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Commercial Street Express LLC v. Sara Lee Corp.

December 18, 2008


The opinion of the court was delivered by: Judge Virginia M. Kendall


Plaintiffs Commercial Street Express LLC ("Commercial"), Nicole Vander Muelen ("Muelen"), Shasta Burzynski ("Burzynski"), and Kathleen Coullard ("Coullard") (collectively, "Plaintiffs") filed a class action suit against Sara Lee Corporation ("Sara Lee"), Colgate-Palmolive Company ("Colgate"), Henkel Chemie Verwaltungsgesellschaft MBH and Henkel Corp. (collectively, "Henkel"), Unilever N.V., Unilever PLC, and Unilever United States Inc. (collectively, "Unilever") (collectively, "Defendants"). Count I of Plaintiffs' Amended Complaint alleges a violation of Section 1 of the Sherman Anti-Trust Act ("Sherman Act"), 15 U.S.C. § 1, while the remaining three counts allege violations of various state laws. Defendants moved to dismiss Count I of Plaintiffs' Amended Complaint for lack of subject matter jurisdiction.*fn1 For the reasons stated, Defendants' Motion to Dismiss Count I of Plaintiffs' Amended Complaint is granted. Moreover, this Court finds that it lacks original jurisdiction over Plaintiffs' remaining state law claims under 28 U.S.C. § 1332(d)(2) and declines to exercise supplemental jurisdiction over Plaintiffs' state law claims pursuant to 28 U.S.C. § 1367(c)(3).


Plaintiffs allege that Defendants entered into a conspiracy to artificially raise prices of oral, personal and home care products in the U.S., and that Plaintiffs paid higher prices for oral, personal and home care products than they would have paid in the absence of Defendants' alleged illegal conduct. Am. Compl. ¶ 32, 35. Plaintiffs allege that Defendants' are global companies that manufacture and sell oral, personal and home care products. Am. Compl. ¶ ¶ 11-16. On February 20, 2008, the German Federal Cartel Office ("FCO") issued a press release stating that it fined Defendants, for price fixing in Germany and for illegally passing on information on price talks with retailers in an attempt to influence the market behavior of competitors and remove the uncertainty of competitive conditions in Germany. Am. Compl. ¶ ¶ 25-26. The FCO stated that Defendants, in early 2006, agreed to hike up the price of Pril and Palmolive dish detergents, Fa, Duschdas and Palmolive shower gels and Signal, Dentagard and Colgate toothpaste brands. These products are made by Henkel, Sara Lee, Unilever and Colgate. Am. Compl. ¶ 25. The Defendants' alleged anticompetitive behavior in Germany came to light after Colgate "spilled the beans" to the German competition authorities. Am. Compl. ¶ 26. Plaintiffs allege that a spokesperson for Henkel stated, "We made mistakes. We accept the fine of €21.6." Am. Compl. ¶ 27. Plaintiffs allege that "Defendants' price-fixing conspiracy in Germany dramatically increased the profitability of the Defendants which included the United States market." Am. Compl. ¶ 29. Henkel, in 2006, reported record revenues and profits in its Home Care business of more then €4.1 billion and an operating profit of €449 million, a 3.7% increase compared to 2005. Am. Compl. ¶ 29. Henkel explained the increase in profit by stating,

Market growth was more price-driven than in previous years because-unlike in 2005-it became possible to pass on raw material cost increases by raising products prices. As a consequence, the decline of the last few years encountered in our largest market, Western Europe, was reversed to product gratifying growth. In North America, too, there was a tangible price-driven upswing in the market dynamics, with a considerable expansion in sales. In North America, the successfully implemented price increases and good performance of our air freshener business contributed to strong growth in organic sales.

Am. Compl. ¶ 29. Plaintiffs claim that the oral, personal and home care products market is large. Am. Compl. ¶ 30. In 2006 Unilever's global sales were €18.297 billion and U.S. sales were more then €3 billion. In 2006 Henkel's U.S. sales were more then €1 billion and Colgate's U.S. sales were €2.211 billion. Am. Compl. ¶ 30. Sara Lee's global sales for the fiscal year ending in 2007 were more then $2 billion. Am. Compl. ¶ 30. Plaintiffs allege that Defendants' conspiracy to fix prices in Germany has: (1) suppressed, restrained and eliminated price competition in the oral, personal and home care industry in the U.S.; (2) raised, fixed, maintained and stabilized the prices of oral, personal and home care products at artificial and non-competitive levels throughout the U.S.; and (3) deprived consumers of free and open competition in the oral, personal and home care products market. Am. Compl. ¶ ¶ 31, 37.


Federal Rule of Civil Procedure 12(b)(1) provides for dismissal for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1); United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003). "If subject matter jurisdiction is... not evident on the face of the complaint, the motion to dismiss... would be analyzed as any other motion to dismiss, by assuming for purposes of the motion that the allegations in the complaint are true. However, as here, if the complaint is formally sufficient but the contention is that there is in fact no subject matter jurisdiction, the movant may use affidavits and other material to support the motion." United Phosphorus, 322 F.3d at 946; Capitol Leasing Co. v. FDIC, 999 F.2d 188, 191 (7th Cir. 1993) citing Grafon Corp. v. Hausermann, 602 F.2d 781, 783 (7th Cir. 1979). The party asserting jurisdiction must establish it by "competent proof." U.S. Phosphorus, 322 F.3d at 946; NFIC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231, 237 (7th Cir. 1995) citing McNutt v. Gen. Motors Acceptance Corp. of Indiana, 298 U.S. 178, 189 (1936). This means that jurisdiction must be established by a preponderance of the evidence or "proof to a reasonable probability." NFIC, 45 F.3d at 237, citing Gould v. Artisoft, Inc., 1 F.3d 544, 547 (7th Cir. 1993).


I. Count I (The Sherman Act)

Defendants' move this Court to dismiss Count I ofPlaintiffs' Complaint for lack of subject matter jurisdiction. Count I of Plaintiffs' Complaint alleges a violation of the Sherman Act. The Sherman Act provides that "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." 15 U.S.C. § 1. In 1982, the Foreign Trade Antitrust Improvements Act ("FTAIA") amended the Sherman Act, stating:

The Sherman Act shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless-(1) such conduct has a direct, substantial, and reasonably foreseeable effect-(A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or (B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and (2) such effect gives rise to a claim under the provisions of this Act other than this section.

15 U.S.C. §§ 6a (1), (2).*fn2 The language of the FTAIA lays down a general rule placing all activity involving foreign commerce outside the Sherman Act's reach. It then brings such conduct back within the Sherman Act's reach provided that the conduct both (1) sufficiently affects American commerce, that is, it has a "direct, substantial, and reasonably foreseeable effect" on American domestic commerce, and (2) has an effect of a kind that antitrust law considers harmful, that is, the "effect" must "giv[e] rise to a [Sherman Act] claim." § 6a(1), (2); F. Hoffmann-La Roche Ltd. et al. v. Empagran S.A. et al., 542 U.S. 155, 162 (2004).

The FTAIA intends to make clear to American firms doing business abroad (and to American exporters) that the Sherman Act does not prevent them from entering into a business arrangement, however anticompetitive, as long as those arrangements adversely affect only foreign markets. F. Hoffmann-La Roche Ltd. et al., 542 U.S. at 161. It does so by removing from the Sherman Act's reach commercial activities taking place abroad, unless those activities "meant to produce and did in ...

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