Ampal Inc., Custom Aluminum Products Inc., Claridge Products and Equipment Inc. and Extruded Aluminum Corp. made their appeal on Thursday, almost two months after U.S. District Judge Katherine B. Forrest dismissed their third amended complaint. In her ruling, Judge Forrest found that the companies, which either bought aluminum directly from the defendants or were the first to pay the allegedly manipulated price, made arguments that were similar to those made by indirect purchasers and rejected by the Second Circuit in August for lack of antitrust standing.
In that 20-page decision, Judge Forrest held that the core of the direct purchasers’ claims was identical to the indirect purchasers’ appealed complaints — that Goldman Sachs & Co., a JPMorgan Chase & Co. unit, commodities firm Glencore Ltd. and others allegedly restricted the supply of aluminum, leading to a higher aluminum commodities market price.
The Second Circuit’s “Aluminum III” decision said that the indirect buyers didn’t sufficiently show that they were directly harmed by the defendants’ actions.
Citing that ruling, Judge Forrest shot down the direct purchasers’ argument that antitrust standing exists because the parties directly compete in the primary aluminum market — the market for aluminum produced directly from mined ore. Instead, she held that the alleged anticompetitive conduct occurred in the aluminum warehouse services market, making the primary aluminum arena a “secondary locale in this drama.”
The companies’ claims center on an alleged conspiracy between the banks, which traded on the aluminum futures markets, and affiliated warehouses that stored aluminum associated with derivatives contracts. They say that intentional delivery delays at those warehouses between 2010 and 2013 raised the costs of metal storage and inflated prices paid by aluminum buyers.
Specifically, the direct purchasers took issue with the Midwest Transaction Price, the Midwest Premium and the price charged by the defendants who sold them aluminum directly. The Midwest Premium is the cost of shipping aluminum from London Metal Exchange warehouses to the Midwestern U.S., while the Midwest Transaction Price is the sum of the Midwest Premium and the price set by the London Metal Exchange.
In March 2015, Judge Forrest ruled that the direct purchasers’ transactions on the primary aluminum market were “inextricably intertwined with the competitive landscape” upon which the scheme supposedly played out. Prior to that decision, she separately held that the fallout for manufacturers and consumers was an “unintended consequence.”
The Second Circuit upheld that ruling, and since then, Goldman Sachs and the other defendants have urged the judge to apply the appellate court’s reasoning to the direct purchasers’ arguments.
The defendants could not be reached for comment Tuesday.
The direct purchasers are represented by Robbins Geller Rudman & Dowd LLP, Nussbaum Law Group PC, Lovell Stewart Halebian Jacobson LLP, Bonsignore LLC, Emerson Scott LLP, Gold Bennett Cera & Sidener LLP, Heins Mills & Olson PLC, Lieff Cabraser Heimann & Bernstein LLP, Lowey Dannenberg Cohen & Hart PC, Morgan & Morgan PC, Oliver Law Group PC and Venek Vickers & Masini PC.
Goldman Sachs is represented by Richard C. Pepperman II, Suhana S. Han, William H. Wagener, Yavar Bathaee and Jennifer H. Blecher of Sullivan & Cromwell LLP.
Glencore is represented by Eliot Lauer, Jacques Semmelman and Chelsea McLean of Curtis Mallet-Prevost Colt & Mosle LLP.
Henry Bath and JPMorgan Securities PLC are represented by Robert D. Wick, Henry Liu, John S. Playforth and David W. Haller of Covington & Burling LLP.
The case is In re: Aluminum Warehousing Antitrust Litigation, case number 1:13-md-02481, in the U.S. District Court for the Southern District of New York.
–Additional reporting by Y. Peter Kang. Editing by Orlando Lorenzo.For a reprint of this article, please contact [email protected]