Antitrust Law Daily Indirect purchasers of film capacitors denied class certification for purposes of price fixing claims
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Wednesday, November 4, 2020

Indirect purchasers of film capacitors denied class certification for purposes of price fixing claims

By E. Darius Sturmer, J.D.

The plaintiffs’ proposal to certify single class of indirect purchasers in 31 states did not satisfy Constitutional due process requirements or California choice-of-law rules did not suffice to justify an extraterritorial application of California law.

Indirect purchasers of electrolytic and film capacitors were not entitled to certification as a class for purposes of trying price-fixing claims they asserted under the Sherman Act and numerous states’ antitrust and consumer protection statutes against manufacturers Shinyei Technology Co., Ltd., Shinyei Capacitor Co. Ltd, and Taitsu Corporation, the federal district court in San Francisco has ruled. The plaintiffs failed to show that the application of California law to the claims of a proposed class consisting of purchasers in 31 different states would be proper. Their motion for class certification was therefore denied (In re Capacitors Antitrust Litigation [No. Iii]November 3, 2020,Donato, J.).

Background. A capacitor is a small but important component of electrical devices that stores and moderates the flow of electrical energy. In 2014, an assortment of direct and indirect capacitor purchasers began filing federal lawsuits against mostly Japanese and East Asian capacitor manufacturers alleging that they participated in a decade-long global price-fixing scheme in violation of U.S. antitrust law. In 2017, the suits were consolidated into a single multi-district litigation in the San Francisco court.

Last August, the court approved a nearly $31 million settlement between the direct and indirect purchasers and four of the defendant manufacturers that released those manufacturers from all antitrust and consumer protection claims related to the alleged price-fixing conspiracy. In the ruling, the court also gave its preliminary approval of the settlement class definitions for the electrolytic class and film class. The claims against the Shinyei entities (hereafter ‘Shinyei’) and Taitsu remain.

At present, the indirect purchaser plaintiffs’ ("IPPs") case against Shinyei and Taitsu runs adjacent to the direct purchaser plaintiffs’ ("DPPs") class action, which is bound for a new trial in January 2021 after the pandemic derailed a prior trial during the presentation of evidence, the court noted. However, the cases differ in several respects. First, whereas the DPPs have alleged one overarching conspiracy among all the manufacturer defendants, the IPPs aver two separate price-fixing conspiracies for electrolytic and film capacitors. Second, the remaining IPP defendants, Shinyei and Taitsu, make only film capacitors and thus are in only the alleged film capacitor conspiracy. As a result, the court observed, the case necessarily requires proof that the direct purchasers paid prices for capacitors that had been artificially inflated by a price-fixing conspiracy.

Through the instant motion, the IPPs asked the court to certify a single class under California law for indirect purchasers in "the 31 states that permit recovery by indirect purchaser plaintiffs in price-fixing cases".

Certification. The court found that the IPPS’ certification request "raise[d] a number of concerns." To begin with, the court said, "it sounds awfully like an end-run around the Court’s [earlier] ruling striking the IPPs’ allegations on behalf of a nationwide class under California law." Indirect purchasers in 24 of the 31 states were never identified in the complaint and "were not even ostensible plaintiffs in this case," the court noted. Moreover, the proposal to apply California law to a 31-state class raised "serious questions" with respect to the Due Process Clause of the U.S. Constitution, California’s choice-of-law rules, and the territorial reach of the California Cartwright Act and Unfair Competition Law (UCL).

It was "not at all clear" that the IPPs met their burden of showing that application of California law against the three remaining defendants was constitutional, the court decided. The complaint alleged hardly any contacts at all with the state of California, and all three defendants were Japanese corporations with their principal places of business in Japan, the court observed. Further, the IPPs’ due process arguments were made in connection with the electrolytic capacitor conspiracy and not the separate film capacitor conspiracy involving Taitsu and the Shinyei entities. "While the IPPs say that Taitsu and Shinyei had U.S. subsidiaries … which were both California corporations registered to do business, and doing business in California," the court stated, "these subsidiaries are not named as defendants."

Even if the plaintiffs were deemed to have cleared the de minimis bar to the application of the Cartwright Act against the defendants, the California choice-of-law rules posed another barrier to certification, in the court’s view. The defendants established that it would not be appropriate to expand a recognized California Damages Class from California-residents-only to a 31-state class because there were material differences in the remedies provided by different states. For example, the prudential standing factors in Associated General Contractors of California v. California State Council of Carpenters, 459 U.S. 519 (1983), did not apply to Cartwright Act claims but did apply under the antitrust laws of Nebraska, New Mexico, and Washington, D.C., and the statute of limitations and overcharge "pass-on" standards were also different among the potentially applicable laws.

Finally, the plaintiffs did not present a substantive reason that might justify the extraterrorial application of the Cartwright Act and did not address at all the same issue for the UCL. Thus, if the court were to permit residents of states not identified in the complaint to join the case, the proposed 31-state class still could not be certified as one class under Federal Rule of Civil Procedure 23(b)(3) because variations in state law would defeat predominance.

An alternative proposal by the plaintiffs to certify six separate state classes for California, Florida, Michigan, Minnesota, Nebraska, and New York was also rejected. The IPPs "offered virtually no argument in support of this alternative," according to the court. They also offered little support for a proposed injunctive relief class under Rule 23(b)(2), the court added.

This case is No. 3:14-cv-03264-JD.

Attorneys: Adam J. Zapala (Cotchett Pitre & McCarthy LLP) for Indirect Purchaser Plaintiffs. C. Andrew Dirksen (Cera LLP) and Joseph J. Depalma (Lite Depalma Greenberg, LLC) for Chip-Tech, Ltd. Ruth Strandness Shnider (Stinson Leonard Street LLP) for Digi-Key Corp. Daniel Stewart Robinson (Robinson Calcagnie, Inc.) for Autorama, Inc. Claire M. Maddox (Dentons US LLP) for Shinyei Technology Co., Ltd. Jarod Michael Bona (Bona Law PC) for Taitsu America, Inc. and Taitsu Corp.

Companies: Chip-Tech, Ltd.; Digi-Key Corp.; Autorama, Inc.; Shinyei Technology Co., Ltd.; Taitsu America, Inc.; Taitsu Corp.

MainStory: TopStory Antitrust CaliforniaNews GCNNews

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