United States District Court, E.D. Virginia, Richmond Division
IN RE INTERIOR MOLDED DOORS ANTITRUST LITIGATION IN RE INTERIOR MOLDED DOORS INDIRECT PURCHASER ANTITRUST LITIGATION
A. Gibney, Jr., United States District Judge.
these consolidated class actions, two groups of plaintiffs
contend that America's leading manufacturers of interior
molded doors unlawfully conspired to fix prices. The first
group of plaintiffs-the direct purchaser plaintiffs-bought
interior molded doors directly from the defendants, Masonite
Corporation and JELD-WEN, Inc. The direct purchaser
plaintiffs seek damages under the Sherman Act for the
defendants' alleged anticompetitive conduct. The second
group of plaintiffs-the indirect purchaser plaintiffs-bought
interior molded doors indirectly from the defendants through
distributors. The indirect purchaser plaintiffs seek
injunctive relief under the Sherman Act and damages under the
laws of thirty-nine states. The defendants have moved to
dismiss both complaints for failure to state a claim.
the direct and indirect purchaser plaintiffs sufficiently
allege that the defendants conspired to fix prices, the Court
will deny the motion to dismiss for failure to state a claim
as to the Sherman Act. Some of the indirect purchaser
plaintiffs' claims arising under state law, however, fall
short in various respects. Accordingly, the Court will grant
in part the motions to dismiss. In this Opinion, the Court
will address each claim in turn.
FACTS ALLEGED IN THE COMPLAINTS
American homes contain interior molded doors
("IMDs"), which separate interior rooms, hallways,
and closets. Manufacturers produce IMDs "by sandwiching
a wood frame and a hollow or solid core between two doorskins
composed of a high-density fibrous mat and formed into a
raised panel design." (Dk. No. 119, 3:18-cv-718, at
¶ 1.) Doorskins comprise the most important part of
IMDs, representing up to 70 percent of the overall cost of
and Masonite are the two largest manufacturers of IMDs in the
United States. In 2012, JELD-WEN acquired another
manufacturer of IMDs and doorskins, CraftMaster
International, Inc. ("CMI"). After the acquisition,
JELD-WEN and Masonite became the only two manufacturers of
doorskins in the United States and controlled 85 percent of
the national IMD market. Because the manufacturers comprising
the other 15 percent of the IMD market did not make
doorskins, they had to buy doorskins from the defendants, who
had aggressively competed for the business of those
manufacturers in the past. In 2014, Masonite abruptly stopped
selling doorskins to third parties, making JELD-WEN the sole
supplier of the largest component of IMDs.
plausibly plead a conspiracy to fix prices, the plaintiffs
must plead facts showing that the defendants (1) increased
prices in a parallel fashion, and (2) entered into an illegal
agreement to fix prices. The Court sets forth the
plaintiffs' allegations in that order.
Parallel Price Increases
JELD-WEN acquired CMI, JELD-WEN and Masonite began to
increase their prices of IMDs in near synchronization-either
simultaneously or in brief succession of each other-
beginning in late 2012. Nine different times between 2012 and
2018, the defendants increased the price of IMDs in similar
percentage increments. For example, in late 2013, Masonite
increased its prices by 5 percent. Seven days later, Jeld-Wen
increased its prices by 4 percent. The last alleged price
increase came from both companies on the same day: October 8,
2018. Both JELD-WEN and Masonite announced that the prices
would take effect later in the year within two days of each
Facts Showing an Agreement
plaintiffs set forth the following allegations to show that
the defendants entered into an illegal agreement to fix
Trade Association Meetings and Revolving Door
from JELD-WEN and Masonite regularly attend the same trade
association meetings, trade shows, and investor conferences.
Representatives from the two companies have both attended at
least five separate annual trade shows and made presentations
at three investor conferences. Additionally, executives from
JELD-WEN and Masonite alternate between working for each
company, resulting in a "revolving door" between
the two competitors. The industry is a "highly inbred,
'good old boy' network that is comprised of the same
players who have been working together since the 1980s."
(Id. at ¶ 79.)
Features of the IMD Market
features of the IMD market make it ripe for price fixing.
Because the IMD market has only two large producers, each
player knows the capabilities and capacity of the rest of the
market. The IMD market has high barriers to entry: any new
company wishing to enter the market must not only capture
customers currently purchasing IMDs from established
suppliers, but also must invest tens of millions of dollars
to construct an IMD plant. Those barriers allow the current
players to ignore the threat of emerging competitors.
home builders, renovators, and other buyers all need IMDs and
will keep buying them regardless of the price, demand for
IMDs is "inelastic." Manufacturers are thus able to
continue increasing prices without decreasing demand.
can easily replace one model of IMD with another. Because
IMDs are interchangeable products, manufacturers must
aggressively compete over price as the only differentiating
feature. Manufacturers, therefore, have a greater incentive
to fix prices.
History of Antitrust Violations
interior door industry has a history of violating antitrust
laws. In the 1990s, several predecessors of the defendants
and their subsidiaries pled guilty to multiple allegations of
price fixing and paid substantial fines to the government.
Price Increases Despite Falling Input Costs
letters to customers, Masonite and JELD-WEN often blamed
their price increases on rising input costs. Those
representations were materially false, as input costs were
decreasing and inflation rates were low.
Knowledge of JELD-WEN's Pricing Decisions
Masonite vice president often returned to Masonite from days
or weeks of travel having obtained knowledge of
JELD-WEN's intended price increases. Decisions to raise
prices at Masonite occurred shortly after that vice president
Masonite 's Pricing Activity
executives set prices well above the levels that internal
analyses showed a competitive market could support. Masonite
never undercut JELD-WEN's pricing, despite having the
necessary profit margins to lower prices and capture a larger
Masonite's Decision to Stop Selling Doorskins
2014, Masonite stopped selling doorskins to independent IMD
manufacturers despite its continued capacity to sell and its
previous aggressive marketing of doorskins. Masonite's
actions were against its economic interests and helped
JELD-WEN corner the doorskins market. Around that same time,
JELD-WEN implemented a new strategy emphasizing price
Masonite announced that it would stop selling doorskins to
independent IMD manufacturers, JELD-WEN-the only remaining
doorskins seller-began raising its prices for doorskins.
THESE PROCEEDINGS AND RELATED LITIGATION
response to JELD-WEN's price hikes, an IMD manufacturer,
Steves & Sons, Inc., sued JELD-WEN, alleging that the
company's 2012 acquisition of CMI violated § 7 of
the Clayton Act because it substantially decreased
competition in the doorskins market. In February, 2018, a jury
returned a verdict in Steves' favor.
the Steves verdict, the direct and indirect purchaser
plaintiffs followed suit with these claims. First, the direct
purchaser plaintiffs allege that Masonite and JELD-WEN
conspired to adopt uniform price increases for IMDs in
violation of § 1 of the Sherman Act and fraudulently
concealed their conspiracy from the plaintiffs. Soon
thereafter, the indirect purchaser plaintiffs sued the
defendants. The indirect purchaser plaintiffs also allege
that the defendants violated § 1 of the Sherman Act, but
only request injunctive relief. The indirect purchaser
plaintiffs seek damages based on alleged violations of state
antitrust, consumer protection, and unjust enrichment laws.
defendants have moved to dismiss both complaints for failure
to state a claim, arguing that the plaintiffs have failed to
plead sufficient facts showing that the defendants conspired
to fix prices in the IMD market. The defendants also lodge
numerous challenges to the plaintiffs' state law claims,
which the Court will address in turn.
virtually all the plaintiffs' claims rise and fall on the
sufficiency of their federal antitrust allegations, the Court
first addresses the federal antitrust claim. The Court then
considers the defendants' sundry challenges to the
plaintiffs' state law claims.
Federal Antitrust Claim
the defendants argue that the plaintiffs do not plead a
plausible conspiracy claim under the Sherman Act. The
defendants also say that the plaintiffs cannot invoke the
doctrine of fraudulent concealment to toll the statute of
limitations. Finally, the defendants contend that the
indirect purchaser plaintiffs lack antitrust standing to seek
injunctive relief under the Sherman Act.
Plausibility Under § 1 of the Sherman Act
state a claim under § 1 of the Sherman Act, "a
plaintiff must [show] (1) a contract, combination, or
conspiracy; (2) that imposed an unreasonable restraint on
trade." N. C. State Bd. of Dental Exam'rs v.
FTC, 111 F.3d 359, 371 (4th Cir. 2013). The parties
dispute whether the plaintiffs sufficiently allege a
"contract, combination, or conspiracy."
that the defendants conspired to fix prices, the plaintiffs
must allege facts suggesting that the defendants
"specifically made 'a conscious commitment to a
common scheme designed to achieve an unlawful
objective.'" SD3, LLC v. Black & Decker
(U.S.) Inc., 801 F.3d 412, 424 (4th Cir.
2015) (quoting Monsanto Co. v. Spray-Rite Serv.
Corp., 465 U.S. 752, 764 (1984)). Here, the plaintiffs
do not allege any direct evidence of a conspiracy or
agreement. See Am. Chiropractic Ass 'n v. Trigon
Healthcare, Inc., 367 F.3d 212, 226 (4th Cir. 2004)
(noting that direct evidence of conspiracy, such as a
"smoking gun, " is "extremely rare in
the plaintiffs contend that the defendants engaged in
parallel conduct that suggests an agreement. But to proceed
on charges of parallel conduct, antitrust plaintiffs must
allege enough additional facts "to raise a reasonable
expectation that discovery will reveal evidence of [an]
illegal agreement." Twombly, 550 U.S. at 557.
Put another way, "[f]or a § 1 claim to survive, ...
a plaintiff must plead parallel conduct and something
'more.'" SD3, 801 F.3d at 424
(quoting Twombly, 550 U.S. at 557) ("[P]arallel
conduct, standing alone, does not establish the required
agreement because it is equally consistent with lawful
conduct."). Courts refer to the "more"
required in the pleadings as "plus factors."
Id. Courts evaluate plus factors holistically and
weigh them together with the allegations of parallel conduct.
See Id. at 424-25 (declining "to parse each
'plus factor' individually"). Allegations that
alone seem neutral "can take on a different shape when
considered in conjunction with other surrounding
factors consist of circumstantial or contextual evidence that
substantiates an otherwise speculative conspiracy claim.
Robertson v. Sea Pines Real Estate Cos., 679 F.3d
278, 289 (4th Cir. 2012) (citing Twombly, 550 U.S.
at 557). The circumstantial evidence need not "compel an
inference of conspiracy, " but need only render the
allegations plausible. In re Text Messaging Antitrust
Litig, 630 F.3d 622, 629 (7th Cir. 2010) (Posner, J.).
Twombly, the plaintiffs set forth extensive allegations of
parallel behavior among the nation's phone service
providers, but made only cursory allegations regarding the
nature of the market, the history of the defendants'
attendance at trade conventions, and suspicious statements
made by company executives. 550 U.S. at 564-65. The
plaintiffs in Twombly "rest[ed] their § 1 claim on
descriptions of parallel conduct and not on any independent
allegation of actual agreement." Id at 564. The
complaint lacked enough plus factors tending to show an
illegal agreement, so the plaintiffs failed to
"nudge" their conspiracy allegation "from
conceivable to plausible." Id. at 570.
contrast, the plaintiff in SD3 alleged specific facts about
the defendants' agreement and conspiracy. 801 F.3d at
429. The plaintiff, an emerging table-saw manufacturer, sued
a group of established table-saw manufacturers for conspiring
to keep it out of the market. The plaintiff identified the
exact time, place, and manner of the agreement, most of the
individuals directly involved, and the procedures used to
seal the agreement. Because the complaint set forth
"parallel conduct in conjunction with '
circumstance[s] pointing toward a meeting of the minds,
'" the Fourth Circuit held that the plaintiff
plausibly alleged a conspiracy claim under the Sherman Act.
Id at 434 (quoting Twombly, 801 F.3d at
Messaging, the Seventh Circuit confronted a set of plus
factors similar to those in our cases. 630 F.3d at 628. The
plaintiffs in Text Messaging alleged that a group of cell
phone companies met at trade shows to fix prices in the
market for text messaging. The plaintiffs made allegations
about the concentrated nature of the text messaging market as
highly concentrated and asserted that the defendants
increased prices despite falling input costs. The Seventh
Circuit noted that "[w]hat is missing ... is the smoking
gun, " direct evidence of conspiracy typically rare in
antitrust cases. Id. at 629. The court, however,
explained that it "need not decide whether the
circumstantial evidence ... is sufficient to compel an
inference of conspiracy." Id. The court thus
held that the complaint plausibly alleged a Sherman Act
conspiracy claim, noting that "[d]iscovery may reveal
the smoking gun or bring to light additional circumstantial
evidence that further tilts the balance in favor of
these cases, the plaintiffs rely on seven plus factors: (1)
Masonite and JELD-WEN attended the same trade group meetings
and investor conventions and often swapped executives; (2)
the market for IMDs is highly concentrated, contains high
barriers to entry, and deals with an inelastic,
interchangeable good; (3) IMD manufacturers have violated
antitrust laws in the past; (4) Masonite and JELD-WEN
increased prices despite falling input costs; (5) Masonite
made pricing decisions after a certain vice president learned
of JELD-WEN's prices before they were public; (6)
Masonite engaged in irrational pricing activity; and (7)
Masonite stopped selling standalone doorskins to outside IMD
manufacturers to yield the market to JELD-WEN.
the plaintiffs allege that the defendants attended the same
trade group meetings, conventions, and conferences. They also
describe a revolving door for corporate executives between
Masonite and JELD-WEN. "Allegations of communications
and meetings among conspirators can support an inference of
agreement because they provide the means and opportunity to
conspire." SD3, 801 F.3d at 432; see also
Evergreen Partnering Grp., Inc. v. Pactiv Corp., 720
F.3d 33, 49 (1st Cir. 2013). The plaintiffs' allegations
here mirror the plaintiffs' assertions in Text Messaging,
in which the plaintiffs alleged that trade association
meetings gave cell phone companies the opportunity to
conspire. See Text Messaging, 630 F.3d at 628
(noting that attending association meetings is not
"illegal in itself, " but "facilitate[s] price
fixing that would be difficult for the authorities to
detect"). These two things-the defendants' mutual
attendance of at least eight separate annual trade
association meetings and their history of swapping
executives-make it more plausible that the alleged conspiracy
spawned from meetings at trade shows or conventions. See
SD3, 801 F.3d at 425 ("Actions that might seem
otherwise neutral in isolation can take on a different shape
when considered in conjunction with other surrounding
the IMD market is highly concentrated and has high barriers
to entry. IMDs are also inelastic (increasing their price
does not significantly change demand) and interchangeable
(any IMD can easily replace another IMD). In highly
concentrated markets, fewer minds must meet to control the
market. When products are inelastic, higher prices do not
create lower demand. And when products are interchangeable,
price is the only differentiating feature. The structure of
the IMD market makes it susceptible to a price-fixing
conspiracy. Because "industry structure that facilitates
collusion constitutes supporting evidence of collusion,
" id. at 432, the nature of the IMD market qualifies as
a significant plus factor. See Text Messaging, 630
F.3d at 627-28.
concentrated markets enable firms "to agree on prices
and to be able to detect 'cheating' (underselling the
agreed price by a member of the group) without having to
create elaborate mechanisms, such as an exclusive sales
agency, that could not escape discovery by the antitrust
authorities." Id. Because JELD-WEN and Masonite
control 85 percent of the market, each firm can easily detect
"cheating" simply by observing the other firm's
behavior-enabling them to carry out a conspiracy without
creating any "smoking gun" evidence.
third and fourth plus factors concern the history of
antitrust violations in the IMD industry and the
defendants' false explanation for their price increases.
In letters to customers, the defendants blamed their price
increases on rising input costs. In reality, input costs were
decreasing and inflation rates were low. The defendants thus
tried to conceal their true motives for raising
prices-whatever those motives may have been. This behavior
becomes especially troubling in light of the history of
antitrust violations in the industry. The defendants'
deception "suggest[s] that [they] knew their actions
'would attract antitrust scrutiny.'"
SD3, 801 F.3d at 432 (quoting Starr v. Sony BMG
Music Entm 7, 592 F.3d 314, 324 (2d Cir. 2010)). The
defendants' actions also mirror the conduct of the
defendants in Text Messaging, who similarly raised prices
while their input costs simultaneously dropped.
fifth plus factor concerns a Masonite vice president who
returned from business trips with advanced knowledge of
JELD-WEN's impending price increases. Shortly after his
return, Masonite also announced a price increase. This
alleged advanced knowledge of JELD-WEN's price increases
is precisely the sort of circumstantial or contextual
evidence that creates a plausible inference of a conspiracy.
See Robertson, 679 F.3d at 289. The defendants argue
that this plus factor lacks in specifics. But "specific
facts are not necessary" to plead an antitrust
conspiracy. Erickson v. Pardus, 551 U.S. 89, 93
(2007). Direct evidence of a conspiracy is rarely available
to antitrust plaintiffs, so they must rely on circumstantial
evidence. See Text Messaging, 630 F.3d at 629;
Robertson, 679 F.3d at 289 ("Conspiracies are
often tacit or unwritten ..., thus necessitating resort to
sixth plus factor concerns Masonite's pricing activity.
One would expect manufacturers of interchangeable products to
engage in competitive pricing. Instead, Masonite not only
raised prices, but also raised them substantially above what
its own economic models predicted would be a competitive
price. Masonite also never undercut JELD-WEN's
perpetually increasing prices, even though doing so would
have captured a larger share of the market. Thus, Masonite
behaved in a manner inconsistent with the expected behavior
of a competitive actor.
the plaintiffs allege that Masonite stopped selling doorskins
to outside manufacturers despite its continued capacity to
produce doorskins. The plaintiffs say that Masonite's
decision makes no business sense absent an illegal agreement.
The defendants provide an alternative explanation: that
Masonite may have left the doorskins market to limit
competition in the downstream IMD market. But Masonite also
may have expected JELD-WEN to sell even more doorskins to
outside manufacturers, continuing downstream competition and
needlessly reducing Masonite's overall market share.
Moreover, if Masonite needed more doorskins for its own IMD
factories, it could have limited the number of doorskins it
sold to independent manufacturers instead of eliminating
those sales altogether.
Masonite's decision to stop selling doorskins to outside
manufacturers constitutes "evidence that [it] acted
contrary to its interests." In re Flat Glass
Antitrust Litig., 385 F.3d 350, (3d Cir. 2004). The
circumstances surrounding Masonite's exit from the
doorskins market make the plaintiffs' allegation of a
conspiracy more plausible. See SD3, 801 F.3d at 430.
defendants try to disaggregate the various plus factors,
knocking down each individual allegation as insufficient to
show that the defendants conspired to fix prices. But the
Court will not "parse each 'plus factor'
individually and ask whether that factor, standing alone,
would be sufficient to provide the 'more.'"
Id. at 425. Taken together, the plus factors in
these cases render plausible the plaintiffs' allegation
that the defendants entered into an illegal agreement.
plaintiffs set forth a combination of opportunity, market
structure, and pricing plus factors similar to the facts that
the Seventh Circuit in Text Messaging deemed sufficient to
survive a motion to dismiss. 630 F.3d at 627-28. They also
allege additional plus factors involving history of antitrust
violations, misrepresentation, insider knowledge, and
irrational business decisions. Here, as in SD3, the
plaintiffs describe parallel conduct and "further
circumstances pointing toward a meeting of the minds."
801 F.3d at 430. The plaintiffs' detailed allegations
"allay[ ] the suspicion that the plaintiff[s] [are]
merely speculating a conspiracy into existence from
coincidentally similar action, " which "after all,
was Twombly's principal concern." Id.
sure, the plaintiffs have not proven that the defendants made
any agreement to fix prices in the IMD market. But their
allegations of parallel conduct and plus factors are
sufficient to survive a motion to dismiss. Accordingly, the
Court will deny the motion to dismiss the plaintiffs'
claims for failure to state a claim under § 1 of the
Statute of Limitations
the Sherman Act, a plaintiff must seek damages for violations
"within four years after the cause of action
accrued." 15 U.S.C. § 15b. In cases involving a
price-fixing conspiracy, "each overt act that is part of
the violation and that injures the plaintiff. . . starts the
statutory period running again, regardless of the plaintiffs
knowledge of the alleged illegality at much earlier
times." Klehr v. A.O. Smith Corp., 521 U.S.
179, 189 (1997) (internal quotation marks omitted). A
plaintiff generally cannot "recover for the injury
caused by old overt acts outside the limitations
the plaintiffs invoke the doctrine of fraudulent concealment
to get around the four-year limitations period. The doctrine
tolls the limitations period until a plaintiff discovers the
fraud. See Bailey v. Glover, 88 U.S. 342, 349
(1874). Courts read the doctrine "into every federal
statute of limitation, " Holmberg v. Armbrecht,
327 U.S. 392, 397 (1946), including antitrust laws.
Supermarket of Marlinton, Inc. v. Meadow Gold Dairies,
Inc., 71 F.3d 119, 122 (4th Cir. 1995) (applying
fraudulent concealment to § 1 of the Sherman Act).
plaintiff must plead three elements to invoke fraudulent
concealment: "(1) the party pleading the statute of
limitations fraudulently concealed facts that are the basis
of the plaintiffs claim, and (2) the plaintiff failed to
discover those facts within the statutory period, despite (3)
the exercise of due diligence." Id .
"Inquiry notice, which charges a person to investigate
when the information at hand would have prompted a reasonable
person to do so, touches on the diligence requirement of part
three." Go Comput. v. Microsoft Corp., 508 F.3d
170, 178 (4th Cir. 2007).
the plaintiffs do not allege that they engaged in any inquiry
to satisfy the due diligence prong. Instead, the plaintiffs say
that they "had no reason to investigate" after the
defendants sent letters to their customers falsely citing
rising input costs for price increases. (See Dk. No. 119, at
¶ 39, 3:18-cv-718.) They contend that no reasonable
investigation would have led them to discover the conspiracy
between Masonite and Jeld-Wen before the Steves litigation,
excusing them from exercising diligence.
support their argument that they need not show diligence, the
plaintiffs rely on the Fourth Circuit's decision in
Supermarket of Marlinton. In that case, the Fourth Circuit
held that a plaintiff can satisfy the due diligence prong
"without demonstrating that it engaged in any specific
inquiry." 71 F.3d at 128. The court, however, later
clarified the scope of that holding: "nothing in
Supermarket of Marlinton excuses a negligent plaintiff from
the diligence requirement-not even if a fraud is allegedly
well disguised." Microsoft, 508 F.3d at 179.
Supermarket of Marlinton does not categorically excuse
plaintiffs from satisfying the diligence prong.
the diligence requirement is triggered when a plaintiff is on
inquiry notice of its claim-when a plaintiff "knows of a
pattern of particular actions that a defendant has taken
against [the plaintiff], though the pattern's precise
scope might be unclear and its exact legal ramifications
uncertain." Id. at 179. Beginning in late 2012,
the defendants sent multiple letters to customers falsely
blaming price increases on rising input costs. At that time,
the IMD industry was highly concentrated between JELD-WEN and
Masonite. The industry also had a history of violating
antitrust laws. The defendants' repeated false statements
coupled with the surrounding circumstances of the industry at
least created the "evidence of the possibility of fraud,
" id, such that it put the plaintiffs on inquiry notice
of their claims. Cf SDS II LLC v. Black & Decker
(U.S.) Inc., 888 F.3d 98, 116 (4th Cir.
2018) (Wynn, J., concurring) (noting that a plaintiff is on
"actual notice" when he "plead[s] the factual