Posted: December 24, 2020

In re Aluminum Warehousing Antitrust Litigation: Update on Summary Judgment Briefing

In In re Aluminum Warehousing Antitrust Litigation, No. 13-MD-2481 (PAE) (S.D.N.Y.), briefing has been completed on defendants’ motion for summary judgment dismissing antitrust claims under the Sherman Act, 15 U.S.C. §1, et seq.  United States District Judge Paul A. Engelmayer held oral argument on December 11, 2020, and the motion is awaiting decision.  The transcript of oral argument has been withheld pending redactions.

The motion turns on whether plaintiffs are “efficient enforcers” under the antitrust law, entitled to pursue claims based on defendants’ alleged conspiracy to artificially inflate the price of primary aluminum sold for delivery in the United States.  Plaintiffs did not buy from the alleged conspirator defendants, but rather from non-party smelters.  Plaintiffs alleged that the price they paid was inflated by defendants’ conspiracy to create a bottleneck in the primary aluminum coming to market, which raised certain aluminum pricing benchmarks and, thereby, raised the price plaintiffs paid in purchasing primary aluminum from non-party sellers.

Defendants argued that claims by plaintiffs who had bought from sellers other than the alleged conspirators constitute “umbrella claims”, barred under the “efficient enforcer” doctrine.  In the Second Circuit, assessment of whether a plaintiff is an “efficient enforcer” considers “(1) the directness or indirectness of the asserted injury . . . ; (2) the existence of more direct victims of the alleged conspiracy; (3) the extent to which [plaintiffs’] damages claim is highly speculative; and (4) the importance of avoiding either the risk of duplicate recoveries on the one hand, or the danger of complex apportionment of damages on the other.” Gelboim v. Bank of Am. Corp., 823 F.3d 759, 778 (2d Cir. 2016) (internal citations omitted.)

Whether defendants’ “efficient enforcer” argument was barred by the “law of the case” doctrine.

Earlier in the case, the Hon. Katherine B. Forrest had denied a motion to dismiss brought by defendants on “efficient enforcer” grounds.  In re Aluminum Warehousing Antitrust Litig., 95 F. Supp. 3d 419 (S.D.N.Y. 2015).  Judge Forrest later dismissed plaintiffs’ claims for lack of anti-trust injury on summary judgment, without revisiting the question of “efficient enforcer” status.  The Second Circuit reversed that dismissal and reinstated plaintiffs’ claims, also without considering the question of “efficient enforcer” status.  Eastman Kodak Co. v. Henry Bath LLC, 936 F.3d 86, 94 (2d Cir. 2019).

Quoting Judge Engelmayer’s statement at a case management conference that “[w]hat Judge Forrest did in her supervision of this case that was unaffected by the appellate decisions seems to me to merit, if not conclusive deference, considerable deference”, and collecting authorities applying the “law of the case” doctrine, plaintiffs argued that it would be improper to reconsider their “efficient enforcer” status on summary judgment, Pl. Opp. Br.., 14, especially as, they claimed, there had been no changes in the facts or controlling law.

Defendants argued that Judge Forrest’s earlier decision did not consider the effect of the asserted “umbrella” nature of their claims on plaintiffs’ “efficient enforcer” status.  They further argued that a motion to dismiss does not bar subsequent review on summary judgment and, even if the law of the case were applicable, it is a discretionary doctrine and both factual developments in the record and the Second Circuit’s intervening decision in Gelboim, which sua sponte raised the question of whether umbrella plaintiffs qualified as “efficient enforcers” of the antitrust laws (823 F.3d at 772), argued against its application.  Def. Reply Br.., 1-5.

Whether summary judgment was warranted on “efficient enforcer” grounds as a substantive matter.

Defendants argued that plaintiffs lacked efficient enforcer standing under the four factors identified by Gelboim because: (1) their claims were fatally indirect (Mov. Br.., 9-20), (2) there were purchasers that had acquired aluminum directly from the defendants, who would be the better enforcers (Mov. Br., 20-22), (3) plaintiffs’ damages were speculative (Mov. Br., 22-2), and (4) plaintiffs’ claims presented complex apportionment questions and the threat of disproportionate liability (Mov. Br., 23-24).

In opposing plaintiffs’ argument that the Second Circuit’s finding in Eastman Kodak that plaintiffs had stated an antitrust injury precluded defendants’ motion for summary judgment, defendants argued that the Court of Appeals 1) had “focus[ed] on the sufficiency of the plaintiffs’ legal theory, rather than on their evidence”,  936 F.3d at 93 n.3, and 2) in any event had not considered indirect nature of plaintiffs’ claims on their status as efficient enforcers.

Were plaintiffs’ claims sufficiently direct?

In arguing that plaintiffs’ injuries were too indirect, defendants cited, among many other authorities, In re LIBOR-Based Financial Instruments Antitrust Litig., 2016 WL 7378980 at *45 (S.D.N.Y. 2016) (“Libor VI”) for the proposition that the “independent decision” of a nondefendant third party to incorporate a benchmark price into a contract with a plaintiff “breaks the chain of causation between defendants’ actions and a plaintiff’s injury”.  Defendants argued that the chain of causation was broken as to plaintiffs’ claims because they had similarly bought from independent non-parties who chose to incorporate into their contracts with plaintiffs the benchmarks that defendants were alleged to have manipulated.

In response, plaintiffs argued that they were directly injured because they were the first parties in the distribution chain to be affected by fluctuations in the benchmark that defendants manipulated, and that the manipulated premiums were “baked into” their contracts.  Thus, even if Judge Forrest’s earlier finding of direct injury were not immune to review, they argued, there was no basis to change her conclusion.

Defendants disputed plaintiffs’ contention that the manipulated premium was necessarily incorporated into plaintiffs’ contracts, insisting that its inclusion was a matter of collaborative choice by plaintiffs and those form whom they purchased.

Were more direct victims of the alleged conspiracy available to serve as efficient enforcers?

Defendants argued that purchasers that had acquired aluminum directly from them would be the better enforcers of the antitrust laws, and the undisputed existence of such persons weighed the second of Gelboim’s factors in their favor.

Plaintiffs responded that, apart from their own, previously-noted status as the first parties in the distribution chain to be affected by fluctuations in the benchmark, those purchasing directly from defendants had purchased “secondary”, or reconstituted aluminum, rather than the “primary” aluminum that plaintiffs had purchased from the smelters who had made it.  Citing Ill. Brick Co. v. Ill., 431 U.S. 720, 730 (1977), plaintiffs argued that, since secondary or indirect purchasers generally cannot sue for damages under federal antitrust law, there were no more direct victims in a position to serve as efficient enforcers.

Defendants, on reply, cited Apple Inc. v. Pepper, 139 S.Ct. 1514, 1520 (2019) to argue that plaintiffs had misread Ill. Brick Co., and that those who purchased directly from defendants would have standing to sue them, whether they had purchased “primary” or “secondary” aluminum.

Plaintiffs’ damages: highly speculative?

Defendants argued that the negotiation of individual contracts between plaintiffs and those who sold to them, and the absence of any direct role by defendants in those negotiations, rendered plaintiffs’ asserted damages unduly speculative.  In this regard, they relied on SonterraCapital Master Fund, Ltd. v. Barclays Bank PLC, 366 F. Supp. 3d 516, 547, 564 (S.D.N.Y. 2018) (““highly negotiated contracts . . . make the effect of [benchmark] manipulation highly speculative”) and LIBOR VI, 2016 WL 7378980, at *19 (“Gelboim expressed skepticism about the measure of damages in such highly negotiated transactions”).

Plaintiffs responded that it would not be difficult to determine the amount by which the price they paid was affected by manipulation of the benchmarks and, citing Gelboim, 823 F.3d at 779, argued that “the wrongdoer shall bear the risk of the uncertainty which his own wrong has created.”

Did the risk of duplicate recoveries/danger of complex apportionment of damage or the risk of disproportionate damages weigh against plaintiffs’ status as efficient enforcers?

Defendants conceded that plaintiffs’ claims did not pose a risk of duplicate recovery, but argued that “where non-defendant parties decided to incorporate [a benchmark] into transactions without Defendants’ knowledge, those decisions may make apportioning damages particularly complex.”  In re Platinum & Palladium Antitrust Litig., — F. Supp. 3d —, 2020 WL 1503538, at *10 (S.D.N.Y. 2020).

Plaintiffs responded that defendants had failed to show any unusual difficulty in apportionment and, in any event, “potential difficulty in ascertaining and apportioning damages is not . . .  an independent basis for denying standing” where proximate cause was adequately alleged.  Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 135 (2014).

Defendants also argued what they described as an issue related to apportionment  – disproportionate damages – and argued these would follow if plaintiffs’ claims were allowed to proceed.

Plaintiffs responded that the prospect of disproportionate damages is not an “efficient enforcer” factor.  In any event, they argued, defendants purchased and resold billions of dollars of aluminum as the price went from 4 cents to more than 20 cents a pound as a result of their price manipulations.  They argued that, as  defendants made hundreds of millions, if not billions, while plaintiffs’ estimate of class damages was less than a billion dollars, defendants had failed to show a risk of disproportionate damages.

This post was written by Schlam Stone & Dolan partner Thomas A. Kissane.

We welcome your feedback. If you have questions or comments about this post, please e-mail John M. Lundin, the Manipulation Monitor’s editor, at or Thomas A. Kissane at or call John or Tom at (212) 344-5400.

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