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In re Capacitors Antitrust Class Action Litigation Survives Motion to Dismiss

Direct and indirect capacitor purchasers who filed class action complaints against an alleged worldwide cartel of capacitor manufacturers have, for the most part, survived a motion to dismiss in the Northern District of California before Judge James Donato.  The opinion is available here.  Capacitors are, as the court stated, a “ubiquitous” unit in electronic circuits, used almost universally to store energy on a short-term basis and smooth the flow of energy through a circuit.

Defendants in the case are foreign manufacturers of capacitors, many of which are based in Japan, and their U.S. subsidiaries.  The case consists of putative class actions against capacitor manufacturers on behalf of four named direct purchasers (DPPs) and five named indirect purchasers (IPPs) of defendants’ electrical components.  These plaintiffs allege that defendants formed a cartel and restrained trade in violation of Section 1 of the Sherman Act, artificially raising prices and suppressing competition.  The classes’ allegations of wrongdoing are quite similar, although there are also some “substantial differences” the court noted between the conduct and type of conspiracy alleged by the DPPs and IPPs.

The DPPs have alleged a single cartel in “aluminum, tantalum and film capacitors” that began in 2003 and has continued to the present.  Although defendants argued that the allegation of a single overarching conspiracy in the market for multiple types of capacitors was implausible on its face, the court found that the complaint had “sufficient grounding” in its allegations of an illegal agreement among the defendants.  Responding to defendants’ criticism of the DPPs’ “single conspiracy” approach, the court noted that “there simply is no requirement that an antitrust plaintiff draw the boundaries of the alleged conspiracy (or conspiracies) in a complaint with the precision of a diamond cutter.”

The IPPs are “first-level” indirect purchasers, who purchased capacitors from distributors, who themselves purchased the capacitors from defendants.  The IPPs alleged two separate conspiracies, one to fix the prices of electrolytic capacitors, and the other to fix the prices of film capacitors. The former has a start date of January 2003, they allege, while the latter dates to January 2007. The IPP complaint seeks injunctive relief under the Sherman Act, treble damages under California’s Cartwright Act, and restitution or disgorgement under California’s Unfair Competition Law, relief not sought in the DPP complaint. The court held that the IPPs provided adequate allegations of the two conspiracies with respect to the majority of the defendants. The court also rejected defendants’ arguments that the IPPs lacked standing.

Not all of the claims survived dismissal. Complaints against a handful of defendants were dismissed as factually insufficient. Claims against certain U.S. subsidiaries of foreign manufacturers were also dismissed, without prejudice, for a failure to allege that the subsidiaries actually joined the conspiracy.  The court found that these entities “were sued because they belong to an alleged family of conspirators rather than on the basis of specific allegations against them individually.”

The court dismissed nationwide class claims, under the Cartwright Act and the California Unfair Competition Law, from the IPP complaint because of the potential for a conflict with the laws of other states should the court apply California law to a nationwide class. The court also dismissed allegations of unjust enrichment from the IPP complaint, on the grounds that unjust enrichment under California law is a remedy, not an independent cause of action.

In addition to this lawsuit, as both the IPP and the DPP complaints referenced, there are currently multiple government antitrust investigations in the United States and abroad into potentially anticompetitive practices in the capacitor industry.  Although the court made clear in its order that “the government investigations alleged by plaintiffs carry no weight” in the motion to dismiss analysis, evidence gathered as part of those investigations may come to light in the event that an amnesty applicant with DOJ seeks to cooperate with class action plaintiffs to avoid treble damages under ACPERA.