On March 26, 2015, U.S. District Judge Katherine Forrest of the Southern District of New York, in a very colorful decision that metaphorically describes the plaintiffs as cats trying to locate a “rat” in the world of aluminum warehousing, denied defendants’ motion to dismiss in In re: Aluminum Warehousing Antitrust Litig. Aluminum is a multi-district litigation in which plaintiffs, a class of direct purchasers of aluminum and a group of other companies that purchase aluminum products, allege that defendants, a group of financial institutions that trade financial instruments tied to metals and operators of warehouses that store metals, conspired to increase their commodities trading profits and warehouse revenues.

The defendants allegedly did so by conspiring to use their positions in the metal market to manipulate the prices for aluminum.  Specifically, plaintiffs alleged that defendants caused an increase in Platts Midwest Premium, which is used in setting aluminum prices, and limited the supply of aluminum, which in turn increased storage costs, delayed orders, and increased the cost of products made using aluminum.

Judge Forrest dismissed the indirect plaintiffs’ complaints in August and September 2014 for lack of antitrust standing.  The initial pleadings set forth theories that “left much to the imagination” and failed to articulate how and why the defendants participated in the alleged conspiracy, or how defendants benefited from their conduct.

Two sets of remaining plaintiffs – a class of “direct purchasers” of aluminum and a group of other companies suing outside that class, Agfa Corporation, Agfa Graphics, N.V., Mag Instrument, Inc., and Eastman Kodak Company – filed a joint amended complaint (“JAC”).  The remaining defendants include Goldman, Sachs & Co.; Goldman Sachs International; Metro International Trade Services LLC; J. Aron & Company; Mitsi Holdings LLC; Burgess-Allen Partnership Ltd.; Robert Burgess-Allen; JPMorgan Securities plc; Henry Bath LLC; Glencore AG; Glencore Ltd.; and Pacorini Metals USA LLC.  In her March 26 decision, Judge Forrest denied the motion to dismiss filed by defendants Agfa Corporation, Agfa Graphics, Mag Instrument, and Eastman Kodak, and granted in part the plaintiffs’ motions for leave to amend their complaints.

As an initial matter, Judge Forrest found that the direct purchaser plaintiffs have antitrust standing even though they are not competitors of defendants and do not directly consume defendants’ trading products or aluminum warehouse services.  Instead, plaintiffs have alleged that they suffered “collateral damage” from defendants’ conduct and the resulting dysfunction in the normal competitive price setting for aluminum since they are the “real world users” of aluminum whose demand creates the aluminum  market.  Under this theory, plaintiffs have suffered an  injury of the type the antitrust laws were designed to prevent, the Court held, and they have standing to bring this case.

Turning to plaintiffs’ Section 1 claim and whether the complaint pled plausible allegations of concerted action under Twombly, the Court found that “Plaintiffs have not done the world’s greatest job in explicating how all of the parts fit together, but they have done enough.”  She also found that “the conspiracy here is certainly not of the type which the antitrust laws have routinely dealt with,” but that this was not fatal at this stage of the case. Specifically, the Court highlighted the fact that plaintiffs fail to identify a single relevant market to examine anticompetitive effects but, rather, reference two markets — the primary aluminum market and the market for aluminum warehouse storage.  Accordingly, Judge Forrest opined that plaintiffs may ultimately struggle to fit their claims into “traditional rubrics” of antitrust law.

For the time being, however, Judge Forrest found the plaintiffs’ allegations, reflecting a complicated web of interactions among financial institutions and warehouses, to be sufficient to support their Section 1 and state law antitrust claims at this stage of the proceedings.  Contrary to defendants’ argument that plaintiffs failed to adequately define a cognizable market, the Court found that plaintiffs “checked the minimum boxes” by articulating a market for warehouse services that was allegedly restrained as a result of defendants’ conduct.   Judge Forrest credited plaintiffs’ assertion that the effect of defendants’ concerted actions was to raise the Platts Midwest Premium, which is commonly used as a component of the stated price in contracts for the purchase of aluminum. Plaintiffs also cited a sufficient number of emails and documents that they claim supported an inference of concerted action among defendants; Judge Forrest found that these documents support “some” inference that defendants were connected to the conspiracy and benefited from it, although whether such inferences will stand the test of time remains to be seen.

Judge Forrest dismissed certain of the “direct purchaser” plaintiff claims (e.g., the monopoly claim under Section 2 of the Sherman Act and a handful of state law claims) on the ground that they remained legally deficient.

The March 26 opinion and order states that discovery on the remaining claims in the case shall proceed immediately, with the parties to confer on a schedule.