Sixth Circuit Saves Air Conditioner Manufacturer’s Claims From The Deep Freeze

The United States Court of Appeals for the Sixth Circuit has revived the antitrust claims of Carrier Corporation, the world’s largest manufacturer of air conditioners, which is suing producers of copper tubing for allegedly participating in an international customer and market allocation scheme.

The Sixth Circuit reversed the U.S. District Court for the Western District of Tennessee, which had dismissed the complaint in Carrier Corporation et al. v. Outokumpu Oyj et al., which alleges violations of the Sherman Act and the Tennessee Trade Practices Act.

In 2006, Defendants-Appellees Outokumpu Oyj, Outokumpu Copper Products Oy, Outokumpu Copper, Inc., and Outokumpu Copper Franklin, Inc. (collectively “Outokumpu”) filed their motion to dismiss, which the district court granted for lack of subject matter jurisdiction and failure to state a claim.  Plaintiffs-Appellants Carrier Corporation, Carrier SA, and Carrier Italia S.p.A. (collectively “Carrier”) appealed the district court’s dismissal of the complaint.

Carrier, along with its affiliates, is the world’s largest manufacturer of air conditioning and commercial refrigeration equipment, and consequently one of the world’s largest purchasers of air conditioning and refrigeration copper tubing.  Carrier alleges that between 1988 and 2001, the Defendants conspired to raise the price for copper tubing by developing a “customer and market allocation scheme” under which “Carrier’s business in the United States was allocated to the Outokumpu defendants.”  According to the complaint, the other conspirators agreed not to pursue Carrier’s business, resulting in “artificially inflated and supra-competitive prices for ACR Copper Tubing in the United States, Europe, and elsewhere.”

Carrier supported these allegations by citing to European Commission (“EC”) decisions which found that Outokumpu and other European companies participated in a conspiracy to coordinate the prices of ACR copper tubing and plumbing tubes sold in the European market.  Carrier also cited the complaint’s allegations of circumstantial evidence that the market allocation scheme reached beyond the European markets and into the United States.  In granting Outokumpu’s motion to dismiss, the district court observed that the complaint merely cut-and-pasted facts from the EC decisions in a manner that was “wholly insubstantial.”

However, the Court of Appeals ruled that the district court erred in granting the motion to dismiss, stating that Carrier’s suit presented valid arguments despite its heavy reliance on the EC decisions.  The appellate court noted that “[t]he mere fact that the complaint borrows its substance from the EC decision[s] and then builds on the EC’s findings does not render its allegations any less valid.  Furthermore, even if all of the facts taken from the EC decisions were stripped from the complaint, Carrier’s complaint still offers additional allegations.”

Tagged in: Antitrust Litigation, Price Fixing,