Antitrust Class Action Complaint Failed to Adequately Establish Antitrust Injury thus Warranting Dismissal of Certain Antitrust Claims in Class Action Complaint for Lack of Standing California Federal Holds
Plaintiffs filed a class action lawsuit against various defendants for allegedly conspiring to artificially inflate and fix the prices of dynamic random access memory (DRAM) in the market: plaintiffs are indirect purchasers of DRAM, and filed the class action on behalf of other indirect purchasers; the class action named as defendants foreign corporations, or U.S. subsidiaries of foreign corporations, that manufacture and sell DRAM in the U.S. In re Dynamic Random Access Memory (DRAM) Antitrust Litig., ___ F.Supp.2d ___ (N.D. Cal. January 29, 2008) [Slip Opn., at 1-2]. Defense challenges to the class action led to the filing of a second amended class action complaint, and defense attorneys moved to dismiss certain claims therein. Id. The district court granted the motion in part and denied the motion in part.
By way of background, the district court explained at page 2 that in August 2006, defense attorneys moved for judgment on the pleadings with respect to the original class action complaint, and in June 2007, the court granted the motion in part in an order that enunciated “two overarching conclusions”: (1) that “under the standing test enunciated in Assoc. Gen. Contractors of Cal. v. Cal. State Council of Carpenters, 459 U.S. 519 (1983)(‘AGC’), plaintiffs lacked antitrust standing to assert their claims under both the California Cartwright Act and 13 state antitrust statutes, for all claims based on purchases of products in which DRAM is a component,” and “further granted defendants’ motion for lack of standing with respect to 3 more state antitrust statutes, regardless whether those claims were based on purchases of non-component DRAM, or products in which DRAM is a component”; and (2) that the class action claims “under various states’ consumer protection statutes failed, on grounds that the claims were untimely, had procedural deficiencies, or else failed to state a valid claim for relief.” The district court granted plaintiffs’ leave to amend, “but only as to three specific state laws – South Dakota, New York, and Rhode Island.” In re DRAM, at 2. Plaintiffs did so, but then sought leave to further amend the class action complaint believing they could overcome the concerns expressed by the court in its June 2007 order; defense attorneys opposed the motion on the ground of futility, but the court granted leave to amend and a second amended class action complaint was filed. Id., at 2-3. Defense attorneys moved to dismiss certain claims therein, id., at 3.
Defense attorneys advanced six arguments, but this article focuses on only one – viz., whether plaintiffs have standing under AGC to prosecute the antitrust class action claims. This part of the motion targeted plaintiffs’ claims under California’s Cartwright Act, and for relief under 15 of the 22 states’ antitrust and unfair competition laws placed at issue by the class action complaint. In re DRAM, at 4. The district court’s June 2007 order had concluded that plaintiffs lacked standing because they failed to demonstrate “injury in his business or property” by “reason of anything forbidden in the antitrust laws,” and the prudential pre-requisites associated with this requirement. Id., at 4-5. Plaintiffs argued that their new allegations in the second amended class action complaint supported a finding of antitrust standing. Id., at 5.
In its June 2007 order, the court had concluded that four AGC factors – “the nature of plaintiffs’ injury (i.e., antitrust injury), the directness of the injury, the speculative nature of the harm, and the complexity in apportioning damages” – each weighed against a finding of standing.” In re DRAM, at 6. Defense attorneys focused on these four factors in attacking the second amended class action complaint, id. After a lengthy and detailed factual analysis, see id., at 6-15, the district court concluded that plaintiffs’ new allegations did not cure the standing deficiencies. In this regard, the court opined that the “most critical AGC factor…is that of antitrust injury,” id., at 6, and found that whether the DRAM and computer markets were “inextricably linked” such that plaintiffs may be deemed to have “adequately alleged market participation” was the central issue, id., at 8. On this point, the court found, based on the particular facts of the case, that controlling case law did not provide a “ready answer” to this question, id., at 13. Neither side presented a compelling argument, but the federal court concluded “on balance” that the amendments to the class action complaint failed to solve the standing deficiencies. Id., at 13. Rather, “while both parties present earnest and thoughtful arguments on the issue, the court finds that neither side provides a convincing answer to what types of allegations satisfy the ‘same market’ requirement, or as to whether plaintiffs’ revised allegations should be treated the same as would be allegations stating that plaintiffs are participating in the ‘same market’ as defendants.” Id. Nonetheless, while recognizing the “potentially devastating effect of this ruling on plaintiffs’ case in chief,” id., at 15, and that “if ever there a situation in which two related markets should be declared tantamount to the same market, this is likely it,” id., at 14,, it concluded that plaintiffs’ new allegations failed to cure the deficiencies in the original class action complaint and, thus, reaffirmed its prior ruling that plaintiffs lacked antitrust standing, id., at 15.
The remaining five arguments – “whether plaintiffs have standing to assert claims under the consumer protection statutes of Nebraska, New York, and North Carolina; whether plaintiffs’ amended claims pursuant to the consumer protection statutes of New York and Rhode Island have been properly stated; whether plaintiffs’ unjust enrichment claim fails as a matter of law; whether claims previously dismissed without leave to amend other than antitrust standing should once more be dismissed here; and whether named plaintiff Robert Cademy should be dismissed,” In re DRAM, at 3-4, are discussed at pages 15 through 24 of the court’s opinion.