Hightower v. Celestron Acquisition, LLC

Background

Daniel Hightower and several indirect purchasers of consumer telescope products brought a putative class action against thirteen defendants, including corporate entities and individuals. The operative complaint alleged that the Synta entities and Ningbo Sunny entities conspired to divide the telescope market, fix or stabilize prices, rig bids, allocate customers, and obtain an unlawful monopoly. The alleged scheme included Synta’s acquisition of Celestron and Ningbo Sunny’s 2013 acquisition of Meade, which plaintiffs alleged was supported by Synta and Celestron.

Plaintiffs asserted four federal claims for the proposed nationwide injunctive class: restraint of trade under § 1 of the Sherman Act, monopolization and attempted monopolization under § 2 of the Sherman Act, and an acquisition-related claim under § 7 of the Clayton Act. They also asserted state antitrust claims, state consumer-protection claims, and unjust-enrichment claims for proposed damages classes.

Defendants filed three motions to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. Synta Canada also initially moved under Rule 12(b)(2), which concerns personal jurisdiction, but withdrew that portion after jurisdictional discovery. Defendants separately moved under Rule 12(f) to strike allegations from the complaint.

Motions to Dismiss

The court rejected defendants’ argument that laches barred plaintiffs’ federal claims for injunctive relief. Laches is an equitable defense based on an unjustified delay that prejudices the opposing party. At the pleading stage, the court found that plaintiffs plausibly alleged a continuing conspiracy because ongoing sales of allegedly price-fixed products could constitute new acts causing new injury. The court therefore found that laches did not bar the injunctive-relief claims.

For the state antitrust and consumer-protection damages claims, the court held that continuing-conspiracy allegations could support recovery for misconduct during the applicable recent limitations periods, but not automatically for injuries caused by older acts. The court found that plaintiffs plausibly alleged fraudulent concealment sufficient to toll the limitations periods for claims based on conduct from 2013 onward. It also held that, for states recognizing a discovery rule, the allegations were sufficient at this stage to support delayed accrual for pre-2013 conduct, because consumers would not necessarily have discovered an alleged conspiracy merely because the 2005 Celestron acquisition was public.

The court rejected defendants’ challenge to the lack of defendant-by-defendant allegations. It found that the complaint’s allegations concerning the Synta corporate family were sufficient against Pacific Telescope, Nantong Schmidt, Suzhou Synta, Olivon Manufacturing, and Synta Canada. It also found that the complaint plausibly alleged personal involvement by David Anderson and Joseph Lupica. The motions to dismiss those corporate entities and individuals were denied.

As to the Sherman Act § 1 claim, the court found that plaintiffs plausibly alleged an agreement to restrain trade, including allegations about dividing products and markets. However, because the only alleged pre-2013 conduct was the 2005 Celestron acquisition, and the complaint did not allege specific misconduct connected to that transaction or to the period before the 2013 Meade acquisition, the court granted defendants’ motion as to the § 1 claim to the extent it was based on pre-2013 conduct. The court otherwise denied the motion as to that claim.

As to the Clayton Act § 7 claim, the court likewise granted defendants’ motion to the extent the claim was based on conduct before 2013, but denied the motion in all other respects.

The court denied the motion to dismiss the unjust-enrichment claim. Although California does not recognize unjust enrichment as a standalone cause of action, the court explained that the allegations could be construed as a quasi-contract claim seeking restitution, and defendants did not argue that such a claim was inadequately pleaded.

Overall, the court granted in part the First Motion to Dismiss, Second Motions to Dismiss, and Synta Canada’s Motion as to the Sherman Act § 1 and Clayton Act § 7 claims insofar as they were based on conduct before 2013. The remainder of defendants’ motions to dismiss was denied. Plaintiffs were granted leave to amend to add allegations, if any, concerning January 1, 2005 through 2013, within fourteen days of the order.

Motion to Strike

Defendants moved to strike allegations concerning the proposed class period from 2005 to 2012 and allegations about the earlier Orion Action, in which a jury found Ningbo Sunny liable for Sherman Act and Clayton Act violations. The court held that the class-period allegations were better addressed through the motions to dismiss. Because plaintiffs were given an opportunity to amend the pre-2013 allegations, the court denied as moot defendants’ motion to strike the class-period allegations, without prejudice to renewal if plaintiffs failed to cure the pleading deficiencies.

The court granted in part and denied in part the motion to strike the Orion Action allegations. It allowed allegations supplying background about that earlier case, including paragraphs 2–3, paragraph 125, and parts of paragraph 107. It struck cited portions of paragraphs 4, 106, and 108, and paragraph 107 to the extent it characterized the Orion jury’s findings as findings against “the defendants” in this case. The court found those allegations improper because the Orion jury had not found the defendants in this action liable.

Disposition

The court granted in part and denied in part the defendants’ motions to dismiss; denied as moot the motion to strike the class-period allegations, without prejudice to renewal; and granted in part and denied in part the motion to strike the Orion Action allegations. The order did not decide whether plaintiffs ultimately proved the alleged antitrust violations or whether a class should be certified.