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From Antitrust Law Daily, March 4, 2015

Owner of London Metal Exchange dismissed from aluminum price fixing suit

By Jeffrey May, J.D.

In an action alleging a conspiracy to drive up the price of aluminum, the federal district court in New York City has refused to exercise personal jurisdiction over four foreign defendants—LME Holdings Limited, Hong Kong Exchanges and Clearing Limited (HKEx), Henry Bath & Son Ltd., and Glencore plc. The complaining aluminum purchasers failed to meet their burden of demonstrating personal jurisdiction over each of the entities. Thus, these defendants were dismissed. The court also denied the plaintiffs' request for jurisdictional discovery (In re Aluminum Warehousing Antitrust Litigation, March 3, 2015, Forrest, K.).

The aluminum purchasers allege a conspiracy to restrain the output of aluminum among the London Metal Exchange Ltd. (LME)—the self-described “world centre for industrial metals trading”—owners and operators of metal storage warehouses, and metal traders. They contend that so-called “load-out delays” at aluminum warehouses certified by the LME increased the price of a premium partially derived from the cost of storing aluminum. The key instrumentality of the conspiracy, according to the plaintiffs, is the LME’s Warehousing Committee, which establishes rules for LME warehouses.

HKEx owns the LME. LME Holdings is the corporate parent of the LME. U.K-based Henry Bath & Son Ltd. “owns and operated numerous LME-certified warehouses in the United States,” and Glencore is described as “a multinational commodities trading and mining corporation.”

The court rejected the plaintiffs' argument that it could exercise jurisdiction over the four defendants based on their participation in the conspiracy. Instead, it would rely on existing jurisdictional principles. “The rules and doctrines applicable to personal jurisdiction are sufficient without the extension of the law to a separate and certainly nebulous `conspiracy jurisdiction' doctrine,” in the court's view.

The plaintiffs attempted to base personal jurisdiction on the fact that these four defendants or their affiliates sat on the LME’s Warehousing Committee. However, membership alone did not constitute the necessary purposeful availment of the laws of the United States or action directed at the United States to support jurisdiction, the court held. This allegation was deemed too generalized, and too devoid of meaningful context to provide a prima facie basis for jurisdiction.

With respect to LME Holdings, the court was not convinced that the plaintiffs' allegations were sufficient to establish that the LME and LME Holdings were indistinguishable for jurisdictional purposes. The plaintiffs unsuccessfully argued that to the extent the LME was present in New York, or in the United States, LME Holdings was too.

HKEx was alleged to have acquired LME Holdings and the LME, to have operated LME Holdings as a “mere department,” and to have the ability to “make meaningful changes to improve the situation in the aluminum market” and failed to do so. The court concluded, however, that the plaintiffs' jurisdictional allegations fell short with regard to the HKEx, as well. There was no basis for an inference that HKEx, LME Holdings, and the LME ignored corporate formalities or were in some way indistinguishable to permit jurisdiction over HKEx and LME Holdings, in the court's view.

Jurisdictional discovery. The plaintiffs requested jurisdictional discovery as an alternative to dismissal. The court denied the request in light of the massive government investigations into the challenged conduct. This was not a case where the plaintiffs were required to guess at bases for jurisdiction, the court noted. In addition, the plaintiffs' motions for leave to amend their complaints were denied.

The case is 13-md-2481 (KBF).

Attorneys: Benjamin Martin Jaccarino (Lovell Stewart Halebian Jacobson LLP) for Superior Extrusion Inc. Phillip Timothy Howard (Howard & Associates PA) for Master Screens Inc. Daniel E. Becnel, Jr. (Becnel Law Firm, LLC) for River Parish Contractors, Inc. Azra Zahoor Mehdi (The Mehdi Firm) for Viva Railings,LLC. Adam E. Polk (Girard Gibbs LLP) for D-Tek Manufacturing. Benjamin M. McGovern (Holland & Knight, LLP) for GS Power Holdings LLC and Metro International Trade Services, LLC. Jennifer Lynn Giordano (Latham & Watkins LLP) for London Metal Exchange Ltd. Henry Liu (Covington & Burling LLP) for Henry Bath LLC. John M. Nannes (Skadden, Arps, Slate, Meagher & Flom LLP) for Pacorini Metals USA, LLC. Margaret M. Zwisler (Latham & Watkins LLP) for Hong Kong Exchanges and Clearing Ltd.

Companies: London Metal Exchange Ltd.; Glencore plc; Henry Bath & Son Ltd.; Hong Kong Exchanges and Clearing Ltd.

MainStory: TopStory Antitrust NewYorkNews

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