Copeland v. Energizer Holdings, Inc.

Background

The court addressed three related proposed class actions against Energizer Holdings, Inc., Walmart, Inc., and other defendants: Copeland, Portable Power, Inc., and Schuman. The plaintiffs alleged that, beginning as early as January 2018, Energizer and Walmart agreed that Walmart would receive preferential treatment while Energizer monitored other retailers and raised their wholesale prices when they undercut Walmart’s retail prices for Energizer batteries.

The complaints alleged that Energizer created a group called Project Atlas to monitor retail prices and enforce its pricing policies. Portable Power, an online battery retailer, alleged that Energizer raised its wholesale prices by 50% to 85% for certain products after Walmart complained about disruptive pricing and later stopped shipping some products because Portable Power had not raised its retail prices to match Walmart’s. The plaintiffs also alleged increases in Energizer’s wholesale prices, Walmart’s retail prices for Energizer products, and retail prices for Duracell products.

The Copeland plaintiffs were customers who bought Energizer products from retailers other than Walmart. The Schuman plaintiffs were customers who bought Energizer or Duracell batteries directly from Walmart stores. Portable Power proposed a class of retailers or others who bought Energizer products directly from Energizer. The defendants filed one motion to dismiss all three complaints under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint adequately states a legal claim, and under Rule 12(b)(1), which concerns federal subject-matter jurisdiction.

Sherman Act claims

Section 1 of the Sherman Act prohibits contracts, combinations, or conspiracies that unreasonably restrain trade. The court explained that plaintiffs had to plausibly allege both an agreement between Energizer and Walmart and an unreasonable restraint of trade.

The court held that the complaints plausibly alleged an agreement. The plaintiffs did not identify direct evidence of an agreement, but they alleged facts that could support a reasonable inference of one. Those facts included Energizer’s alleged calculation of some wholesale prices based directly on Walmart’s retail prices, its monitoring and discipline of retailers, statements that the pricing policy was “1000% about Walmart,” and conduct that the court found more consistent with a coordinated agreement than with Energizer’s independent business decisions.

The court also held that the plaintiffs plausibly alleged that the agreement was unreasonable under the “rule of reason,” a framework that weighs a restraint’s effects on competition and any procompetitive justification. The court accepted, at the pleading stage, the plaintiffs’ proposed nationwide market for disposable battery products. It found that the alleged wholesale and retail price increases sufficiently outlined possible harm to competition and consumers. The court also concluded that the alleged combined market power of Energizer and Walmart could support an inference of substantial anticompetitive effects.

The court rejected the defendants’ argument that Energizer could have taken similar actions on its own. The court stated that the relevant question was whether the alleged conduct resulted from an agreement, not whether Energizer could lawfully have taken some of the same actions independently. The court noted that the defendants could later present procompetitive explanations, but concluded that the claims had adequately passed the pleading stage.

Antitrust standing

The defendants challenged only the antitrust standing of the Schuman plaintiffs, who bought Energizer and Duracell batteries directly from Walmart. The court found that those plaintiffs plausibly alleged an antitrust injury because they claimed to have paid inflated prices, their injury allegedly flowed from the restraint of prices, and higher consumer prices were the type of injury antitrust laws are intended to prevent. The court also found the alleged causal connection sufficiently direct and the existence of harm not speculative at the pleading stage.

The court stated that the defendants did not challenge the antitrust standing of Portable Power or of customers such as Mr. Copeland who bought Energizer batteries from other sellers and sought injunctive relief. The court concluded that all three groups had adequately pleaded their Sherman Act claims, so the motion to dismiss those claims was denied.

State-law claims

The Copeland plaintiffs brought 27 state antitrust claims and 17 state consumer-protection claims. Portable Power and Schuman also brought claims under California’s Cartwright Act and Unfair Competition Law.

The defendants argued that the Copeland plaintiffs lacked standing to pursue claims under states where no named plaintiff lived or bought products. The court rejected that argument as presented under Rule 12(b)(1), explaining that whether an out-of-state plaintiff may pursue a particular state-law claim concerns the merits of the claim rather than federal subject-matter jurisdiction. The court therefore denied the motion to dismiss Copeland claims under laws of states where no named plaintiff lived or purchased batteries.

Because the defendants offered no independent reason for dismissing the state antitrust claims, the court denied the motion as to those claims. The court likewise denied the motion as to the state consumer-protection claims because the defendants offered no independent basis for dismissing them.

Disposition

The court denied the defendants’ motion to dismiss. Pursuant to the parties’ stipulation and the court’s September 18, 2023 order, it lifted the stay on discovery and disclosures. The order allowed the three cases to continue; it did not determine whether the alleged agreement ultimately violated the Sherman Act or the state laws.