AURORA ASTRO PRODUCTS LLC, et al. v. CELESTRON ACQUISITION, LLC, et al.
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
September 13, 2023
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS WITH LEAVE TO AMEND; DENYING MOTION TO STRIKE; Re: ECF Nos. 206, 207
Pending before this Court is Defendants’ motion to dismiss pursuant to
For the reasons stated below, the Court GRANTS IN PART AND DENIES IN PART Defendants’ motion to dismiss with leave to amend and DENIES Defendants’ motion to strike.
I. BACKGROUND
A. Factual Background
This celestial antitrust action arises from the alleged inflation of telescope prices sold to U.S. telescope distributors and domination of the telescope market.
Plaintiffs Aurora Astro Products LLC (“Aurora“) and Pioneer Cycling & Fitness, LLP (“Pioneer“) are Washington and Minnesota independent distributors that sold telescopes in their retail stores. Fourth Am. Compl. (“FAC“), ECF No. 495 ¶¶ 12-13. Plaintiff Jason Steele is a resident of Texas who directly purchased a telescope from Defendant Celestron (collectively, “Plaintiffs“). Id. ¶ 13. Plaintiffs bring this putative class action on behalf of themselves and a proposed class of direct purchaser plaintiffs (“DPPs“) who purchased telescopes manufacturеd or sold by Defendants during the time period beginning in 2005 through such time as class notice is given. Id. ¶ 143. DPPs allege
The allegations concern two relevant markets in the telescope industry: manufacturers and distributors. Id. ¶¶ 73, 77. The geographic scope of the manufacturing market is global, and the geographic scope of the distribution market is the United Statеs. Id. Celestron and Meade Instruments Corp. (“Meade“) are U.S. telescope manufacturers and distributors. Id. ¶¶ 25, 39. Historically, Meade was the leading U.S. telescope brand. Id. ¶ 94. Celestron unsuccessfully attempted to merge with Meade in 1991 and, again, in 2002. Id. ¶ 95. The acquisitions were blocked by the FTC on antitrust grounds. Id. ¶¶ 95, 98-99. Then, in 2005, Synta acquired Celestron. Id. ¶ 78.
When Meade went up for sale in 2013, Synta recognized that it could not lawfully acquire Meade because it owned Meade‘s direct competitor Celestron. Id. ¶ 98. Instead, Ningbo Sunny‘s CEO, Peter Ni, and Synta‘s CEO, David Shen, agreed that Ningbo Sunny would purchase Meade with financial and other assistance from Synta.2 Id. ¶¶ 98-101, 104-05. This agreement prevented a small telescope manufacturer, Jinghua Optical, from purchasing Meade and competing with Synta and Ningbo Sunny. Id. ¶¶ 96-97. After the Meade acquisition, Celestron loaned substantial sums to horizontal competitor Ningbo Sunny. Id. ¶¶ 101, 109. In exchange for these capital contributions, Celestron took ownership interest in Meade, which was memorialized in Celestron‘s “shadow books.” Id. ¶ 110.
The Synta Entities and Ningbo Sunny Entities effectively divided the telescope market by agreeing that Synta would manufacture and supply higher-end telescopes, that Ningbo Sunny would manufacture and supply lower-end telescopes, and that they would not compete. Id. ¶¶ 74-76. Ningbo Sunny also provided Celestron with Meade‘s trade secrets and pricing information, allowed Celestron engineers to tour Meade‘s factory, and continued to coordinate business activities with Mr. Shen and his trusted counselor and Celestron Executive Committee member Laurence Huen. Id. ¶¶ 106, 108, 117, 120-27. As a result, Synta and Ningbo Sunny became the two key telescope manufacturers—both of which are vertically integrated with the largest telescope distributors and allegedly act as single enterprises exercising control over their U.S. subsidiaries and affiliates. Id. ¶¶ 51-60, 84.
DPPs allege that Synta and Ningbo Sunny “transformed the [distribution] market through their stranglehold over the Manufacturing Market.” Id. ¶ 79. According
Defendant David Shen, who owns and controls multiple telescope manufacturing and distribution companies, is at the center of the alleged conspiratorial universe. Id. ¶ 16. Mr. Shen founded and controlled Synta from 2001 to 2005, during which time he was also chairman of Synta‘s horizontal competitor, Ningbo Sunny. Id. ¶¶ 17-18. The Synta entities and the Ningbo Sunny entities are vertically integrated corporate families that manufacture telescopes in China and distribute, market, and sell those telescopes around the world, including in the U.S. Id. ¶ 52. DPPs alleges that with their combined market power, these two corporate families have been able to work together to dominate the telescope industry. Id. ¶ 72.
Mr. Shen allegedly exerts his control of the telescope industry through family and relatives who own or control Synta entities and other market participants, including: Mr. Shen‘s sister, Sylvia Shen, who owns Pacific Telescope, and her husband, Jack Chen, who are both members of telescope manufacturer Celestron‘s executive committee; Jean Shen, Mr. Shen‘s sister, who exercises control over Olivon Manufacturing, a Canadian telescope company with U.S. subsidiaries; Suzhou Synta and Nantong Synta, telescope manufacturing companies in China owned and controlled by Mr. Shen and his family; Synta Canada, which has 20% ownership of Suzhou Synta and is controlled by the Shen family; and SW Technology, an affiliate of Synta that is also owned and controlled by the Shen family and which acquired Celestron in 2005. Id. ¶¶ 19-24, 26-28, 31. According to DPPs, this constellation of family-controlled telescope manufacturers enables Mr. Shen to market and sell telescopes at unlawfully inflated prices in the U.S. to telescope distributors who are not participants in the conspiracy while offering co-conspirator distributors preferential pricing.
On June 1, 2020, Plaintiffs initiated this action alleging violations of §§ 1 and 2 of the Sherman Act and Clayton Act § 7, as well as state law violations arising under the Cartwright Act and UCL. DPPs allege price-fixing, market allocation, product allocation, and other unlawful collusion between competitors as well as monopolization, attempted monopolization, and conspiracy to monopolize. See generally FAC. DPPs allege that at both the manufacturing and distributions levels, price competition and open competition have been restrained for products where Synta and Ningbo Sunny have agreed to divide the market between them beginning in 2005. Id. ¶¶ 134, 136. DPPs also allege that price competition has been harmed at the distribution level by Defendants’ agreement to fix price and credit terms so that DPPs pays more than Celestron. Id. ¶ 136.
B. Procedural Background
The Court previously granted in part and denied in part Defendants’ motion to dismiss the Second Amended Complaint (“SAC“), finding in relevant part that Plaintiffs Radio City and Spectrum Scientifics3 failed to sufficiently allege: (1) Defendants
DPPs filed the Third Amended Complaint (“TAC“) on August 31, 2021. Defendants moved to dismiss the TAC and strike certain allegations therein. ECF Nos. 206, 207. DPPs oppose the motion. See Mot. to Dismiss Third Am. Compl. (“Opp‘n to Mot. to Dismiss“), ECF No. 217. While the motion was pending, DPPs moved for leave to file a Fourth Amended Complaint (“FAC“) to add three proposed class representatives. ECF No. 402. DPPs and the new proposed class representatives agreed to allow Defendants’ pending motions attacking the pleadings to apply to their claims to prevent any additional work or re-filing. The Court granted leave to amend (see ECF No. 486) and DPPs filed the FAC on September 1, 2023. See FAC, ECF No. 495. The Court construes Defendants’ motion to dismiss the TAC at ECF No. 206 as attacking the FAC filed at ECF No. 495.
II. LEGAL STANDARD
For purposes of ruling on a
III. MOTION TO DISMISS
Defendants seek to dismiss the Complaint on three grounds: (1) DPPs fail to state claims under §§ 1 and 2 of the Sherman Act and § 7 of the Clayton Act for Defendants’ conduct prior to 2013; (2) DPPs’ claims are barred under the applicable statutes of limitations; and (3) DPPs
A. Sherman Act Claims
1. Sherman Act § 1
Section 1 of the Sherman Act provides that “[e]very 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, is declared to be illegal.”
For the purposes of this motion, DPPs’ allegations can be reasonably understood as encompassing two distinct time periods: (1) the 2005 acquisition of Celestron until 2012 and (2) the acquisition of Meade—Celestron‘s horizontal competitor—in 2013 through the end of the class period. See FAC ¶ 143. The main issue is whether DPPs adequately allege an antitrust conspiracy prior to the acquisition of Meade in 2013. The First Order found that DPPs adequately alleged violation of § 1 in the period following the Meade acquisition in 2013 but failed to do so for the preceding period.
Defendants maintain that DPPs have not cured the deficiencies that led the Court to dismiss the SAC. The Court disagrees. Viewing the allegations in the light most favorable to DPPs, the Court finds that the allegations adequately allege that Defendants conspired to fix pricеs beginning in 2005.
The FAC alleges in relevant part that, after acquiring telescope distributor Celestron in 2005, the Synta entities began colluding with Ningbo Sunny to fix prices. Id. ¶ 91; see also id. 121-124. To carry out this conspiracy, “Ningbo Sunny forced customers (other than Celestron) to purchase Ningbo Sunny goods through Ms. Huang—an employee of Ningbo Sunny‘s horizontal competitor Synta []” who allegedly answered to David Shen and was under his control. Id. According to DPPs, Synta and Ningbo Sunny concealed the fact that Joyce Huang worked for David Shen and Synta by referring to the company as “A Good Advance,” which was “just a trading company with no connection with Synta rather than a company controlled by Chairman Shen and Synta.” Id. ¶ 92. DPPs alleges that this price fixing conspiracy extended to the other companies directly or indirectly owned and/or controlled by David Shen, including Synta Canada, Pacific Telescope Corp, Olivon Canada, and Olivon USA. Id. ¶ 93.
In support of the allegations, DPPs attach contemporaneous email communications between Joyce Huang of Synta and James-Junwen (“James“) Chiu оf Ningbo Sunny suggesting coordinated price-fixing on at least one occasion between the entities. See ECF Nos. 495-13, 495-14. The correspondence reveals that independent distributor-customer Orion reached out to James Chiu seeking product pricing information.
First, Defendants accuse DPPs of inserting “baseless allegations relating to the 2005 tо 2012 time period in an attempt to artificially expand their class” but the attached email chain between Orion, James, and Joyce provides a basis for DPPs’ price-fixing allegation. Mot. to Dismiss at 7-8; Optronic Techs., Inc. v. Ningbo Sunny Elec. Co., 414 F. Supp. 3d 1256, 1266 (N.D. Cal. 2019), aff‘d, 20 F.4th 466 (9th Cir. 2021) (“When competitors share sensitive information, such as pricing information, it can support a finding that the competitors are part of a conspiracy.“).
Second, Defendants contend that these emails post-date 2013 and therefore cannot support DPPs’ allegations of a conspiracy beginning in 2005. Although Defendants may lack proof that the alleged conspiracy began in 2005, the Ninth Circuit disfavors summary dismissals of antitrust actions for this very reason: “because the proof lies largely in the hands of the defendants.”6 Ernest W. Hahn, Inc. v. Codding, 615 F.2d 830, 835 (9th Cir. 1980). At the pleading stage, DPPs need only make allegations containing enough factual matter to “plausibly” suggest a conspiracy to fix prices prior to 2013. Id. at 545 (“Asking for plausible grounds to infer an agreement . . . simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement.“). The emails between Joyce Huang and James Chiu lend support to DPPs’ allegations of collusive conduct between competitors Ningbo Sunny and Synta, which reasonably could have begun after the Celestron acquisition in 2005 as pled. It is plausible that discovery will reveal evidence of the price-fixing conspiracy prior to the acquisition of Meade in 2013. In re TFT-LCD (Flat Panel) Antitrust Litig., 586 F. Supp. 2d 1109, 1117 (N.D. Cal. 2008). Should discovery fail to support DPPs’ allegations regarding this time period, Defendants may renew their challenges to the pre-2013 claims. See In re TFT-LCD (Flat Panel) Antitrust Litig., 599 F. Supp. 2d 1179,
1185 (N.D. Cal. 2009).
Accordingly, the Court finds that the factual allegations give rise to a plausible conspiracy in violation of § 1 of the Sherman Act for the 2005 to 2012 period, and “will not limit the class period at this stage of the litigation.” In re TFT-LCD, 599 F. Supp. 2d at 1185. The Court DENIES Defendants’ motions as to the Sherman Act § 1 claim.
2. Sherman Act § 2
Section 2 enumerates three antitrust violations: monopolization, attempt to monopolize, and conspiracy to monopolize.
a. Monopolization and Attempted Monopolization
“While [the Sherman Act] Section 1 ‘targets concerted anticompetitive conduct, Section 2 targets independent anticompetitive conduct.‘” Optronic Techs., Inc., 20 F.4th at 481 (quoting Qualcomm, 969 F.3d at 989-90). Section 2 makes it illegal to “monopolize .. any part of the trade or commerce among the several States.”
Attempted monopolization refers to “the employment of methods, means and practices which would, if successful, accomplish monopolization, and which, though falling short, nevertheless approach so close as to create a dangerous probability of it.” Am. Tobacco Co. v. United States, 328 U.S. 781, 785 (1946). A plaintiff asserting an attempted monopolization claim under § 2 must plead: “(1) a specific intent to control prices or destroy competition; (2) predatory or anticompetitive conduct directed at accomplishing that purpose; (3) a dangerous probability of achieving ‘monopoly power,’ and (4) causal antitrust injury.” Rebel Oil, 51 F.3d at 1434.
First, Defendants argue that DPPs fails to adequately allege monopoly power prior to 2013. Mot. to Dismiss at 4-5. Monopoly power refers to a monopolist‘s ability to increase prices by restricting output. Ohio v. Am. Express Co., 138 S. Ct. 2274, 2288 (2018) (quotations and citations omitted). A court may infer monopoly power from a defendant‘s predominant share in the relevant market. United States v. Grinnell Corp., 384 U.S. 563, 571 (1966). “Monopoly power differs in degree from market power, requiring something greater.” Epic Games, Inc. v. Apple, Inc., 67 F.4th 946, 998 (9th Cir. 2023) (quotations and citations omitted). Direct evidence of monopoly power includes a showing of restricted output and supracompetitive prices. Theme Promotions, Inc. v. News Am. Mktg. FSI, 546 F.3d 991, 1001 (9th Cir. 2008). To establish monopoly power using circumstantial evidence, a plaintiff must “(1) define the relevant market, (2) show that the defendant owns a dominant share of that market, and (3) show that there are significant barriers to entry and . . . that existing competitors lack the capacity to increase their output in the short run.” MetroNet Servs. Corp., 329 F.3d at 1003 (quoting Rebel Oil, 51 F.3d at 1434).
There are two relevant markets: the global manufacturing market and the downstream U.S. distribution market. FAC ¶¶ 73, 77. DPPs allege that Celestron monopolized the U.S. telescope distribution market. Id. ¶ 137. “Courts generally require a 65% market share to establish a prima facie case of market power.” Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1206 (9th Cir. 1997). Here, the FAC lacks any specific allegation that Celestron “owned a dominant share of the market” prior to the Meade acquisition. Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1206 (9th Cir. 1997) (quotations and citation omitted).
DPPs allege Celestron became the dominate U.S. distributor with approximately 70% market share because of the conspiratorial conduct. See, e.g., FAC ¶ 3 (“As a result of this unlawful conspiracy, Celestron controls at least 70% of all U.S. consumer telescope sales.“); id. ¶ 78 (“Through Defendants’ and their co-conspirators’ efforts, Celestron became the dominant U.S. telescope distributor.“); id. ¶ 119 (“[T]he goal of the co-conspirators’ conduct was to ensure that Celestron was able to dominate the U.S. market and keep their ill-gotten gains outside of mainland China.“). However, the Court cannot reasonably infer from these allegations that Celestron possessed monopoly power at or around the time it was acquired in 2005. Indeed, DPPs allege that another formidable competitor, Meade, existed as a “leading” telescope brand in the market during this time period and that it stopped competing with Celestron only after it was acquired in 2013. Id. ¶¶ 4, 80, 94; see Stanislaus Food Prod. Co. v. USS-POSCO Indus., 782 F. Supp. 2d 1059, 1079 (E.D. Cal. 2011) (finding plaintiffs failed to allege “sрecific intent” where plaintiff alleged that defendants intended to eliminate competition and monopolize the market but also alleged the presence of other competitors in the market). Because the class period encompasses both acquisitions, allegations of market power during the class period sum up the combined market power of Synta and Ningbo Sunny after the Meade acquisition.
Before 2013, however, Meade was Celestron‘s direct, “leading” competitor in the market, and the allegations suggest Meade controlled a substantial market share such that its acquisition harmed competition. For example, DPPs allege:
-
“Together, Celestron and Meade account for the vast majority of consumer telescopes sold in the United States.” FAC ¶ 78. - “The Federal Trade Commission blocked attempts by Celestron and Meade to merge in 1991 and 2002 because the mergers would have created monopolies and reduced competition.” Id. ¶ 95.
- “Because JOC‘s acquisition of Meade would have diversified manufacturing, preserved an independent distributor, and increased competition in the telescope industry, both Synta and Ningbo Sunny wanted to acquire Meade to keep it out of JOC‘s hands.” Id. ¶ 97.
- “Competition, innovation, and consumer choice have also been restrained due to Ningbo Sunny‘s acquisition of Meade.” Id. ¶ 138.
The FAC further alleges that Synta and Ningbo Sunny “leveraged their market power in the Manufacturing Market to control the Distribution Market” which resulted in Celestron‘s rise to “prominence” in the distribution market. Id. ¶ 80. This was achieved by offering products to Celestron at lower prices and with better credit terms than those offered to other distributors, and it was successful because Synta and Ningbo Sunny had eliminated “other meaningful sources of supply” leaving independent distributors with no better choice “but to pay the elevated prices.” Id. ¶ 81. Plaintiffs specifically allege that, after Ningbo Sunny‘s acquisition, “there are few or no substitutes for Defendants’ manufacturing services and products . . . . ” Id. ¶ 87. It is therefore possible that Celestron did not possess market power prior to 2013; it only did so after Ningbo Sunny acquired Meade and effectively dismantled its manufacturing capabilities thereby reducing Celestron‘s competition. FAC ¶ 80 (“Meade has not seriously competed with Celestron since the Ningbo Sunny acquisition and has not used its manufacturing capabilities to diversify the supply of telescopes.“); id. ¶ 135 (“Ningbo Sunny[] . . . dismantle[d] Meade‘s manufacturing capabilities.“). Indeed, DPPs allege that “[w]ith Ningbo Sunny‘s acquisition of Meade, which also had manufacturing capabilities, the number of sources of supply essentially diminished to two: Synta and Ningbo Sunny.” FAC ¶ 86. Thus, pursuant to DPPs’ own theory, Celestron would not have possessed monopoly until 2013 or later.
Here, by failing to allege Celestron‘s market share prior to the Mead acquisition, the DPPs have not adequately pled Celestron had the power to control prices or exclude competition from the 2005 to 2012 time period.
Second, Defendants argue that DPPs fail to allege any threat or dangerous probability of monopolization arising from the Celestron acquisition. Mot. to Dismiss at 5. Defendants likewise contend the monopoly allеgations are predicated on the Meade acquisition in 2013 and the effects alleged to have occurred thereafter. Id. at 7; see FAC ¶¶ 135-38.
DPPs allege that Defendants have “a dangerous probability of success in accomplishing its unlawful purpose of obtaining monopoly power.” FAC ¶ 171; Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145, 1163 n.22 (9th Cir. 2003). In the Ninth Circuit, “a dangerous probability of success may be inferred either (1) from direct evidence of specific intent plus proof of conduct directed to accomplishing the unlawful design, or (2) from evidence of conduct alone, provided the conduct is also the sort from which specific intent can be inferred.” William Inglis & Sons Baking Co. v. ITT Cont‘l Baking Co., 668 F.2d 1014, 1029 (9th Cir. 1981). While the Court held in the First Order that DPPs adequately alleged a “dangerous probability”
DPPs rely on the aggregated market share of Synta and Ningbo Sunny, who together controlled “over 65% of the Manufacturing Market since 2012“, to plead monopoly power. Opp‘n to Mot. to Dismiss at 13-14 (citing Rebel Oil, 51 F.3d at 1437-38). As discussed, DPPs allege that “Synta and Ningbo Sunny conspired and leveraged their market power in the Manufacturing Market to control the Distribution Market,” which resulted in Celestron gaining monopoly power in the U.S. distribution market. FAC ¶¶ 80-81. The alleged conspiracy between manufacturers Synta and Ningbo Sunny at the global level is what brought about Celestron‘s market power in the downstream U.S. distribution market. Id. ¶¶ 135, 137.
When assessing a § 2 attempted monopoly claim, “[t]he aggregation of market shares of several rivals is justified if the rivals are alleged to have conspired to monopolize.” Rebel Oil Co., 51 F.3d at 1437. Here, DPPs allege that Synta and Ningbo Sunny conspired to monopolize and seek to aggregate Synta and Ningbo Sunny‘s shares in the manufacturing market, however, the FAC alleges Celestron‘s actual or attempted monopolization in the downstream distribution market. FAC ¶¶ 88, 137, 164, 169. “Even in the two-market situation, a plaintiff cannot establish a violation of Section 2 without proving that the defendant used its monopoly power in one market to obtain, or attempt to аttain, a monopoly in the downstream, or leveraged, market.” Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536, 547 (9th Cir. 1991). It is insufficient to allege that a defendant “merely [] obtain[ed] a competitive advantage in the second market.” Id. There can be no legally cognizable claim that Celestron monopolized or attempted to monopolize the distribution market using Synta and Ningbo Sunny‘s dominant share in the manufacturing market without adequately alleging that Celestron had monopoly power or a “dangerous probability” of attaining actual market power in the U.S. distribution market during the 2005 to 2012 period. Furthermore, DPPs’ allegations with respect to Sytna and Ningbo Sunny‘s manufacturing market shares refer only to the 2012 to 2018 time period.
Accordingly, the Court finds that DPPs have not adequately stated a § 2 claim for the period starting in 2005 to 2012.
***
In sum, the Court GRANTS Defendants’ motion to dismiss to the extent that Defendants assert the FAC fails to state a claim for Sherman Act § 2 from the 2005 to 2012 class period.
B. Clayton Act § 7 Claim
“Section 7 of the Clayton Act generally prohibits business acquisitions whose effect ‘may be substantially to lessen competition, or tend to crеate a monopoly’ in a relevant market.” Dehoog v. Anheuser-Busch InBev SA/NV, 899 F.3d 758, 762 (9th Cir. 2018) (quoting
The Court previously found that DPPs stated a claim under § 7 arising out of Ningbo Sunny‘s acquisition of Meade. Defendants contend that DPPs do not state a plausible Clayton Act claim for the class period following the acquisition of Celestron in 2005. Mot. to Dismiss at 2. DPPs allege that the acquisition of Celestron “and removal of it from the Manufacturing Market was the blueprint for the subsequent unlawful Meade acquisition.” Opp‘n to Mot. to Dismiss at 15. However, DPPs fail to allege a § 7 claim beginning in 2005 because DPPs fail to allege a monopoly or attempted monopoly arising from the Celestron acquisition, and “[m]erely alleging the elimination of a rival does not plausibly support an inference of an appreciable danger of anticompetitive effects in a relevant market.” Demartini v. Microsoft Corp., No. 22-CV-08991-JSC, 2023 WL 2588173, at *6 (N.D. Cal. Mar. 20, 2023).
Therefore, the Court finds that DPPs fail to allege any conduct giving rise to a § 7 claim with respect to the Celestron acquisition in 2005.
C. Cartwright Act Claim
DPPs’ fourth cause of action alleges that Defendants’ price-fixing and other collusive conduct restrains trade in violation of California‘s Cartwright Act. FAC ¶¶ 177-80. Defendants argue that DPPs fail to sufficiently allege a Cartwright Act claim because DPPs’ federal antitrust claims fail. Mot. to Dismiss at 8. Indeed, “[the] analysis under California‘s antitrust law mirrors the analysis under federal law because the Cartwright Act,
D. Statute of Limitations
Defendants seeks to revisit its argument that DPPs’ Sherman Act §§ 1 and 2, Clayton Act § 7, and Cartwright Aсt claims fail because they are all barred by the four-year statute of limitations. Mot. to Dismiss at 8-9; see
The First Order considered whether the “continuing violation” doctrine or the fraudulent concealment doctrine tolled the state of limitations on DPPs’ claims. The Court held that “Plaintiffs have plausibly alleged that Defendants’ fraudulent concealment of their misconduct tolled the statutes of limitations as to claims arising out of conduct in 2013 or later.” First Order at 14. In determining when the statute of limitations accrued, the Undersigned found that “each new price-fixed sale triggers a new limitations period for Plaintiffs to recover ‘the damages caused by that act‘” but concluded that, pursuant to Oliver v. SD-3C LLC, 751 F.3d 1081, 1086 (9th Cir. 2014), “Plaintiffs may recover
Defendants now argue that DPPs’ amended allegations regarding Joyce Huang‘s role in the price-fixing conspiracy beginning in 2005 prevent DPPs from claiming fraudulent concealment. Mot. to Dismiss at 9; see FAC ¶¶ 91-93. A plaintiff asserting fraudulent concealment must allege that: (1) the defendant took affirmative acts to mislead the plaintiff; (2) the plaintiff did not have actual or constructive knowledge of the facts giving rise to its claim; and (3) the plaintiff acted diligently in trying to uncover the facts giving rise to its claim. In re Animation Workers Antitrust Litig., 123 F. Supp. 3d 1175, 1194 (N.D. Cal. 2015) (quoting Hexcel Corp. v. Ineos Polymers, Inc., 681 F.3d 1055, 1060 (9th Cir. 2012)). “Passive concealment of information is not enough” to establish an affirmative act but “[a]n affirmative act of denial . . . is enough if the circumstances make plaintiff‘s reliance on the denial reasonable.” Reveal Chat Holdco, LLC v. Facebook, Inc., 471 F. Supp. 3d 981, 992 (N.D. Cal. 2020).
First, Defendants contend that the only alleged fraudulent concealment with respect to the 2005 to 2012 period—that the price-fixing conspiracy was carried out by Joyce Huang who was controlled by the Synta enterprise—does not rise to the level of affirmative misrepresentation necessary to satisfy the first element of fraudulent concealment. Mot. to Dismiss at 10-11. The Court addressed the “affirmative act” element extensively in the First Order, finding that DPPs adequately alleged affirmative acts as to the alleged conduct that occurred in 2013 or later. Mot. to Dismiss at 10-12. For example, the Court found that DPPs alleged the following affirmative acts: (i) that Ningbo Sunny made affirmative misrepresentations to the FTC regarding Mr. Shen‘s involvement in the Meade acquisition; (ii) the fact that Celestron took equity in its competitor Meade and only recorded the transaction in “shadow books“; and (iii) that Celestron structured payments to Ningbo Sunny to avoid raising red flags. First Order at 12. With respect to Joyce Huang‘s alleged conduct at the beginning of the proposed class period in 2005, the Court finds that this allegation, considered in combination with Defendants’ affirmatively misleading conduct after the 2013 time period, adequately alleges an affirmative act to mislead DPPs. See Animation Workers, 123 F. Supp. 3d at 1200 (finding that the allegations of pretextual statements “taken as a whole” with other allegations of active concealment plausibly stated a claim that Defendants took “affirmative acts” to mislead the plaintiffs); see also In re Korean Ramen Antitrust Litig., 281 F. Supp. 3d 892, 906 (N.D. Cal. 2017) (considering affirmative acts in their totality).
Second, Defendants argue that DPPs had actual or constructive knowledge of where Joyce Huang worked. Mot. to Dismiss at 11. Under the theory of constructive notice, “[o]nce the plaintiff has knowledge or constructive knowledge of all the operative facts underlying its claim, the statute begins to run, even the plaintiff does not believe the information it received or is not convinced of the defendant‘s culpability.” In re Cathode Ray Tube, 2016 WL 8669891, at *5. A plaintiff is deemed to have constructive knowledge of their claim “if it has enough information to warrant an investigation which, if reasonably diligent, would [lead] to the discovery of the facts underlying its claims.” Id. (alteration in original) (citation omitted).
Defendants raise this argument because Joyce Huang‘s email address (“hcsynta@sysnix.com.tw“)
Litig., 504 F.Supp.2d 777, 789 (N.D. Cal.2007) (“[I]t is generally inappropriate to resolve the fact-intensive allegations of fraudulent concealment at the motion to dismiss stage[.]“); In re Rubber Chemicals Antitrust Litig., 504 F. Supp. 2d 777, 789 (N.D. Cal. 2007). “[C]ourts have been hesitant to dismiss an otherwise fraudulently concealed antitrust claim for failure to sufficiently allege due diligence, because questions of inquiry notice are necessarily bound up with the facts of the case.” In re Animation Workers, 123 F. Supp. 3d at 1205 (quotations and citation omitted). Thus, the Court finds that that DPPs have adequately alleged that they did not have actual or constructive knowledge of their claims.
Accordingly, DPPs’ allegations with respect to the conduct in 2005 suffice for the purposes of the pleading stage such that the Court will not dismiss any claims as time barred.
E. Sufficiency of Allegations as to Specific Defendants
“Courts in this district do not require plaintiffs in complex, multinational, antitrust cases to plead detailed, defendant-by-defendant allegations; instead they require plaintiffs ‘to make allegations that plausibly suggest that each Defendant participated in the alleged conspiracy.‘” In re Cathode Ray Tube (CRT) Antitrust Litig., 738 F. Supp. 2d 1011, 1019 (N.D. Cal. 2010) (quoting In re TFT-LCD, 599 F.Supp.2d 1179, 1185 (N.D. Cal. 2009)). An antitrust complaint “must allege that each individual defendant joined the conspiracy and played some role in it because, at the heart of an antitrust conspiracy is an agreement and a conscious decision by each defendant to join it.” In re TFT-LCD, 586 F. Supp. 2d 1109, 1117 (N.D. Cal. 2008). “Although Plaintiffs will need to provide evidence of each Defendants’ participation in any conspiracy, they now only
In the First Order, the Court found that the allegations with respect to Defendants SW Technology, Jack Chen, Pacific Telescope, Nantong Schmidt, Olivon Manufacturing, Olivon USA, Suzhou Synta, Jean Shen, and Synta Canada failed to state claims against them. See First Order at 14-19. Defendants assert that DPPs fail to plead specific facts establishing the conspiratorial involvement of the following Defendants: SW Technology, Synta Canada, Pacific Telescope, Nantong Schmidt, Suzhou Synta, Jean Shen, Olivon Manufacturing, Olivon USA, and Jack Chen. Mot. to Dismiss at 14-21.
The FAC alleges that Jean Shen is David Shen‘s sister who controls Olivon Manufacturing and Olivon USA. FAC ¶ 21. The First Order found that DPPs’ allegations with respect to Jean Shen‘s participation in the conspiracy failed to specify what action, if any, Jean Shen may have taken to join and participate in the conspiracy. First Order at 19. DPPs add allegations bolstering their assertion that “Jean Shen was aware of and took advantage of her brother Synta‘s price-fixing and market divisiоn by using her influence with her brother to sell telescopes produced by Ningbo Sunny through her own companies, Olivon USA, LLC and Olivon Manufacturing Co. Ltd., for her own profit.” FAC ¶ 21. The new allegations specifically address how Jean Shen participated in the conspiracy:
These activities included representing to telescope distributors that Synta‘s horizontal competitor and co-conspirator Ningbo Sunny Electronic Co., Ltd. was one of “my family‘s companies” in an effort to obtain bids from these distributors. Jean‘s sales activities on behalf of the conspirators were thus made with actual knowledge of the conspiracy and with the intent to advance its ends. On information and belief, Jean Shen‘s and the Olivon Defendants’ acts to advance the conspiracy were also repaid through preferential pricing from Ningbo Sunny and Synta beyond prices afforded to other telescope distributors who were not members of the conspiracy.
Id. Thus, the Court finds that DPPs have cured the deficiencies with respect to allegations against Jean Shen.
Jаck Chen is Sylvia Shen‘s husband and David Shen‘s brother-in-law. FAC ¶ 20. He is allegedly a member of Celestron‘s executive committee. Id. The First Order likewise dismissed the claims against him for lacking sufficient detail as to his participation in the conspiracy. First Order at 18-19. DPPs add allegations that Jack Chen controlled strategic business decisions for Defendant Celestron alongside Sylvia Shen, David Shen, and Laurence Huen, with whom he colluded to fix prices and engage in other anticompetitive activities. Id. For example, the FAC specifically alleges that:
For example, Defendant Chen was aware of Ningbo Sunny‘s efforts to purchase Meade before Ningbo Sunny submitted a bid, a fact that was disclosed in a filing with federal securities regulators. Defendant Chen authorized, approved, and ratified Celestron‘s involvement in the unlawful acquisition of Meade, and was on the email between Ningbo Sunny and Synta and Celestron personnel in which Peter Ni stated that “to prevent JOC to buy MEADE, we decided to purchase MEADE by sunny after discussion. But the premise of this case is CELESTRON/SYNTA should be provided the financial support to SUNNY.” Defendant Chen participated in
numerous meetings after the acquisition of Meade in which Chairman Ni, Chairman Shen, and other Celestron and Meade executives jointly planned the companies’ activities and strategies, including their price-fixing and market division. Chairman Ni and his right-hand man Hank Qi continued to exchange correspondence with Chairman Shen and Defendant Chen to develop a plan of cooperation between Meade, Synta Canada, Celestron, and the rest of the Synta family of businesses. This plan included taking advantage of Meade‘s intellectual property in order to take over the U.S. telescope market through a new brand known as “SkyWatcher” for the benefit of Synta and Ningbo Sunny.
Id.; see also id. ¶ 31. In reference to the internal emails from David Shen regarding the Meade acquisition, Defendants argue that Jack Chen‘s “passive receipt of an email by an employee” does not amount to a conscious commitment to conspire. Mot. to Dismiss at 20-21. At the pleading stage, however, communications exchanging information can be “sufficient to rаise a plausible inference of antitrust conspiracy.” In re SRAM, 580 F. Supp. 2d at 904 (finding that internal emails exchanging “price information” between defendants support an inference of an ongoing conspiracy to fix prices). Construed in light most favorable to DPPs, these communications support an inference that Jack Chen participated in the conspiracy and unlawful Meade acquisition. The Court therefore finds that DPPs have also cured the deficiencies with respect to allegations against Jack Chen.
Turning to the Synta affiliate Defendants, SW Technology is an affiliate of Synta that wholly-owns Celestron. FAC ¶ 27. Sylvia Shen is the CEO, CFO, and Secretary of the company. Id. The FAC alleges that Mr. Shen “owns and controls Celestron through SW Technology.” Id. In the First Order the Court found that the allegations with respect to SW Technology were “not sufficient to raise a plausible inference that SW technology participated in the alleged conspiracy.” First Order at 16. The Court noted that DPPs did not allege any wrongdoing with respect to SW Technology. Id. at 16. Instead, DPPs relied on thе fact that SW Technology is a holding company created to acquire Celestron and allegedly lacks a legitimate business purpose. Id. The Court reasoned that “[i]t is common for companies to create special purpose entities or holding companies for the purpose of acquiring a target, and without more, there is nothing nefarious about the use of such a holding company to acquire Celestron.” Id. at 16-17.
DPPs add detailed allegations describing the relationships between the individual defendants and the corporate families to which they belong and how they operate, alleging that (i) each corporate family operated as a “single enterprise” where the conspiracy was organized at the highest level and Synta and Ningbo Sunny used their subsidiaries and affiliates to achieve their conspiratorial aim and purpose “as their distribution and sales arm in the United States.” FAC ¶¶ 51-55. The FAC specifically alleges that: (i) “individual and participants in the conspiratorial meetings and discussions did not distinguish among entities within a particular corporate family” nor did they “know the specific corporate affiliation of their counterparts“, id. ¶ 61; (ii) “[p]articipants in the conspiratorial meetings entered into agreements on behalf of, and reported these meetings and discussions to their respective corporate families and United States affiliates“, id.; and (iii) “Defendants and Co-Conspirators knew the individuals at the conspiratorial meetings represented their entire respective corporate family“, id. Allegations that SW Technology is part of a corporate family operating as a single enterprise, and that the conspiracy was organized by executives and carried out by subsidiaries and
Alongside SW Technology, the FAC alleges that “Synta Canada, Olivon Canada, Olivon USA, Celestron, and Synta Technology Corp.[] are part of a network of Synta entities directly and indirectly owned and contrоlled by Chairman Shen and his family members.” FAC ¶ 36. The First Order found that the SAC‘s conclusory allegations with respect to Olivon Canada and Olivon USA merely stated that Defendants participated in the conspiracy without specifying sufficient factual details as to the role they played in the conspiracy. First Order at 18. The FAC raises the following amended allegations as to Synta Canada, Olivon Canada, and Olivon USA:
- Synta Canada is a Canadian company owned by Synta, i.e., Defendant David Shen and his family. Id. ¶ 26. It has 20% ownership of Suzhou Synta. Synta Canada‘s officers and owners (Defendants Sylvia Shen and Jack Chen) “were aware of and approved Celestron‘s involvement in the unlawful acquisition of Meade, and participated in numerous meetings in California and at Meade‘s Mexico factory after the acquisition of Meade in which Chairman Ni, Chairman Shen, and other Celestron and Meade executives jointly planned the companies’ activities and strategies, including their price-fixing and market division to develop a plan of cooperation between Meade, Synta Canada, Celestron, and the rest of the Synta family of businesses.” Id.
- Olivon Manufacturing is registered and headquartered in British Columbia, Canada, id. ¶ 27, and Olivon USA is registered and headquartered in Nevada, id. ¶ 28. Defendant Jean Shen is the principal of both entities. Id. ¶¶ 27, 28. “In specific, Jean Shen was aware of and took advantage of her brother Synta‘s price fixing and market division by using her influence with her brother to sell telescopes produced by Ningbo Sunny through her own companies, Olivon Canada and Olivon USA, LLC, for her own profit. These activities included representing to telescope distributors that Synta‘s horizontal competitor and co-conspirator Ningbo Sunny Electronic Co., Ltd. was one of ‘my family‘s companies’ in an effort to obtain bids from these distributors.” Id.
For the same reasons the Court finds that the allegations against SW Technology are sufficiently pled, the Court also finds that DPPs have cured their allegations with respect to Olivon Canada and Olivon USA. The Court finds that the above-mentioned allegations are sufficient to state claims against all three entities as part of the “corporate family” and their roles in the alleged anticompetitive conspiracy.
The remaining entities—Pacific Telescope, Nantong Schmidt, and Suzhou Synta—are manufacturers allegedly owned or controlled by Sylvia and David Chen:
- Pacific Telescope is registered in British Columbia, Canada. Id. ¶ 29. Sylvia Shen is its principal. Id. The FAC alleges that Pacific Telescope, either directly or through its subsidiaries, manufactured and sold telescopes in the U.S. at inflated prices as a result of the conspiracy. Id.
- Nantong Schmidt is a telescope manufacturer located in Nontong, China
that is owned and controlled by David Shen. Id. ¶ 21. The FAC alleges that Nantong Schmidt, either directly or through its subsidiaries, manufactured and sold telescopes in the U.S. at inflated prices as a result of the conspiracy, including to Defendant Celestron. Id. - Suzhou Synta is a telescope manufacturer located in Suzhou, China that is owned and controlled by David Shen and his family. Id. ¶ 20. It is Synta‘s primary manufacturing company. Id. The FAC alleges that Suzhou Synta, either directly or through its subsidiaries, manufactured and sold telescopes in the U.S. at inflated prices as а result of the conspiracy. Id.
For the same reasons the Court finds that the allegations against SW Technology and other Synta affiliate Defendants are sufficiently pled, the Court also finds that DPPs have cured their allegations with respect to these entities.
For the foregoing reasons, the Court finds that the FAC adequately alleges the involvement of each Defendant. The motion to dismiss is DENIED with respect to Defendants SW Technology, Synta Canada, Pacific Telescope, Nantong Schmidt, Suzhou Synta, Jean Shen, Olivon Manufacturing, Olivon USA, and Jack Chen.
IV. MOTION TO STRIKE
Defendants concurrently move to strike certain allegations in the FAC as immaterial and impertinent. DPPs oppose the motion. See Opp‘n to Mot. to Strike, ECF No. 216.
Defendants move to strike DPPs’ allegations asserting the class period from 2005 to 2012 because DPPs fail to allege legally cognizable claims prior to 2013. See generally Mot. to Strike. Given the Court‘s finding that DPPs plausibly allege a Sherman Act § 1 claim for the 2005 to 2019 period, the Court disagrees that there is no legally cognizable claim alleged to have occurred before 2013. Defendants argue no other basis to strike these allegations. Accordingly, Defendants’ motion to strike is DENIED.
V. LEAVE TO AMEND
DPPs request leave to amend any pleading deficiencies. “Requests for leave to amend should be granted with ‘extreme liberality.‘” Brown v. Stored Value Cards, Inc., 953 F.3d 567, 574 (9th Cir. 2020). A court should grant leave to amend if “it determines that the pleading could
VI. CONCLUSION
For the foregoing reasons, Defendants’ motion to dismiss is GRANTED IN PART AND DENIED IN PART with leave to amend and Defendants’ motion to strike is DENIED.
DPPs may file a fifth amended complaint, if any, by no later than fourteen (14) days from the date of this order. If DPPs choose to file an amended complaint, Plaintiffs shall file a redlined document showing the changes made to the previously filed complaint pursuant to Section III of the Court‘s Standing Order.
IT IS SO ORDERED.
Dated: September 13, 2023
EDWARD J. DAVILA
United States District Judge