Law Office Of Robert Connolly
Judge Beth Labson Freeman recently denied defendants’ motion for summary judgment in an indirect purchaser’s complaint alleging a price-fixing conspiracy among the major suppliers of titanium dioxide. Home Depot, U.S.A., Inc. v. E.I. DuPont De Nemours & Company, et al., Case No. 16-cv-04865-BLF; 2019 WL 3804667 (N.D. Cal. 8/13/2019) . In a similar suit brought by the direct purchasers of titanium oxide, the District Court for the District of Maryland denied the defendants’ motions for summary judgment under Fourth Circuit law. See In re Titanium Dioxide Antitrust Litig. [Haley Paint], 959 F.Supp. 2d 799 (D. Md. 2013). In a third case, an opt out suit from the direct purchasers, the District Court for the District of Delaware granted the defendant’s motion for summary judgment. The ruling was affirmed in a published opinion by Third Circuit. See Valspar Corp. v. E.I. Du Pont de Nemours and Co., 873 F.3d 185 (3d Cir. 2017). Judge Freeman broke the tie, declined to follow Valspar and denied defendant’s request for summary judgment.
Judge Freeman addressed two questions: Is the Ninth Circuit standard the same as that set forth by the Third Circuit in Valspar? (No); and 2) Did Home Depot’s case survive a summary judgment motion under Ninth Circuit law? (Yes).
Plaintiff’s story is essentially that the oligopolistic industry was in distress until 2002 when Dupont was accepted into the previously closed European trade group—Titanium Dioxide Manufacturers Association. Days after being accepted in the Association, DuPont announced a price increase; the first of what was to be 31 parallel price increases during the relevant time—2002–2014. This pattern was a marked change from the industry practice from 1994-2001 when only a few parallel price increases were announced. Judge Freeman found that this, along with other evidence discussed herein, was enough for a reasonable trier of fact to conclude the 31 parallel price increases were the product of a conspiracy rather than lawful market activity expected in an oligopoly.
II. Comparison of Valspar and Ninth Circuit Law on Price Fixing Summary Judgment
The district court noted that since the Supreme Court decision in Matsushita Elec. Indus.Co. v. Zenith Radio Corp. 475 U.S. 574 (1986), each of the Circuit Court of Appeals has developed a set of legal standards to address motions for summary judgment brought in a conscious parallelism antitrust price fixing case. In Matsushita, the Supreme Court held that although all inferences must be viewed in the light most favorable to the non-moving party, “antitrust law limits the range of permissible inferences from ambiguous evidence in a § 1 case.” Matsushita, 475 U.S. at 587-8. (“To survive a motion for summary judgment or for a directed verdict, a plaintiff seeking damages for a violation of § 1 must present evidence that tends to exclude the possibility that the alleged conspirators acted independently.”). Id.
Judge Freeman discussed the Valspar decision at length. The Judge noted that in Valspar, the Third Circuit followed established precedent that evidence of conscious parallelism cannot alone create a reasonable inference of conspiracy. To get past summary judgment, plaintiffs must allege certain ”plus factors.” The Valspar court identified three categories of evidence which may qualify: “(1) evidence that the defendant had a motive to enter into a price fixing conspiracy; (2) evidence that the defendant acted contrary to its interests; and (3) evidence implying a traditional conspiracy.” Valspar, 873 F.3d at 193 (internal quotation marks and citation omitted). 2019 WL 3804667 at *3.
Judge Freeman opined that in Valspar, the Third Circuit gave short shrift to the first two categories because they largely restate the phenomenon of interdependence. Id. Instead, Valspar indicated that courts should focus primarily on the third factor, that is, evidence implying a traditional conspiracy. In order to satisfy that factor, Valspar stated, the plaintiff must provide “proof that the defendants got together and exchanged assurances of common action or otherwise adopted a common plan even though no meetings, conversations, or exchanged documents are shown.” Valspar, 873 F. 3d at 193. According to Judge Freeman, Valspar holds that “The plaintiff may defeat summary judgment only if, after evaluating the evidence as a whole, the court determines that it is more likely than not that the defendants conspired to fix prices. 2019 WL 3804667, at *3.
Judge Freeman then turned to Ninth Circuit law noting that the Ninth Circuit also focuses on Matsushita’s key holding that “to survive summary judgment on the basis of circumstantial evidence, ‘a plaintiff seeking damages for a violation of § 1 must present evidence that tends to exclude the possibility that the alleged conspirators acted independently,’” and “‘conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy.”’ 2019 WL 3804667 at *3.
(citations omitted). Judge Freeman recounted the Ninth Circuit’s two-part test to be applied when a defendant seeks summary judgment with respect to a § 1 claim that is based on circumstantial evidence:
1) The defendant can rebut an allegation of conspiracy by showing a plausible and justifiable reason for its conduct that is consistent with proper business practices;
2) If the defendant makes this showing, the burden shifts back to the plaintiff to provide specific evidence tending to show that the defendant was not engaging in permissible competitive behavior.” 2019 WL 3804667 at *4 (citations omitted).
The court noted that the crucial question is whether all the evidence considered as a whole can reasonably support the inference that the defendant conspired to fix prices.
III. The Ninth Circuit Standard is Not as Onerous for the Plaintiffs As Valspar
Judge Freeman rejected defendants’ request to apply the Valspar standard stating that: “The standards articulated in Valspar all but eliminate an antitrust plaintiff’s opportunity to defeat summary judgment in an oligopoly case based on reasonable inferences arising from circumstantial evidence.” 2019 WL 3804667 at *4 Under Valspar, a successful plaintiff needs “evidence implying a traditional conspiracy,” which the majority defined as “proof that the defendants got together and exchanged assurances of common action or otherwise adopted a common plan even though no meetings, conversations, or exchanged documents are shown.” Id. (internal quotation marks and citations omitted).
The court found two faults with the Valspar approach: 1) Ninth Circuit law does not require the plaintiff to present “smoking gun” type evidence in order to avoid summary judgment; and 2) Ninth Circuit authority does not allow, much less require, district judges to weigh evidence. Id. The Court concluded that a plaintiff opposing summary judgment under Valspar’s standards must persuade the district court that it is “more likely than not” that the defendants conspired to fix prices, while in the Ninth Circuit the plaintiff need only present evidence showing “that the inference of conspiracy is reasonable in light of the competing inferences of independent action or collusive action that could not have harmed [the plaintiff]. Id. (internal quotation marks and citations omitted).
IV. Application of Ninth Circuit’s Standards to Facts of this Case
Judge Freeman next applied the Ninth Circuit summary judgment standard to the facts of the case.
Defendants satisfied their burden of showing that the announcements of parallel price increases were the product of independent decisions, not collusion. The burden then shifted to plaintiffs to produce evidence tending to show the price increases were the product of collusion. 2019 WL 3804667 at * 6.
The court found it very plausible that an industry in distress would, for the first time, invite an American producer into its trade association. The start of 31 parallel price increases over the next decade, in contrast to the previous market turbulence, plausibly suggested collusion. Having a plausible beginning to the price fixing story was very helpful to plaintiffs. Id.
Parallel conduct was not in dispute. Judge Freemans quoted the dissent in Valspar: “[t]he sheer number of parallel price increase announcements in this case – 31 to be exact – is unprecedented,” and “would undoubtedly raise red flags to any reasonable fact finder.” Valspar, 873 F.3d at 205, and the Haley Paint court which characterized the parallel price increase announcements as “noteworthy, because they were so pervasive.” Haley Paint, 959 F.Supp. 2d at 825.” 2019 WL 3804667 at * 7.
The court found the structure of the titanium dioxide market was conducive to a price-fixing conspiracy: highly concentrated; commodity-like product with no substitutes; and substantial barriers to entry in the market. Id.
An interesting point in the case is that representatives from some defendants testified in depositions that they did not engage in follow the leader pricing. Apparently, the witnesses thought this would come too close to be admitting collusion. But Judge Freeman noted that “at the hearing, Home Depot’s counsel made the point that ‘it’s hard for the defendants to even argue that this is legitimate follow-the-leader pricing if their own witnesses are denying it.’” 2019 WL 3804667 at * 8.
Actions Against Self-Interest
There was also evidence that the defendants acted against their own self-interest
- they sold titanium dioxide to each other at below market prices and swapped raw materials needed for manufacture, conduct that normally would not be expected between market rivals.
- When DuPont shut down one of its plants in 2005 after Hurricane Katrina, DuPont announced that it would bring the plant back online slowly and would “NOT flood the market with product,” and would “not be aggressively pursuing their lost share” of the market.
- Internal Millennium emails and notes from a later time-frame show that, at least in 2006-2008, Millennium consciously avoided competition with DuPont. (“we do not want to be disruptive to DuPont”); handwritten note (“Don’t steal Dup tonnes”).
- The alleged conspirators also shared confidential and commercially sensitive information through the TDMA and its Global Statistics Program.
- Following a meeting between senior executives of Millennium and Huntsman in Baltimore on September 13, 2004, Millennium sent colleagues an email stating: “now that we have competition on board for the Oct 1 price increase announcement, please relook at your agents [sic] commissions.”
- There were other documents suggesting that trade association meetings were a “great place for…side meetings.”
2019 WL 3804667 at *9.
Judge Freeman agreed that the evidence did not establish direct communications about pricing, but is the kind of circumstantial evidence that, when viewed as a whole, could lead a jury to reasonably infer a conspiracy in restraint of trade. The court concluded that “[U]nder Ninth Circuit standards, Home Depot has presented evidence from which a reasonable trier of fact could conclude that the thirty-one parallel price increase announcements were the product of a price- fixing conspiracy rather than lawful market activity to be expected in an oligopoly.” 2019 WL 3804667 at *10.
The case indicates that when plaintiffs have a choice in an oligopoly parallel price increase collusion case, the Ninth Circuit should be the venue of choice. The Fourth Circuit also seems like a viable alternative. The Third Circuit is currently the most hostile terrain for price fixing cases based on parallel price increases and other “plus factors.”
 The parties submitted thousands of pages of documents as part of the record but cited relatively few in their briefs. Judge Freeman disregarded documents not cited in the briefs noting it is not the Court’s task to review the entire record. The Court relies on the nonmoving party to identify with reasonable particularity the evidence that precludes summary judgment. Judge Freeman quoted Stanislaus Food Prod. Co. v. USS-POSCO Indus., 803 F.3d 1084, 1094 (9th Cir. 2015)(“Specific citations, not bulk references, are essential to pinpoint key facts and factual disputes.”). 2019 WL 3804667 at *5.