Last Thursday, Judge Kevin McNulty in the District of New Jersey issued a 69-page opinion explaining his sua sponte dismissal of the putative class action complaint in Animal Science Products, Inc. v. China Minmetals Corp., which alleges a horizontal price-fixing scheme by a cartel of Chinese magnesite exporters.
Magnesite is a naturally occurring form of magnesium used in a variety of industrial applications. The Animal Science Products complaint alleges that in 2000 and 2001, following a drop in magnesite prices in 1999, the exporters formed a 23-member cartel under a series of names, including "Chinese Magnesite Export Association" and "China Magnesite Forum." Working together in a series of in-person meetings, the exporters allegedly overcharged magnesite purchasers in the U.S. by 4% from 2000 to 2003 and by more than 21% between 2004 and 2008.
Judge McNulty acknowledged that plaintiffs plausibly alleged a horizontal price-fixing scheme, but he dismissed their amended complaint sua sponte because the plaintiffs failed to establish antitrust standing. The court reasoned that the plaintiffs needed to plead that they bought price-fixed product either directly from a cartel member, under what the court described as "the bright-line direct purchaser rule," or through a third party working as a co-conspirator. The plaintiffs, however, (1) failed to allege that they had purchased magnesite directly from cartel members and (2) failed to properly plead conspiracy, relying only on conclusory assertions to allege that the intermediaries through whom they bought magnesite were working in league with the defendants.
Judge McNulty dismissed the Animal Science Products complaint with leave to amend. Thursday's decision represents the second time the suit has been dismissed since it was initially filed in 2005.
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