Haley Paint Co. v. EI DuPont De Nemours and Co.

Citations: 804 F. Supp. 2d 419; 2011 U.S. Dist. LEXIS 33349; 2011 WL 1197643Docket: Civil Action RDB-10-0318

Court: District Court, D. Maryland; March 29, 2011; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

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Haley Paint Company and Isaac Industries, Inc. initiated a class action lawsuit against E.I. Dupont De Nemours and Co., Huntsman International LLC, Kronos Worldwide Inc., and Millennium Inorganic Chemicals, Inc., alleging a conspiracy to fix the price of titanium dioxide in violation of Section 1 of the Sherman Act. The lawsuit, filed on April 12, 2010, is on behalf of all individuals and entities that purchased titanium dioxide directly from the defendants. The defendants have moved to dismiss the complaint, arguing that it fails to state a claim under the standards set in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal. The court has reviewed the parties' submissions and found no need for a hearing. The motion to dismiss has been denied. 

The court noted that when evaluating a motion to dismiss, the factual allegations in the complaint must be taken as true and viewed in the light most favorable to the plaintiffs. The plaintiffs' complaint spans 49 pages and 128 paragraphs, focusing on key facts. The defendants are major suppliers of titanium dioxide, controlling about 70% of global production capacity. Plaintiffs assert that, due to a declining market, the defendants conspired to fix and stabilize titanium dioxide prices from March 1, 2002, to the present. During this period, prices rose significantly, leading to billions in revenue for the defendants.

Defendants dominate the global titanium dioxide market, characterized by high entry barriers, requiring $450-500 million and three to five years to establish a new plant. Price fluctuations have been notable since the 1990s, with a decline due to overcapacity and customer consolidation, followed by a price drop in 2001. Plaintiffs assert that these conditions led Defendants to conspire around early 2002 to raise prices and improve profit margins. 

On January 24, 2002, a meeting in Finland set the stage for a series of price increases announced despite stagnant or declining demand. Subsequent increases were implemented in March and summer 2002, with further discussions at a Miami conference in 2003 where Defendants indicated more price hikes. Plaintiffs claim that numerous meetings, industry publications, and discussions with consultants helped facilitate this conspiracy, allowing Defendants to coordinate pricing strategies and minimize competitive undercutting. 

Despite reduced demand and costs, titanium dioxide prices rose significantly during the Class Period, with market leader Dupont's price announcements closely followed by other Defendants. A chart in the complaint details several price increases, all coordinated among the key players, indicating a clear pattern of price fixing among Defendants throughout the period.

The document outlines a series of titanium dioxide price increases by various defendants, including Dupont, Millennium, Kronos, Tronox, and Huntsman, from 2005 to 2008. Specific price points per effective date are listed, indicating a consistent increase among these companies. Notably, the increases occurred despite unfavorable market conditions, such as declining demand and manufacturing costs, suggesting that these actions may indicate collusion among the defendants. 

Additionally, the document mentions energy surcharges introduced in 2008, despite falling oil prices at that time. The plaintiffs allege that three price increases and two energy surcharges were announced within a 14-week period in 2008, further supporting claims of coordinated price-fixing behavior. The plaintiffs argue that this conspiracy has suppressed competition, leading to artificially high prices and deprived purchasers of competitive market benefits.

The summary touches on the legal standards relevant to the case, referencing Federal Rule of Civil Procedure 8(a)(2) regarding the requirements for a complaint and Rule 12(b)(6) which allows for dismissal if a claim lacks legal sufficiency. The document emphasizes that the alleged actions by the defendants have resulted in restrained and fixed pricing in a market where they control a significant portion of production capacity.

A complaint must be dismissed if it fails to present sufficient factual allegations to establish a plausible claim for relief, as outlined in *Bell Atl. Corp. v. Twombly*. The plausibility standard requires more than mere labels or formulaic recitations of legal elements. Courts may disregard conclusory statements and must assume well-pleaded factual allegations are true, even if they appear doubtful. However, legal conclusions do not receive judicial deference, and a complaint must contain factual content that allows for a reasonable inference of the defendant's liability. The standard does not require a probability of success but rather a showing of plausibility, which is evaluated through judicial experience and common sense.

In the context of Section 1 of the Sherman Act, which prohibits agreements that restrain trade, the plaintiffs must allege sufficient facts to suggest that such an agreement exists. Defendants have moved to dismiss the plaintiffs' consolidated amended complaint, asserting it does not meet the pleading requirements established in *Twombly*. The original *Twombly* case involved straightforward allegations of parallel conduct among regional telephone companies that hindered competition, leading to claims of conspiratorial behavior to prevent competitive entry in local markets. The underlying allegations included that the defendants mutually agreed not to compete and to allocate customers and markets among themselves.

The Supreme Court determined that the complaint was inadequate because it relied solely on allegations of parallel conduct and a mere assertion of conspiracy. The Court emphasized that parallel business conduct alone does not establish a claim under antitrust law; additional facts are required to rule out independent actions of the defendants. The Court clarified the distinction between pleading standards at the motion to dismiss stage and the summary judgment stage. At the motion to dismiss stage, the plaintiff need not eliminate the possibility of independent conduct but must provide plausible grounds for an inference of an agreement. The Court noted that a well-pleaded complaint may proceed even if actual proof seems improbable. It rejected the notion of a heightened pleading requirement for antitrust cases, affirming that Rule 8 only requires a "short and plain statement" demonstrating entitlement to relief.

The plaintiffs' Consolidated Amended Complaint surpassed mere conclusory allegations, presenting sufficient details to suggest price fixing in violation of the Sherman Act. Key elements included allegations of parallel price increases among defendants, industry characteristics that favor collusion, market conditions conducive to collusion, and opportunities for agreement through trade associations. The Court stated that allegations must be considered collectively rather than in isolation, supporting a plausible case for Sherman Act liability. The parallel price increases, while not definitive proof, indicated potential illegal agreements, especially given the defendants' control over the global titanium dioxide supply, which facilitated monitoring of each other’s actions. Additionally, allegations of attendance at industry meetings and private discussions regarding pricing were cited as practices that could facilitate undetectable price fixing.

Plaintiffs' complaint regarding price increases by Defendants highlights that these increases occurred during a period of declining demand for titanium dioxide and reduced manufacturing costs, particularly during the 2008 recession when demand for related products diminished. Despite Defendants' arguments that their actions could be interpreted as competitive rather than collusive, the Court emphasizes that at this stage, Plaintiffs are only required to present a plausible allegation of conspiracy, not to disprove Defendants' explanations. After reviewing the complaint, the Court finds that Plaintiffs have met this plausibility standard, leading to the denial of Defendants' Motion to Dismiss. Separate orders were issued, including one addressing a fifth Defendant, The National Titanium Dioxide Company Ltd. (Cristal), which has filed its own motion concerning jurisdiction issues. Additionally, Plaintiffs identified three co-conspirators, including Lyondell Chemical Company, Tronox, Inc., and International Business Management Associates, with the latter's president alleged to have shared sensitive information among the parties. The Court notes the importance of the Twombly standard, which aims to prevent defendants from unnecessary burdens in responding to complaints lacking sufficient merit, and acknowledges that significant pricing changes by multiple competitors can imply a conspiracy, supporting the Plaintiffs' claims.