,
Defendants also argue that the MCPA requires that "[c]laims under the MCPA for fraud or mistake must state the circumstances with [the] particularity" required by Rule 9(b). HRL Land or Sea Yachts v. Travel Supreme, Inc., No. 07-cv-945,
The Court dismisses the IP Plaintiffs' MCPA claim for failure to allege an intent to deceive and for failure to plead fraud with the requisite particularity.
New York
The IP Plaintiffs claim that Defendants have violated New York's consumer protection law, N.Y. Gen. Bus. Law § 349(a). To state a consumer protection act claim under New York General Business Law § 349, IP Plaintiffs must establish that the false or deceptive act occurred in New York and was directed at New York consumers. "To state a claim [under section 349], a plaintiff must allege both a deceptive act or practice and that such act or practice resulted in actual injury to a plaintiff." In re Wellbutrin,
Under § 349, specific allegations of deceptive conduct are essential to state a claim. A plaintiff is required to plead with specificity the allegedly deceptive acts or practices that form the basis of a claim under the Consumer Protection Act. Leider v. Ralfe,
The IP Plaintiffs do not allege any deceptive conduct and certainly do not allege such conduct with the required particularity even if an allegation of deception could be gleaned from the ACAC. Moreover, the IP Plaintiffs expressly disclaimed, at the hеaring on this matter, any further pursuit of any claim under any state law based on deceptive conduct. The Court dismisses the IP Plaintiffs' claim under section 349, the New York consumer protection law, for failure to allege deceptive, consumer-oriented conduct.
E. The IP Plaintiffs' Undifferentiated Unjust Enrichment Claims Must be Dismissed
The ACAC fails to identify any specific state unjust enrichment law under which the IP Plaintiffs purport to proceed.[7] State law requirements under unjust enrichment law vary widely. See, e.g. In re Potash,
The Court cannot analyze the IP Plaintiffs' undifferentiated unjust enrichment claims based on the ACAC as pled. See In re Chocolate,
F. It is Premature to Conclude that the IP Plaintiffs are Not Entitled to Injunctive Relief
The Arctic Glacier and Home City Defendants argue that the IP Plaintiffs' federal antitrust claim for injunctive relief, which Defendants argue must be limited by the allegations of the Complaint to the time period ended March 6, 2008, should be dismissed because the IP Plaintiffs fail to allege a future "threatened" injury and therefore they are not entitled to injunctive relief under the Clayton Act, 15 U.S.C. § 16. (AG Mot. 16.) Arctic Glacier and Home City argue that because they both pled guilty to conspiratorial conduct in Southeastern Michigan and have agreed to fully and completely comply with the government in the sworn plea agreements, the IP Plaintiffs' suggestion that there remains a continued threat of harm is without merit. The IP Plaintiffs respond that the Complaint, which alleges conduct continuing at least until March 6, 2008, the exact dates being unknown to plaintiffs, cannot not be so limited temporally and that they have sufficiently alleged a continuing harm. (Pls.' Resp. 6.)
"It is clearly established that allegations of possible future injury do not satisfy the requirements of Art. III. A threatened injury must be certainly impending to constitute injury in fact. Further, this court has recently held that while past illegal conduct might constitute evidence ... regarding whether there is a real and immediate threat of repeated injury, where the threat of repeated injury is speculative or tenuous, there is no standing to seek injunctive relief." Rosen,
Defendants argue that any threat of continuing activity has been eliminated by the guilty pleas entered in to by Arctic Glacier and Home City. "A request for injunctive relief requires a showing of a `likelihood of substantial and immediate irreparable injury', a `requirement that cannot be met where there is no showing of any real or immediate threat that the plaintiff will be wronged.'" In re Plavix Indirect Purchaser Antitrust Litig., 06-cv-226,
There is no basis on which the Court can reasonably conclude at this pleading stage that the threat of continued conspiratorial conduct in markets other than Southeastern Michigan has been removed. The Court concludes that the plea agreements, even if the Court did consider them to be dispositive on the issue of Defendants' intent or ability to repeat their admitted illegal conduct, would preclude an award of injunctive relief only as to those areas and activities that are the subject of, and described in, the plea agreements. The Court will not, at this stage, preclude IP Plaintiffs from attempting to establish a threat of continued harm that could form the basis for injunctive relief.
Defendants also argue that the IP Plaintiffs must be limited to the time period described in their definition of the purported indirect purchaser class. The IP Plaintiffs respond that they cannot be limited by the allegations as to the class period, and rely on In re SRAM,
IP Plaintiffs allege that the same market conditions that facilitated the conspiracy from 1996 to 2006 [the class time period] continue today. They allege that Defendants' price-fixing resulted from a systematic, repeated pattern of sharing sensitive competitive information which was greatly facilitated by the cross-competitor business relationships that still exist. Thus, there is alleged a significant risk that the conspiracy will persist or reform in the future.
G. The Court Cannot Conclude at This Stage of the Litigation that the IP Plaintiffs' Claims Are Barred by Any of the Applicable Statutes of Limitation
The Arctic Glacier Defendants and Home City argue that the IP Plaintiffs' claim for injunctive relief under the Sherman Act and several of the IP Plaintiffs' state-law claims are barred by applicable statutes of limitation and that the IP Plaintiffs' have not sufficiently alleged fraudulent concealment of those claims. Defendants incorporate by reference and rely on their statute of limitation and fraudulent concealment arguments made in their motions to dismiss the direct purchaser claims. (AG Br. 22-23.) For the same reasons that the Court rejected Defendants' *670 statute of limitatiоns/fraudulent concealment arguments in its July 1, 2010 Opinion and Order denying the motions to dismiss the direct purchaser complaint, it does so here and incorporates by reference those portions of its earlier Opinion and Order. In re Packaged Ice,
At the hearing on this matter, Defendants argued that because the government has closed its criminal investigation into the packaged ice industry, the landscape has changed such that the Court should now rule differently on the issue of fraudulent concealment. Defendants urge the Court to conclude now that Reddy Ice has somehow been vindicated and therefore can not plausibly be alleged to have made any fraudulent or misleading disclosures such as may have supported the Court's earlier ruling on the issue of fraudulent concealment. However, as noted above, in this civil litigation, the Court does not attach dispositive significance to the DOJ's decision not to pursue further criminal charges against these Defendants. The Court cannot conclude, at the pleading stage, that IP Plaintiffs have failed to adequately plead fraudulent concealment.
Nor can the Court, at this pleading stage, conclude that the IP Plaintiffs will be unable to establish the applicability of any state discovery rules that may apply to their state law claims. See, e.g. In re Vitamins Antitrust Litig., No. 99-197,
The Court denies Defendants' motion to dismiss on the basis of any applicable statutes of limitation.
H. As It Has Done in Three Prior Opinions, The Court Declines to Dismiss the Arctic Glacier Canadian Entities at This Stage of the Proceedings
The Arctic Glacier Canadian Defendants move the Court, again by incorporating by reference its argument on this issue set forth in the motion to dismiss the direct purchaser plaintiffs' complaint, to dismiss them for lack of personal jurisdiction. For the same reasons that the Court rejected Defendants' personal jurisdiction arguments in its July 1, 2010 Opinion and Order denying the motions to dismiss the direct purchaser complaint, it does so here and incorporates by reference those portions of its earlier Opinion and Order. In re Packaged Ice,
IV. CONCLUSION
For the foregoing reasons:
(1) the Court GRANTS Defendants' motions to dismiss the IP Plaintiffs' claims under the laws of the states of Arizona, Arkansas, District of Columbia, Idaho, Iowa, Kansas, Maine, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, West Virginia, Wisconsin and Wyoming;
(2) the Court GRANTS Defendants' motions to dismiss the IP Plaintiffs' claims under the consumer protection laws of Florida, Michigan and New York;
(3) the Court GRANTS Defendants' motions to dismiss the IP Plaintiffs' unjust enrichment claims but will allow IP Plaintiffs the opportunity to amend to state unjust enrichment claims under the laws of specified states;
(4) the Court DENIES Defendants' motions to dismiss the IP Plaintiffs' claims under the antitrust laws of California, Michigan and New York;
(5) the Court DENIES Defendants' motions to dismiss the IP Plaintiffs' claim for injunctive relief under the Clayton Act;
(6) the Court DENIES Defendants' motions to dismiss the IP Plaintiffs' claims on the basis of any applicable statute of limitation; and
(7) the Court DEFERS ruling on Arctic Glacier's motion to dismiss the Arctic Glacier Canadian Defendants.
IT IS SO ORDERED.
NOTES
Notes
[1] The Defendants state that they adopt by reference, where applicable, and "to spare the Court unnecessary repetition," the arguments made by the Reddy Ice and Arctic Glacier Defendants in their motions to dismiss the direct purchaser complaint. The direct purchaser plaintiffs, in their responsive briefs, referred to related packaged iсe litigation before this Court, as do the IP Plaintiffs in their response to the instant motions to dismiss.
In analyzing the allegations in the IP Plaintiffs' ACAC for purposes of this motion to dismiss, the Court takes judicial notice of allegations made in the Complaints filed in this Court in two related actions: McNulty v. Reddy Ice Holdings, Inc., No. 08-13178 (a whistleblower complaint) and Chamberlain v. Reddy Ice Holdings, Inc., et al., No. 08-13451 (a securities class action complaint). See Hinds County, Mississippi v. Wachovia Bank, et al.,
[2] On February 28, 2011, more than a year after the IP Plaintiffs filed their response to Defendants' motions to dismiss, less than ten (10) days prior to the hearing on this matter, and after the Defendants and the Court had spent countless hours analyzing the IP Plaintiffs' claims under each of the states' laws under which claims were asserted in the ACAC, the IP Plaintiffs filed a "Notice of Withdrawal of Certain Claims," seeking to "withdraw without prejudice" several of their state law statutory claims. (Dkt. No. 330.) The Court finds that the IP Plaintiffs' tactic of withdrawing these claims at this late stage borders on sanctionable conduct as vexatious litigation in violation of 28 U.S.C. § 1927 and Fed.R.Civ.P. 11(b) and (c). The Court will not permit the IP Plaintiffs to withdraw those claims which the Court concludes that IP Plaintiffs have standing to bring but that the Court concludes do not sufficiently state a claim on which relief can be granted, i.e. the Michigan and New York consumer protection act claims. These claims are dismissed with prejudice for the reasons discussed infra at pp. 664-66. The Court will permit the IP Plaintiffs to withdraw other claims.
Similarly unacceptable were IP Plaintiffs' counsel's efforts at the hearing on March 8, 2011 to "on the fly" in effect attempt to amend the ACAC by withdrawing "any consumer protection act claim where deception is an element," and to limit IP Plaintiffs' unjust enrichment claims to those states "where they have asserted a statutory claim." This Court is ruling on the two motions to dismiss the ACAC that are fully briefed and properly before the Court, and dismissing the majority of the IP Plaintiffs' state law claimsclaims as to which the named IP Plaintiffs have no standing to assert. The Court will not indulge IP Plaintiffs' counsel's improper backdoor attempt to cabin the claims of the ACAC at oral argument; attempting to concede legal issues and ostensibly limit claims, matters which should have been addressed in writing months ago. Instead, the Court and Defendants' counsel were subjected to this clearly improper "meandering" at oral argument.
[3] See, e.g. In re Chocolate Confectionary Antitrust Litig.,
[4] Applying Justice Stevens' approach, several courts have distinguished § 901(b) and have concluded that statutory restrictions on class actions which appear in the very statutes that define the substantive rights at issue survive Shady Grove and should continue to be enforced. See Bearden,
[5] Both IP Plaintiffs and Defendants group all state consumer protection act claims and deceptive or unfair trade practices claims under the heading of "consumer protection claims." The Court will do the same. (Pls.' Resp. 15 n. 9.)
[6] Named Plaintiff Perry Peka is alleged to be a citizen of the State of Indiana but the IP Plaintiffs have not alleged any claims under the laws of Indiana.
[7] The Court rejects IP Plaintiffs counsel's attempt, at the hearing on this matter, to in effect amend the ACAC to limit the unjust enrichment claims to "those states in which Plaintiffs also allege a statutory claim." The only matters properly before the Court are the Defendants' motions to dismiss the existing ACAC. The Court will not rule on matters that have been "floated" or orally raised subsequent to the filing of the Defendants' instant motions to dismiss.