Seventh Circuit Eschews “Antitrust Standing” in Favor of Proximate Cause Analysis of Indirect Purchaser Claims Under California Cartwright Act, UCL, and Other State Antitrust Laws

Ian L. Papendick
Kevin B. Goldstein
Dana L. Cook-Milligan
Winston & Strawn LLP

In Supreme Auto Transport, LLC v. Arcelor Mittal USA, Inc., 902 F.3d 735 (7th Cir. 2018), the Seventh Circuit affirmed the dismissal of antitrust conspiracy claims brought under the laws of 21 states, including the Cartwright Act and UCL, as time barred and, in the alternative, because the operative complaint did not plausibly plead a causal connection between the alleged conspiracy and indirect purchaser plaintiffs’ injuries. The plaintiffs’ claims were affirmed to have been time barred because the scope of the products at issue in the action had materially changed between the original complaint and the amended complaint, which was filed after the limitations period had run. The causation issue originally came before the Seventh Circuit as a question of antitrust standing under Associated General Contractors of California Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983) and its progeny. However, in reaction to the Supreme Court’s clarification of what is a true “standing” issue in Lexmark International, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014), the Seventh Circuit reframed how it would analyze what has long been termed “antitrust standing.” As a result, the Seventh Circuit announced that it would no longer refer to questions of “antitrust standing” and would instead discuss issues like those raised in this case through the lens of proximate cause and whether the requirements of the particular statutes at issue are met.

Background

This putative indirect purchaser class action alleged an antitrust conspiracy in the domestic steel industry. Supreme Auto Transport, 902 F.3d at 737. The plaintiffs claimed that the eight defendant domestic steel producers—which allegedly accounted for 80-85% of steel production in the United States—colluded to decrease steel output in order to increase steel prices nationwide. Id. at 738. The original complaint in the action was filed in 2008, and a significantly amended complaint was filed in 2016.

The amended complaint at issue in the Seventh Circuit’s opinion was brought by sixteen plaintiffs from twelve states that alleged that they purchased “one or more steel products containing steel purchased from one or more of the Defendants during the Class period.” Id. at 740. Those sixteen plaintiffs sought to represent a class asserting claims arising from “state-law antitrust injuries in 21 states, consumer-protection injuries in 19 states, and unjust enrichment injuries in 48 states and the District of Columbia.” Id. The plaintiffs’ claims included causes of action under California’s Cartwright Act, Unfair Competition Law, and for unjust enrichment under California law.

Although the original complaint defined the “steel products” at issue to include “any consumer steel product including but not limited to produced flat steel sheets and coils; galvanized steel products; tin mill products; steel plates; steel beams, rails and other structural shapes; steel bars and rods; steel wire and wire rod; steel pipes and other tubular products; and a variety of other products derived from raw steel,” this definition was changed in the amended complaint. The amended product scope that was considered by the district court when it dismissed the amended complaint, and by the Seventh Circuit, defined “steel products” to include “any consumer steel product for end use and not for resale, including clothes washers, clothes dryers, refrigerators, freezers, dishwashers, microwave ovens[,] regular ovens, automobiles, semi-tractor trailers, farm and construction equipment, room air conditioner units, hot water heaters, snow blowers, barbeque grills, lawn mowers, and reinforcing bars used in patios, driveways, swimming pools and sidewalks.” Id. Thus, the putative class would have included all purchasers of any consumer product containing steel in the relevant states.

The defendants moved to dismiss the amended complaint, arguing that the plaintiffs’ alleged injuries were too remote to establish a right to recover. Id. In particular, they argued that under the AGC framework, Plaintiffs’ alleged injury was too remote, damages too speculative, and the alleged improper conduct not likely to be targeted to downstream purchasers. Supreme Auto Transport LLC v. Arcelor Mittal, 238 F. Supp. 3d 1032 (N.D. Ill. 2017). The defendants further argued that the claims in the amended complaint were time barred because they alleged a new set of injuries and thus did not relate back to the original complaint. Supreme Auto Transport, 2018 WL 4224426, at 740. The District Court agreed, ruling that the claims were time barred and, in the alternative, were too remote for recovery. Id.

Plaintiffs appealed, and the Seventh Circuit, in an opinion authored by Chief Judge Wood, affirmed the District Court’s decision on both grounds.

The Seventh Circuit’s Analysis

The Seventh Circuit began its analysis by addressing the statute of limitations argument, and although the it affirmed on statute of limitations grounds, it further opined on the remoteness of plaintiffs’ claims because the Court “recognize[d] that [it does] not necessarily have the last word.” Id. at 742. The Court thus thought it “prudent also to say a word about this basis for the district court’s decision.” Id.

The Seventh Circuit Affirmed that Plaintiffs’ Amended Complaint is Time Barred by the Relevant Statutes of Limitations

Considering the argument that the plaintiffs’ amended complaint was time-barred, the Seventh Circuit observed that the plaintiffs conceded that the April 2016 amended complaint fell outside the relevant statutes of limitation, the longest of which would have expired in 2014. Id. at 740. Thus, the amended complaint would be time barred unless, as the plaintiffs argued, it related back to the original complaint filed in 2008. The Court noted that an amended pleading relates back for purposes of the statute of limitations analysis if “the amendment asserts a claim or defense that arose out of the conduct, transaction, or occurrence set out—or attempted to be set out—in the original pleading.” Id. at 741 (citing Fed R. Civ. P. 15(c)(1)(B)). Under Seventh Circuit precedent, the court looks to whether the original complaint “gave the defendant enough notice of the nature and scope of the plaintiff’s claim that he shouldn’t have been surprised by the amplification of the allegations of the original complaint in the amended one.” Id. (quoting Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 573 (7th Cir. 2006)).

The District Court held that the amended complaint did not relate back to the original complaint because it did not satisfy the fair-notice requirement under Seventh Circuit authority because “the transactions at issue in the first complaint (the indirect purchase of steel pipes, tubing, and sheets) were wholly distinct from the transactions at issue in the amended complaint (the purchase of washing machines, cars, swimming pools, and the like).” Id. The Seventh Circuit agreed, finding that the changed definition of steel products between the original complaint and amended complaint meant that a reasonable defendant was unlikely to have read the original complaint and imagine that the plaintiffs were including end-use household and commercial goods. Id.Such a reading, the Seventh Circuit further noted, “would transform nearly every person in the country into a potential class member.” Id.

The Seventh Circuit acknowledged the plaintiffs’ arguments that the original complaint definition of steel products included “any” product “derived from raw steel,” and that the list was intended to be illustrative and not exhaustive. Id. But the Seventh Circuit opined that even if the list was meant to be illustrative, the Court had to consider “what general category the list was designed to illustrate.” Id. Under Supreme Court precedent, an illustrative list is meant to “indicate that a definition includes only those objects that are similar to the objects in the list.” Id.(citing Begay v. United States, 553 U.S. 137, 142 (2008)). Further, the Court noted, the plaintiffs gave no indication in the years between filing its original complaint and the amended complaint that its suit included products other than mill output (such as steel pipes, tubing and sheets). In fact, the original complaint and other filings referred only to mill output and the definition seemed to be taken from another complaint in a related direct purchaser action, which was exclusively about mill output. Id. at 742. As such, the Seventh Circuit disagreed that even viewing this as an illustrative list would relate the amended complaint back to the original complaint. Id.

Finally, the Seventh Circuit disagreed with Plaintiffs’ argument that the statute of limitations should have been tolled under American Pipe & Construction Co. v. Utah, 414 U.S. 538, 94 S.Ct. 756 (1974), because the newly named putative class representatives or putative class members added under the scope of the amended complaint were not “asserted members of the class” as defined by the original complaint, nor were their claims included in the original complaint. Id. (quoting American Pipe, 414 U.S. at 553).

Proximate Causation

The District Court held that the amended complaint did not demonstrate that the plaintiffs had antitrust standing under the AGC test, because the plaintiffs’ injury was too remote, their damages too speculative, and the alleged improper conduct was not likely to be targeted toward downstream purchasers. Supreme Auto Transport, 238 F. Supp. at 1038-41.

The Seventh Circuit began its analysis by explaining that proximate causation as a general matter is “an essential element that plaintiffs must prove in order to succeed on any of their claims” and that the purpose of this analysis “is to avoid speculative recovery by requiring a direct relation between the plaintiff’s injury and the defendant’s behavior.” Supreme Auto Transport, 902 F.3d at 743. The Seventh Circuit further commented that while this proximate causation requirement is often referred to as “antitrust standing” in the context of an antitrust litigation, it in fact “has nothing to do with a plaintiff’s standing to sue under Article III of the U.S. Constitution (which requires only but-for causation, an injury-in-fact, and redressability).” Id. (citing Greater Rockford Energy & Tech. Corp. v. Shell Oil Co., 998 F.2d 391, 395 & n.7 (7th Cir. 1993); Associated Gen. Contractors of Cal. Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 535-43 (1983)). It further noted that the Supreme Court clarified in Lexmark International, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014), “that the considerations often referred under the rubric of ‘prudential standing’ are nothing more or less than substantive questions about the coverage of a statute.” Id. The Seventh Circuit thus “eschew[ed] the term ‘antitrust standing’” and decided to “speak only of the requirements to bring a case under the particular statutes involved.” Id.

The Seventh Circuit recognized that federal law generally limits who may recover as a plaintiff to those potentially injured parties that directly purchased an allegedly price-fixed product from an alleged conspirator. Id. at 743 (citing Illinois Brick Co. v. Illinois, 431 U.S. 720, 729-30 (1977)). However, twenty-one of the states under which the plaintiffs brought claims in their amended complaint were “Illinois Brick repealer states,” which have under state law rejected the strict “direct purchaser only” requirement that would bar the claims of downstream purchasers like the plaintiffs. Id.

However, the Seventh Circuit explained that the mere fact that these states allow indirect purchaser claims did not necessarily solve the plaintiffs’ remoteness problem. Although the plaintiffs argued that the laws in Illinois Brick repealer states allow all indirect purchaser suits to go forward “no matter how far removed the purchasers are from the production process and no matter how speculative the damages award would be,” the Seventh Circuit disagreed. Id. at 744. Contrary to the plaintiffs’ expansive and categorical reading of the relevant states’ laws, the Court found that the fact that some states permit indirect purchaser claims under their law does not mean that proximate causation is irrelevant to the analysis of the viability of claims under those laws. Id.

In affirming the District Court’s dismissal on remoteness grounds, the Seventh Circuit compared the product scope alleged in the plaintiffs’ original complaint against the product scope in the amended complaint at issue. In contrast to the expansive definition of “steel products” in the amended complaint, the Seventh Circuit observed that “many if not all Illinois Brick repealer states would have allowed Supreme Auto’s original complaint to go forward.” Id. The amended complaint, in contrast, “alleges that plaintiffs purchased steel only insofar as it was one among many components of other more complex products, all of which have gone through numerous manufacturing alterations and lines of distribution.” Id. As such, the Court explained that it could not imagine a circumstance under which the effect of the alleged overcharge could be adequately traced through the complex supply and production chains at issue. Id. The Court concluded that the District Court properly ruled that “the claims asserted . . . were too remote to support a claim under the different state laws plaintiffs invoked.” Id.

Conclusion

The Supreme Court has in recent years clarified that courts should look to the relevant laws when considering standing and jurisdictional issues, rather than resting on “prudential” considerations. See Lexmark Int’l., 572 U.S. 118; Arbaugh v. Y & H Corp., 546 U.S. 500 (2006). The Seventh Circuit appears to be the first circuit court to apply this message to abandon that long-used term “antitrust standing” in favor of a more fundamental approach that looks at the proximate causation element of antitrust and consumer protection causes of action.

In indirect purchaser cases, litigants have historically fought about whether particular states apply the AGC framework for antitrust standing at all. Because the Seventh Circuit decided to “eschew the term ‘antitrust standing’ and [instead] speak only of the requirements to bring a case under the particular statutes involved,” Supreme Auto Transport, 902 F.3d at 743, its analysis may be particularly useful in assessing the viability of indirect purchaser claims under the antitrust and consumer protection laws of states that do not completely adopt federal precedent, such as California. See, e.g., Aryeh v. Canon Bus. Solutions, Inc., 55 Cal. 4th 1185 (2013).

The Seventh Circuit’s analysis is also a useful example of the application of the relation-back doctrine and American Pipe tolling in instances where the product scope in the definition of the putative class changes in an amended complaint. This decision underscores that when there are material changes in the descriptions of product scope between pleadings, catch-all “including but not limited to” language is not sufficient to save claims from being time barred.