Court Opinion

ID: 183852
Source: CourtListenerOpinion
Date Created: 2011-01-28 20:53:20+00
Date Added: 2024-06-11T17:26:04.831029
License: Public Domain

NOT PRECEDENTIAL

                   UNITED STATES COURT OF APPEALS
                        FOR THE THIRD CIRCUIT
                             _____________

                                  No. 09-1487
                                 _____________

               IN RE: ASPARTAME ANTITRUST LITIGATION

                NOG, INC; SORBEE INTERNATIONAL, LTD.,
                                           Appellants
                             _____________

                On Appeal from the United States District Court
                     for the Eastern District of Pennsylvania
                        District Court No. 2-06-cv-01732
                District Judge: The Honorable Legrome D. Davis
                                  _____________

                Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
                               January 25, 2011

            Before: McKee, Chief Judge, and SMITH, Circuit Judges
                       and STEARNS, District Judge*

                            (Filed: January 28, 2011)

                            _____________________

                                   OPINION
                            _____________________

SMITH, Circuit Judge.

*
 The Honorable Richard G. Stearns, United States District Judge for the District of
Massachusetts, sitting by designation.

                                         1
      This is an antitrust matter arising under Section 1 of the Sherman Act, 15

U.S.C. § 1. Plaintiffs Nog, Inc. and Sorbee International, Ltd. represent a putative

class of direct purchasers of Aspartame, an artificial sweetening product.

Defendants are producers of Aspartame and entities related to its production,

distribution, and supply. According to the complaint, defendants conspired to,

inter alia, fix the price of Aspartame. Plaintiffs allege that this anticompetitive

activity began no later than January 1, 1993, and that it persisted until December

31, 2003. The complaint characterizes this time frame as the class period.

      Plaintiffs commenced suit on April 25, 2006. Before this date, however, it

had been a number of years since either entity actually purchased Aspartame.

Sorbee‟s last product acquisition occurred in 2001. Nog had not purchased the

sweetener since 1995. Defendants zeroed in on this time lapse and moved to

dismiss the complaint for falling outside of the four-year statute of limitations

applicable to federal antitrust claims. Plaintiffs defeated the motion by attributing

any delay to defendants‟ efforts to fraudulently conceal their anticompetitive

behavior. In a thorough memorandum addressing the motion, the District Court

recognized that plaintiffs‟ factual allegations were “not robust.” At the same time,

the Court emphasized that statute of limitations issues generally should be

adjudicated “on a developed factual record.” Thus, the parties were permitted to

proceed to discovery.

                                           2
      Defendants deposed two key witnesses during the discovery period. The

first was Nog‟s president and Rule 30(b)(6) designee, Bruce Ritenburg III.

According to Ritenburg, Nog purchased Aspartame from defendant NutraSweet on

three occasions in 1994 and 1995. The company procured a total of 13.23 pounds

of the product, for which it paid $454.00. Ritenburg testified that at the time of

their purchase, NutraSweet was the lone supplier in the market. He stated that

although he believed “the price [for Aspartame] was out of sight,” no one at Nog

complained to NutraSweet or attempted to negotiate a price reduction. Ritenburg

also conceded that he made no effort to investigate the price of Aspartame or the

Aspartame market. When pressed, Ritenburg acknowledged that he “didn‟t take

any steps [between 1993 and 2003] to investigate [Nog‟s] claims or to exercise due

diligence.” He added, “I guess I didn‟t take it too seriously as far as getting out

there and investigating all of these things.”

      David Waxler, Sorbee‟s vice president and 30(b)(6) designee, provided a

similar account. Between 1997 and 2001, Sorbee purchased at least $47,500 worth

of Aspartame. Waxler was unable to say how Sorbee determined an appropriate

purchase price. He did not know whether Sorbee negotiated a price or whether the

company made any attempt to procure Aspartame at a lower rate. Furthermore,

Waxler was unable to answer the most basic questions concerning the Aspartame

market; he admitted that he had no understanding of the balance of supply and

                                           3
demand, the fluctuation in the price of raw materials, or the prevailing price

tendered by other direct purchasers. At one point, defense counsel asked, “Is there

anything that you know that the company did during th[e class] period to exercise

due diligence?” Waxler responded, “No.”

      Defendants eventually moved for summary judgment on statute of

limitations grounds. The District Court granted the motion and held that (1)

plaintiffs‟ Sherman Act claim accrued well outside the four-year period within

which antitrust plaintiffs must initiate suit, and (2) plaintiffs failed to come forth

with sufficient evidence to toll the limitations period under the doctrine of

fraudulent concealment. Plaintiffs later sought reconsideration of this ruling, but

their request was denied. We have jurisdiction over this timely appeal pursuant to

28 U.S.C. § 1291, and we review the order granting summary judgment de novo,

EBC, Inc. v. Clark Bldg. Sys., Inc., 618 F.3d 253, 262 (3d Cir. 2010).

      A suit under the Sherman Act must be “commenced within four years after

the cause of action accrued.” 15 U.S.C. § 15b. “[A]n antitrust cause of action

generally „accrues . . . when a defendant commits an act that injures a plaintiff‟s

business.‟” W. Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 105-06

(3d Cir. 2010) (quoting Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S.

321, 338 (1971)). A plaintiff suffers antitrust injury by purchasing a product

whose price was anticompetitively fixed. See Klehr v. A.O. Smith Corp., 521 U.S.

                                            4
179, 189 (1997). There is no question here that the plaintiffs‟ injury—assuming

they suffered one—occurred well outside the four years allotted by statute.

Plaintiffs attempt to overcome this shortcoming by invoking the equitable doctrine

of fraudulent concealment.

      The doctrine of fraudulent concealment works to toll the limitations period

set forth by statute “when a plaintiff‟s cause of action has been obscured by the

defendant‟s conduct.” In re Linerboard Antitrust Litig., 305 F.3d 145, 160 (3d Cir.

2002), cert. denied, 538 U.S. 977 (2003). For the doctrine to apply, the plaintiff

must prove the existence of the following: “(1) fraudulent concealment; (2) failure

on the part of the plaintiff to discover his cause of action notwithstanding such

concealment; and (3) that such failure to discover occurred [notwithstanding] the

exercise of due care on the part of the plaintiff.” Id. (quoting 70 A.L.R. 498

(1984)). At summary judgment, the plaintiff must come forward with evidence to

support each of these three prerequisites. See Forbes v. Eagleson, 228 F.3d 471,

487 (3d Cir. 2000) (“Absent evidence to support these findings there is no genuine

dispute of material fact on the issue and the defendants are entitled to summary

judgment.”), cert. denied, 533 U.S. 929 (2001).

      The District Court held that plaintiffs failed to come forth with evidence

sufficient to satisfy either the second or third elements of the fraudulent

concealment inquiry. We need not address the second element, for we find that the

                                           5
third element is dispositive here. Even if we assume that defendants fraudulently

concealed their anticompetitive conduct, there is simply no evidence to show that

plaintiffs exercised the level of due care necessary to toll the limitations period.

      A plaintiff who neglects to “take reasonable measures to uncover the

existence of injury” is not entitled to the benefit of the fraudulent concealment

doctrine. Id. at 486 (quoting Oshiver v. Levin, Fishbein, Sedran & Berman, 38

F.3d 1380, 1390 (3d Cir. 1994)). It is undisputed that neither Nog nor Sorbee

made any attempt to ensure that the price they paid for Aspartame was not the

product of price-fixing. In fact, when asked what steps their respective employers

took to exercise due care during the class period, both 30(b)(6) designees admitted

that they took none. Plaintiffs contend that their complete inactivity is justified by

the sophistication of defendants‟ concealment; in other words, they argue that until

there is some outward indication of a price-fixing conspiracy, plaintiffs cannot be

expected to do anything at all.

      This argument would surely be more persuasive if it were factually accurate.

It is not. The District Court identified three “storm warnings” that, taken together,

triggered a duty to exercise due care: (1) in the mid-1990s, plaintiffs believed that

the purchase price of Aspartame was “out of sight,” and defendant NutraSweet was

the sole supplier in the market; (2) several anti-competition suits were filed in

foreign jurisdictions naming some of the above-captioned defendants and alleging

                                           6
price-fixing in the Aspartame market; and (3) the 1993 publication of an academic

study that depicted the contours of the Aspartame market. According to the Court,

these “„red flag[s]‟ . . . collectively revealed significant barriers to entry and lack of

competition in the Aspartame market.” We agree that the first two warnings

identified by the Court triggered a duty to exercise reasonable diligence. Although

these warnings were not particularly ominous, they certainly required plaintiffs to

do something. See Prudential Ins. Co. of Am. v. United States Gypsum Co., 359

F.3d 226, 238 (3d Cir. 2004) (“The more ominous the warnings, the more

extensive the expected inquiry.” (quoting Mathews v. Kidder, Peabody & Co.,

Inc., 260 F.3d 239, 255 (3d Cir. 2001))). Instead, both parties sat on their hands.

Equity will not excuse such unjustified inactivity. The order of the District Court

granting summary judgment will be affirmed.

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