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Eastman Kodak Co. v. Henry Bath LLC

United States Court of Appeals, Second Circuit

August 27, 2019

Eastman Kodak Co., AGFA Corp., AGFA Graphics NV, Fujifilm Manufacturing U.S.A., Inc., Mag Instrument Inc., Claridge Products and Equipment, Inc., individually and on behalf of all others similarly situated, Custom Aluminum Products Inc., Ampal Inc., Extruded Aluminum Corp., Reynolds Consumer Products LLC, Southwire Co., LLC, Plaintiffs-Appellants,
v.
Henry Bath LLC, Metro International Trade Services, LLC, J.P. Morgan Chase & Co., Goldman Sachs & Co. LLC, Goldman Sachs International, JPMorgan Securities PLC, Glencore Ltd., Pacorini Metals USA, LLC, Pacorini Metals Vlissingen B.V., JPMorgan Chase Bank, N.A., Glencore International AG, Glencore AG, J. Aron & Co. LLC, MITSI Holdings LLC, Access World (USA) LLC, Henry Bath & Son Limited, Defendants-Appellees, Glencore Xstrata PLC, GS Power Holdings LLC, MCEPF Metro I, Incorporated, Goldman Sachs Group, Inc., Pacorini Metals AG, London Metal Exchange Limited, London Metal Exchange Limited, John Does 1-10, Does 1-10, inclusive, Unidentified Parties, John Does 1- 50, Defendants.

          Argued: May 3, 2018

         Appeal by the plaintiffs from a judgment of the United States District Court for the Southern District of New York (Katherine B. Forrest, J.), for defendants in three consolidated antitrust actions. The district court granted summary judgment, ruling that this court's decision in In re Aluminum Warehousing Antitrust Litig. (Aluminum III), 833 F.3d 151 (2d Cir. 2016) compels the conclusion that these plaintiffs, like the plaintiffs in that case, failed to establish antitrust standing. We disagree. The circumstances of these plaintiffs are materially different. In addition, the district court erred in denying Reynolds and Southwire an opportunity to replead on the ground of futility.

         The judgment is VACATED and the case REMANDED.

          Patrick J. Coughlin, Robbins Geller Rudman & Dowd LLP, San Diego, CA (Steven F. Hubachek, Carmen A. Medici, on the brief), for Direct Purchaser Plaintiffs-Appellants.

          Derek Brandt, Brandt Law LLC, Edwardsville, IL (Walter W. Noss, Stephanie A. Hackett, Scott Scott, Attorneys at Law, LLP, San Diego, CA, on the brief), for Plaintiffs-Appellants Eastman Kodak Co., AGFA Corp., AGFA Graphics NV, Fujifilm Manufacturing U.S.A., Inc. and Mag Instrument Inc.

          Robert J. Palmersheim, Honigman Miller Schwartz and Cohn LLP, Chicago, IL (David E. Koropp, Anand C. Mathew, Matthew G. Mrkonic, on the brief), for Plaintiffs-Appellants Reynolds Consumer Products LLC and Southwire Co. LLC.

          Richard C. Pepperman II, Sullivan & Cromwell LLP, New York, NY (Suhana S. Han, William H. Wagener, Sullivan & Cromwell LLP, New York, NY; John M. Nannes, John H. Lyons, Skadden, Arps, Slate, Meagher & Flom LLP, Washington, D.C.; Robert D. Wick, Henry Liu, John Playforth, Covington & Burling LLP, Washington, D.C.; Eliot Lauer, Jacques Semmelman, Curtis, Mallet-Prevost, Colt & Mosle LLP, New York, NY, on the brief), for Defendants- Appellees.

          Before: LEVAL, LYNCH, and DRONEY, Circuit Judges.

          LEVAL, CIRCUIT JUDGE

         The plaintiffs in three consolidated actions appeal from the grant of summary judgment by the United States District Court for the Southern District of New York (Katherine B. Forrest, J.) dismissing their complaints. The complaints allege violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, through a conspiracy to inflate prices in the primary aluminum market. The term "primary aluminum" is used in the industry to describe aluminum in the form produced at a smelter or primary aluminum plant, by original producers, as distinguished from "secondary aluminum," which is reconstituted aluminum scrap.

         I. Parties

         The plaintiffs are manufacturers that use primary aluminum in the fabrication of their products. The plaintiffs allege that they purchased primary aluminum for their needs mainly through long-term supply contracts with aluminum producers. In accordance with industry standards, the purchase prices provided in their long-term supply contracts included as a price element the Platts Midwest Premium (hereinafter the "Midwest Premium"), a figure which, as explained below, is based on the costs associated with delivery of aluminum.

         The plaintiffs in the three actions fall into three categories. In the district court, these three categories were termed "Individual Plaintiffs" ("IPs"), "First Level Purchasers" ("FLPs"), and Reynolds Consumer Products LLC and Southwire Company, LLC ("Reynolds/Southwire"). The IPs are Eastman Kodak Company, Agfa Corporation, Agfa Graphics NV, Fujifilm Manufacturing U.S.A. Inc., and Mag Instrument Incorporated. The FLPs are Custom Aluminum Products Incorporated, Incorporated, Ampal Incorporated, Extruded Aluminum Corporation, and Claridge Products and Equipment, Inc. While we will at times use the designations "FLP," "IP," and "Reynolds/Southwire" to make procedural distinctions between the three sets of plaintiffs, we perceive no significant substantive difference between their claims for purposes of their contentions in this appeal seeking relief from the grant of summary judgment. All of them purchased primary aluminum at prices that included the Midwest Premium, and all were first in line to pay prices affected by the defendants' alleged inflation of the Midwest Premium. See Brief of Appellant AGFA Corporation at 6; Fujifilm Amended Complaint ¶ 32; IPs' Joint Amended Complaint ¶¶ 18, 31-47; Brief of Appellant Ampal at 8; FLPs' Complaint ¶¶ 17, 32-40; Reynolds and Southwire Brief at 10-12; Complaint of Reynolds/Southwire ¶¶ 1-5.

         There are two categories of defendants: Financial Defendants and Warehousing Defendants. The Financial Defendants are J.P. Morgan Chase & Co., Goldman Sachs & Co., and Glencore Ltd. Each of them trades in primary aluminum and in primary aluminum derivatives, including futures contracts that are linked to the price of primary aluminum on the London Metals Exchange ("LME"), the world's largest non-ferrous metals market. During the relevant time, approximately from 2011 to 2014, each is alleged to have sold primary aluminum in transactions that included the Midwest Premium as an element of the sale price. Each also (directly or indirectly) owned one of the Warehousing Defendants, having purchased them in 2010 during an aluminum glut in the aftermath of the 2008 financial crisis.

         The Warehousing Defendants are Henry Bath & Son Ltd., Metro International Trade Services, LLC, and Pacorini Metals USA, LLC. Each of them owns and operates aluminum warehouses certified by the LME, and each of them was owned during the relevant time by one of the Financial Defendants-Henry Bath by J.P. Morgan, Metro by Goldman Sachs, and Pacorini by Glencore.

         The gist of the allegations is that the Financial Defendants, having acquired large positions in primary aluminum at low prices during the economic downturn following the 2008 market collapse in anticipation of future price increases, conspired with each other and with the Warehousing Defendants to inflate artificially the prices they would realize in the sale of these positions by manipulating the Midwest Premium.

         The plaintiffs allegedly were harmed by the defendants' manipulation of the Midwest Premium because the manipulation required the plaintiffs to pay artificially inflated prices in their purchases pursuant to their supply contracts with aluminum producers.

         II. Procedural History

         The complaints of these three plaintiff groups were part of a larger group of related actions that were originally filed in various district courts throughout the country and were consolidated for pretrial proceedings by the United States Panel on Multidistrict Litigation before Judge Forrest in the Southern District of New York. The other consolidated actions, brought by groups identified as Commercial End Users and Consumer End Users, also asserted liability based on the defendants' conspiratorial manipulation of the Midwest Premium. Those plaintiffs, however, purchased aluminum otherwise than in the primary aluminum market in which plaintiffs in this case claim to have suffered injury. This court later concluded that those plaintiffs "disavow[ed] participation in any of the markets in which the defendants operate." In re Aluminum Warehousing Antitrust Litig. (Aluminum III), 833 F.3d 151, 161 (2d Cir. 2016).

         The district court had earlier dismissed the actions of the Commercial End Users and Consumer End Users on the ground that they were inefficient enforcers who did not satisfy the requirements for antitrust standing. The court noted that "[t]here will always be others who are more directly injured . . . ." In re Aluminum Warehousing Antitrust Litig. (Aluminum I), No. 13-md-2481 (KBF), 2014 WL 4277510, at *21, *39. (S.D.N.Y. Aug. 29, 2014).[1] The district court denied them leave to replead. In contrast, the district court granted the FLPs and IPs leave to amend their complaints, finding-at least at first-that their amended complaints stated claims for ...


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