District Court Denies Class Action Certification in Aluminum Pricing Case

A judge for the U.S. District Court for the Southern District of New York has denied the motion put forth by a group of aluminum buyers to certify a class action lawsuit. The plaintiffs, referred to as first level purchasers (FLPs), contended that the defendants, which include large financial institutions and aluminum warehouses, engaged in anticompetitive conduct that increased regional premiums and inflated prices in the primary aluminum market.

In his opinion, Judge Paul Engelmayer wrote that individual analysis of each class member’s transactions would be required to determine whether the purchaser qualified for class membership.

The court also denied a motion to exclude the declaration of the defendants’
expert David Kaplan. Next steps could include the plaintiffs seeking certification of a smaller class or filing individual claims. The court announced on July 23 that it would issue an order explaining the case’s next steps. The order had not been issued as of press time.

Background

The FLPs brought claims against six sets of defendants, three of which traded in primary aluminum and primary aluminum derivatives on the London Metals Exchange (LME) during the relevant period (the financial defendants), and three of which owned and operated LME-certified warehouses for metal (the warehousing defendants). The financial defendants are each affiliated with either Goldman Sachs & Co. LLC, J.P. Morgan Securities plc, or Glencore Ltd.

Each group of financial defendants directly or indirectly acquired one of the
warehousing defendants in 2010. The warehousing defendants are Metro International Trade Services LLC, Mitsi Holdings LLC, Henry Bath LLC and Pacorini Metals USA LLC.

“In the wake of the 2008 financial crisis, a sharp drop in demand for aluminum led to a massive global surplus, depressed price, and a large supply of physical aluminum stored in warehouses. Anticipating that the market for aluminum would improve over time, traders and financial institutions purchased some of this surplus …” reads the opinion. “In this environment, the financial defendants, ‘seeing opportunities to purchase primary aluminum at low prices in anticipation of future resale at higher prices, acquired substantial aluminum holdings.’ In 2010, when the quantity of aluminum stored in LME warehouses … was extremely high, each of the financial defendants purchased one of the warehousing defendants. During the period that followed, delays in the loading out of
aluminum from key LME warehouses operated by the warehousing defendants increased considerably. The FLPs allege that defendants conspired to lengthen these load-out ‘queues,’ which—by driving up a regional premium often used as a price component in aluminum supply contracts—increased the all-in price the FLPs paid when purchasing primary aluminum from smelters.”

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