Ramen Noodle Price-Fixing Suit Heads Toward Trial After Northern District of California Denies Summary Judgment, Noting “Hotly Disputed” Facts

Harrison (Buzz) Frahn, Jennifer S. Palmer, Alexander S. Moser 
Simpson Thatcher & Bartlett LLP

On January 2, 2018, Judge William H. Orrick of the Northern District of California turned up the heat on defendants in In re Korean Ramen Antitrust Litigation , denying their motions for summary judgment and ruling in favor of plaintiffs on several evidentiary questions.  Defendants Nongshim Co., Ltd., Nongshim America, Inc. (collectively Nongshim), Ottogi Co., Ltd., and Ottogi America, Inc. (collectively Ottogi) moved for summary judgment on both procedural and factual grounds.  They argued that the statute of limitations barred plaintiffs’ Sherman Act and state unfair competition claims.  Nongshim also argued that the court should grant summary judgment as a matter of international comity, given the Korean Supreme Court’s overturning of the Korea Fair Trade Commission’s (“KFTC’s”) finding of a conspiracy. Substantively, both defendants argued there was no evidence of a conspiracy to fix prices, and that even if there were evidence of such a conspiracy in Korea, it could not be linked to antitrust harm in the United States.  Judge Orrick ruled against defendants on all grounds.

Background

Plaintiffs filed this class action in 2013, alleging a price fixing conspiracy among the four dominant manufacturers of Korean ramen noodles: Nongshim, Ottogi, Samyang Foods Co. Ltd. (Samyang), and Korea Yakult Co. Ltd.  Together, these four manufacturers control virtually the entire market for Korean ramen noodles in Korea.  According to plaintiffs, Korean ramen noodles “have a unique flavor profile” and therefore do not compete with Japanese or Chinese ramen noodle products in the United States.

Plaintiffs are U.S. consumers, food retailers, and distributors.  They allege that the four manufacturers entered a conspiracy to fix wholesale ramen prices in Korea in late 2000 or early 2001.  The conspiracy allegedly continued until 2010, when Samyang decreased its prices to “apologize to [its] customers” for the previous price increases.  While plaintiffs allege that the conspiracy occurred in Korea, they filed suit for its effects in the United States. 

The alleged conspiracy’s effects in Korea were the subject of an investigation by the KFTC.  Based on testimony from several Samyang employees and copies of communications between the companies found on a portable hard drive kept by Samyang, the KFTC found that the companies had conspired to increase prices and levied significant fines against them.  However, in 2015 the Korean Supreme Court overturned the KFTC’s findings and fines, holding there was insufficient evidence of an express price fixing agreement based on a lack of direct, non-hearsay evidence.  The Korean Supreme Court’s holding underlies several of the arguments in defendants’ motions for summary judgment.

Antitrust Issues

The court’s January 2 order presents three issues of interest to antitrust practitioners.  First, it raises the question of whether Sherman Act claims are subject to a pure injury rule or discovery rule for statute of limitations purposes.  Second, the order addresses questions of international comity, an area of concern whenever there are allegations of anticompetitive behavior that crosses international borders.  Finally, the order examines the evidence of a conspiracy in Korea, and whether that evidence supports an inference of conspiracy under the antitrust summary judgment standards. 

Statute of Limitations

The Sherman Act includes a four-year statute of limitations.  The clock starts ticking when the injury occurs (under the “injury rule”) or when plaintiffs reasonably should have discovered the injury (under the “discovery rule”).  Here, the alleged conspiracy ran from 2000 until 2010, and plaintiffs did not file suit until 2013, making the start date of the statute of limitations very important.

Defendants, favoring the injury rule, highlighted a recent holding by Judge Lucy Koh that “clear U.S. Supreme Court authority and the overwhelming majority of Circuits have explicitly held that antitrust claims are subject to a pure injury rule, not a discovery rule.” In re Animation Workers Antitrust Litig., 87 F. Supp. 3d 1195, 1210 (N.D. Cal. 2015).  Defendants argued that, under this rule, the statute of limitations bars all sales made more than four years before the suit was filed.  As such, defendants asked that—if the court did not grant summary judgment outright—it limit damages to those resulting from sales within this four-year window.  This request recognizes Ninth Circuit precedent, under which each sale of a price fixed product “constitutes a new overt act causing injury to the purchaser and the statute of limitations runs from the date of the act.” Oliver v. SD-3C LLC , 751 F.3d 1081, 1086 (9th Cir. 2014).

Plaintiffs responded by pointing to Judge Orrick’s earlier decision on defendants’ motion to dismiss, where he applied the discovery rule instead of the injury rule.  Plaintiffs argued that this earlier decision is “law of the case,” and the court should therefore not revisit whether the injury rule or the discovery rule applies.

While Judge Orrick acknowledged the apparent conflict between his earlier opinion and decisions in other courts, he sidestepped the issue using the fraudulent concealment doctrine.  Fraudulent concealment tolls a statute of limitations “where (i) affirmative acts by defendants conceal their wrongful conduct from plaintiffs, (ii) plaintiffs are actually ignorant of the wrongful conduct, and (iii) there was reasonable diligence by the plaintiff to discover the misconduct in response to any information it may have about that conduct.”  Fenerjian v. Nongshim Co., Ltd, 72 F. Supp. 3d 1058, 1078 (N.D. Cal. 2014). 

Judge Orrick then explored a long list of defendants’ acts that allegedly show affirmative concealment, including: (1) staggering price increases to avoid detection of their anticompetitive cooperation; (2) conducting inter-company communication by phone, rather than email, to conceal the frequency and content of the communication; (3) Ottogi destroying and altering pricing memos referring to competitor contacts after the KFTC investigation began; (4) a Nongshim employee using his personal email address to communicate with competitors after the KFTC investigation began; and (5) using pretextual reasons, like rising costs of fuel and inputs, to justify price increases.  Judge Orrick found this evidence sufficient to toll the statute of limitations, despite defendants’ objections that the evidence does not clearly show affirmative acts of concealment, and that any such acts were not directed towards plaintiffs or the current litigation.

International Comity

Nongshim’s motion for summary judgment urged the court to dismiss the suit as a matter of international comity, because the Korean Supreme Court found the evidence of conspiracy insufficient.  International comity, or more specifically adjudicatory comity (“comity among courts”), is “a discretionary act of deference by a national court to decline to exercise jurisdiction in a case properly adjudicated in a foreign state.”  Mujica v. AirScan Inc. , 771 F.3d 580, 599 (9th Cir. 2014). 

But Judge Orrick found that the question before his court and that decided by the Korean Supreme Court were different.  The Korean Supreme Court determined whether the KFTC’s finding of a conspiracy was adequately supported by Korean law, while the question in this case is whether “defendants’ conduct as it impacted sales of products in the United States violate[d] federal and state antitrust and unfair competition laws.”  Opinion at 15 (emphasis in original).  Moreover, the Supreme Court has said that “application of our antitrust laws to foreign anticompetitive conduct is nonetheless reasonable, and hence consistent with principles of prescriptive comity, insofar as they reflect a legislative effort to redress domestic antitrust injury that foreign anticompetitive conduct has caused.”  F. Hoffmann-La Roche Ltd. v. Empagran S.A. , 542 U.S. 155, 165 (2004).  Judge Orrick therefore rejected defendants’ call for summary judgment on comity grounds.

The Korean Conspiracy, the United States, and Antitrust Standing

Despite the Korean Supreme Court’s decision that the KFTC’s finding of a price-fixing conspiracy lacked adequate support, there is significant evidence that such a conspiracy existed.  Direct evidence of the conspiracy includes testimony from three Samyang executives and employees describing the meeting where the conspiracy was formed and how non-public pricing information was shared between the alleged conspirators.  Additional corroborating evidence includes testimony and documents showing Samyang employees were aware of non-public pricing information from the other co-conspirators at various points throughout the conspiracy and communicated their own pricing in turn.  Defendants disputed the authenticity, reliability, and admissibility of much of this evidence, but in the aggregate Judge Orrick found it sufficiently voluminous and unambiguous.  He concluded that there was a genuine dispute of material fact as to whether there was a price-fixing conspiracy in Korea.

However, to succeed on their claims, plaintiffs also had to show “some linkage” between the overseas conspiracy and price-fixed sales in the United States. See, e.g., In re Elevator Antitrust Litig. , 502 F.3d 47, 52 (2d Cir. 2007).  Judge Orrick acknowledged there is no direct evidence that the alleged conspiracy expressly aimed its conduct at products intended for the United States.  As such, plaintiffs relied on various forms of circumstantial evidence, ranging from expert analyses purporting to show that prices in the United States tracked prices in Korea, to the secondment of executives from Korean parent companies to American subsidiaries, to correspondence between the Korean and American companies discussing price increases.

In the case of Nongshim, the analysis is complicated by the company’s establishment of a factory in Rancho Cucamonga, California in 2005.  A full 65% of Nongshim products sold in the United States during the alleged conspiracy were manufactured at that plant.  Arguably, any price-fixing of Korean-manufactured noodles should not have affected United States-manufactured noodles. 

Under the summary judgment standards in the antitrust context, conduct as consistent with permissible competition as with illegal conspiracy cannot, standing alone, support an inference of conspiracy.  Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 588 (1986).  But here, Judge Orrick found, the evidence of conspiracy in Korea was direct and unambiguous.  And there was at least a genuine dispute of material fact over the connection between the alleged Korean conspiracy and anticompetitive conduct in the United States.  This was true even for Nongshim’s noodles produced and sold entirely within the United States.  As such, the court found summary judgment inappropriate.

Conclusion

Now that this case has survived summary judgment, it heads toward a jury trial scheduled for February 23, 2018.  In the meantime, the court’s opinion shows that the injury rule and international comity may not always protect antitrust defendants.  It also shows that where there is substantial, unambiguous evidence of wrongdoing, even if that evidence is “hotly disputed” and does not necessarily prove any effect in the United States, courts will be reluctant to grant summary judgment for defendants.