Gov't of P.R. v. Hitachi Auto. Sys., Ltd. (In re Auto. Parts Antitrust Litig.)

IN RE AUTOMOTIVE PARTS ANTITRUST LITIGATION(Air Flow Meters) GOVERNMENT OF PUERTO RICO, Plaintiff, v. HITACHI AUTOMOTIVE SYSTEMS, LTD., HITACHI AUTOMOTIVE SYSTEMS AMERICAS, INC.,DENSO CORP., and DENSO INTERNATIONAL AMERICA, INC., Defendants.

Case No. 13-cv-2005

Case No. 20-cv-11208

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

January 15, 2021

Sean F. Cox United States District Court Judge

OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

I.

The center of this case is the car part known as an air flow meter. True to its name, this equipment "measure[s] the volume of air flowing into engines." (Case No. 14-cr-20559, ECF No. 1, PageID.4.) These engine parts are the focus of the latest part of this multidistrict antitrust litigation.¹ In the instant litigation related to air flow meters, the Government of Puerto Rico("Puerto Rico") filed a complaint last year. (Case No. 20-cv-11280, ECF No. 1.) Puerto Rico seeks at least $50 million under a state-law unjust enrichment claim as well as injunctive relief under the federal Clayton Act. In response, Hitachi Automotive Systems, Ltd., Hitachi Automotive Systems Americas, Inc., Denso Corp., and Denso International America, Inc. ("Defendants") moved to dismiss the case under Federal Rule of Civil Procedure 12(b)(6).

The parties have briefed the issues, and the Court held a Zoom hearing on January 7, 2021. For the reasons discussed below, the Court agrees with Defendants and grants their motion to dismiss.

II.

In deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court "construes the complaint in the light most favorable to the plaintiff, accepts the plaintiff's factual allegations as true, and determines whether the complaint 'contain[s] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.' " Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393, 403 (6th Cir. 2012) (alteration in original) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Court "need not, however, accept unwarranted factual inferences." Bennett v. MIS Corp., 607 F.3d 1076, 1091 (6th Cir. 2010) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The factual allegations must "raise a right to relief above the speculative level." Twombly, 550 U.S. at 555.

Puerto Rico alleges in its complaint: "The combination and conspiracy engaged in by the Defendants and their coconspirators allowed Defendants and their co-conspirators to be unjustly enriched at the expense of the consumers and governmental agencies of Puerto Rico." (ECF No. 1, PageID.3.)

Defendants make three arguments in support of its motion to dismiss. (ECF No. 9.) First, they assert that Puerto Rico fails to state a claim for injunctive relief under the Clayton Act; there is no threat of injury from an impending antitrust violation and, even if there were one, the suit would be too late. Second, Defendants argue that Puerto Rico's unjust enrichment claim is barred by state law. Finally, the Government of Puerto Rico does not have standing to assert these claims on behalf of its citizens, they say. On all three points, Puerto Rico disagrees. (ECF No. 20.)

Notably, there are two strikingly similar cases that courts recently decided against Puerto Rico. A summary of these will set the stage for the instant case.

First, Puerto Rico filed suit against flexible polyurethane foam companies in a case that was dismissed on February 27, 2020. See Puerto Rico v. Carpenter Co., 442 F. Supp. 3d 464 (D.P.R. 2020). In that price-fixing case, Puerto Rico alleged an antitrust conspiracy and sought relief pursuant to the Clayton Act as well as $50 million for unjust enrichment. See id. at 466-67. In 2010, lawsuits against companies in the foam industry had been consolidated in a multidistrict litigation. See id. at 470. Defendants moved to dismiss, making many of the same arguments advanced by Defendants here. See id. at 472. For reasons that will be discussed in more detail below, the court agreed with Defendants on each point and granted their motion to dismiss. See id. at 479.

Second, Puerto Rico filed suit against industrial producers of chicken meat in a case that was dismissed last summer. See In re Broiler Chicken Antitrust Litig., No. 16-8637, 2020 WL 4032932 (N.D. Ill. July 15, 2020). Puerto Rico filed a separate complaint nearly two years after that court had denied motions to dismiss against the direct-purchaser plaintiffs and others. See id. at *1. The court dismissed the claims under the Puerto Rico Antitrust Act and the theory of unjust enrichment as well as a parens patriae claim for damages. See id. at *2-5.

III.

A. Standing

In this case, the Court first considers whether Puerto Rico has standing to bring suit at all.

Parens patriae standing, from the Latin for "parent of his or her country," is a "doctrine by which a government has standing to prosecute a lawsuit on behalf of a citizen." Black's Law Dictionary (11th ed. 2019). The ability of a state (or territory) to sue individual defendants in federal court is governed by Alfred L. Snapp & Son, Inc. v. Puerto Rico ex rel. Barez, 458 U.S. 592 (1982). "In order to maintain such an action," the Supreme Court held, "the State must articulate an interest apart from the interests of particular private parties, i.e., the State must be more than a nominal party. The State must express a quasi-sovereign interest." Snapp, 458 U.S. at 607. The Snapp Court articulated at least two quasi-sovereign interests: "interest in the health and well-being—both physical and economic—of its residents in general" and "interest in not being discriminatorily denied its rightful status within the federal system." Id. The Court explained that "more must be alleged than injury to an identifiable group of individual residents." Id.

The Sixth Circuit recently considered this doctrine in holding that the State of Arizona did not have parens patriae standing to intervene in a case after a settlement was awarded. SeeChapman v. Tristar Prods., Inc., 940 F.3d 299 (6th Cir. 2019). The objections that the state wished to make were "indistinguishable from the objections which individual Arizonans might raise." Id. at 306. That is, "the only injury alleged is injury to an identifiable group of Arizonans" and Arizona as a state "has not shown any imperiled quasi-sovereign interests." Id. Other courts of appeal have followed similar logic in other cases. See, e.g., Missouri ex rel. Koster v. Harris, 847 F.3d 646, 652 (9th Cir. 2017) ("The complaint contains no specific allegations about the statewide magnitude of these difficulties or the extent to which they affect more than just an 'identifiable group of individual' egg farmers." (quoting Snapp, 485 U.S. at 607)).

In their motion to dismiss, Defendants here argue the following:

First, to the extent Puerto Rico seeks to bring claims on behalf of its citizens, it fails to plead facts demonstrating that its citizens could not vindicate their own interests through a class action—the preferred method for damages arising out of anticompetitive conduct—just as the EPPs did years ago. . . . Second, Plaintiff asserts that it brings suit "as parens patriae . . . to enforce public rights and to protect its residents from Defendants' unjust enrichment." But Plaintiff does not identify any such "public rights" associated with its claims, and "protecting" citizens "from Defendants' unjust enrichment" is merely another way of asserting its citizens' own claims for unjust enrichment. . . . Finally, Plaintiff's assertion that "Plaintiff, the population of Puerto Rico, and its consumers have sustained injury to their businesses or property" similarly fails to establish parens patriae standing because injury to the government's own business or property is not a quasi-sovereign interest.

(ECF No. 9, PageID.93-94.) Puerto Rico responds that it "has a legitimate and vital state interest in seeking a recovery for the economic harm that Defendants caused through their admittedly illegal conspiracy" and that its "present financial hardship is another factor demonstrating its interest and desire to seek relief on behalf of its population." (ECF No. 20, PageID.240-41.)

Defendants have the better of the argument. To be sure, certain citizens of Puerto Rico may have suffered an injury if they bought air flow meters that were at issue in this case. But PuertoRico does not explain how an injury to this "identifiable group of individual residents" amounts to a "quasi-sovereign interest." See Snapp, 458 U.S. at 607. Nor does the complaint contain "specific allegations about the statewide magnitude of these difficulties." See Koster, 847 F.3d at 652. As the defendants' brief persuasively argues, these injuries did not relate to public rights. And, as the defendants' brief correctly notes, neither the injury to the government's own property—if it indeed purchased these auto parts—nor financial hardship alone is sufficient for this type of standing.

Additionally, Puerto Rico maintains that it has standing based on its own statutes. The argument centers on the wording of 32 L.P.R.A. § 3341, which says the government of Puerto Rico has a right "in their capacity of 'parens patriae' to file a class suit on behalf of said consumers by reason of damages as well as injunction suits." According to Puerto Rico's brief, the state legislature "explicitly" recognizes Puerto Rico's ability to bring a suit such as this one. (ECF No. 20, PageID.238.) There is competing case law on this issue. One court stated that "Thirteen states and the Commonwealth of Puerto Rico . . . have expressly conferred parens patriae authority upon their Attorneys General." In re Cardizem CD Antitrust Litig., 218 F.R.D. 508, 521 (E.D. Mich. 2003). However, that broad statement does not specifically say that Puerto Rico can bring any type of case it wants on behalf of its citizens, including an equitable claim of unjust...