Loeb Industries Inc v. Sumitomo Corp , 306 F.3d 469 ( 2002 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 00-3979, 01-1148
LOEB INDUSTRIES, INCORPORATED, LOS ANGELES SCRAP
IRON & METAL CORPORATION, and METAL PREP COMPANY,
INCORPORATED,
Plaintiffs-Appellants,
v.
SUMITOMO CORPORATION and GLOBAL MINERALS
AND METALS CORPORATION,
Defendants-Appellees.
____________
LOEB INDUSTRIES, INCORPORATED, LOS ANGELES SCRAP
IRON & METAL CORPORATION, and METAL PREP COMPANY,
INCORPORATED,
Plaintiffs-Appellants,
v.
JPMORGAN CHASE & CO.,Œ
Defendants-Appellees.
____________
ARGUED SEPTEMBER 5, 2001
____________
Œ
For purposes of this opinion we are using the current name of
the bank, which is JPMorgan Chase & Co. That entity includes
both J.P. Morgan & Co., Inc., and Morgan Guaranty Trust Co. of
New York.
2 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
Nos. 01-3229, 01-3230
OCEAN VIEW CAPITAL, INCORPORATED, formerly
known as TRIANGLE WIRE & CABLE, INCORPORATED,
Plaintiff-Appellant,
v.
SUMITOMO CORPORATION OF AMERICA,
SUMITOMO CORPORATION, GLOBAL MINERALS
AND METALS CORPORATION, et al.,
Defendants-Appellees.
____________
SUBMITTED SEPTEMBER 13, 2001ŒŒ
____________
No. 01-3485
VIACOM, INCORPORATED, as successor by
merger to CBS CORPORATION, formerly known
as WESTINGHOUSE ELECTRIC CORPORATION,
and EMERSON ELECTRIC COMPANY,
Plaintiffs-Appellants,
v.
GLOBAL MINERALS AND METALS CORPORATION
and CREDIT LYONNAIS ROUSE, LTD.,
Defendants-Appellees.
____________
ARGUED MAY 16, 2002
____________
ŒŒ
After an examination of the briefs and the record in Nos. 01-
3229 and 01-3230, we have concluded that oral argument is
unnecessary. Thus, those appeals are submitted on the briefs
and the record. See FED. R. APP. P. 34(a)(2).
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 3
Appeals from the United States District Court
for the Western District of Wisconsin.
Nos. 99 C 377, 99 C 468, 99 C 621, 99 C 801, 00 C 274,
00 C 528—Barbara B. Crabb, Chief Judge.
____________
DECIDED SEPTEMBER 20, 2002
____________
Before CUDAHY, ROVNER, and DIANE P. WOOD, Circuit
Judges.
DIANE P. WOOD, Circuit Judge. These cases, which we
have consolidated for purposes of this opinion, all arise
out of an alleged conspiracy in the 1990s to fix the price
of copper futures at artificially high levels on the interna-
tional exchange markets. This market manipulation nec-
essarily and directly inflated the price of the products
purchased by the plaintiffs, buyers of copper cathode,
copper rod, and scrap copper, who have sued for violations
of the Sherman Act, RICO, and various state laws. The
district court dismissed the claims of each of the plain-
tiffs either on the ground that their claims were barred
by the indirect purchaser rule of Illinois Brick Co. v. Illi-
nois, 431 U.S. 720 (1977), or on the ground that their in-
juries were too remote and speculative under Associated
General Contractors of Cal. Inc. v. California State Council
of Carpenters, 459 U.S. 519 (1983) (AGC). We find that
Illinois Brick presents no obstacle to any of the plaintiffs’
claims but that the claims of the scrap copper dealers are
precluded under AGC. On the other hand, we conclude that
the purchasers of copper cathode and rod have suffered
a direct and independent injury and are the best situ-
ated participants in the physical copper market to bring
a lawsuit. We therefore affirm in part, reverse in part, and
remand in part for further proceedings.
4 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
I
A. The Parties
The production of copper entails a complicated four-step
process. First, copper producers extract ore from a copper
mine and crush or mill it into a gravel-like substance
known as concentrate. Second, smelters separate out the
nonferrous metals in the concentrate, producing one-
meter square plates of anode, which are approximately
90% copper. Next, the anode is refined electrolytically to
create sheets of cathode. Finally, the cathode is fed into
a furnace at a mill and melted into rod or wire. In the
course of manufacturing cathode and rod, scrap copper
is also produced, and it too can be sold into the market.
The plaintiffs in these actions are large companies oc-
cupying various positions along the copper production
chain. The plaintiffs in No. 01-3485, Viacom, Incorporated
(a successor to Westinghouse Electric Corporation) and
Emerson Electric Company, turn copper cathode into wire
for resale to merchants. Each purchased hundreds of
millions of pounds of cathode during the relevant time
period from integrated producers, who smelt and refine
copper from their own mines into cathode.
Ocean View Capital is the plaintiff in Nos. 01-3229 and
01-3230. Until it went out of business in 1996, it was a
large Rhode Island-based manufacturer of copper wire
and cable. Unlike Viacom and Emerson, Ocean View nor-
mally did not purchase cathode; instead, it bought copper
that had already been transformed into rod. Some of this
rod was manufactured by integrated producers. Ocean View
also contracted frequently with semi-fabricators, which
own and operate rod mills but do not own mines, concentra-
tors, smelters, or refineries. Instead, semi-fabricators typ-
ically purchase cathode from producers or copper traders
and fabricate the cathode into rod. On some occasions,
Ocean View varied this process by entering into tolling
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 5
agreements with its semi-fabricators under which it pur-
chased its own cathode from producers or traders and
then paid the semi-fabricator to convert it into usable rod.
The plaintiffs in Loeb Industries v. Sumitomo, Nos. 00-
3979 and 01-1148, are three scrap metal dealers (to whom
we refer as the “Scrap Dealers”). Each purchases only
scrap copper; none buys either cathode or rod. The scrap
is purchased from a variety of sources, including inte-
grated producers and wire manufacturers, and then re-
packaged and resold.
B. The Copper Market
Despite the fact that copper is sold in a variety of physical
forms, the summary judgment record (viewed in the light
most favorable to the plaintiffs) indicates that the pric-
ing of copper is consistent throughout the industry. Like
many other commodities, copper is traded on commodities
exchanges through warrants and futures contracts. Most
copper futures are traded on either the London Metals
Exchange (LME) or the Commodities Exchange Divi-
sion of the New York Mercantile Exchange (known famil-
iarly as the “Comex”). When futures contracts mature, they
must either be closed out by an offsetting trade or sat-
isfied by deliveries of the underlying physical goods. If
a futures trader is short, she must satisfy her obligation
under the futures contract by immediately delivering phys-
ical copper cathode to an LME or Comex warehouse; if a
trader is long, she may similarly call in physical copper
cathode from a warehouse. Because of this, the price
of physical copper, including cathode, rod, and scrap cop-
per, is directly linked to the LME and Comex price for
copper futures, and dealers in all forms of physical copper
quote prices based on rigid formulas related to copper
cathode futures.
6 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
While sales between six plaintiffs and numerous other
copper industry participants are involved, we will illustrate
this linkage by discussing only the relationship between
one of the plaintiffs, Viacom, and the largest integrated
producer, Asarco. Viacom entered into yearly supply con-
tracts with Asarco, copies of which are included in the
record. In these contracts, the price Viacom paid Asarco
for cathode was made up of two components. First, the
base price was set by “the arithmetic average of the
COMEX first position settlements for high-grade copper
during the calendar month of scheduled shipment.” From
1990 to 1996, this price fluctuated from about 75¢/lb to over
$1.40/lb. Added to the base price was a “cathode premium”
that was set on a monthly or quarterly basis. Asarco’s
premium fluctuated over the relevant time period from
2.75¢/lb to 3.5¢/lb. The record also indicates that when the
base price of copper increased, the premium tended to
increase as well.
Viacom bought over half a billion pounds of cathode
from Asarco. Asarco manufactured most of this cathode,
but some had been purchased for resale from other mer-
chants to make up for production shortfalls. Because rec-
ords of these purchases were not kept, it is impossible to
tell whether any particular pound of cathode sold to Viacom
was manufactured by Asarco or merely purchased for
resale. The defendants concede, however, that some of the
cathode in question was being sold into the market for the
first time. While there is some dispute as to the exact
numbers, taking the evidence in the light most favorable
to Viacom, Asarco sold it 510 million pounds of cathode
over the relevant period. During this same time frame,
Asarco refined 6.4 billion pounds of cathode and purchased
153 million pounds from third parties. Therefore, even if
one assumed that every scrap of Asarco’s previously sold
cathode was shipped to Viacom (instead of to one of its
many other customers), Viacom still purchased 357 million
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 7
pounds of never-before-purchased cathode. Viacom seeks
damages in this suit only for cathode that was sold to it for
the first time by its integrated producers.
Asarco also purchased raw materials, such as concen-
trate and anode, to supplement its own production and
keep its smelters and refineries running at full capacity.
At least 27 million pounds of the cathode Asarco shipped
to Viacom consisted entirely of Asarco raw materials, but
the rest may well contain some percentage of previously
purchased materials. While raw materials are often priced
in reference to Comex prices, only cathode is actually traded
on the exchange. Raw material prices also incorporate
significant and widely varying discounts based on both the
cost of converting the materials into cathode and current
refining and smelting capacity. Furthermore, the defen-
dants’ experts testified that while the prices of raw ma-
terials “may be indirectly affected by the manipulations,”
a squeeze or corner on cathode could not directly harm
the purchasers of pre-cathode raw materials.
The pricing of rod and scrap are similar except that
each contains further premiums and discounts off the
cathode futures price to reflect a variety of additional costs.
Rod pricing contains an additional rod or shaping premium.
Scrap copper prices are affected by not only the price of
cathode but also freight costs, sizing, sorting, packaging,
and purity requirements.
Some of Viacom’s suppliers and customers engaged
in strategic hedging by purchasing “put” options on the
futures markets. A put option holder has the right, but
not the obligation, to sell a futures contract at an estab-
lished “strike” price. If the market price is higher than
the strike price (because, for example, the price has been
artificially raised), the holder’s option will expire and its
only cost will be the price of the option. Asarco purchased
put options to hedge its output, but it did not hedge
8 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
against specific transactions, by, for example, purchasing
a futures contract for each sale made to Viacom. Its hedg-
ing activities were also limited to a fraction of its sup-
ply. One of Viacom’s suppliers, Kennecott, did not hedge
at all, and Viacom itself never hedged its copper purchases.
C. The Conspiracy
Defendant Sumitomo Corporation is a Japanese trading
corporation that attempted to fix and maintain the price
of copper at artificially high levels from September 1993
to June 1996, all with an eye to enriching itself in its
capacity as a seller of physical copper. Through a series
of transactions with defendant Global Minerals and
Metals Corporation, a copper merchant, it hoarded vast
supplies of physical copper for the purpose of restricting
supply, and it entered into paper transactions in order to
show a false increased demand for the metal. In particular,
Sumitomo established sham long-term contracts that
purportedly required it to purchase vast quantities of
copper from Global on a monthly basis over a period of
three years. These sham contracts enabled Sumitomo
publicly to justify its accumulation of excessive copper
forward positions as a hedge. By June 1995, Sumitomo
held approximately ten percent of the entire long posi-
tion in Comex copper futures.
At that time, Sumitomo began to call in shorts to raise
copper demand to inflated levels and to reap the profits
from its sales. When these contracts came due, short
futures traders were forced to cover their positions by
acquiring physical copper at inflated prices, because no
new copper was entering the warehouses thanks to
Sumitomo’s actions. These manipulations caused the price
of primary copper to rise more than 50% over a two-year
period. In June 1996, the scheme was uncovered, and the
trading price for copper dropped by a third almost over-
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 9
night. The prices of physical copper cathode, rod, and scrap
crashed comparably.
In 1998, the United States Commodities and Futures
Trading Commission (CFTC) determined that Sumitomo
had violated the Commodity Exchange Act by raising
and fixing the price of copper futures and reached a settle-
ment with the company that required it to pay a $150
million fine. That finding has spawned a number of anti-
trust suits against the defendants, including class ac-
tion lawsuits on behalf of those who traded copper futures
and on behalf of certain purchasers of primary copper.
Sumitomo settled its suit with the futures traders for
approximately $134 million. The defendants have also
settled a California state court class action brought under
various state antitrust laws. Many of the plaintiffs’ sellers,
including Asarco, participated in the lawsuit and re-
ceived 0.15 cents per dollar of copper purchased.
II. Proceedings in the District Court
These lawsuits were all consolidated in the Western
District of Wisconsin by the Judicial Panel on Multidis-
trict Litigation. The defendants include not only Sumitomo
and Global, but also alleged co-conspirators Credit Lyon-
nais Rouse, Ltd. (CLR), and J.P. Morgan and Morgan
Guaranty Trust (which have since merged to form JPMor-
gan Chase & Co. and to whom we refer collectively as
JPMorgan Chase). The plaintiffs in each case sought
damages for the allegedly inflated overcharge in the price
of the copper products they had purchased, which was
caused by Sumitomo’s actions. The Scrap Dealers also
sought certification of a class under FED. R. CIV. P. 23
consisting of all metals dealers who purchased any form
of physical copper in commercial quantities between 1994
and 1996. The defendants moved to dismiss each of the
actions.
10 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
The district court first denied the motion to dismiss
Ocean View’s complaint on May 9, 2000. In re Copper
Antitrust Litig., 98 F. Supp. 2d 1039 (W.D. Wis. 2000). The
district court found that if the facts alleged in the com-
plaint were true, Ocean View was a proper party to sue
under the principles espoused by this court in Sanner v.
Board of Trade, 62 F.3d 918 (7th Cir. 1995). The court
also denied a motion to dismiss Viacom’s complaint on
similar grounds. It allowed both cases to proceed, but
limited discovery to the issue of standing.
The court next examined the claim of the Scrap Dealers.
It denied their motion for class certification, fundamentally
because it concluded that the proposed named plaintiffs
could not sue, either for their own injuries or for those
of others similarly situated, because they fell within the
ban on indirect purchaser suits established by Illinois
Brick, 431 U.S. at 720. The court decided in addition that
the proposed class would be unmanageable, because it
would be impossible to ascertain class membership. It then
turned to the defendants’ 12(b)(6) motion to dismiss. The
court found that the Scrap Dealers’ bare-bones allegations
were sufficient to state a claim, but that in light of deposi-
tion testimony and other facts adduced during litigation of
the class certification question, it would nonetheless grant
the motion based once again on the perceived Illinois Brick
flaw. The court did not, in so ruling, follow the command
of Rule 12(b)(6) to convert the motion to dismiss into a
motion for summary judgment under Rule 56, despite its
reliance on matters outside the complaint. The court also
dismissed the Scrap Dealers’ RICO allegations on the same
grounds.
Soon thereafter the district court granted JPMor-
gan Chase’s motion to dismiss all claims that the Scrap
Dealers had brought against it on the ground that the
plaintiffs were subject to offensive issue preclusion on the
pivotal question of their status as indirect purchasers.
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 11
After discovery closed in the remaining cases, the defen-
dants filed for summary judgment. On July 23, 2001, the
district court granted summary judgment to all of the de-
fendants on Ocean View’s claims, finding that Ocean View
had no right to sue under the antitrust laws both because
it was an indirect purchaser (Illinois Brick) and because
its injuries were too remote (AGC).
A month later, the district court granted summary
judgment to Global and CLR on Viacom’s claim. In con-
trast to its conclusions in Loeb and Ocean View, the court
here rejected the argument that the claim was barred
by Illinois Brick. Instead, it applied the factors set forth
in AGC and determined that a manipulation of the fu-
tures market would have effects too “subtle and complex”
to warrant recovery for these cathode purchasers. The
district court primarily relied on the following factors: (1)
the huge number of exchange-based pricing formulas
available on Comex; (2) the various premiums and dis-
counts available in the industry; (3) potential duplication
of recovery due to purchases of cathode and raw ma-
terials by the integrated producers who sold to Viacom;
(4) potential duplication of recovery due to hedging; and
(5) the complexity of the damages calculation. For similar
reasons, the district court also granted summary judg-
ment to the defendants on Viacom’s RICO claims. With the
federal claims gone, it finally dismissed Viacom’s state
law claims without prejudice.
III. Use of Rule 12(b)(6)
Before turning to the important antitrust issues under-
lying all of these appeals, we must deal with an issue of
federal civil procedure unique to the appeal of the Scrap
Dealers. They argue that the district court committed
reversible error by relying on outside materials in evalu-
ating the motion to dismiss without giving them notice
12 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
and an opportunity to submit additional materials. As
they correctly point out, Rule 12(b) requires that if the
district court wishes to consider material outside the
pleadings in ruling on a motion to dismiss, it must treat
the motion as one for summary judgment and provide
each party notice and an opportunity to submit affidav-
its or other additional forms of proof. Fleischfresser v. Di-
rectors of School Dist. 200, 15 F.3d 680, 684 (7th Cir. 1994).
This requirement of a reasonable opportunity to respond
is mandatory, not discretionary. Edward Gray Corp. v.
National Union Fire Ins. Co., 94 F.3d 363, 366 (7th Cir.
1996).
In this case, the district court stated that, considering
only the bare pleadings, it would find that the Scrap
Dealers had stated a claim. Notwithstanding this con-
clusion, relying on the materials and affidavits produced
for the earlier class certification hearing, it instead
granted the defendants’ motion dismissing the case. We
agree with the Scrap Dealers that this was error, and that
the district court should have given them notice of its
intentions and an opportunity to respond and produce
additional facts going beyond whatever might have been
appropriate for class certification purposes.
The question, however, is what the consequence of this
error should be. The Scrap Dealers assume that reversal
should be automatic, but this position overlooks the com-
mand of 28 U.S.C. § 2111, which directs appellate courts
to apply the harmless error rule to anything that does
not affect the “substantial rights of the parties.” We are
not aware of any case that holds that the command of
Rule 12(b)(6) to convert a motion to dismiss into a sum-
mary judgment motion is somehow exempt from § 2111.
The question for us is therefore whether the district
court’s error affected the Scrap Dealers’ substantial rights.
To answer that question, we must consider whether the
Scrap Dealers have shown us any evidence raising a
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 13
question of material fact that they would have submitted
to the district court had they been given proper notice of
the de facto conversion. Burick v. Edward Rose & Sons,
18 F.3d 514, 516 (7th Cir. 1994). If there are no potential
disputed material issues of fact, then the court’s reli-
ance on materials outside the pleadings is not by itself
ground for reversal despite the failure to follow appro-
priate procedures. Ribando v. United Airlines, Inc., 200
F.3d 507, 510 (7th Cir. 1999). Here, the dispute over
whether the Scrap Dealers were proper plaintiffs to sue
under the antitrust laws was a hard-fought issue in the
class certification hearings, and the Scrap Dealers de-
voted substantial portions of both their reply brief and
supplemental brief to the issue. Furthermore, the dis-
trict court provided an after-the-fact opportunity to the
Scrap Dealers to bring additional materials to its atten-
tion in the subsequent litigation against JPMorgan Chase.
See Edward Gray Corp., 94 F.3d at 366 (reversing where
plaintiff had no opportunity to submit materials that did
create a factual dispute). In light of these facts, we are
confident that the Scrap Dealers had a full opportunity to
bring all material factual disputes to the court’s attention.
Therefore, we will review dismissal of all of these actions,
as we would any other ruling on summary judgment,
drawing all disputed or potentially disputed factual infer-
ences in favor of the plaintiffs and deciding de novo whether
the defendants were entitled to judgment on the law.
Simmons v. Chicago Bd. of Educ., 289 F.3d 488, 491 (7th
Cir. 2002).
The Scrap Dealers also contend as a threshold matter
that the district court’s reliance on materials submitted
for the class certification hearing to rule against them
on summary judgment violates the dictates of Eisen v.
Carlisle & Jacquelin, 417 U.S. 156 (1974). This over-reads
Eisen, in our opinion. Eisen merely indicates that a court
may not refuse to certify a class on the ground that it
14 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
thinks the class will eventually lose on the merits. Id. at
177-78; see also Szabo v. Bridgeport Mach., Inc., 249 F.3d
672, 677 (7th Cir. 2001). It says nothing about wheth-
er courts may use evidence produced at a prior class
certification hearing for other purposes, including for a
decision on summary judgment. We see no reason why
these affidavits should be treated any differently from
other parts of the record which may be considered in later
rulings. See Kochlacs v. Local Bd. No. 92, 476 F.2d 557,
558 n.1 (7th Cir. 1973). We may therefore rely on the
materials and affidavits submitted at the class certifica-
tion hearing in determining whether the district court’s
decision to grant the defendants’ motion in the Scrap Deal-
ers’ action was correct.
IV. Illinois Brick
While the Clayton Act permits civil suits by “any per-
son who shall be injured in his business or property,” 15
U.S.C. § 4, courts have long acknowledged that not every
person, however tangentially injured by an antitrust
violator, may recover treble damages. Blue Shield of Va.
v. McCready, 457 U.S. 465, 477 (1982). Numerous doc-
trines have arisen to clarify the circumstances under
which a particular person may recover from an antitrust
violator. At times these doctrines are rather incautiously
lumped together under the umbrella term of “antitrust
standing.” However, the Supreme Court has generally
been careful to limit the actual question of standing to
the simple inquiry of whether a plaintiff has suffered a
redressable injury in fact, entitling the federal courts to
hear such a “case or controversy” under Article III. See
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).
There is no dispute that the plaintiffs in these cases
have been injured by paying an inflated price for copper;
their Article III standing is therefore secure. The difficult
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 15
question is statutory, because the Sherman Act has addi-
tional rules for determining “whether the plaintiff is the
proper party to bring a private antitrust action.” AGC, 459
U.S. at 535 n.31. For example, the injury must be an
“antitrust injury” caused by anti-competitive behavior as
opposed to mere economic loss. Brunswick v. Pueblo Bowl-
O-Mat, Inc., 429 U.S. 477, 487-89 (1977). Two other limita-
tions on which parties may bring suit for antitrust viola-
tions are central here: the proximate cause requirements
of AGC, 459 U.S. at 544-45, and the direct purchaser
rule of Illinois Brick, 431 U.S. at 729-30.
Illinois Brick holds that the direct purchaser from the
alleged antitrust violator(s) is the one with the right of
action; those further removed from the illegal arrange-
ment may not (under the federal antitrust laws, at least)
bring their own actions. 431 U.S. at 729. In Illinois Brick
itself, the defendants were companies who sold bricks to
masonry contractors at allegedly inflated prices. The
contractors in turn allegedly “passed on” those over-
charges to the plaintiffs who purchased their constructed
buildings. Id. at 726. In an earlier decision, Hanover Shoe,
Inc. v. United Shoe Mach. Corp., 392 U.S. 481 (1968), the
Supreme Court had decided that defendants could not
escape liability on the ground that the plaintiff had passed
on the anticompetitive overcharge. By parity of reason-
ing, the Court decided in Illinois Brick that the persons
authorized to sue under the antitrust laws in this type
of case were the direct purchasers. Hence, the contrac-
tors were permitted to sue and recover in full for the
price inflation, including any “pass-on.”
Illinois Brick does not stand for the proposition, as the
defendants would seem to have it, that a defendant can-
not be sued under the antitrust laws by any plaintiff
to whom it does not sell (or from whom it does not pur-
chase). Such a rule would eliminate in one fell swoop all
competitor suits based on exclusionary practices—a step
16 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
that some antitrust theorists have urged, but a step that
the Supreme Court has never taken. To the contrary, the
Court has made it clear that it does not read Illinois
Brick so broadly. For instance, the plaintiff in McCready,
who purchased the defendant’s health services from her
employer, alleged that a conspiracy between the defen-
dant and psychiatrists increased her costs for visiting
a psychologist. 457 U.S. at 468-70. The defendant con-
tended that after Illinois Brick only the employer who
purchased the health plan should be permitted to sue,
but the Court disagreed. It held that the chain-of-distri-
bution inquiry in Illinois Brick was meant only to pre-
clude duplicate recovery. While the employer might have
suffered some economic injury (through, for example, pay-
ing higher wages to attract skilled workers in order to
compensate for the illegally inferior benefits), its harm
was distinct from the plaintiff’s injury, her own out-of-
pocket payments for psychological services. Id. at 475.
While it is not identical to this case, McCready is help-
ful insofar as it recognizes that different injuries in dis-
tinct markets may be inflicted by a single antitrust con-
spiracy, and thus that differently situated plaintiffs
might be able to raise claims. The injuries suffered by
the copper traders who purchased inflated futures con-
tracts from the defendants are distinct from any harm
inflicted on Viacom when it paid inflated cash prices for
cathode, or on Ocean View, to the extent it purchased
copper rod from integrated producers. Other cases also
demonstrate that the Supreme Court has been willing to
entertain suits between plaintiffs and defendants not
in privity with each other. Allied Tube & Conduit Corp.
v. Indian Head, Inc., 486 U.S. 492 (1988) (plastic conduit
manufacturer suing competitor steel conduit manufacturer);
National Collegiate Athletic Ass’n v. Board of Regents, 468
U.S. 85 (1984) (university suing association that prohib-
ited it from entering a television contract); Klor’s Inc. v.
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 17
Broadway-Hale Stores, Inc., 359 U.S. 207 (1959) (store
suing competitor over refusal to deal).
The reason the plaintiffs’ suit in Illinois Brick failed
was not because the defendants did not sell to them.
Rather, it was because the defendants did sell to a third
party who (after Hanover Shoe) could recover for any
injury they claimed. The same paradigm applies in all of
the cases cited by the defendants: Party A, the antitrust
violator, sells to Party B, and then Party C, a down-stream
purchaser from B, seeks to recover the implicit over-
charges that B passed on to C. See, e.g., Kansas v. UtiliCorp
United, Inc., 497 U.S. 199, 207 (1990) (public utilities
but not residential customers to whom they sell may sue
natural gas companies); In re Brand Name Prescription
Drugs Antitrust Litig., 123 F.3d 599, 606 (7th Cir. 1997)
(drug wholesalers but not retail pharmacies to whom
they sell may recover from manufacturers); McCarthy v.
Recordex Serv., Inc., 80 F.3d 842, 852-54 (3d Cir. 1996)
(attorneys may recover overcharges for copies, but the
clients to whom they offer services may not); In re Beef
Indus. Antitrust Litig., 710 F.2d 216, 218 (5th Cir. 1983)
(packers who sell to grocers may recover for their unlaw-
ful conduct but feeders who sell to packers may not).
Here, in contrast, the plaintiffs are not indirect pur-
chasers along a supply chain. As far as the plaintiffs’
claims are concerned, Global, CLR, and Sumitomo did
not sell cathode to integrated producers who in turn sold
to any of the plaintiffs. Instead, the alleged conspiracy
operated in the separate but related futures market,
through which it sought directly to manipulate the price
of copper the plaintiffs were buying. (It is true that
Sumitomo Corporation made some sales of cathode, pri-
marily overseas, to reap the benefit of its illegal futures
market scheme. None of the plaintiffs, however, is seek-
ing recovery on the basis of any of these cash market
sales; all rest solely on the manipulation of sales of futures
18 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
contracts. Sanner v. Board of Trade, 62 F.3d 918, 929 (7th
Cir. 1995), discussed below, recognizes such a theory,
and we see no reason why the mere existence of separate
independent physical transactions should in any way
change the analysis.)
The defendants repeatedly urge that the availability
of recovery for copper futures traders who bought and
sold from the defendants in that market should bar re-
covery for any plaintiff in the cash market. But this kind
of an absolutist approach is ruled out by Sanner, which
recognized at least one situation in which the futures
market and physical market must be evaluated separately.
The serious question here is whether these plaintiffs
have presented another such instance.
In Sanner, a group of soybean farmers sued the Chicago
Board of Trade alleging that the Board conspired with
several individuals artificially to lower the price of soy-
bean futures. The farmers suffered damages when they
were forced to sell their soybeans into the cash market
at correspondingly low prices. Id. at 921. The district
court granted a motion to dismiss, finding as a matter
of law that the farmers’ injuries were indirect because
the farmers did not participate in the futures market, that
the causal chain between the cash and futures prices
was too attenuated, and that damages were too specula-
tive. Id. at 926.
This court reversed the dismissal. On the assumption
(given the procedural posture of the case) that the farm-
ers’ allegations about the relation between the cash and
futures markets were true, and that those market prices
“tend[ed] to move in lockstep,” we determined that the
farmers had suffered sufficiently direct injuries from the
conspiracy to proceed with their case. Id. at 929-30. We
rejected the proposition that “participants in the futures
market were more directly injured,” so as to preclude
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 19
recovery by farmers in the cash market and denied
the defendants’ claim that we should assume at the mo-
tion to dismiss stage that damages would be too specula-
tive. Id. at 931. From the perspective of Illinois Brick, the
Sanner court expressly found that in the context of a
market manipulation scheme, damages inflicted on the
physical commodity market were not derivative of in-
juries in the futures market. Unlike Illinois Brick, the
harms incurred in the physical market during a market
manipulation are not “secondary consequences arising
from an injury to a third party.” Id. at 929. Instead, they
form a separate and compensable injury.
The defendants’ reading of Illinois Brick is inconsis-
tent with Sanner. Their claims to the contrary, there is
no indication in Sanner that the plaintiff soybean farm-
ers were in privity with the Board of Trade, and as a fac-
tual matter the assertion is surely wrong. The Board and
its members did not sell soybeans to the farmers; like
the defendants here they dealt solely with futures con-
tracts. If Illinois Brick bars all recovery here, it should
have barred recovery in Sanner and should also bar re-
covery in group boycott and other restraint of trade set-
tings.
To put it another way, Hanover Shoe, Illinois Brick, and
McCready make plain that the antitrust laws create a
system that, to the extent possible, permits recovery
in rough proportion to the actual harm a defendant’s
unlawful conduct causes in the market without com-
plex damage apportionment. This scheme at times fa-
vors plaintiffs (Hanover Shoe) and at times defendants
(Illinois Brick), but it never operates entirely to preclude
market recovery for an injury. Applying those prin-
ciples and the decision in Sanner to this case, we con-
clude that the evidence viewed favorably to the plaintiffs
shows that damage from the defendants’ conduct was
felt in two separate markets: the futures market and the
20 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
physical copper market.ŒŒŒ We have identified those
who may recover in the futures market and must now
turn to the more difficult question of establishing the
proper plaintiff in the physical market. The defendants’
answer (nobody) is not supported by Illinois Brick—or
economics or fairness for that matter. Instead, we must
be guided in our inquiry by the analytical framework
and factors set out in AGC.
V. Associated General Contractors
AGC requires a court to examine through a case-by-case
analysis the link between a plaintiff’s harm and a defen-
ŒŒŒ
The fact that the defendants were hoping to profit in the
physical market, ultimately, through their manipulation of the
separate futures market, also has implications for their argu-
ments related to the so-called “umbrella standing” theory. The
defendants object to the possibility that they might be held
responsible for higher copper prices throughout the physical
market, rather than just for the sales they made. If this were an
ordinary cartel case, in which cartel members A and B sell to
customers X and Y, and then non-cartel member firm C makes
sales at or near the enhanced cartel price to customer Z, the
question arises whether A and B are liable to Z for the over-
charges it paid. See generally, ABA Section of Antitrust Law, 1
Antitrust Developments (Fourth) at 778-79 & n.128 (1997) (col-
lecting cases on umbrella standing). Here, however, we have a
conspiracy to rig prices for the entire physical market, accom-
plished through manipulation of the Comex futures market.
Another possible analogy might be to rigging product standards,
which affects everyone who tries to participate in a particular
product market. In the latter case, the defendants who manipu-
lated the standards cannot be heard to complain that they
should be immune from damages for a product they did not sell.
We leave this issue open for further exploration at the district
court level, now that we have clarified how the direct purchaser
rule and the remoteness doctrine of AGC apply here.
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 21
dant’s wrongdoing. 459 U.S. at 535-36. We are to consider
a number of factors in this analysis, notably (1) the causal
connection between the violation and the harm; (2) the
presence of improper motive; (3) the type of injury and
whether it was one Congress sought to redress; (4) the
directness of the injury; (5) the speculative nature of
the damages; and (6) the risk of duplicate recovery or
complex damage apportionment. Id. at 537-45; Sanner, 62
F.3d at 927. The defendants concede only the second fac-
tor: they admit that each of the plaintiffs has adduced
evidence sufficient to survive summary judgment that
they intended artificially to inflate the price of both cop-
per futures and physical copper in order to reap millions
of dollars in profits. They contest each of the other points.
The first and third factors are discussed only cursorily
by the defendants and can be dealt with adequately in
the course of our analysis of the remaining three. For
example, the defendants claim that there is no causal
connection between their actions and any of the plain-
tiffs’ harms because the plaintiffs’ injuries are indirect
(the fourth factor), and they argue that Congress had
no intention of redressing this sort of injury because it is
indirect and speculative (the fifth factor). We therefore
devote our attention to the other three factors, consider-
ing in the case of each plaintiff whether its injury was
indirect and unpredictable, risked duplicate recovery,
and would lead to speculative and complex damage ap-
portionment. We begin with the claims of the Scrap Deal-
ers.
A. Scrap Dealers (Loeb, Nos. 00-3979, 01-1148)
The Scrap Dealers face problems with all three of the
contested AGC factors. First, whether or not they were
in some sense original purchasers of physical copper, that
fact alone is not enough to establish that their injury
22 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
flowed directly from the defendants’ market manipula-
tions. An injury is still indirect if a plaintiff fails to es-
tablish a chain of causation between the harm it has suf-
fered and the defendant’s wrongful acts. AGC, 459 U.S. at
541. The directness inquiry further focuses on the pres-
ence of more immediate victims of an antitrust viola-
tion in a better position to maintain a treble damages
action. “The existence of an identifiable class of persons
whose self-interest would normally motivate them to
vindicate the public interest in antitrust enforcement
diminishes the justification for allowing a more remote
party . . . to perform the office of a private attorney gen-
eral.” Id. at 542.
There are numerous other parties who have suffered
more direct injuries at the hands of the defendants than
the Scrap Dealers suing here. Among them (though as
we explain below not limited to them) are the Comex
copper futures traders who have already filed and settled
their claims with the defendants. But even in the physical
copper market itself, the Scrap Dealers are quintessen-
tial examples of indirect victims of antitrust injury. Al-
though the copper distribution chain is exceedingly com-
plex, even in the simplest possible version, an integrated
producer such as Asarco will refine copper into cathode
and sell it to a manufacturer, such as Viacom, Emerson,
or Ocean View. The manufacturer will in turn transform
the cathode into some product using copper and sell it
down to the retail level. In the process, it may generate
unused scrap copper, at which point the Scrap Dealers
finally appear on the scene to buy the scrap. It is for
these last purchases that the plaintiffs seek to recover
damages. But distributors and manufacturers have al-
ready entered into monetary transactions involving this
same copper, and indeed we are faced in this very
case with suits filed by some of those manufacturers. It is
apparent that these companies at the least have suf-
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 23
fered more direct injuries than the Scrap Dealer plaintiffs.
This stands in marked contrast to Sanner, where the
soybean farmers were clearly the most directly injured
participants in the cash market because they were the
only cash sellers of soybeans. Sanner, 62 F.3d at 927.
The speculative nature of the damages the Scrap Deal-
ers have suffered also supports our conclusion that they
cannot maintain this action. See id. at 542-43 (denying a
claim that rested on an “abstract conception or speculative
measure of harm”). The Scrap Dealers’ economic experts
have stated that they can tie a rise in the price of copper
futures directly to price increases for physical copper
through econometric analysis. Defendants argue to the
contrary that a host of other factors are also at play,
destroying the closeness of any link. Even accepting the
Scrap Dealers’ position on this point, as we must at
this stage of the litigation, it is difficult to know whether
they have suffered any economic loss at all as a result of
the defendants’ actions. After all, the Scrap Dealers, mid-
dlemen who resell their scrap copper soon after they pur-
chase it, are alleging that the defendants’ market manip-
ulations caused the price of copper to increase steadily
from 1994 to 1996. Therefore, on most or all the sales
the Scrap Dealers made in that time frame, which
they contend are inflexibly linked to prevailing Comex
prices, they should have made a slight profit because of
Sumitomo’s actions. Only when the price of copper plum-
meted in June 1996 would the Scrap Dealers have taken
a bath in the resale market. And depending on how much
copper the Scrap Dealers had on hand as compared to
the number of transactions they made as the price of
copper was increasing, it is possible that some of them
may have suffered no true economic loss at all. In short,
the exact nature of the damages they have suffered is
speculative.
24 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
The Scrap Dealers attempt to counter this problem by
arguing that damages can be set simply by computing the
difference between the price of copper that should have
prevailed on a given day absent Sumitomo’s manipulations
and the actual price for every copper transaction. This
assertion, however, plunges the Scrap Dealers headlong
into conflict with the sixth AGC factor, the problems of
duplicate damage recovery and complex damage appor-
tionment. The Scrap Dealers argue that they—and all
other commercial purchasers of physical copper—should
be permitted to recover damages equal to three times the
overcharge caused by Sumitomo’s scheme for every single
sale of copper in the mid-1990s. But this proposition ig-
nores the fact that the same piece of physical copper
may be resold many times in a given year as it is refined,
distributed, turned into scrap, sold between scrap dealers,
re-refined, and sold for scrap again. As mentioned above,
every time a scrap dealer resold scrap copper during the
two years at issue, it recouped the vast majority of its
losses. Since defendants are not permitted to mount any
sort of cost recovery defense along these lines, see Han-
over Shoe, 392 U.S. at 491-94, this would cause the Scrap
Dealers to receive a damages award far in excess of any
economic loss the defendants caused them. While Sanner
permitted farmers to recover their soybean losses, it did
not let millers, wholesalers, or retailers of soybeans also
assert claims. It would be a significant extension of
Sanner to allow these plaintiffs to sue, and it is one we
decline to make.
The Scrap Dealers repeatedly argue that there are
no duplicate damages in this case because their pricing
decisions are based exclusively on Comex prices rather
than a pass-on of historical costs. We fail to see why this
fact should lead us to ignore the Supreme Court’s com-
mand to prevent the duplicate recovery of antitrust in-
juries wherever possible. AGC, 459 U.S. at 544; Greater
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 25
Rockford Energy & Tech. Corp. v. Shell Oil Co., 998 F.2d
391, 396 (7th Cir. 1993). The Scrap Dealers’ contention that
absent a pass-on of historical costs their injuries are
“separate and distinct” defies economic reality. If a scrap
dealer purchased a ton of copper when the Comex price
was artificially inflated by $400, and the price subse-
quently rose another $200 prior to resale, it has reaped
a $200 gain, not a $400 loss. The Scrap Dealers’ own
witnesses admitted that there is no pass-on only “if the
current Comex price has moved in an adverse direction.”
Yet the evidence shows that Sumitomo’s actions caused
the Comex price to rise throughout the period at issue
in this case, making us skeptical that the Scrap Dealers
have suffered any real loss at all.
The fact that the Scrap Dealers here are further down
the chain of copper users than others also will increase
the economic complexity of apportioning damages. Even
the marketing manager of Loeb admitted that such fac-
tors as “freight costs, the sizing, sorting, packaging, purity
requirements, length of time it took to get paid, [and] the
risk of getting paid” all factored into Loeb’s pricing deci-
sions. While it might be possible for economists to factor
out each of these considerations for all prior sales involv-
ing copper, the Supreme Court has decreed a simpler
solution: simply restrict the right to recover to those who
are more directly affected by the defendants’ actions.
UtiliCorp, 497 U.S. at 208-11 (noting policy rationales for
denying recovery even to those plaintiffs whose damages
could be easily calculated). This description applies fully
to the plaintiffs here. Because the Scrap Dealers have
suffered an indirect injury causing them at best specula-
tive damages that would lead to a strong possibility of
duplicative recovery, we agree with the district court
that they may not pursue their claims.
26 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
B. Viacom and Emerson (No. 01-3485)
1.
Many of the successful arguments from Loeb are echoed
by the defendants in the Viacom action, but after a careful
review of the record we find that the facts of the latter case
compel a different result. The defendants’ first argument
for denying recovery to Viacom and Emerson (to whom we
will refer as “Viacom” except when distinctions between
the two companies are important) is that Viacom has
shown no evidence of direct and predictable harm stem-
ming from the defendants’ conduct. As we stated earlier,
directness relates to the question whether there exists a
chain of causation between a defendant’s action and a
plaintiff’s injury or (in contrast) if the connection is based
instead only on “somewhat vaguely defined links.” AGC,
459 U.S. at 540. Global and CLR, the only defendants
remaining in the Viacom action after Sumitomo’s settle-
ment, begin their attack by pointing out that the prices
of copper cathode on the LME and Comex often diverged.
We fail to see why this matters. Sumitomo purchased
futures on Comex to drive up the price on that particu-
lar exchange artificially, and the prices Viacom paid for
copper were directly based on Comex prices. The fact
that Sumitomo also bought and sold futures on the LME
and may have caused additional harms to physical cop-
per purchasers who based their decisions on LME
prices has no impact on Viacom’s ability to recover un-
der the AGC factors.
Next, the defendants rely on the fact that Viacom’s
purchases included not only a price linked to Comex but
“a variety of discounts or premiums that, in response to
changes in supply and demand, varied over time and
among suppliers.” The defendants’ experts have opined
that, through adjustments of premiums in response to
supply and demand factors, the actual impact on the physi-
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 27
cal copper market of their illegal futures market activities
is likely to be indirect and unpredictable.
While all of this might be so as a theoretical matter, on
summary judgment it is our duty to evaluate the evidence
in the record that Viacom presented. And that evidence
paints a starkly different picture. Viacom has introduced
into the record both its contracts and its suppliers’ pub-
lished premiums. After a careful review of these mate-
rials, we are convinced that Viacom has established di-
rect injury. In its contracts, Viacom purchased all but
a de minimis amount of copper through the two-part
formula we described earlier, consisting of (1) a base price
equal to the Comex first position copper settlement price,
and (2) a cathode premium, negotiated on a monthly
or quarterly basis. Over the six years at issue here, the
settlement price fluctuated from about 75¢ to $1.40 per
pound. During the same years, the premium ranged
from 2.75 to 3.50¢/lb. (Viacom does not seek recovery based
on changes in premium prices; the complaint is based
only on those caused by variations in the base price.)
The district court ruled that the base price and cathode
premium were “inseparable.” After a careful review of
the record in the light most favorable to the plaintiffs,
we are unable to agree with this characterization. All of
the contracts specify that the payment price is deter-
mined by adding these two separately described compo-
nents, and the values of both numbers throughout the
relevant time period should be available through discov-
ery. The district court also seems to have thought that
the premium could in some cases be a discount off the
Comex price. There is no evidence to support this; to the
contrary, all of the evidence, including defendants’ coun-
sels’ concession at oral argument, indicates that the pre-
mium was always a positive number. While Viacom ap-
pears to have been awarded volume and cash payment
discounts in some instances, there is no indication that
28 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
these discounts were tied to market conditions, and the
defendants do not focus on such discounts in their briefs.
Furthermore, the cathode premium was a small fraction
of the Comex price. In fact, the evidence shows that as
the Comex price increased, the premium also increased.
Thus, there is no possibility that the two components
“offset” or that the premium somehow compensated for the
defendants’ manipulated price inflation. (Even if, counter-
factually, the Comex price had for example risen by 65¢
and, to compensate, the base price dropped a penny, this
could at best represent a mitigation of damages. But this
would not make the injury any less direct.) The district
court’s conclusion on this point, which relied mainly on the
testimony of an expert who had not even looked at Viacom’s
contracts, is both factually mistaken and fails to take the
evidence in the light most favorable to Viacom. The pres-
ence of a small cathode premium does not negate the fact
that the prices of cathode and cathode futures “tend to move
in lockstep.” Instead, the price reference in Viacom’s con-
tracts supports just such lockstep linkage. Our case law has
never required that the cash and futures prices be identical
to support recovery. It is only necessary that the relation-
ship be direct, as it is here. See Sanner, 62 F.2d at 929.
Furthermore, the experts note that Comex quotes 24
different exchange prices at any given time and that the
defendants’ actions could have affected each of those
prices differently. Accepting the truth of this statement,
we do not see why it compels a finding that Viacom’s
injury is indirect. According to the record evidence, out
of this menu of prices, Viacom used just one (the month-
ly settlement price) as the basis for all but a minuscule
number of its contract purchases, and Emerson used only
two. While acknowledging this, the defendants contend
that other cathode purchasers could have used different
or widely varying systems. Perhaps they did, and if so
perhaps they should be found to be improper plaintiffs
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 29
under the antitrust laws, though that is an issue for
another day. But this fact does not weaken the direct
causal chain between the defendants’ actions and these
particular plaintiffs’ harm and is no more reason to
deny Viacom and Emerson recovery than the fact that
some purchasers might have bought cathode at prices
not tied to those on either Comex or the LME.
Similarly, we reject the defendants’ argument that
because a number of Viacom’s contracts contained clauses
permitting the parties to renegotiate the base price if
they believed that Comex prices did not accurately re-
flect market conditions, Viacom’s injuries are somehow
remote and indirect. It is undisputed that, because of
the success of the defendants’ conspiracy, Viacom and
its integrated suppliers were never aware of the artifi-
cial Comex inflation and so never took advantage of
this clause. Instead, Viacom based all of the purchases
for which it seeks recovery directly on Comex.
We also believe that, contrary to the defendants’ con-
tentions, our holding on this point is entirely consistent
with the Second Circuit’s decision in Reading Indus., Inc.
v. Kennecott Copper Corp., 631 F.2d 10, 13-14 (2d Cir.
1980). There, the plaintiff, a refiner of scrap copper, al-
leged that the defendant-integrated producers had con-
spired to keep the price of refined copper low and that
this conspiracy injured it by artificially raising the price
of scrap. Id. at 12. The court found the injury indirect
because it “depend[ed] upon a complicated series of mar-
ket interactions,” including the actions and pricing deci-
sions of refiners, fabricators, dealers, speculators, and
consumers of copper. Id. at 13. Such “conjectural theories
of injury and attenuated economic causality” were enough
to render Reading’s injury indirect. Id. at 14.
Other than the fact that both Reading and the present
case involve price-fixing conspiracies in the physical cop-
30 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
per market, we find little similarity between them. The
injury here does not depend on the speculative actions
of innumerable market decision makers. It flows in-
stead directly from the contracts between Viacom and its
suppliers. It is this contractual linkage, absent in Reading,
that prevents other market variables from miring a trier
of fact here in “intricate efforts to recreate the possible
permutations in the causes and effects of a price change.”
Id.
In sum, Viacom’s contracts and the other record evi-
dence establish a direct relation between the defendants’
illegal scheme and Viacom’s harm. The contract price it
paid its suppliers for copper was directly and explicitly
based on the Comex monthly settlement price, and there-
fore the defendants’ manipulations directly and predictably
had an impact on that price. Amarel v. Connell, 102 F.3d
1494, 1512 (9th Cir. 1997) (injury direct where price of
milled rice directly affected price of paddy rice); Sanner,
62 F.3d at 929. Any variations in the cathode premium
moved in the same direction as the manipulation and
could not have limited or mitigated this harm. For these
reasons, Viacom has established the directness element
of AGC.
2.
We turn next to the district court’s other major reason
for granting the defendants summary judgment: its belief
that opening the door to Viacom’s suit would inevitably
lead to either duplicate recovery or complex damage ap-
portionment. See AGC, 459 U.S. at 544. The court cited
at least three manifestations of this problem, all involv-
ing Viacom’s integrated suppliers, such as Asarco. First,
it believed that Viacom’s claim would duplicate Asarco’s
because Asarco could assert claims for its raw material
purchases from third parties, and those raw material
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 31
prices are tied to Comex. Second, because Asarco pur-
chased some cathode from third parties, both it and Viacom
would be permitted to recover and duplicate each other’s
damages. Third, Viacom’s claim would duplicate Asarco’s
because Asarco hedged by purchasing put options on
Comex. In addition to those three points, the court
noted that Asarco has recovered damages in a California
state court class action, and it thought that this too
should preclude Viacom from recovering.
We begin with the defendants’ claim that Asarco’s
purchase of raw materials, such as ore, concentrate, blister,
and anode, all of which it transformed into cathode,
should bar recovery. This does not follow. Practically
every product is created through the use of some kind
of raw materials, but that fact does not prevent the di-
rect purchaser of the finished product from suing its
manufacturer under the antitrust laws, as long as the
direct purchaser is not trying to attack a price-fixing
arrangement at the raw materials level. The defendants’
own experts testified that while raw material prices “may
be indirectly affected” by price manipulations, a squeeze
or corner on cathode—the only copper product traded
on Comex and the LME—would not directly harm purchas-
ers of these raw materials. Instead, raw material prices
vary widely and contain various discounts off the Comex
price to account for such factors as the expected cost of
conversion into cathode, which in turn varies based on
supply, demand, and current refining and smelting ca-
pacity.
We agree with the broad proposition that a party cannot
recover when others more directly injured are better
able to state a claim. AGC, 459 U.S. at 544-45. Indeed,
we have just applied this very principle to deny recovery
to the Scrap Dealers, who are farther down the chain of
resale, even though scrap prices too are tied to Comex. For
parallel reasons, raw materials purchasers are also ill-
32 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
suited to bring an antitrust claim. Permitting both raw
materials purchasers and cathode purchasers in the same
line of distribution to recover would lead to duplicate
damages in violation of the Illinois Brick rule. The solu-
tion to this problem, however, is not to deny a right to
recover to everyone. Such a draconian rule would give
a green light to antitrust scofflaws to conspire to fix
prices in a particular market and would create incen-
tives to engage in antitrust conspiracies in markets with
complicated distribution structures. Instead, the proper
course is to recognize only the best of the several poten-
tial plaintiffs who otherwise satisfy the requirements
for bringing suit under the antitrust laws. Because raw
materials prices will vary in comparison to Comex prices
much more than will the price of physical cathode, physi-
cal cathode purchasers such as Viacom are better situated
than raw materials purchasers to pursue a claim in the
physical market. This logically implies that raw mate-
rials purchasers up the chain from cathode sales could
not satisfy AGC, just as we found to be the case for the
downstream Scrap Dealers. In between, however, lies
the physical market transaction at the heart of the de-
fendants’ scheme—the purchase of cathode. There are
no better parties than these purchasers to pursue a
claim, and it is therefore they who are proper plaintiffs.
More bite lies in the argument that recovery should
be denied because some of the cathode Asarco sold Via-
com was purchased before, although this claim is not
as strong as it might at first appear. As the district court
noted, some if not most of the cathode Viacom purchased
had never before been purchased in cathode form. Asarco
sold Viacom 510 million pounds of cathode between 1990
and 1996. During that time frame, Asarco refined 6.4 bil-
lion pounds of cathode and purchased 153 million pounds
from third parties, about 2.3% of its output. Because cop-
per is fungible, one cannot tell whether any given Viacom
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 33
purchase of cathode consisted of cathode refined by Asarco
or previously purchased product.
We do not believe the mere existence of third-party
cathode presents such a risk of duplicate recovery as to
justify the extreme step of denying recovery altogether. Had
the Board of Trade in Sanner produced evidence that
farmers on some rare occasions bought soybeans from
neighboring farms and then resold them along with the
soybeans they grew themselves, that would not have
provided a reason to deny recovery entirely. Similarly, if
Viacom can prove at trial that 97.7% of all copper Asarco
sold it was cathode it had refined itself, then Viacom
should be permitted to recover 97.7% of its proved damages
from cathode purchases. Cf. Paper Sys., Inc. v. Nippon
Paper Indus. Co., 281 F.3d 629, 633 (7th Cir. 2002) (carving
out indirect purchases while still leaving open possibility
of recovery for direct purchases). The physical copper
market is complicated, but not so complicated that one
cannot estimate to a reasonable degree of accuracy the
amount of damage a party has sustained. It is certainly
acceptable through expert economic testimony to make
a reasonable estimation of actual damages through prob-
ability and inferences. See Zenith Radio Corp. v. Hazeltine
Research, Inc., 395 U.S. 100, 124 (1969). “Where the tort
itself is of such a nature as to preclude the ascertain-
ment of the amount of damages with certainty it would
be a perversion of fundamental principles of justice to
deny all relief to the injured person.” Story Parchment Co.
v. Paterson Parchment Paper Co., 282 U.S. 555, 563 (1931).
While we are not permitted to make complex damage
apportionments in antitrust cases, AGC, 459 U.S. at 544,
nothing about these calculations is inordinately complex.
One need only know two pieces of information: the amount
of cathode purchased by Viacom and the amount of
cathode purchased and sold by those who sold cathode to
Viacom. From there, reasonable estimates of damages
34 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
are the order of the day. Because this estimation is not
overly complex and will not lead to duplicate damages, it
provides a sufficient basis at this stage for the case to
proceed to the merits.
The defendants’ next major attack rests on hedging.
Commodities exchanges function in part to protect partici-
pants in a physical market by shifting some of the risk
(and damage) caused by fluctuations in price to partici-
pants in the futures market. Extending this principle,
Global and CLR claim that through an extremely compli-
cated set of economic interactions between the cash and
futures markets, the damages experienced in the physical
cathode market will be duplicated in their entirety by
damages suffered in the futures market. Therefore, only
futures traders, and not cash market participants, should
be permitted to recover.
The hedging theories advocated by the defendants are
based on economic theory, with no specific application of
that theory here that would correlate sales in the cash
market and sales in the futures market. Notably, Viacom’s
individual purchases from its suppliers were not hedged.
Neither Viacom nor Asarco purchased a futures contract
as a hedge every time they exchanged copper. Had they
done so, then perhaps one might be able to “match” each
physical market transaction to a futures contract sale
and argue that the opportunity for a trader to recover
the overcharge in a federal lawsuit should preclude recov-
ery for the overcharged physical market participant. Emer-
son’s supplier, Phelps Dodge, did hedge some of its sales
to Emerson. On remand, the district court should ex-
plore further whether these hedging transactions would
lead to some degree of duplicate recovery and a correspond-
ing need to reduce damages. Nevertheless, since our re-
view of the record indicates that not all of Phelps Dodge’s
sales were hedged, we conclude that Emerson is an appro-
priate plaintiff for the same reasons as Viacom.
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 35
In any event, the kind of futures matching the defen-
dants’ postulate does not reflect the way that most hedg-
ing works in the copper futures market. Asarco did not
buy futures. Instead, it purchased put options. Put options
are strategic hedges designed to protect against a general
risk of declining cathode prices. With a put option, Asarco
had the right, but not the obligation, to sell a futures
contract if the price fell below a certain “strike” price. See
United States v. Catalfo, 64 F.3d 1070, 1072 (7th Cir. 1995).
But as the defendants were artificially inflating the price
of cathode throughout the period at issue here, the price
never would have fallen below the strike price. Therefore,
no sale ever would have gone forward and the only dam-
ages Asarco would have suffered from the conspiracy
would have been the cost of the put option, or, more prop-
erly, the amount by which the price of the put option
changed because the price of copper was artificially high.
The defendants and their experts have made no at-
tempt to correlate the damages Asarco could theoretically
recover on the futures market for its put options to the
specific damages sought here by Viacom, and the relation-
ship is far from intuitively obvious. Instead, the experts
trace the potential for hedging by numerous parties up-
stream and downstream from Viacom and contend that
because so many participants in the copper industry use
so many different forms of hedging there will be “inevit-
able” duplication between the cash and futures markets.
This sort of potential duplication bears no resemblance
to the duplication rejected in Illinois Brick and AGC, 459
U.S. at 544, nor do we think that it independently pro-
vides a reason to deny recovery to Viacom. In Illinois Brick,
any “pass-on” of damages would (because of Hanover
Shoe) already be taken into account in its entirety in the
recovery to another potential party, the direct purchaser.
431 U.S. at 737-38. This simply is not the case here. Asarco
strategically hedged only about half its output. The de-
36 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
fendants claim that potential hedging by those parties to
whom Viacom sold and from whom Asarco purchased raw
materials is also relevant, but this cannot be so under
Sanner. There we held that injuries incurred in futures
market purchases not linked to any particular cash market
purchases did not “duplicate” and were not more “direct”
than the cash market injuries. 62 F.3d at 929-30. Because
there are two separate markets, each with compensable
injuries, the opportunity for recovery in one market does
nothing to alleviate the harm in the other. For similar
reasons, the fact that Comex futures traders have re-
ceived money in a now-settled lawsuit says nothing
about the ability of Viacom or other similarly situated
plaintiffs in the cash market to recover.
Finally, the defendants note that Asarco and three of
the manufacturers’ other suppliers have recovered in a
lawsuit brought in California state court. This lawsuit
was brought pursuant to California law, which permits
suit by indirect purchasers. Union Carbide Corp. v. Supe-
rior Ct., 679 P.2d 14, 16 (Cal. 1984). However, the sup-
posed “duplication” here comes from different bodies in
our federal system seeking to remedy separate harms. It
presents no risk of duplicate recovery for the same
injury under the same law and is thus no bar to the plain-
tiffs’ recovery. See Browning-Ferris Indus. v. Kelco Dis-
posal, Inc., 492 U.S. 257 (1989) (upholding award of both
federal antitrust and state tort damages); California v. ARC
Am. Corp., 490 U.S. 93 (1989) (permitting states to re-
quire offenders to pay both state damages to indirect
purchasers and federal treble damages to direct purchas-
ers). If the resolution of the state court action poses a
problem at all to these plaintiffs, it would be in the
nature of claim or issue preclusion. See Matsushita Elec-
tric Indus. Co. v. Epstein, 516 U.S. 367 (1996); Marrese v.
American Acad. of Orthopaedic Surgeons, 470 U.S. 373
(1985). It is possible that the defendants have waived
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 37
their right to assert any such defense; it is not mentioned
in their briefs before this court. Accordingly, we express
no opinion at this time on the merits of any preclusion
argument.
In sum, of all participants in the physical market, Via-
com and other first purchasers of cathode are the only
plaintiffs possibly situated to recover damages against
the defendants for the anti-competitive harms they
have inflicted on the physical market for copper cathode.
Faced with the option of permitting a clear, non-speculative
harm to the cash market to go unremedied or of allow-
ing the plaintiffs’ suit to go forward, we elect the latter.
As narrowed to first purchases, there is no danger of
duplication of recovery, and so, under AGC and Sanner, the
claim should proceed to trial.
3.
The final broad claim of the defendants is that recov-
ery of damages in this case simply would be too specula-
tive and complex to warrant allowing this suit to proceed.
Cf. AGC, 459 U.S. at 542. Based on the evidence adduced
by Viacom, however, we disagree. The main complica-
tion will come from attempting to discern how much of
the Comex price of copper at a given time represented
an overcharge due to the defendants’ manipulation and
how much stemmed from normal economic forces. This
difficulty, however, occurs in every price-fixing case. It is
no different from the task of gauging the damages recov-
erable by Comex futures traders, whom defendants have
conceded to be proper plaintiffs. Through discovery, eco-
nomic experts can evaluate the impact of the defendants’
illegal actions on the futures market and come to rea-
soned conclusions. Cf. Sanner, 62 F.3d at 930 (rejecting
claim that damages analysis in a market manipulation
is “beyond the ken of the federal courts”). At that point,
38 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
recovery could be calculated by reviewing all of Via-
com’s contracts (assuming they are similar to the ones
already in the record) and assessing damages based on
the already computed overcharge. Since the only other
factors involved in setting the price of Viacom’s cathode
are items which have no relation to the Comex price, such
as freight charges and cash payment discounts, and the
cathode premium, for which Viacom does not seek to
recover, there should be no problems as a theoretical mat-
ter with making these calculations. The mere fact that
each individual transaction relevant to an antitrust
scheme must be examined on a case-by-case basis to
assess damages does not thereby render those damages
speculative. American Ad Mgmt., Inc. v. General Tel. Co.
of Cal., 190 F.3d 1051, 1059 (9th Cir. 1999).
We fully recognize that perfecting such economic analysis,
tracking every pound of cathode refined or purchased
by Viacom’s suppliers, and locating every cathode con-
tract Viacom entered into over a six-year span will not
be easy. But complex litigation is hardly new for the fed-
eral courts, whether it is in the field of antitrust, environ-
mental clean-ups, pension law, or accounting frauds.
The key here is that the damages are not inherently
speculative in the sense that AGC used that term. See
459 U.S. at 542. Nor, as in Illinois Brick or Hanover Shoe,
is a party asking a jury or the district court to perform
some form of econometric analysis to deduce whether
all, some, or none of an overcharge was passed on down
a chain of distribution. Illinois Brick, 431 U.S. at 727.
Instead, one need only determine through available rec-
ords what percentage of cathode bought by Viacom rep-
resents first purchases. This is not speculative or com-
plex, only time-consuming, and we are confident that
the parties and their counsel are up to the task.
The defendants’ entire case theory, apparent not only
here but also through their discussion of duplication
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 39
and hedging, seems to be the troubling one because their
scheme was so evil, went undetected for so long, and caused
so much economic loss throughout the cash market, that
we should simply give them a pass from the antitrust
laws. This is not now and never has been the law. Since the
days of Eastman Kodak Co. v. Southern Photo Materials
Co., 273 U.S. 359, 379 (1927), it has been established that
in complicated antitrust cases plaintiffs are permitted to
use estimates and analysis to calculate a reasonable ap-
proximation of their damages. While we fully agree that we
should not use the massiveness of defendants’ conspiracy as
an excuse to punish them unduly (by, for example, permit-
ting the Scrap Dealers in Loeb to recover for harms that
would duplicate those of Viacom), the sensible solution is to
let one—but only one—level of purchasers in the physical
copper market recover. Based on all the evidence avail-
able on summary judgment, the best plaintiff in this mar-
ket is the first purchaser of copper cathode, and Viacom
and Emerson are prototypical examples of such plaintiffs.
The district court erred in dismissing the case at this
stage, and we must therefore reverse its judgment.
C. Ocean View (Nos. 01-3229, 01-3230)
We turn to the final plaintiff, Ocean View. We have
already rejected the defendants’ principal argument for
affirming summary judgment in this case, that the ac-
tion is barred by the Illinois Brick direct purchaser rule.
For the same reasons discussed in connection with Via-
com’s action, there is no party along a chain of distribu-
tion between Ocean View and any of the defendants
who can recover for an alleged overcharge. Therefore,
Illinois Brick is inapplicable. Instead, this case is con-
trolled by the basic premise of Sanner, 62 F.3d at 929-30,
which holds that a cash market participant injured by
40 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
a party’s illegal actions in the futures market may, in
some instances, sue that party under the federal antitrust
laws. The controlling factors in this inquiry are those
set out in AGC, 459 U.S. at 537-45. The defendants al-
lege that under an analysis of these factors, Ocean
View’s claim should still be precluded, while Ocean View
contends that it should be entitled to recover for every
copper rod it has ever purchased, or, in the alternative,
that it may recover at least for those instances where
it was the first purchaser of copper in cathode form.
As with the Scrap Dealers, we must reject Ocean View’s
proposition that it can recover for rod manufactured
from cathode purchased by others, such as its semi-fabrica-
tors. Such an injury would be indirect because the semi-
fabricator would serve as a more immediate victim of
the antitrust violation intended to affect the cash and
futures markets for cathode. AGC, 459 U.S. at 541-42;
supra at 22-23. Semi-fabricators who purchased cathode
would stand in shoes similar to those of Viacom, purchas-
ing large quantities of cathode to reshape and sell as rod
or wire. Because they are well-situated to bring any
claim for inflation in the physical market, there is no
need for Ocean View, as a more remote party, to step in
“to vindicate the public interest in antitrust enforcement.”
AGC, 459 U.S. at 542.
Additionally, granting recovery to both a semi-fabricator
for its cathode purchase and Ocean View for its purchase
of that same cathode reshaped as rod would lead to
either duplicate recovery or complex damage apportion-
ment in violation of the principles underlying AGC. 459
U.S. at 544. We have already rejected the claim that
the copper market should not be subject to a ban on dupli-
cate recovery because copper pricing decisions are based
on Comex and not a “pass on” of historical costs, supra at
24-25. To avoid such duplicate recovery one must either
attempt to apportion damages along a chain of distribu-
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 41
tion, forbidden by AGC, or deny the right to sue to all
but one plaintiff along the chain of distribution.
The best-situated plaintiff to recover is the first pur-
chaser of copper cathode, the specific commodity the de-
fendants targeted in their futures market conspiracy.
For such a plaintiff, it is possible both to avoid duplicate
recovery problems and at the same time to ensure that
antitrust harm perpetrated in the cash market will not
go unremedied. Based upon on our review of the record,
we are satisfied that in at least some cases Ocean View
did purchase cathode refined by integrated producers.
The existence of such purchases is enough to get Ocean
View in the door; recovery should not be denied simply
because a plaintiff may not receive damages as high as
it would like. The quantity of such sales, and thus the
eventual damages Ocean View might get if it manages
to prove the rest of its case, can await further discovery.
Like Viacom, Ocean View will have the burden of ascer-
taining what percentage of the cathode sold by these
producers was refined by them and not purchased from
third parties. If, as defendants fear, many of these rec-
ords are lost, that fact will come out in discovery, and
they may move for a missing evidence instruction or
perhaps even summary judgment on the merits.
We have already rejected most of the other claims the
defendants make for denying Ocean View recovery, includ-
ing the proposition that the integrated producers’ purchase
of copper raw materials should somehow render them
improper plaintiffs, supra at 31, and the claim that hedg-
ing on the copper futures markets by some physical mar-
ket participants renders the injury indirect or duplicative,
supra at 34-36. Finally, we have found that the damages
claimed are not too speculative or complex, supra at 37-38.
At this point we can think of only one possible distinction
between Ocean View and Viacom that deserves further
comment. That is the fact that while Viacom purchased
42 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
cathode, Ocean View bought cathode that had been tolled
into rod. The parties do not focus on this distinction
much in their briefs, and the defendants concede that
there is no physical difference between cathode and rod
other than the product’s shape. Based upon our review
of the contracts in the record, the price Ocean View paid
its integrated producers for rod appears to be identical
to that paid by Viacom for cathode except for the exis-
tence of an additional rod premium. We assume, since
the defendants do not contend otherwise, that like the
cathode premium, the rod premium is a small fraction of
the total price paid and tends to increase as the Comex
price increases, so that it does not in some way offset
the Comex inflation or render the injury indirect. In that
case, the similarities between cathode and rod are close
enough that, in instances where the same integrated
producer refines raw materials into cathode and then
shapes it into rod, Ocean View, as the first purchaser
after the materials are formed into cathode, can state a
claim, regardless of whether that copper is then in the form
of cathode or rod. Cf. In re Sugar Indus. Antitrust Litig.,
579 F.2d 13, 17-18 (3d Cir. 1978) (finding no distinc-
tion for AGC purposes between price-fixed sugar and
candy incorporating that price-fixed sugar sold into the
market for the first time).
VI.
In addition to their points under Illinois Brick and
AGC, the various plaintiffs make arguments specific to
their own cases. Most of these involve procedural issues. We
consider these points in turn, on an issue-by-issue basis.
A. RICO and State Law Claims
We begin once again with the Loeb action. Our determina-
tion that the AGC factors prevent the Scrap Dealers
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 43
from pursuing their antitrust claims disposes of their re-
maining claims against Sumitomo and Global for viola-
tions of RICO and state law. It is also dispositive of all
claims against JPMorgan Chase.
The district court dismissed the Scrap Dealers’ RICO
claims on the ground that the AGC factors apply equally
to RICO. The Scrap Dealers, however, argue that even
if their antitrust claim fails, their RICO case should
proceed. This claim lacks merit. Civil RICO was modeled
after the Clayton Act. Holmes v. Security Investor Protec-
tion Corp., 503 U.S. 258, 267-69 (1992). To satisfy its re-
quirement of proximate causation, the Scrap Dealers
must allege a relation between their injury and the defen-
dants’ violation that is neither indirect nor remote. Interna-
tional Bhd. of Teamsters, Local 734 Health & Welfare Trust
Fund v. Phillip Morris, Inc., 196 F.3d 818, 825 (7th Cir.
1999) (applying AGC factors to a proximate causation
analysis). Since we have already determined that the
Scrap Dealers’ injury is too indirect and remote under
AGC for antitrust purposes, we conclude that the rela-
tion is similarly too remote for RICO purposes.
The Scrap Dealers also assert that the district court
erred in finding that they had abandoned their state law
claims. On this point, they appear to be correct. There
is certainly no evidence in the record that the Scrap
Dealers voluntarily dismissed or failed to pursue their
various state law claims. The defendants argue that
these claims were abandoned when the Scrap Dealers
attempted to certify a class for the federal antitrust
claims but not for the state claims. But no inference of
abandonment should flow from a limited request for a
class action; to the contrary, FED. R. CIV. P. 23(c)(4)(A)
specifically recognizes that “an action may be brought
or maintained as a class action with respect to particular
issues.” It would be entirely consistent with the rule to
seek certification on issues governed by federal law,
44 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
while declining to do so for more particularized state law
issues. Nevertheless, the fact remains that we have dis-
missed all of the Scrap Dealers’ federal claims against
Sumitomo and Global. Since the Scrap Dealers have
asserted no independent basis for federal subject matter
jurisdiction, it is entirely appropriate to dismiss the
state law claims, though without prejudice. See 28 U.S.C.
§ 1367(c)(3); Oates v. Discovery Zone, 116 F.3d 1161, 1173
n.12 (7th Cir. 1997).
B. Issue Preclusion: JPMorgan Chase
The district court dismissed the Scrap Dealers’ claims
against JPMorgan Chase on issue preclusion grounds. To
prove that issue preclusion applies, the defendant must
establish that (1) the plaintiff was fully represented in
the prior litigation, (2) the issues to be precluded are
identical to those in the prior litigation, (3) the issues were
actually litigated and decided on the merits, and (4) reso-
lution of the issue was necessary to the judgment. People
Who Care v. Rockford Bd. of Educ., 68 F.3d 172, 178 (7th
Cir. 1995). The Scrap Dealers’ claims against JPMorgan
Chase arise from an alleged conspiracy between JPMorgan
Chase and Sumitomo in which JPMorgan Chase’s metals
desk somehow furthered the conspiracy through its own
copper purchases on the LME. The issue the defendants
sought to preclude, that of the Scrap Dealers’ ability to
recover as a proper plaintiff under the antitrust laws, was
actually litigated and decided on the merits in their suit
against Sumitomo. That is enough to bind the Scrap
Dealers, who have now had their day in court, with respect
to JPMorgan Chase as well.
The Scrap Dealers argue, however, that their day in
court was flawed, because they did not have an opportu-
nity to litigate these issues fully before the district
court. Their only support for this contention is the fact
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 45
that the district court turned Sumitomo’s motion to dis-
miss into a summary judgment motion without notice
to them. As we have already noted, this action by the
district court, while in error, did not prejudice the
Scrap Dealers. The antitrust issues were fully litigated
by counsel, albeit at the class certification stage. Besides
this, the district court gave the Scrap Dealers an opportu-
nity for a hearing prior to dismissing the JPMorgan Chase
claims at which they were invited to bring forth any
additional arguments that would call into question the
district court’s prior grant of judgment to the defendants.
The Scrap Dealers produced no new evidence at that
time that would call into question the factual basis for
that determination. Therefore, we affirm the district
court’s decision to dismiss all claims brought by the Scrap
Dealers against JPMorgan Chase on issue preclusion
grounds.
C. Statement of Claim Against CLR
CLR advances one final argument in support of the
judgment in both Viacom and Ocean View, which applies
only to itself and not to its co-defendants. The district
court stated in the Viacom action that, while it would not
“address the issue in any detail,” it believed that Via-
com had made an inadequate showing that CLR’s activ-
ities in any way affected the prices Viacom paid for copper.
CLR urges this as an alternate ground for affirmance.
The procedural history of this argument is complex
and seems to have engendered a great deal of enmity
between the parties. The parties filed cross-motions for
summary judgment on the standing question in the Viacom
action. In its lengthy joint motion with Global, CLR never
argued that its role in the conspiracy was too attenuated
to have directly affected the Comex price. The issue was
first raised in CLR’s response to Viacom’s cross-motion.
46 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
Viacom, in reply, pointed to evidence in the record that
addressed this new argument. The district court struck
these submissions as untimely. This, however, was in
error. Viacom had no obligation to produce specific evi-
dence of CLR’s role to survive CLR’s motion for sum-
mary judgment since the issue was never raised by CLR
at that stage. Aviles v. Cornell Forge Co., 183 F.3d 598, 604-
05 (7th Cir. 1999). Because CLR raised this argument
in an untimely manner, the district court should not have
considered it as a ground for summary judgment with-
out giving Viacom “notice and a fair opportunity to pre-
sent arguments and evidence in response.” Id. By strik-
ing the materials Viacom submitted, the district court
denied just that opportunity. Of course, since we are
remanding this case on other grounds, the issue may
resurface again after further discovery. At that point,
considering all evidence in the record, the district court
may properly evaluate—after considering all record evi-
dence—whether either Viacom or Ocean View has pre-
sented enough to connect CLR to any violation of the
antitrust laws. For the foregoing reasons, we also deny
CLR’s motion to strike.
D. Aiding and Abetting: JPMorgan Chase
Another minor issue crops up only in Ocean View, but
it too can be disposed of easily. JPMorgan Chase asserts
that the district court incorrectly denied its motion to dis-
miss on the ground that the complaint failed to state a
claim against it because it only aided and abetted the
conspiracy between Sumitomo and Global. But Ocean View
is not attempting to state an “aiding and abetting” case. Its
allegation is that JPMorgan Chase was a participant in the
conspiracy to manipulate the copper market. To state such
a claim, Ocean View need only prove that JPMorgan Chase
knew Sumitomo intended to restrain trade, intended that
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 47
trade be restrained, and materially contributed to that
restraint. 7 Phillip E. Areeda, Antitrust Law: An Analysis
of Antitrust Principles and Their Application, ¶1474a
(1986); Poller v. Columbia Broad. Sys., Inc., 368 U.S. 464,
470 (1962). A broad reading of the complaint alleges this
and more. It states that JPMorgan Chase, aware that
Sumitomo was manipulating futures prices, provided
services and loans at well above-market prices to finance
and hide Sumitomo’s activities. JPMorgan Chase also
allegedly stonewalled and lied to regulators and otherwise
helped Sumitomo in an attempt to avoid investigations,
all the while profiting handsomely on its deal. Of course,
after merits discovery, it may come to pass that Ocean View
lacks the evidence to establish any of these claims. But
accepting the allegations as true, it is entitled to proceed.
E. Reinstatement of Claims
Only a few brief housekeeping matters remain. In both
Viacom and Ocean View, the district court also granted
the defendants summary judgment on their RICO and
fraud claims because RICO contains rules similar to the
Clayton Act for identifying proper plaintiffs. International
Bhd. of Teamsters, 196 F.3d at 825. Having found that the
plaintiffs here may pursue their antitrust claims, the RICO
claims must be reinstated as well. The same goes for the
state law claims. They were dismissed without prejudice in
Viacom only because all federal claims had dropped out of
the case. Finally, in Ocean View, the district court dis-
missed Ocean View’s claim under Rhode Island state law on
the ground that Rhode Island law imposed standing re-
quirements similar to those of federal law. Expressing no
opinion on the merits of that determination, we note that
since we have found that Ocean View may proceed on at
least some of its claims under federal law, the dismissal of
the Rhode Island claim on similar grounds must be recon-
sidered.
48 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
VII.
To summarize, we MODIFY the dismissal of the state law
claims in No. 00-3979 to reflect that this dismissal was
without prejudice. In all other respects we AFFIRM the
judgment of the district court. We also AFFIRM the judg-
ment in No. 01-1148. On the other hand, we find that
Viacom, Emerson, and Ocean View are not indirect pur-
chasers under Illinois Brick, and their injury is direct,
predictable, and unlikely to produce duplicate recovery
or speculative damages. Therefore, in Nos. 01-3229, 01-
3230, and 01-3485, we REVERSE the judgment of the dis-
trict court and REMAND for further proceedings.
CUDAHY, Circuit Judge, concurring in Nos. 00-3979 and
01-1148 and concurring in the judgments in Nos. 01-3485,
01-3229 and 01-3230. I join in the outcomes reached by
the majority in the several cases, but I write separately
to question the appropriateness of finding a “lockstep”
relationship between the copper futures and cash mar-
kets in the analysis of the claims of Viacom, Emerson
and Ocean View.
The analysis and outcome in Sanner (which relied on the
allegations of a complaint, not a summary judgment rec-
ord) were based on the thesis that the futures market and
the cash market tended to move in “lockstep.” Thus, the re-
lationship of futures prices of soybeans on the Chicago
Board of Trade and the cash price of soybeans to be real-
ized by farmers could be assumed to be simple, direct
and absolutely predictable. “The futures market and
the cash market for soybeans are . . . ‘so closely related’
that the distinction between them is of no consequence
Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485 49
to antitrust standing analysis.” 62 F.3d at 929. Based
on the complaint, there could be no question that a given
manipulation of the futures market produced a precisely
proportionate consequence in the cash market.
This is hardly the case with the Comex and the market
for physical copper. Even though the majority attempts
to minimize the departures from a fully direct relation-
ship between the futures and the physicals market (and
takes issue with the more critical analysis of these rela-
tionships by the district court), under either view “lock-
step” becomes more a slogan than a fact. And, of course, it
was the existence of a “lockstep” relation that apparently
excused Sanner from the strictures of Illinois Brick v.
Illinois, 431 U.S. 720 (1977) and squared it with Associ-
ated General Contractors of California, Inc. v. California
State Council of Carpenters, 459 U.S. 519 (1983). The
existence, in the case before us, of a negotiable premium
(or discount) as part of the price is enough in itself to
remove this relationship from the “lockstep” category.
And, if the language of Kansas v. Utilicorp United, Inc.,
497 U.S. 199, 216 (1990) about the undesirability of ex-
ceptions to Illinois Brick were to be applied here, the
outcome might be in doubt.
With respect to the possibility of duplicative recovery,
Sanner is also quite distinguishable. There the plaintiff-
farmers produced the commodity, bought none of it and
there was no trade in any precursor raw material. Here
the plaintiff-manufacturers bought from integrated pro-
ducers, which purchased from others substantial quantities
of copper cathode and pre-cathode copper raw material
(the price of which also tended to follow the copper futures
market).
I believe, therefore, that the case before us, although it
seeks to apply Sanner’s principle, may be a major step
beyond Sanner. The outcome, however, may be justified
50 Nos. 00-3979, 01-1148, 01-3229, 01-3230, 01-3485
insofar as there is sufficient evidence that the defendants
engaged in massive physical cathode transactions and
intended to manipulate physical prices as well as futures
prices and thus to injure purchasers such as the plain-
tiffs. See Sanner, 62 F.3d at 929 (“even if we were to as-
sume . . . that there is a distinction between markets that
is relevant to antitrust standing, the farmers here have
alleged that one of the CBOT’s objectives in adopting
the Resolution was to prompt a price decline in the cash
market for soybeans.”).
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-97-C-006—9-20-02