Energy Conversion Devices Liquidation Trust v. Trina Solar Ltd.

833 F.3d 680

Energy Conversion Devices Liquidation Trust, By and Through Its Liquidating Trustee, John Madden, Plaintiff–Appellant,

v.Trina Solar Limited; Trina Solar (U.S.), Inc. ; Yingli Green Energy Holding Company Limited; Yingli Green Energy Americas, Inc.; Suntech Power Holdings Co., Ltd.; Suntech America, Inc., Defendants–Appellees.

No. 15-2130

United States Court of Appeals, Sixth Circuit.

Argued: June 15, 2016

Decided and Filed: August 18, 2016

ARGUED: W. Gordon Dobie, Winston & Strawn LLP, Chicago, Illinois, for Appellant. Daniel E. Laytin, P.C., Kirkland & Ellis LLP, Chicago, Illinois, for Appellees. ON BRIEF: W. Gordon Dobie, William C. O'Neil, Kathryn W. Bayer, Winston & Strawn LLP, Chicago, Illinois, for Appellant. Daniel E. Laytin, P.C., Leonid Feller, James R.P. Hileman, Kirkland & Ellis LLP, Chicago, Illinois, Matthew J. Reilly, Karen M. Gift, Simpson Thacher & Bartlett LLP, Washington, D.C., Jerome S. Fortinsky, Shearman & Sterling LLP, New York, New York, Mikael A. Abye, Shearman & Sterling LLP, San Francisco, California, Catherine T. Dobrowitsky, Rivenoak Law Group, P.C., Troy, Michigan, Jonathan C. Sanders, Simpson Thacher & Bartlett LLP, Palo Alto, California, Patrick Seyferth, Bush Seyferth & Paige, PLLC, Troy, Michigan, for Appellees.

Before: SILER, ROGERS, and SUTTON, Circuit Judges.

OPINION

SUTTON, Circuit Judge.

Consumers benefit when market competition leads to lower prices. Competitors do not. Because antitrust law protects “competition, not competitors,” Brown Shoe Co. v. United States , 370 U.S. 294, 320, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962), courts are leery of antitrust claims brought by competitors alleging only that their rivals lowered prices and forced them out of business.

That is the claim Energy Conversion Devices pursues. It alleges that three solar-panel producers agreed to decrease prices to below-cost levels and, by doing so, drove the company into bankruptcy. Missing from the complaint is any allegation that the competitors not only agreed to lower prices but also planned to earn back what they lost—to recoup the losses by charging anti-competitive prices in a cornered market. In the absence of such an allegation or any willingness to prove a reasonable prospect of recoupment, the district court correctly rejected the claim on the pleadings. We affirm.

I.

As is always the case in reviewing a dismissal under Civil Rule 12(b)(6), we accept the facts as Energy Conversion, the plaintiff, has pleaded them.

Solar energy is not new. Seeking to reduce dependence on fossil fuels (and in some instances seeking to save money in the process), businesses and homeowners sometimes install solar panels on their roofs. Rooftop solar systems are not one type fits all. Two technologies are available for commercial and industrial purchasers. The older, conventional technology uses “[p]olysilicon-based” “flat” panels. R. 1 at 14. The newer technology uses “flexible thin-film silicon” panels. Id. Thin-film panels produce more electricity, are easier to install, and maintain their performance longer after the sun sets or is eclipsed by clouds.

At the time of the relevant events in this case, Suntech Power, Trina Solar, and Yingli Green Energy, all based in China, produced conventional panels. Energy Conversion, along with a number of other American manufacturers, produced the newer thin-film panels. The two technologies competed, each obtaining significant sales in the American market for commercial and industrial rooftops. Suntech reported up to $750 million in annual sales in that market in recent years, Trina $440 million, Yingli $340 million, and Energy Conversion over $300 million.

In the absence of restraints on trade, competition rarely is static. So too in this industry. The Chinese producers sought greater market shares. They agreed to export more products to the United States and to sell them below cost. A host of entities supported their endeavor. Suppliers provided discounts on silicon, a trade association facilitated cooperation, and the Chinese government provided below-cost financing. Between 2008 and 2011, the average selling prices of Suntech, Trina, and Yingli's panels fell over 60%.

The agreement took a toll on some domestic producers of solar panels. Struggling American manufacturers sought refuge, turning first to the Department of Commerce and the International Trade Commission, the agencies that administer this country's international trade laws. See generally 19 U.S.C. §§ 1671 –1677n. The agencies found that the Chinese firms had harmed American industry through illegal dumping. See Changzhou Trina Solar Energy Co. v. U.S. Int'l Trade Comm'n , 100 F.Supp.3d 1314, 1318–19 (Ct. Int'l Trade 2015) ; 80 Fed. Reg. 40,998 (July 14, 2015) ; 77 Fed. Reg. 31,309 (May 25, 2012). As a result, the agencies assessed substantial tariffs on several manufacturers, including Suntech, Trina, and Yingli.

The American solar-panel manufacturers nonetheless continued to suffer. Over twenty firms, including Energy Conversion, filed for bankruptcy or closed their operations. R. 1 at 17–18. As of 2012, shortly after Energy Conversion filed its Chapter 11 petition, there were still roughly thirty producers of solar panels in the United States. See Int'l Energy Agency, National Survey Report of PV Power Applications in the United States 2012, at 14 tbl.6 (2013), available at http://goo.gl/BJnsJq.

Energy Conversion turned from the executive branch to the judicial branch for additional relief. It filed this lawsuit in the Eastern District of Michigan. Invoking § 1 of the Sherman Act, 15 U.S.C. § 1, and its Michigan equivalent, Mich. Comp. Laws § 445.772, the company sought nearly $3 billion in treble damages. Its complaint boiled down to the allegation that the three Chinese companies had unlawfully conspired “to sell Chinese manufactured solar panels at unreasonably low or below cost prices ... in order to destroy an American industry.” Id. at 29. Because this allegation did not state that Suntech, Trina, and Yingli could or would recoup their losses by charging monopoly prices after they drove their competitors from the field, the district court dismissed the claim with prejudice. No. 13–14241, 2014 WL 5511517, at *3–7 (E.D. Mich. Oct. 31, 2014). And because the legal requirements of the Michigan antitrust statute mirror those of its federal cousin, the district court did the same for the state law claim. Id. at *7.

After the district court's ruling, Energy Conversion asked the court for permission to amend its complaint to add a recoupment allegation. The court rejected the request.

II.

On appeal, Energy Conversion argues that the district court erred (1) in dismissing the complaint for failure to plead that the Chinese companies would recoup their losses and (2) in preventing Energy Conversion from filing an amended complaint that added this allegation.

A.

The Sherman Act contains two prohibitions. Act of July 2, 1890, ch. 647, 26 Stat. 209. The first declares illegal “[e]very contract, combination ..., or conspiracy ... in restraint of trade.” 15 U.S.C. § 1. As suggested by the words “contract,” “combination,” and “conspiracy,” § 1 claims require two or more defendants. Am. Needle, Inc. v. Nat'l Football League , 560 U.S. 183, 190, 130 S.Ct. 2201, 176 L.Ed.2d 947 (2010). Here are a few types of claims, for illustrative purposes, recognized under this provision: “price fixing” between competitors, see United States v. Trenton Potteries Co. , 273 U.S. 392, 396–98, 47 S.Ct. 377, 71 L.Ed. 700 (1927) ; unreasonable “vertical” agreements between a supplier and its distributors, see Leegin Creative Leather Prods., Inc. v. PSKS, Inc. , 551 U.S. 877, 881–82, 127 S.Ct. 2705, 168 L.Ed.2d 623 (2007) ; “boycotts” of a seller by a group of buyers, see FTC v. Superior Court Trial Lawyers Ass'n , 493 U.S. 411, 421–24, 110 S.Ct. 768, 107 L.Ed.2d 851 (1990) ; and “predatory pricing,” Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 584 n.8, 588–93, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

The second prohibition punishes any “person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize” commerce. 15 U.S.C. § 2. As the language of this provision suggests, a plaintiff may bring a § 2 claim against a single monopolist (a “person who shall monopolize”) or against two or more (those who “combine or conspire ... to monopolize”). Am. Needle , 560 U.S. at 190, 130 S.Ct. 2201. Here are a few types of claims, for illustrative purposes, recognized under this provision: exclusionary conduct that allows a monopoly to unfairly maintain its position, see Lorain Journal Co. v. United States , 342 U.S. 143, 153–55, 72 S.Ct. 181, 96 L.Ed. 162 (1951) ; “tying” products together so a monopoly in one market becomes a monopoly in two, see Eastman Kodak Co. v. Image Tech. Servs. , 504 U.S. 451, 464, 480–86, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992) ; and “predatory pricing,” see Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp. , 509 U.S. 209, 222, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993).

1.

It is common ground that a predatory-pricing claim under § 2 requires the plaintiff to plead and prove (1) that the defendants charged below-cost prices, Brooke Grp. , 509 U.S. at 222, 113 S.Ct. 2578 ; and (2) that they “had a reasonable prospect ... of recouping [their] investment in below-cost prices,” id. at 224, 113 S.Ct. 2578. Had Energy Conversion filed this claim under § 2, the parties agree that we would have to dismiss it on the pleadings. The complaint alleges only that the three defendants charged below-cost prices, not that they had a fair prospect of recouping their investment by later charging non-competitive prices.

The question at hand is whether a § 1 predatory-pricing claim contains these same two requirements. Energy Conversion concedes that one requirement (below-cost prices) applies to both claims but not the other (recoupment).

Both claims—§ 1 and ...