Antitrust Law Daily Consumers’ aluminum price manipulation claims properly scrapped
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Wednesday, August 10, 2016

Consumers’ aluminum price manipulation claims properly scrapped

By Greg Hammond, J.D.

Alleged commercial end users of semi-fabricated aluminum and consumer end users of finished aluminum products lacked antitrust standing to pursue claims that aluminum futures traders and warehouse operators manipulated a price component for aluminum in the Detroit metro area. The U.S. Court of Appeals in New York City affirmed dismissal of the commercial and consumer plaintiffs’ antitrust claims, finding that the end users failed to demonstrate—and could not demonstrate—that they suffered antitrust injury (In re Aluminum Warehousing Antitrust Litigation, August 9, 2016, Jacobs, D.).

The commercial and consumer end users claimed that the aluminum futures trader and warehouse operator defendants conspired to manipulate the regional premium in the Detroit metro area so that it no longer accurately reflected the cost of delivering, financing, and insuring local, immediately available aluminum in the Midwest. The trader defendants allegedly cancelled customers’ rights to obtain a specific lot of aluminum at a particular London Metal Exchange (LME) affiliated warehouse and directed the warehouse operators to shuttle aluminum from one warehouse to another. In addition, the warehouse operator defendants treated the minimum load-out requirement as a maximum, and offered incentive payments to attract more aluminum. The district court dismissed the commercial and consumer end users’ complaint without leave to amend, and the plaintiffs appealed.

Antitrust standing, injury. The commercial and consumer end users failed to demonstrate antitrust injury, the appellate court affirmed. In particular, the plaintiffs did not store aluminum in the defendants’ warehouses; they did not trade aluminum futures contracts with the defendants; and they did not allege that any of the aluminum they purchased was ever stored in any of the defendants’ warehouses, or was the underlying asset for any of the defendants’ futures trades. The court found that whatever injury the consumer and commercial end user plaintiffs suffered—which was based solely on their purchases of aluminum and aluminum products on the physical aluminum market, where prices were allegedly affected by the defendants’ alleged anticompetitive behavior—was not inextricably intertwined with whatever injury the defendants allegedly intended to inflict. All of the anticompetitive conduct would have occurred, and would have been felt, in the LME-warehouse storage market. However, the plaintiffs did not allege and could not allege that they participated in that market, the court stated.

Various state consumer protection and unfair trade practice claims were also properly dismissed, the appellate court concluded, because the complaint failed to explain adequately how the defendants’ conduct violated any of the statutes, or why any of the state law claims should survive if the antitrust claims were dismissed.

The cases are Nos. 14-3574(L) and 14-3581 (CON).

Attorneys: Kimberly A. Justice (Kessler Topaz Meltzer & Check, LLP), Jonathan W. Cuneo (Cuneo Gilbert & LaDuca, LLP), and Daniel C. Girard (Girard Gibbs LLP) for Plaintiffs-Appellants Commercial End Users. Douglas G. Thompson (Finkelstein Thompson LLP) and Brian R. Strange (Strange & Butler) for Plaintiffs-Appellants Consumer End Users. Richard C. Pepperman II (Sullivan & Cromwell LLP), John M. Nannes (Skadden, Arps, Slate, Meagher & Flom LLP), Robert D. Wick (Covington & Burling LLP), and Eliot Lauer (Curtis, Mallet-Prevost, Colt & Mosle LLP) for Goldman Sachs Group, Inc.; GS Power Holdings LLC; Metro International Trade Services, LLC.

Companies: Goldman Sachs Group, Inc.; GS Power Holdings LLC; Metro International Trade Services, LLC

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