Supreme Auto Transport, LLC v. Arcelor Mittal USA, Inc. ( 2018 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17-2910
SUPREME AUTO TRANSPORT, LLC, et al.,
Plaintiffs-Appellants,
v.
ARCELOR MITTAL USA, INC., et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 08 C 5468—Manish S. Shah, Judge.
____________________
ARGUED FEBRUARY 16, 2018 — DECIDED SEPTEMBER 6, 2018
____________________
Before WOOD, Chief Judge, and KANNE and ROVNER, Circuit
Judges.
WOOD, Chief Judge. This putative class action rests on alle-
gations of a massive antitrust conspiracy within the domestic
steel industry. Plaintiffs, indirect purchasers of steel, assert
that eight U.S. steel producers colluded to slash output in an
effort to drive up the price of steel nationwide. Years after
their initial complaint, however, the plaintiffs transformed
their theory of liability. The original complaint, filed in 2008,
2 No. 17-2910
charged that plaintiffs overpaid for steel sheets, rods, and tub-
ing manufactured by the defendants at their steel mills. Eight
years later, the plaintiffs amended their complaint, asserting
instead that they overpaid for end-use consumer goods, such
as vehicles, washing machines, and refrigerators, that were
manufactured by third parties using steel. This new product
definition greatly expanded the potential scope of the class.
The district court dismissed the suit for two reasons. First,
it determined that plaintiffs’ amended complaint is time-
barred because it redefines “steel products” in a way that
gives rise to an entirely different, and exponentially larger,
universe of plaintiffs. Second, in the alternative, the court held
that the amended complaint does not plausibly plead a causal
connection between the alleged antitrust conspiracy and
plaintiffs’ own injuries. Plaintiffs now appeal both rulings. We
affirm.
I
According to the allegations in plaintiffs’ amended com-
plaint, which we accept as true for the purposes of this appeal,
defendant Arcelor Mittal is the largest integrated producer of
steel in the United States, controlling 20–25 percent of total
domestic raw steel capacity. Defendant U.S. Steel is the sec-
ond largest integrated producer, controlling about 16 percent
of total domestic raw steel capacity. Defendant Nuncor is the
nation’s largest mini-mill producer, controlling 21 percent of
total domestic raw steel capacity. Other major domestic steel
producers include defendants Gerdau Ameristeel (10 per-
cent), AK Steel (5 percent), Steel Dynamics (4 percent), IPSCO
(2.5 percent), and Commercial Metals (2 percent). The remain-
ing 15–20 percent of the steel market is controlled by firms
No. 17-2910 3
that are not named defendants and are not alleged to have en-
gaged in any anticompetitive behavior.
It can be difficult to organize and maintain a price-fixing
cartel in a market with many competitors—including firms
that are not party to the conspiracy—but that is what plain-
tiffs allege happened here. They theorize that sometime in
early 2005, Arcelor Mittal organized a scheme to “improve in-
dustry discipline” by cutting raw steel output in order to
drive up prices and reap supracompetitive profits. They point
to a statement by a Mittal executive at an industry meeting in
March 2005 criticizing the industry’s traditional business
model on the grounds that it “ensured that most producers
would cut price before reducing volume.” The executive then
called on his competitors to coordinate supply cuts: he asked
them directly to “respond to market fluctuations” by cutting
production at “marginal facilities” to avoid a “race to the bot-
tom” in steel prices. A series of industry meetings followed in
early-to-mid 2005; at those meetings, multiple defendants al-
legedly cautioned the industry against oversupplying the
market and urged everyone to “adjust … operating levels” to
preserve high prices.
According to plaintiffs, the result of all this “urging” and
“cautioning” was a series of major production cuts in mid-
2005. Arcelor Mittal closed five of its twelve U.S. integrated
blast furnaces and reduced production at U.S. mills to 55 per-
cent of total capacity. U.S. Steel reduced output from 90 per-
cent capacity in the first quarter of 2005 to 75 percent capacity
in the second quarter, and closed at least two of its twelve do-
mestic blast furnaces. Nuncor similarly reduced its output
from 96 percent of capacity in 2004 to 79 percent capacity in
4 No. 17-2910
the second quarter of 2005. The smaller defendants took com-
parable measures. After these cuts took effect, the price of a
steel sheet increased by about 25 percent. The supply cuts al-
legedly remained in effect until mid-to-late 2007.
Plaintiffs insist that there is no procompetitive explanation
for this huge reduction in output. They allege that from early
2005 to late 2007, “annual domestic demand for steel far ex-
ceeded the United States production capacity of Defendants
and other domestic producers,” and that as a result, “there
was a shortage of steel in the United States market” through-
out the relevant period. (We can assume that there was such a
shortage. We observe, however, that neither the original nor
amended complaint discusses input or energy costs, or what
effect these costs might have had on steel prices. This is a trou-
bling omission, especially given the fact that a separate sec-
tion of plaintiffs’ complaint admits that the cost of energy, in-
puts, and many other commodities—including “aluminum,
copper, precious metals, resins, … plastic, … zinc and
nickel”—increased substantially during the class period. The
rising cost of inputs would provide an obvious innocent ex-
planation for the increase in steel prices. Cf. Bell Atlantic Corp.
v. Twombly, 550 U.S. 544 (2007). We will not address this pos-
sibility because the defendants did not raise it on appeal. Nor
will we address the impact of steel imports on the market—
an issue that also has not been discussed by the parties and
that would take us down a deep rabbit-hole.)
In the end, the 2005 production cuts and subsequent in-
creases in steel price led to two major antitrust class actions.
The first suit, which we call the “direct-purchaser” suit, was
filed in early September 2008, with Standard Iron Works as
the lead plaintiff. Standard Iron filed that suit on behalf of a
No. 17-2910 5
putative class. See Complaint at 1, 6, Standard Iron Works v.
Arcelor Mittal, No. 08-cv-5214 (N.D. Ill. Sept. 12, 2008),
ECF No. 1. The complaint defined class members as those
who purchased “steel products” directly from the defendants.
In turn, it defined “steel products” as:
[A]ll products derived from raw steel … including, but
not limited to, steel sheet and coil products; galvanized
sheet and other galvanized and/or coated steel prod-
ucts; tin mill products; steel slabs and plates; steel
beams, blooms, rails, and other structural shapes; steel
billets, bars, and rods; steel pipe and other tubular
products; and all other products derived from raw
steel.
Id. at 6.
The second suit, which we call the “indirect-purchaser”
suit, is the one that gave rise to this appeal. It was brought by
Supreme Auto in late September 2008, just weeks after the di-
rect-purchaser action. The original complaint did not include
a formal class definition. It simply alleged that Supreme Auto
was injured when it “purchased several items of steel tubing
[at an inflated price] indirectly from one or more of the de-
fendants … for end use” and indicated that Supreme Auto
was bringing suit on behalf of “all others similarly situated.”
Supreme Auto’s original complaint included a definition of
the types of steel products at issue. Its description mirrored
the language from the direct-purchaser suit:
“Steel products” means any consumer steel product in-
cluding but not limited to produced flat steel sheets
and coils; galvanized steel products; tin mill products;
steel plates; steel beams, rails and other structural
6 No. 17-2910
shapes; steel bars and rods; steel wire and wire rod;
steel pipes and other tubular products; and a variety of
other products derived from raw steel.
Supreme Auto stated that it was seeking relief under federal
antitrust law, as well as under the antitrust, consumer protec-
tion, and unjust enrichment laws of 28 states. The district
court deferred proceedings on class certification in the indi-
rect-purchaser suit until the court in the direct-purchaser suit
decided whether to certify a class.
After several years of delay, in September 2015 the district
court certified a class in the direct-purchaser case for the sole
purpose of determining whether defendants engaged in a
conspiracy in violation of federal antitrust laws. See Standard
Iron Works, 2015 WL 5304629, at *12 (Sept. 9, 2015). The court
denied certification on the issues of impact and damages,
holding that common questions there would not predominate
over individual ones. Id. The direct-purchaser suit was settled
shortly thereafter.
In March 2016, defendants moved to dismiss the indirect-
purchaser complaint. They argued that Supreme Auto failed
to allege any injuries outside of its home state (Michigan), that
it failed to allege that the steel it purchased was manufactured
by any one of the named defendants, and that Supreme Auto’s
complaint therefore failed to state a plausible claim for relief.
Supreme Auto did not respond to defendants’ motion to
dismiss. Instead, Supreme Auto—which was, at the time, the
only named plaintiff—filed an amended complaint adding
No. 17-2910 7
15 new plaintiffs from 11 states1 who purchased “one or more
steel products containing steel purchased from one or more
of the Defendants during the Class period.” Relying on juris-
diction pursuant to the Class Action Fairness Act, 28 U.S.C.
§ 1332(d)(2), which requires only minimal diversity and an
amount in excess of $5 million (both satisfied here), the
amended complaint dropped the federal antitrust claims and
alleged only state-law antitrust injuries in 21 states,2 con-
sumer-protection injuries in 19 states,3 and unjust enrichment
injuries in 48 states and the District of Columbia. It also
changed the definition of “steel products” from the definition
that appeared in the original complaint to the following:
“Steel products” means any consumer steel product
for end use and not for resale, including clothes wash-
ers, clothes dryers, refrigerators, freezers, dishwashers,
microwave ovens[,] regular ovens, automobiles, semi-
tractor trailers, farm and construction equipment,
room air conditioner units, hot water heaters, snow
blowers, barbeque grills, lawn mowers, and reinforc-
ing bars used in patios, driveways, swimming pools
and sidewalks.
1 Arizona, California, Florida, Iowa, Kansas, Michigan, Montana, New
York, North Carolina, South Dakota, and Tennessee.
2 Arizona, California, District of Columbia, Iowa, Kansas, Maine,
Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Mexico, New
York, North Carolina, North Dakota, South Dakota, Tennessee, Utah, Ver-
mont, West Virginia, and Wisconsin.
3 Alaska, Arkansas, California, Colorado, Delaware, District of Co-
lumbia, Florida, Idaho, Maine, Massachusetts, Michigan, Montana, Ne-
braska, Nevada, New Hampshire, New York, North Carolina, Vermont,
and Wisconsin.
8 No. 17-2910
Supreme Auto further announced that it was abandoning
claims related to its initial injury, which arose out of its pur-
chase of $171 worth of steel tubing. Going forward, the firm
proclaimed, it would be claiming injury solely based on its
purchase of two semi-truck trailers, each priced at over
$115,000.
Defendants again moved to dismiss the complaint, repeat-
ing their earlier argument that plaintiffs’ injuries were too re-
mote to establish a right to recover under either federal or
state antitrust laws. They also argued that the claims set forth
in the amended complaint were time-barred because they al-
leged a new set of injuries. The district court agreed with de-
fendants in both respects and granted the motion to dismiss
with prejudice. Plaintiffs then appealed.
II
We begin by addressing the statute of limitations. Plain-
tiffs concede that their amended complaint, filed in April
2016, falls outside all relevant limitations periods. The longest
period for any of plaintiffs’ claims is six years, meaning that
their claims expired, at the latest, sometime in the late sum-
mer of 2014—six years after the alleged conspiracy ended,
and a year and a half before plaintiffs filed their amended
complaint. Thus, the amended complaint is untimely unless
the plaintiffs can show that their claims were tolled or that the
amendments to their new complaint relate back to the original
one.
An amended pleading relates back to the original if “the
amendment asserts a claim or defense that arose out of the
conduct, transaction, or occurrence set out—or attempted to
be set out—in the original pleading.” FED. R. CIV. P.
No. 17-2910 9
15(c)(1)(B). The central inquiry under Rule 15(c) is whether
the original complaint “gave the defendant enough notice of
the nature and scope of the plaintiff’s claim that he shouldn’t
have been surprised by the amplification of the allegations of
the original complaint in the amended one.” Santamarina v.
Sears, Roebuck & Co., 466 F.3d 570, 573 (7th Cir. 2006) (citing
Tiller v. Atlantic Coast Line R.R. Co., 323 U.S. 574, 581 (1945)).
Even “significant” changes to a complaint or to a class defini-
tion can relate back so long as the defendant had fair notice of
the substance of the new allegations from the outset. See
Knudsen v. Liberty Mut. Ins. Co., 411 F.3d 805, 806 (7th Cir.
2005).
The district court held that the plaintiffs’ amended com-
plaint did not satisfy the fair-notice standard, because the
transactions at issue in the first complaint (the indirect pur-
chase of steel pipes, tubing, and sheets) were wholly distinct
from the transactions at issue in the amended complaint (the
purchase of washing machines, cars, swimming pools, and
the like). We agree. The original complaint defined “steel
products” by illustrating the meaning of that term through a
list of examples, such as steel sheets, rods, and tubing. All of
the examples listed in plaintiffs’ definition are mill output—
that is to say, they are steel products manufactured at steel
plants. No reasonable defendant, upon reading the original
definition, would have imagined that plaintiffs were in fact
suing over the thousands of end-use household and commer-
cial goods manufactured by third parties—a reading so broad
that it would transform nearly every person in the country
into a potential class member.
Plaintiffs fight this conclusion by emphasizing that the
original definition of steel products included “any” product
10 No. 17-2910
“derived from raw steel.” They also insist that the list was in-
tended to be “illustrative, not exhaustive.” These points do
not save the day. The word “derived,” as used in the context
of product manufacturing, is susceptible to multiple interpre-
tations. To say that a product is derived from steel could mean
simply that the product has some steel ingredients. It could
just as easily mean that the product is “formed” in its entirety
out of steel. See OXFORD ENGLISH DICTIONARY ONLINE,
http://www.oed.com/view/Entry/50613?redirectedFrom=de-
rive#eid (last visited Sept. 5, 2018). And while we do not
doubt that the list in the original complaint was intended to
be illustrative rather than exhaustive, we must ask ourselves
what general category the list was designed to illustrate.
Here, the items that appeared in the original complaint—steel
sheets, tubes, pipes, and rods—illustrate a category along the
lines of “steel products manufactured at steel mills.” It cannot
fairly be read as illustrating the much broader category of “all
consumer goods that include any steel component.” As the
Supreme Court often reminds us, the purpose of illustrative
lists is to indicate that a definition includes only those objects
that are similar to the objects in the list. See Begay v. United
States, 553 U.S. 137, 142 (2015). No object in Supreme Auto’s
original list bore any resemblance to the end-use consumer
goods listed in the amended complaint. If the original defini-
tion of steel products was intended to be all-encompassing, as
plaintiffs now argue, then “it is hard to see why [the com-
plaint] would have needed to include the examples at all.” Id.;
cf. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 114 (2001)
(explaining that, under the interpretative canon ejusdem gene-
ris, where general words follow specific words in an enumer-
No. 17-2910 11
ation, the general words are limited to the shared characteris-
tics of the specific words, even though the general words may
ordinarily have a much broader meaning).
What’s more, Supreme Auto gave no indication during the
first seven years of litigation that its suit included any prod-
ucts other than mill output. Not only did its complaint and
other filings refer only to mill output, but the definition of
“steel products” in plaintiffs’ complaint appears to be lifted in
large part from the complaint in the direct-purchasers’ suit,
which had been filed less than a month earlier. All parties
knew that the direct-purchaser litigation was exclusively
about mill output, and so the definitional similarity between
the two complaints further buttressed the already-intuitive
inference that Supreme Auto’s suit was also about products
made by the defendants at their steel mills.
The first hint of a shift in Supreme Auto’s litigation strat-
egy did not come until late 2015, when Supreme Auto sent
subpoenas to third-party retailers such as Whirlpool and John
Deere asking about their use of steel in washing machines and
lawnmowers. Defendants complained about this expansive
discovery tactic when they moved to dismiss the original
complaint. They protested that plaintiffs’ suit now purported
to encompass “not only tubes but ‘any consumer steel prod-
uct,’ from refrigerators to washing machines to other con-
sumer products made of steel among other constituent mate-
rials.” On appeal, plaintiffs assert that this statement—which
defendants wrote in 2016—constitutes an “admission” that
defendants knew all along that the suit was really about this
vast array of products with some steel in their make-up. We
are not persuaded. Our review of the record, as well as our
interrogation of both parties during oral argument, reveals no
12 No. 17-2910
indication that defendants had notice of plaintiffs’ new claims
at any time before the expiration of the limitations period. Be-
cause the original complaint did not give defendants fair no-
tice of the nature and scope of the claims set out in the
amended complaint, the amendments do not relate back un-
der Rule 15(c).
We also see no basis for tolling the statute of limitations.
Tolling is not available under American Pipe & Construction Co.
v. Utah, 414 U.S. 538 (1974), which suspends the applicable
statute of limitations in class action suits to all members of the
purported class, because the plaintiffs named in the amended
complaint were not “asserted members of the class” defined
in the original complaint and their claims were not encom-
passed by the original suit. See id. at 553. If there were any
doubt about this (and we have none), the Supreme Court’s
recent decision in China Agritech, Inc. v. Resh, 138 S. Ct. 1800
(2018)—to the effect that upon denial of certification, a puta-
tive class member may not commence a new class action be-
yond the time allowed by the applicable statute of limita-
tions—also supports our reasoning. The substantial prejudice
to defendants—who had no reason to think in 2008 that they
should preserve evidence relating to the gargantuan number
of consumer products now at issue—further counsels against
applying any form of equitable tolling.
III
Given that plaintiffs’ amended complaint is time-barred,
we could end our analysis now without reaching the proxi-
mate causation issue. But since the district court ruled in the
alternative, and we recognize that we do not necessarily have
the last word, we think it prudent also to say a word about
this basis for the district court’s decision.
No. 17-2910 13
Proximate causation is an essential element that plaintiffs
must prove in order to succeed on any of their claims. The
purpose of the proximate causation requirement—in both an-
titrust and tort law—is to avoid speculative recovery by re-
quiring a direct relation between the plaintiff’s injury and the
defendant’s behavior. Holmes v. Sec. Inv’r Prot. Corp., 503 U.S.
258, 268 (1992).
In the antitrust context, the proximate causation require-
ment in the past has been termed “antitrust standing,” even
though it has nothing to do with a plaintiff’s standing to sue
under Article III of the U.S. Constitution (which requires only
but-for causation, an injury-in-fact, and redressability).
Greater Rockford Energy & Tech. Corp. v. Shell Oil Co., 998 F.2d
391, 395 & n.7 (7th Cir. 1993); see also Associated Gen. Contrac-
tors of Cal. Inc. v. Cal. State Council of Carpenters, 459 U.S. 519,
535–43 (1983) (providing a six-factor test for determining
whether the requirements of proximate causation are satisfied
in an antitrust case). The Supreme Court clarified in Lexmark
International, Inc. v. Static Control Components, Inc., 572 U.S. 118
(2014), in the context of the Lanham Act, that the considera-
tions often referred under the rubric of “prudential standing”
are nothing more or less than substantive questions about the
coverage of a statute. Id. at 127–28. We will thus similarly es-
chew the term “antitrust standing” and speak only of the re-
quirements to bring a case under the particular statutes in-
volved.
Along with the ordinary requirement of proximate causa-
tion, federal antitrust law imposes additional limits on recov-
ery in suits for treble damages under the Clayton Act,
15 U.S.C. § 15. One of the most significant is the direct-pur-
chaser requirement announced in Illinois Brick Co. v. Illinois,
14 No. 17-2910
431 U.S. 720, 729–30 (1977), which held that only direct pur-
chasers of a product can sue the supplier for damages. Allow-
ing private suits by purchasers further down the supply
chain, the Court held, would risk duplicative awards.
But Supreme Auto and its co-plaintiffs are not suing under
the Clayton Act or any other federal statute (at least, not any
more); rather, they are suing under the antitrust laws of
nearly two dozen states. While most states model their anti-
trust statutes and jurisprudence on federal law, they are un-
der no obligation to do so. California v. ARC Am. Corp., 490 U.S.
93, 102 (1989). Relevant to this appeal, 21 of the states where
plaintiffs claim injuries have enacted statutes that do not in-
corporate Illinois Brick’s strict direct-purchaser requirement.4
In these states, downstream purchasers who pay inflated
prices for consumer goods are not automatically barred from
bringing antitrust suits against upstream price fixers.
And there’s more, plaintiffs say. They argue that the so-
called “Illinois-Brick repealer states” have replaced one per se
rule with another and now allow all indirect-purchaser suits
to go forward, no matter how far removed the purchasers are
from the production process and no matter how speculative
the damages award would be. We do not read these state laws
4See Ariz. Rev. Stat. Ann. §§ 44-1401, -1408; Cal. Bus. & Prof. Code
§ 16750(a); D.C. Code Ann. § 28-4509; Iowa Code §§ 553.12, .4; Kan. Stat.
Ann. § 50-161(b); Me. Rev. Stat. Ann. 10 § 1104(1); Mich. Compiled Laws
§ 445.778(2); Minn. Stat. § 325D.57; Miss. Code Ann. § 75-21-9; Neb. Rev.
Stat. Ann § 59-821; Nev. Rev. Stat. Ann. § 598A.210; N.M. Stat. Ann. § 57-
1-3(A), (C); New York Gen. Bus. Law § 340(6); N.C. Gen. Stat. § 75-16; N.D.
Cent. Code § 51-08.1-08(3); S.D. Codified Laws Ann. §§ 37-1-14.3, -33;
Tenn. Code Ann. § 47-25-106; Utah Code Ann. § 76-10-3109(1)(a); Vt. Stat.
Ann. tit. 9 § 2465(b); W. Va. Code R. § 142-9-2; Wis. Stat. § 133.18(1)(a).
No. 17-2910 15
so expansively. It is one thing to say that a state is willing to
allow someone other than a direct purchaser to have the op-
portunity to shoulder the burden of showing proximate cau-
sation; it is quite another thing to say that the state has thrown
both the direct-purchaser rule and proximate causation out
the window.
There are many suits that satisfy ordinary principles of
proximate causation but nevertheless would be barred under
federal law by Illinois Brick’s direct-purchaser requirement.
This very case provides an example: many if not all Illinois-
Brick repealer states would have allowed Supreme Auto’s
original complaint to go forward. That first complaint alleged
injury based on the purchase of steel rods and similar items
from distributors who, in turn, had purchased those same
items from the defendants. The original complaint involves
an indirect purchase (and so would be barred by Illinois Brick
at the federal level) where the alleged injury is still fairly trace-
able to the defendant steel manufacturers.
The amended complaint is a different story. It alleges that
plaintiffs purchased steel only insofar as it was one among
many components of other more complex products, all of
which have gone through numerous manufacturing altera-
tions and lines of distribution. In many of these products, steel
is not even a primary or necessary ingredient. We cannot im-
agine—and plaintiffs have not told us—how one might tackle
the task of tracing the effect of an alleged overcharge on steel
through the complex supply and production chains that gave
rise to the consumer products at issue here. The district court
thus appropriately ruled that the claims asserted here were
too remote to support a claim under the different state laws
plaintiffs invoked.
16 No. 17-2910
IV
We express no opinion here on the ultimate question
whether these defendants violated the federal antitrust laws.
Plaintiffs cite many statements by steel-industry executives
that sound suspiciously like invitations to fix prices and out-
puts. Price-fixing agreements are per se illegal under the Sher-
man Act. Both direct purchasers and the federal government
are authorized to sue when they believe they have found such
an agreement. See, e.g., 15 U.S.C. §§ 4 (government civil suits),
15 (private treble damage actions). But, to repeat, we do not
have a federal case before us. Plaintiffs have pared their action
down to a case asserting violations of state laws, and we have
concluded that the district court correctly decided that they
have not shown how their alleged injury could be traced to
defendants’ conduct—a requirement that is just as essential
under the state laws as it is under federal law. Also, and more
straightforwardly, they failed to raise their current claims
within the relevant limitations periods. For both these rea-
sons, we AFFIRM the judgment of the district court.