When we last wrote about In re Aluminum Warehousing Antitrust Litigation (Direct Purchaser Plaintiffs), Index No. No. 14-cv-3116-PAE (S.D.N.Y.), United States District Judge Paul A. Engelmayer had recently denied class certification. (See post here.) In this post, we will be doing a quick catch-up on last years’ decision on Defendants’ motion for summary judgment against claims brought by the Individual Purchaser (“IPs”) and First Level Purchaser Plaintiffs (“FLPs” and the subsequent briefing of the still-pending appeal.
In granting Defendants’ motion for summary judgement against these two groups of plaintiffs, the Court set aside the question of merits and focused on the causal distance between defendants’ conduct and plaintiffs’ harms. The relationship is indeed an attenuated one. The producers of aluminum – that is, the smelters who create primary aluminum, and who are unrelated third parties for the purpose of this litigation – sell their product in two ways: first, to manufacturers and processors (like the Individual Purchasers and First Level Purchasers here) who use primary aluminum in industrial processes or to generate finished products; and, second, to traders and financial institutions (like the financial Defendants here) who simply hold and re-sell the primary aluminum. All but one of the IP and FLP Plaintiffs made their aluminum purchase exclusively from non-Defendants (with the other Plaintiff buying just 5% of their total from a Defendant), but still sought damages arising from their purchase of aluminum at inflated prices, arguing that Defendants’ anticompetitive conduct increased regional premiums associated with their purchases of primary aluminum from the smelters.
Given the lack of direct contact between the IP and FLP Plaintiffs and the Defendants, the question to be answered was whether these Plaintiffs were the most efficient enforcers of the antitrust laws—and thus plaintiffs with proper antitrust standing? In arguing that they were not, Defendants relied on a line of cases following the 2016 decision in Gelboim v. Bank of Am. Corp., 823 F.3d 759 (2d Cir. 2016) and dismissing antitrust claims in benchmark manipulation cases where those plaintiffs had not transacted directly with defendants. Plaintiffs in this line of cases had argued in favor of “umbrella” claims, on the theory that market-wide harms arising from the rigged benchmark extended to transactions to which the “cartel members” were not parties. But, Defendants argue, their conduct—whether or not truly anticompetitive—did not directly cause plaintiffs’ injuries because of the intervening transactions between plaintiffs and third-party sellers. The IP and FLP Plaintiffs counter, first, that their status as “efficient enforcers” is already law of the case; and, second, that their claims are distinguishable from the Gelboim line because “defendants’ illicit conduct aimed at driving up the MWP premium demonstrable and directly caused them injury.”
The Court dismissed the first of Plaintiffs’ arguments, observing that—to the extent Plaintiffs rely on a 2015 decision denying a motion to dismiss on efficient-enforcer grounds—the “law-of-the-case doctrine does not preclude a district court from granting summary judgment based on evidence after denying a motion to dismiss based only on plaintiff’s allegations.” Plaintiffs’ arguments based on the Second Circuit’s earlier appellate decision are also not persuasive, the Court held, because neither party raised the efficient-enforcer issue on appeal at that point in time, and thus “the Second Circuit did not consider, let alone decide, that question.”
On the merits, the Court also sided with Defendants. While, as stated above, the Court assumed in Plaintiffs’ favor the steps in the causal chain presenting a merits or damages question, the Court found that one step along, “the independent decision by non-defendant sellers to charge plaintiffs a price containing the allegedly inflated MWP [] breaks the chain of causation between defendants’ actions and plaintiffs’ injury.” This holding was based in large part on evidentiary showings (namely, contract terms) that the decision to charge customers the MWP was an independent pricing decision by smelters, and not the inevitable result of the conspiracy. More than 30% of the relevant contracts did not expressly incorporate MWP, which led the Court to conclude that—even if Plaintiffs were harmed by paying an inflated MWP, and even assuming that the inflation was due to the Defendants’ illicit actions—the proximate cause of that pricing was a decision of a third party, and not the defendants. Also important to the Court was the “readily ascertainable” existence of more direct purchaser plaintiffs—including two plaintiffs in this action who made substantial portions of their purchases from Defendants, and against whom the Defendants did not move for summary judgment.
In April 2021, the Plaintiffs filed a notice of appeal of this order, as well as the prior motion denying summary judgment. The IP and FLP Plaintiffs filed separate appellate briefs (see here and here), to which Defendants replied jointly (here). The arguments in the appellate court largely mirrored the above discussion. The IP Plaintiffs’ opening brief disputed the District court’s holding that their injuries were “indirect,” arguing that “fatal flaw” was that the decision “treat[ed] the (disputed) existence of some ability to negate the inclusion or exclusion of the premium, the some parties at some point in time, as a legally conclusive fact that breaches the chain causation for all purchasers[.]” The FLP Plaintiffs’ brief joined the LP’s arguments concerning their “efficient enforcer” status, and otherwise focused on their appeal of the class action decision. Defendants’ appellee brief stressed the “unusually complex and attenuated chain of causation,” one which “involve[d] at least five separate steps,” and whose complexity must render Plaintiffs’ claims “indirect” under the first-step rule—a doctrine which requires that injuries proximately caused by an antitrust violation be those “that happen at the first step following the harmful behavior.”
The appeal was fully briefed in December 2021, and oral argument has not yet been scheduled. We’ll be sure to post when we do have a decision. Aside from the appeal, next up in this case is briefing on Defendants’ summary judgment and Daubert arguments against the remaining Defendants. The parties agreed to—and the court has approved—a staggered filing schedule, with a three-week delay between the filing of their initial, sealed briefs and subsequent public, redacted versions. That means that we won’t see opening briefs until early February, so keep your eyes open for a follow up post in a few weeks.
This post was written by Alexandra M.C. Douglas.