Teague v. Bayer Ag

Teague v. Bayer AG, 

STATE OF NORTH CAROLINA                             IN THE GENERAL COURT OF JUSTICE
                                                        SUPERIOR COURT DIVISION
COUNTY OF BUNCOMBE                                              05 CVS 90

MITCHELL TEAGUE, on behalf of himself
and all others similarly situated,

                      Plaintiff,

   v.

BAYER AG; BAYER POLYMERS, LLC,
n/k/a BAYER MATERIALSCIENCE, LLC;                     ORDER ON MOTION TO DISMISS
BAYER CORPORATION; CROMPTON                           SECOND AMENDED COMPLAINT
CORPORATION; UNIROYAL CHEMICAL                      AND FOR APPROVAL OF DISMISSAL OF
COMPANY, INC., n/k/a CROMPTON                             CLASS ACTION CLAIMS
MANUFACTURING COMPANY, INC.; THE
DOW     CHEMICAL   COMPANY;         E.I.
DUPONT DE NEMOURS & COMPANY;
DUPONT DOW ELASTOMERS, L.L.C.;
DSM     COPOLYMER,      INC.;      DSM
ELASTOMERS EUROPE, B.V.; EXXON
MOBIL CHEMICAL, a division or subsidiary
of EXXON MOBIL CORP.,

                      Defendants.


   {1}    This case arises out of Plaintiff’s suit for damages under sections 75-1 and 75-1.1 of
the General Statutes of North Carolina.       This matter comes before the Court on certain
Defendants’ Motion to Dismiss Second Amended Complaint Under Rule 12(b)(6) and Plaintiff’s
motions to dismiss his North Carolina class action allegations against some defendants as a result
of a multistate settlement agreement presided over by the courts of the State of Tennessee.
   {2}    After considering the briefs and oral arguments, the Court GRANTS Defendants’
Motion to Dismiss on the grounds that Plaintiff lacks standing to pursue the action. With grave
reservations and the firm belief that the class representative and his counsel have done little for
the citizens of North Carolina, the Court GRANTS Plaintiff’s motions to dismiss his class action
allegations against the Bayer, Dow, and DuPont Defendants.




                                                1
         Wimer & Jobe by Michael G. Wimer; Forman Rossabi Black, P.A. by Amiel J. Rossabi;
         Law Offices of Isaac L. Diel by Issac L. Diel; Weinstein, Kitchenoff Scarlato, Karon &
         Goldman, Ltd. by Daniel R. Karon; Law Office of Krishna B. Narine by Krishna B.
         Narine; Schriffrin & Barroway, LLP by Stephen E. Connolly; Gunderson, Sharp &
         Walke, P.C. by Rex Sharp for Plaintiff Mitchell Teague.

         Mayer, Brown, Rowe & Maw LLP by Mary K. Mandeville, W.C. Turner Herbert, Gary A.
         Winters, Andrew S. Marovitz, and Britt M. Miller for Defendants DSM Copolymer, Inc.
         and DSM Elastomers Europe, B.V.

         Nelson, Mullins, Riley & Scarborough, LLP by Joseph W. Eason and Christopher J.
         Blake; O’Melveny & Myers LLP by Ian Simmons and Benjamin G. Bradshaw for
         Defendants Chemtura (f/k/a Crompton) Corporation and Uniroyal Chemical Company,
         Inc.

         Pinto, Coates, Kyre & Brown, PLLC by Richard L. Pinto; Weil, Gotschal & Manges,
         LLP by James W. Quinn, Steven Alan Reiss, and Christopher V. Roberts for Defendant
         ExxonMobil Chemical Company.


Tennille, Judge.

                                                I.
   DEFENDANTS’ MOTION TO DISMISS SECOND AMENDED COMPLAINT UNDER
                                         RULE 12(b)(6)
                                                A.
                       FACTUAL AND PROCEDURAL BACKGROUND
                                                1.
                                         THE PARTIES
   {3}     This case involves alleged price fixing of a synthetic rubber known as ethylene
propylene diene monomer, or “EPDM.”           Defendants are all involved in the manufacture,
distribution, marketing, or sale of EPDM.
   {4}     Plaintiff Mitchell Teague is a citizen and resident of the State of North Carolina.
Plaintiff purchased EPDM roofing material and pond liner manufactured, marketed, distributed,
or sold by one or more of the Defendants. Plaintiff also purchased at least one vehicle with
EPDM components during the relevant time. He brings this claim individually and on behalf of
all other North Carolinians who purchased products containing EPDM from 1994 until 2002. He
has held himself out to be a person suitable to represent the interests of his fellow citizens. His


                                                2
counsel have likewise held themselves out to be suitable advocates for the interests of the North
Carolina class members.
   {5}      Defendant Bayer AG is a corporation organized and existing under the laws of the
Federal Republic of Germany, with its principal place of business located in Leverkusen,
Germany. Bayer AG is a management holding company that oversees operations for some 350
companies worldwide. The global enterprise operates in the fields of health care, nutrition, and
high technology materials.
   {6}      Defendant Bayer Polymers, LLC (n/k/a Bayer MaterialScience, LLC) is a limited
liability company organized and existing under the laws of the State of Delaware, with its
principal place of business located in Pittsburgh, Pennsylvania. Bayer MaterialScience, LLC is a
subsidiary of Bayer AG.
   {7}      Defendant Bayer Corporation is a corporation organized and existing under the laws
of the Commonwealth of Pennsylvania, with its principal place of business located in Pittsburgh,
Pennsylvania. Bayer Corporation is a wholly owned subsidiary of Bayer AG.
   {8}      Defendant Crompton Corporation merged with Great Lakes Chemical Corporation in
2005 to form Chemtura Corporation. Chemtura is a global enterprise that manufactures and
markets specialty chemicals for a variety of uses. The company is headquartered in Middlebury,
Connecticut.
   {9}      Defendant Uniroyal Chemical Company, Inc. merged with Crompton & Knowles
Corporation in 1996, became part of Crompton Corporation in 1999, and is now part of
Chemtura.
   {10} Defendant Dow Chemical Company is a corporation organized and existing under the
laws of the State of Delaware, with its principal place of business in Midland, Michigan.
   {11} Defendant E.I. DuPont De Nemours & Company (“DuPont”) is a corporation
organized and existing under the laws of the State of Delaware, with its principal place of
business in Wilmington, Delaware.
   {12} Defendant DuPont Dow Elastomers, LLC was a joint venture of Defendants DuPont
and Dow at times relevant to this action. Dow withdrew from the partnership in 2005. DuPont
operates the remaining businesses under the name DuPont Performance Elastomers.
   {13} Defendant DSM Elastomers Europe, B.V. is part of a global operation headquartered
in the Netherlands.



                                                3
    {14} Defendant DSM Copolymer, Inc. is part of the DSM global operation, with its
principal place of business in Baton Rouge, Louisiana. 1
    {15} Defendant ExxonMobil Chemical Company is an entity organized and existing under
the laws of the State of New Jersey with its principal place of business in Irving, Texas.
ExxonMobil Chemical is a division or subsidiary of ExxonMobil Corporation.
                                                          2.
                                      PROCEDURAL BACKGROUND
    {16} Plaintiff filed the Complaint in this action in Buncombe County Superior Court on
April 2, 2004. Plaintiff filed the First Amended Complaint on December 23, 2004. The case
was designated complex business and assigned to the undersigned Special Superior Court Judge
for Complex Business Cases by order of the Chief Justice of the Supreme Court of North
Carolina dated March 15, 2005.
    {17} Defendants filed motions to dismiss the original and first amended complaints in the
summer of 2004 and winter of 2005. The Court heard oral arguments on the motions on
November 21, 2005. Following the hearing, the Court entered an order giving Plaintiff an
opportunity to plead facts with more precision. (Order, Nov. 22, 2005.) Plaintiff filed the
Second Amended Complaint on December 8, 2005. In January of 2006, Defendants renewed
their motions to dismiss.
    {18} This order addresses the Motion to Dismiss the Second Amended Complaint under
Rule 12(b)(6) of Defendants DSM Copolymer, Inc., Chemtura Corporation (successor by merger
to Crompton Corporation and Uniroyal Chemical Company, Inc.), and ExxonMobil Chemical
Company. This order also addresses the Motion of Defendant DSN Elastomers Europe B.V. to
Dismiss Second Amended Complaint under Rules 12(b)(2) and 12(b)(6).
                                                          3.
                                       PLAINTIFF’S ALLEGATIONS
    {19} Plaintiff alleges the following facts in his Second Amended Complaint:
    {20} As noted above, Defendants are involved in the manufacture, distribution, marketing,
or sale of EPDM. (2d Am. Compl. ¶¶ 1, 25.) EPDM is a synthetic rubber with many and varied

1
  DSM Elastomers Holding Company, Inc., DSM Elastomers, Inc. and DSM Elastomers Americas were originally
parties to this action. By stipulation filed May 20, 2004, Plaintiff dismissed these three entities and substituted DSM
Copolymer, Inc. (Notice of Dismissal Without Prejudice and Stipulation Re: Tolling and Acceptance of Service 1–
2.) DSM Copolymer, Inc. and DSM Elastomers Europe, B.V. are the only DSM-related parties currently involved
as defendants in this action.


                                                          4
applications. (Id. ¶¶ 21, 23.) It is a “commodity product that is fungible among grades.” (Id. ¶
24.) EPDM itself is not a consumer product. Rather, it is a component found in many consumer
products. The amount of EPDM in a given product varies depending on the nature of the
product. For example, “[t]he EPDM roofing material purchased by Plaintiff and other Class
Members is believed to contain at least 90% EPDM” and “[t]he tires, window molding, hoses,
and other rubber products purchased by Plaintiff and other Class members is [sic] believed to
include 1% or more EPDM.”         (Id. ¶ 36.)   The crux of Plaintiff’s allegations is that the
Defendants “engaged in a combination, conspiracy and scheme to suppress and eliminate
competition by fixing the price of EPDM sold in the United States and elsewhere.” (Id. ¶ 27.)
The conspiracy “consisted of a continuing agreement, understanding and concerted action among
Defendants and co-conspirators.” (Id. ¶ 28.) The Defendants allegedly colluded to issue price
announcements, allocate markets and customers among themselves, and actively conceal their
uncompetitive actions from consumers in North Carolina. (Id. ¶ 30.) These alleged actions are
under investigation by antitrust authorities in the United States, Canada, and Europe. (Id. ¶¶ 32,
34.)
   {21} As a result of Defendants’ conduct, Plaintiff and other consumers “have been forced to
pay higher and supracompetitive prices for EPDM and were deceived and treated unfairly and
unethically in their purchases of EPDM.” (Id. ¶ 44.) Plaintiff paid these “supracompetitive
prices” when he “purchased EPDM roofing material and pond liner manufactured, distributed,
and/or sold by one or more of the Defendants.” (Id. ¶ 35.) Plaintiff also purchased “at least one
vehicle, components of which contain Defendants’ EPDM.” (Id.) Plaintiff claims that he and
other North Carolina class members absorbed all of the supracompetitive portion of the price
because “middlemen passed on 100% or more of the overcharge from the Defendants.” (Id. ¶
37.)
   {22} In sum, Plaintiff claims that “Defendants were parties to an illegal cartel, agreement,
contract, combination, scheme and/or conspiracy designed to fix, raise, stabilize and maintain the
price for EPDM” and conceal their conduct from consumers. (Id. ¶ 49.) “Defendants’ contract,
combination, scheme and/or conspiracy restrained trade or commerce in the State of North
Carolina and affected commerce in North Carolina.” (Id.) Plaintiff seeks “actual damages,
treble damages, plus costs, pre- and post-judgment interest and attorneys’ fees” under sections
75-1 and 75-1.1 of the General Statutes of North Carolina. (Id. ¶¶ 48, 55.) These provisions



                                                5
make combinations in restraint of trade and unfair methods of competition illegal. 

, 75-1.1 (2005).
                                                B.
                                     MOTION TO DISMISS
                                                 1.
                                      LEGAL STANDARD
   {23} The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency
of the pleading against which the motion is directed. Sutton v. Duke, 

, 

 (1970). In Branch Banking & Trust Co. v. Lighthouse Financial Corp., 

 (N.C. Super. Ct. July 13, 2005), http://www.ncbusinesscourt.net/opinions/2005%20
NCBC%203.htm, this Court summarized the 12(b)(6) standard as follows:


   When ruling on a motion to dismiss under Rule 12(b)(6), the court must determine
   "whether, as a matter of law, the allegations of the complaint . . . are sufficient to state a
   claim upon which relief may be granted." In making its decision, the court must treat the
   allegations in the complaint as true. The court must construe the complaint liberally and
   must not dismiss the complaint unless it appears to a certainty that plaintiff is entitled to
   no relief under any state of facts which could be proved in support of the claim. When
   considering a motion under Rule 12(b)(6), the court is not required to accept as true any
   conclusions of law or unwarranted deductions of fact in the complaint. When the
   complaint fails to allege the substantive elements of some legally cognizable claim, or
   where it alleges facts which defeat any claim, the complaint should be dismissed under
   Rule 12(b)(6).

Branch Banking & Trust Co., 

 (citations omitted). In this case, it is also
relevant that “[a] motion to dismiss a party’s claim for lack of standing is tantamount to a motion
to dismiss for failure to state a claim upon which relief can be granted according to Rule
12(b)(6).” Slaughter v. Swicegood, 

, 

 (2004).
                                                 2.
                                           STANDING
   {24} The doctrine of standing is usually considered in the context of federal jurisdiction
under Article III of the United States Constitution. North Carolina state courts use the term
“standing” to “refer generally to a party’s right to have a court decide the merits of a dispute.”
Neuse River Found., Inc. v. Smithfield Foods, Inc., 

, 

(2002). A court may not properly exercise subject matter jurisdiction over the parties to an


                                                 6
action unless the standing requirements are satisfied. Aubin v. Susi, 

, 

 (2002). The requirements are as follows:


        (1) “injury in fact”—an invasion of a legally protected interest that is (a) concrete
        and particularized and (b) actual or imminent, not conjectural or hypothetical; (2)
        the injury is fairly traceable to the challenged action of the defendant; and (3) it is
        likely, as opposed to merely speculative, that the injury will be redressed by a
        favorable decision.

Lujan v. Defenders of Wildlife, 

, 560–61 (1992). With its concern over conjectural
injuries and speculative damage awards, standing is frequently an issue in indirect purchaser
cases such as this one. 2 The goal of the detailed analytical framework described below is to
determine if indirect purchaser plaintiffs meet the broad standing requirements.
                                                         3.
                      INDIRECT PURCHASER CASES IN FEDERAL COURT
    {25} In Hanover Shoe Co. v. United Shoe Machinery Corp., 

 (1968), and
Illinois Brick Co. v. Illinois, 

 (1977), the United States Supreme Court addressed the
issue of standing for indirect purchasers under federal antitrust law. Hanover Shoe was a suit by
a shoe manufacturer against a manufacturer of shoe machinery. 

. In defending
the treble damage suit, United argued that Hanover suffered no injury because it simply passed
the illegal overcharges on to its customers. 

 at 487–88. The Supreme Court rejected this
“passing-on” defense, and held that a direct purchaser was entitled to damages regardless of the
actual injury. 

.
    {26} In Illinois Brick, the State of Illinois brought suit as an indirect purchaser against a
manufacturer and distributor of concrete block. 

. The issue was whether the
“pass on” theory “may be used offensively by an indirect purchaser plaintiff against an alleged
violator.” 

 Justice White, writing for the Court as he did in Hanover Shoe, declined to
construe the federal antitrust laws to allow for indirect purchaser suits. 

. With these
two cases, the federal judiciary has decided “that the direct purchaser suit is on balance a more


2
   Indirect purchaser causes of action are generally based upon claims that the defendants conspired to fix prices in
violation of the antitrust laws. They are indirect in the sense that the plaintiff did not purchase the price-fixed
product directly from a defendant but rather purchased the product further down in the distribution chain or
purchased a product in which the price-fixed product was either used as a component or consumed in the
manufacturing process.


                                                         7
effective instrument for enforcement of the antitrust rule prohibiting price fixing than the indirect
purchaser suit.” Crouch v. Crompton Corp., 

 ¶ 30 (N.C. Super. Ct. Oct. 26, 2004),
http://www.ncbusinesscourt.net/OtherRefdocs/2004%20NCBC%207.htm;                see   also   William
Landes & Richard Posner, Should Indirect Purchasers Have Standing to Sue Under the Antitrust
Laws? An Economic Analysis of the Rule of Illinois Brick, 

, 634–35
(1979).
                                                   4.
                      INDIRECT PURCHASER CASES IN STATE COURTS
   {27} Dissatisfied with the federal policy, some states enacted new statutes or interpreted
existing statutes to allow indirect purchasers to recover under state antitrust laws. See Crouch,

 ¶ 31. These state policies favoring indirect purchaser recovery were challenged,
but in California v. ARC America Corp., 

 (1989), the Supreme Court held that states
may allow indirect purchaser standing if they so choose. 

 at 105–06. As this Court has
previously discussed, the differences in the federal and state policies regarding indirect
purchasers create a number of problems. See Adams v. Aventis, S.A., 

 (N.C.
Super. Ct. Aug. 26, 2003), http://www.ncbusinesscourt.net/opinions/2003%20NCBC%207.htm.
Despite these problems, this system of dual enforcement is the law today, and the Court must
work within it.
                                                   5.
                    INDIRECT PURCHASER CASES IN NORTH CAROLINA
   {28} The section of North Carolina’s General Statutes that gives rise to a number of indirect
purchaser cases is 75-16, which states as follows:


          If any person shall be injured or the business of any person, firm, or corporation
          shall be broken up, destroyed, or injured by reason of any act or thing done by any
          other person, firm or corporation in violation of the provisions of this Chapter,
          such person, firm, or corporation so injured shall have a right of action on account
          of such injury done, and if damages are assessed in such case judgment shall be
          rendered in favor of the plaintiff and against the defendant for treble the amount
          fixed by the verdict.

 (2005). In Hyde v. Abbot Laboratories, Inc., 

, 

 (1996), the North Carolina Court of Appeals interpreted section 75-16 to allow



                                                   8
indirect purchasers to sue manufacturers for antitrust violations. 

, 

.
Hyde was a class action against manufacturers of infant formula alleging violations of state
antitrust laws. 

, 

.       Plaintiffs were consumers who purchased the
formula from retailers and distributors. 

, 473 S.E.2d at 681–82. The trial court granted
defendants’ motion to dismiss for lack of standing, but the Court of Appeals reversed. 

,

. Although Hyde established indirect purchaser standing in North Carolina, it
did not delineate the scope and breadth of standing under the statute. In Crouch v. Crompton
Corp., this Court noted several important developments since Hyde and set certain boundaries
for indirect purchaser standing.    The most important of these developments was a 1996
amendment to the North Carolina antitrust statutes revising those provisions to be “internally
consistent and consistent with federal antitrust laws.” Act of June 3, 1996, ch. 550, 

. This legislative signal required the Court to reconcile the indirect purchaser
standing statute with federal standing requirements. Crouch, 

 ¶ 49.
   {29} The leading federal case on standing in cases such as this is Associated General
Contractors of California, Inc. v. California State Council of Carpenters, 

 (1983)
(AGC). In AGC, the United States Supreme Court adopted a five factor standing test. In
Crouch, this Court modified the AGC factors to recognize indirect purchaser standing. See
Crouch, 

 ¶¶ 66–74. Those factors were described in Crouch as follows:


       1.           Whether the plaintiff is a consumer or competitor in the allegedly
       restrained market. This inquiry focuses on the market the alleged restraint was
       designed to impact and the intent of the actor in engaging in the restraint. One
       key question is whether the plaintiff claims injury in a market collateral to the
       market in which the alleged restraint took place. This factor recognizes that the
       antitrust laws are designed to see that customers in the relevant market get the
       benefit of price competition. This factor would have supported standing in Hyde.
       2.            The directness of the impact on the plaintiff. This factor is modified
       to eliminate the restriction of Illinois Brick against indirect purchaser standing.
       Being an indirect purchaser does not preclude standing. However, the causal
       connection between the act and the claimed injury cannot be too remote.
       Purchasers in the direct chain of distribution are more likely to be able to show
       sufficiently direct injury than those outside the chain of distribution. Purchasers
       who buy the product which is the subject of the restraint are more likely to be able
       to show sufficiently direct injury than those who purchase a product with a
       component which is the subject of the restraint. Purchasers of products whose
       manufacture was impacted by the restraint face significant hurdles showing
       sufficiently direct impact. Within the chain of distribution, the relative positions


                                                 9
of the purchaser and the actor can be significant, depending on the length and
complexity of the distribution chain. Even though a purchaser is removed from
the direct restraint, he or she may still show direct injury. See Blue Shield of Va.
v. McCready, 

 (1982). This factor would have supported
standing in Hyde.
3.            Whether there exist other indirect purchasers in the distribution chain
who are more directly impacted by the alleged violation. The nature of the
market is significant here. Courts must look at the nature of the product and the
market for the product as well as the chain of distribution to determine the
likelihood of direct pass through of the cost of the restraint or inflated price. The
nature of the restraint must also be considered. Double recovery among indirect
purchasers should be avoided. This factor would have supported standing in
Hyde where the distribution chain was short.
4.             The speculative nature of the damage claims. As damage claims
move from direct to indirect and the distribution chain becomes more complex,
the possibility of factors intervening to affect causation and price multiplies, and
claims become more speculative. It is appropriate for purposes of determining
indirect purchaser standing “to consider whether a claim rests at bottom on some
abstract conception or speculative measure of harm.” McCready, 

n.11. In McCready the Court noted that the courts were required to be cautious
when dealing with speculative, abstract and impractical damage theories. 

This factor would not have prevented standing in Hyde. This factor focuses on
sound economic analysis. Important factors would include reliable demand and
supply curve studies and sufficient regression analysis to eliminate other factors
in pricing.
5.              The risk of duplicative recovery and danger of complex
apportionment of damages. While these factors are limited by the General
Assembly’s creation of indirect purchaser standing, they should not be totally
eliminated when considering the state claims. The courts still have the same
interest in keeping the scope of a complex antitrust trial within judicially
manageable limits. AGC, 

. The factors are simply taken down a
level and the Hanover Shoe/Illinois Brick restrictions eliminated. State cases may
present apportionment issues which are simply too complex and for which there
exists no measure of recovery which is not speculative. It is clear that the General
Assembly did not intend that every purchaser in the distribution chain have a right
of recovery or that there be duplicative recovery among indirect purchasers. Such
an interpretation would be contrary to the clear guidance to follow federal
precedent and harmonize state antitrust law with federal law. Rather, it should be
clear that the General Assembly intended that those who can show with some
degree of certainty that they were directly impacted by the alleged acts in restraint
of trade should be able to recover even though they are indirect purchasers. The
courts must be cognizant that the problems between direct and indirect purchaser
cases replicate themselves in state indirect purchaser cases where there are
multiple levels in the distribution chain and multiple distribution chains. There
should only be one fund constituting the amount of the alleged overcharge to
North Carolina residents, and the courts must guard against multiple liability for



                                         10
       the fund and prejudice to absent victims or non-class members. The complexity
       of the distribution chain and the variety of consumers in Bruggers [Bruggers v.
       Eastman Kodak Co., 

 (N.C. Super. Ct. Mar. 17, 2000),
       http://www.ncbusinesscourt.net/opinions/2000%20NCBC%203.htm.] highlight
       the issues this factor would implicate. As the Supreme Court noted in AGC and
       Illinois Brick, massive and complex damages litigation undermines the
       effectiveness of treble damage suits. The poor results obtained in settlement in
       the North Carolina cases confirms this view.

Id. ¶ 73(1)–(5). The application of these factors is a fact-intensive exercise. The relative
importance of any single factor may vary considerably from case to case. This Court’s decision
in Crouch was not appealed and no appellate court has addressed the standing question.
                                                6.
                                          ANALYSIS
   {30} The Court now turns to the facts of the case at bar. Before applying the AGC factors,
the Court notes that this case presents the same problems encountered in Crouch. Crouch
involved price fixing of rubber processing chemicals used in the manufacture of automobile tires.
Crouch, 

 ¶ 15. In Crouch, the Court faced several problems:
       First, the price-fixed item is a product consumed or altered in the manufacturing
       process. Accordingly its use will vary with the type of . . . product being made. It
       may also vary with the nature of the product . . . being used and how it is used in
       the manufacturing process. Different direct purchasers . . . might use the various
       [products] in various ways in differing products.

. The EPDM at issue here is similar to the rubber processing chemicals in Crouch. As
noted previously, EPDM is a component of many consumer products. The use of EPDM varies
with the type of product being made. Some products, such as roofing material or pond liners,
contain a high percentage of EPDM. Others, such as automobiles, have only a small amount of
EPDM. As such, the role of EPDM varies with the nature of product being used.
   {31} However, this case differs from Crouch in the number of consumer products at issue.
The only products at issue in Crouch were tires, and the Court was able to determine at the
motion to dismiss stage that “the recovery per tire sold in North Carolina will be in the range of
$0.01 to $0.11.” Id. ¶ 79. The Court concluded that this “would not represent a meaningful
recovery for consumers” and that “the costs associated with litigation and administration of any
settlement would far outweigh the benefits to consumers.”         Id.   Here, there are multiple
consumer products at issue. Plaintiff alleges he purchased EPDM roofing material, pond liner,


                                               11
and at least one vehicle containing EPDM. (2d Am. Compl. ¶ 35.) The EPDM components in
an automobile include “tires, window molding, hoses, and other rubber products.” (Id. ¶ 36.) It
is clear to the Court that EPDM may well be present in hundreds of consumer products, resulting
in an enormous class of plaintiffs and many subclasses. Plaintiff does not seek to limit his claims
to pond liners or products which might have a substantial component of EPDM. Perhaps the
market and damages would be too small to make the case attractive. The Second Amended
Complaint seeks to recover for every product which was made using EPDM. The Court’s ruling
is based upon the Second Amended Complaint before it.               The costs of litigation and
administration of such a settlement far outweigh the benefits to consumers.           Indeed, the
settlements reached with the Bayer, Dow, and DuPont defendants in this matter demonstrate that
recovery on behalf of individual consumers of EPDM would be miniscule and distribution
administratively impossible. The funds from these settlements are destined to end up in the
hands of the lawyers, a handful of named plaintiffs, and a small number of charities selected by
the approving court pursuant to the cy pres doctrine. In no way do these settlement funds
compensate North Carolina consumers who purchased products that contained overpriced
EPDM. See infra Part II.C. As a preliminary matter, the Court thus notes that the challenges
here appear to be even greater than those in Crouch.
   {32} Preliminary considerations aside, the Court must determine whether Plaintiff has
standing to pursue this action, and therefore turns to the AGC factors as harmonized with North
Carolina law in Crouch.
                                                a.
                                  THE RELEVANT MARKET
   {33} Here the Court must consider “whether the plaintiff claims injury in a market
collateral to the market in which the alleged restraint took place.” Crouch, 

 ¶ 73.
Recognizing that “[t]he antitrust laws are designed to see that customers in the relevant market
get the benefit of price competition,” the first step is to identify the “relevant market.” In this
case, as in Crouch, there are two relevant markets. The first is the market for EPDM itself. In
this first market, the sellers are EPDM manufacturers and the buyers are manufacturers of
products that contain EPDM. For example, an automobile manufacturer may purchase EPDM
for use in its cars. Plaintiff is not part of this first market. Rather, Plaintiff is a buyer in a
second, collateral market. In this second market, the sellers are manufacturers, distributors, or



                                                12
retailers of products that contain EPDM and the buyers are consumers who purchase these items.
In the case of automobile parts or other small component parts of larger products, the consumer
is even further removed from the primary sale. As a purchaser at retail of a product that contains
EPDM, Plaintiff is in a market at least secondarily affected by the restraint in the original
EPDM-only market. The antitrust laws primarily seek to protect buyers in the first market, who
are most directly affected by artificially high prices for EPDM. Plaintiff purchased products the
price of which may or may not have been influenced by the illegal restraint. Thus, this factor
weighs against standing as to most products.
   {34} The situation here is similar to that in Crouch, where the plaintiff purchased products
that contained the price-fixed rubber additive, rather than the rubber additive itself. The Court
found that this weighed slightly against standing in Crouch. Both Crouch and the case at bar are
distinguishable from Hyde, in which the plaintiff was a participant in the market for baby
formula. See Hyde, 

, 473 S.E.2d at 681–82. Although the Hyde plaintiffs
did not purchase baby formula directly from the manufacturer, they purchased baby formula, not
a product comprised of baby formula and a number of other ingredients. For this reason, this
factor would have supported standing in Hyde. If the product at issue in Hyde was an ingredient
in baby formula, rather than the formula itself, this first factor would not have supported
standing.   Since Plaintiff in this case is a participant in a collateral market—the market for
products that contain EPDM rather than the market for EPDM itself—this factor works against
standing.
                                                 b.
                                   DIRECTNESS OF IMPACT
   {35} As the Court of Appeals made clear in Hyde, being an indirect purchaser in North
Carolina does not preclude standing. See 

, 

. In Crouch, this Court
fashioned a test to determine the scope of indirect purchaser standing and recognized that there is
a boundary beyond which claims are too remote. See Crouch, 

 ¶ 96. This is
similar to the concept of proximate cause in the law of torts. See Palsgraf v. Long Island R.R.
Co., 

 (N.Y. 1928). The analysis centers on the length and complexity of the
distribution chain. See Crouch, 

 ¶ 73. Furthermore, “[t]he nature of the item can
influence the directness of the impact on the price of the end product at retail . . . . The smaller
the component, the less likely there will be impact on the final price.” Id. ¶ 85. In Crouch,



                                                13
however, the Court knew that “the chemicals only comprise 1% of the value of a tire, reducing
the likelihood that total final price was significantly affected.” Id.
   {36} The Court does not have the benefit of such knowledge here. Plaintiff is not claiming
damage based on one product. Rather, Plaintiff claims damage based on his purchase of roofing
material, pond liner, and “at least one vehicle.” (2d Am. Compl. ¶ 35.) The list of products at
issue may grow even longer, for “[d]iscovery may reveal that Plaintiff purchased other goods
containing Defendants’ EPDM, but which are not known to him at this time.” (Id. ¶ 36.) The
fact that there are multiple products at issue makes analysis of the directness of impact rather
difficult. Some products, such as roofing material or pond liner, contain a high percentage of
EPDM. The price paid for these items is more likely to have been affected by price fixing
because EPDM is a significant component. But other products, such as the vehicle, may contain
little EPDM, and their final prices are not as likely to have been influenced by price fixing in the
EPDM market.
   {37} The presence of multiple end products also presents the Court with distribution chains
of varying length and complexity. Some products may have relatively short distribution chains.
For example, a chain might run from an EPDM manufacturer to a pond liner manufacturer to the
customer. There is also the potential for long distribution chains. A longer chain might run from
an EPDM manufacturer to a rubber hose manufacturer to a hose distributor to an automobile
manufacturer to a retailer, and finally to the customer.
   {38} Given the great number of products, the varying amount of EPDM in those products,
and the varying length and complexity of the distribution chains, the Court cannot determine the
directness of impact on these facts. This factor is inconclusive and weighs neither for nor against
standing. But as the Court will discuss later, the complexity inherent in multiple distribution
chains weighs against standing. See infra Part I.B.6.d & e.
                                                  c.
               OTHER DIRECT PURCHASERS MORE DIRECTLY IMPACTED
   {39} Examination of this factor is meant to avoid a double recovery. “State courts should
focus this inquiry on whether or not the existence of other indirect purchasers in the chain of
distribution gives rise to other claims against the fund representing the amount by which the
price of the retail item has been artificially inflated.” Crouch, 

 ¶ 85. The potential
for long distribution chains makes this inquiry easier. In long distribution chains, there are likely



                                                  14
to be distributors and retailers who may have a claim that they absorbed some or all of the price
increase, rather than passing it along to Plaintiff. For example, a retailer who sold pond liners
containing EPDM would also be an indirect purchaser (since it did not purchase raw EPDM), but
would have a more direct claim than Plaintiff by virtue of its higher position on the distribution
chain. The antitrust laws favor recovery on behalf of these purchasers, and their existence
increases the likelihood of double recovery if Plaintiff is allowed to recover. Even though no
claims have currently been filed on behalf of these distributors and retailers, this factor
nevertheless weighs against standing. The Court reached the same conclusion in Crouch on
similar facts. See id. ¶ 85.
                                              d & e.
             SPECULATIVE NATURE OF DAMAGE CLAIMS AND COMPLEXITY
   {40} Earlier, the Court noted that analysis of the modified AGC factors is a fact-intensive
exercise and that “different factors might be important in different cases.” Id. ¶ 74. In this case,
the fourth and fifth factors are extremely important and weigh heavily against standing. These
factors are interrelated and share an overarching concern for practicality and wise use of judicial
resources.
   {41} Calculation of damages in this case would be a daunting task. First, Plaintiff would
have to establish prices for products containing EPDM both before and after the alleged
conspiracy period. However, this process is complicated by the fact that EPDM is only a
component in these products. Thus, “a regression analysis would be required to disaggregate any
effect of other changes in the manufacturing process for each manufacturer for each product
category.” Id. ¶ 80. It would not be enough to simply establish that cars, roofing material, pond
liner, and other products cost more after the alleged conspiracy than before. There are many
factors which could cause a price increase in these products—inflation, prices of other inputs,
transport costs, product demand, and market conditions just to name a few. Such an analysis
would have to be carried out at each link in the distribution chain in order to determine whether
the allegedly illegal price increase was borne in whole or in part by consumers such as Plaintiff.
Economists would require huge amounts of information before they could embark on such an
analysis. Nonparties will almost certainly consider some of this information to be confidential or
subject to trade secret protection, resulting in a protracted and contentious discovery process that
would burden the Court. Even if the information were readily available, “the demand and supply



                                                15
curves must then be calculated for this myriad of products and suppliers and the prices
determined by the intersections of those curves tested against rigorous regression analysis to
insure that no external factors affected the pricing and pass through at the manufacturer level.”
Id. ¶ 81. This rigorous economic analysis is necessary to determine whether increased prices
were the result of the alleged price fixing, or were the result of some other factor. If, at the end
of this process, it is determined that none of the increased price was passed on to the Plaintiff,
then there are no damages and there can be no recovery. 3
    {42} The potentially large number of products containing EPDM adds to the complexity.
The analysis described above would have to be carried out for each product in order to accurately
calculate damages. In Crouch, the Court found that carrying out this type of analysis for a single
product, tires, “would be a Herculean task and one which the Court believes would not be free
from speculation given the enormous number of disaggregating factors to be considered in the
process.”      Crouch, 

 ¶ 80.                   The present case, with its multiple products,
manufacturers, markets, externalities, and disaggregating factors, would cause even Hercules to
question his legendary abilities. Given these variables, the issues surrounding allocation of the
alleged price fixing in this case would be enormously complex and would render the results of
any economic analysis speculative.
    {43} The Court notes again that each case must be analyzed separately. It is not difficult to
imagine “other examples where a component, such as a computer chip, is price fixed, and its
costs passed through directly to purchasers of the product in which it is incorporated.” Crouch,

 ¶ 84.             In the example, the required economic analysis would be relatively
straightforward. But here, it is clear from the pleadings that the analysis would be unmanageably
difficult and unreliable. Thus, it is to the benefit of all parties for the Court to rule on standing
early in the litigation process, before substantial resources are expended gathering information
for an economic analysis that would prove unreliable in the end.
    {44} Considering all factors, Plaintiff lacks standing to pursue indirect purchaser claims.
Due to this lack of standing, the law will not grant him relief. Accordingly, Plaintiff’s claims
against the moving Defendants are subject to dismissal under Rule 12(b)(6).


3
  This is similar to the “loss causation” requirement found in the federal securities laws, which itself is rooted in the
common law of torts. See, e.g., Dura Pharms., Inc. v. Broudo, 

 (noting “Congress’ intent to
permit private securities fraud actions for recovery where, but only where, plaintiffs adequately allege and prove the
traditional elements of causation and loss”).


                                                          16
                                                 II.
       PLAINTIFF’S MOTIONS FOR LEAVE TO DISMISS CERTAIN DEFENDANTS
   {45} Plaintiff moves for leave to voluntarily dismiss the Bayer, Dow, and DuPont
defendants under Rule 41(a). These defendants are parties to EPDM antitrust lawsuits in other
states and have entered into a multistate settlement agreement which Plaintiff contends includes
resolution of all claims asserted in the litigation before this Court. Settlements as to both the
Bayer and the Dow and DuPont Defendants were approved by the Honorable John McAfee,
Circuit Court Judge for Claiborne County, Tennessee.
                                                 A.
  PLAINTIFF’S MOTION FOR LEAVE TO DISMISS WITH PREJUDICE DEFENDANTS
     BAYER CORPORATION, BAYER MATERIALSCIENCE, LLC, AND BAYER AG
   {46} Plaintiff moves to dismiss Defendants Bayer Corporation, Bayer MaterialScience,
LLC, and Bayer AG (collectively “Bayer defendants”) pursuant to Rule 41(a) of the North
Carolina Rules of Civil Procedure, subject to Rule 23(c), which requires court approval of the
dismissal or compromise of a class action. Claims against the Bayer defendants have been
compromised and settled for $2,250,000 as part of a multistate settlement agreement. Plaintiffs
and Bayer AG submitted the multistate settlement, along with three others, to the Honorable
John McAfee, Circuit Judge of Claiborne County, Tennessee. On March 3, 2006, Judge McAfee
approved the settlement, which “provides for a fluid recovery or cy pres distribution in lieu of a
claims-made process.” (Order ¶ 11, Mar. 3, 2006.) The following amounts were deducted from
the gross settlement amount:
       $818,500 – Attorney fees and expenses for Plaintiffs’ counsel
       $55,303 – Notice costs
       $14,500 – Incentive payments to named plaintiffs
This left $1,361,696.30 plus interest available for cy pres distribution.
   {47} On May 15, 2006, Judge McAfee entered a Corrected Supplemental Order
consolidating the settlement funds from the four settlements and approving the following cy pres
awards:
       $700,000 – East Tennessee Children’s Hospital of Knoxville, Tennessee
       $700,000 – Special Operations Warrior Foundation of Tampa, Florida



                                                 17
       $250,000 – Baker Cancer Center of Harrogate, Tennessee
       $1,400,000 – St. Jude Children’s Research Hospital of Memphis, Tennessee
These payments were to be made from the consolidated settlement funds, which included the
$2,250,000 Bayer settlement.
                                                B.
 PLAINTIFF’S MOTION TO DISMISS DEFENDANTS DOW CHEMICAL COMPANY, E.I
     DUPONT DE NEMOURS & COMPANY and DUPONT DOW ELASTOMERS, LLC
   {48} Plaintiff also moves to dismiss Defendants Dow Chemical Company, E.I. DuPont de
Nemours & Company, and DuPont Dow Elastomers, LLC (collectively “Dow/DuPont
Defendants”) under Rule 41(a) and subject to Rule 23(c). These claims have been settled for
$2,000,000 as part of a multistate settlement agreement. On June 21, 2005, Judge McAfee
approved the settlement. The following amounts were deducted from the gross settlement
amount:
       $746,771.26 – Attorney fees and expenses for Plaintiffs’ counsel
       $101,000.00 – Notice Costs
       $6,000.00 – Incentive payments for named plaintiffs
This left $1,156,982.15 available for cy pres distribution. On July 1, 2005, Judge McAfee
entered a Supplemental Order approving the following cy pres awards:
       $800,000.00 - Special Operations Warrior Foundation of Tampa, Florida
       $356,982.15 - East Tennessee Children’s Hospital of Knoxville, Tennessee
                                                C.
                                           ANALYSIS
   {49} In considering these motions, the Court is mindful of the clear public policy of this
state regarding unpaid residuals in class action litigation. The General Assembly codified this
policy in section 1-267.10 of the General Statutes, which states as follows:
       It is the intent of the General Assembly to ensure that the unpaid residuals in class
       action litigation are distributed, to the extent possible, in a manner designed either
       to further the purposes of the underlying causes of action or to promote justice for
       all citizens of this State. The General Assembly finds that the use of funds
       collected by the State courts pursuant to this section for these purposes is in the
       public interest, is a proper use of the funds, and is consistent with essential public
       and governmental purposes.




                                                18


(a)(2005). The statute goes on to require the parties to report to the
court the total amount actually paid to class members. After receiving this report, the court
“shall direct the defendant to pay the sum of the unpaid residue, to be divided and credited
equally, to the Indigent Person’s Attorney Fund and to the North Carolina State Bar for the
provision of civil legal services for indigents.” 

 § 1-267.10(b). Although the statute does not
directly address cy pres distributions in which there are no payments made to class members, the
Court believes the public policy regarding unpaid residuals is also applicable to cy pres
distributions which have no relationship with the class victimized by the violations. Indeed, the
citizens of North Carolina are at even greater risk of injustice in nationwide cy pres settlements
than they are when there is money left over after class members have been paid. When cy pres
distributions are approved by judges sitting in distant jurisdictions, there is an acute danger that
the settlement funds will not “further the purposes of the underlying causes of action or . . .
promote justice for all citizens” of North Carolina. See id. § 1-267.10(a).
   {50} The term “cy pres” is most commonly associated with trust law. It “appears to derive
from the Norman-French term ‘cy pres comme possible,’ meaning ‘as near as possible.’” Susan
Beth Farmer, More Lessons from the Laboratories: Cy Pres Distributions in Parens Patriae
Antitrist Actions Brought by State Attorneys General, 

, 406 n.212
(1999). In trust law, “[c]y pres is a rule of construction which courts employ to carry out the
spirit of a trust’s terms when literal application of such terms is not feasible.” 

 An example of
the proper application of the cy pres concept in North Carolina can be found in Board of Trustees
v. Heirs of Prince, 

, 

 (1984). In that case, the testatrix bequeathed
her residuary estate in trust to the University of North Carolina at Chapel Hill for the purpose of
building a theatre. 

, 

. When the University eventually built a new
theater, it used funds from the General Assembly instead of the trust funds. 

, 

. The Supreme Court affirmed an order of the trial court amending the trust to
provide for “activities that enhance the production, development, maintenance, and student
participation in theatrical productions” at the University, reasoning that this amendment carried
out Mrs. Prince’s general charitable intent to promote dramatic art. 

, 

.
   {51} In the context of class actions, “[c]ourts have utilized cy pres distributions where class
members are difficult to identify, or where they change constantly, or where there are unclaimed
funds.   In these cases, the court, guided by the parties’ original purpose, directs that the



                                                19
unclaimed funds be distributed for the indirect prospective benefit of the class.” 3 Alba Conte &
Herbert Newberg, Newberg on Class Actions § 10:16, at 513 n.1 (4th ed. 2002).
   {52} The cy pres distributions here are all going to respectable medical or charitable
organizations.   However, the injured class in this case consists of consumers who were
overcharged for a variety of products as the result of an alleged conspiracy between
manufacturers of synthetic rubber.      The funds distributed are in no way “for the indirect
prospective benefit of the class.” Such distributions are contrary to the very definition of “cy
pres.” The National Association of Consumer Advocates suggests that “[c]lass counsel should
recommend cy pres remedies which will provide indirect benefit to absent members of the class
or which will further the purposes of the underlying litigation.” Nat’l Ass’n of Consumer
Advocates, Standards and Guidelines for Litigating and Settling Consumer Class Actions § 7.C.,
at 32 (rev. 2006), available at http://www.naca.net/_assets/media/RevisedGuidelines.pdf. The
purpose of this litigation was to protect consumers from collusion among manufacturers. The
organizations receiving funds from these settlements engage in many praiseworthy activities for
the benefit of the sick and injured, but they do not work to protect consumers. The distribution
of these settlement funds is clearly not “as near as possible” to the purposes of the litigation or
the benefit of class members.
   {53} In this case, the settlements approved by Judge McAfee are prima facie evidence of
the fact that there can be no administratively economical distribution to the class and that the cy
pres distribution will result in less than fifty percent of the settlement being distributed to anyone
in need. Of that amount, there is no demonstrable showing that any citizen of North Carolina
will benefit and a clear indication that citizens of states which do not have indirect purchaser
statutes (a majority) will benefit as much as, if not more than, citizens of states that recognize
such causes of action. Approximately $150,000 will be spent on “notices” to tell class members
who probably will never recognize that they are class members that they will receive nothing
from the settlement.
   {54} The indirect purchaser cases present a real contradiction. Usually the defendants have
been charged with or pleaded guilty to a federal antitrust violation. They are not entitled to any
sympathy.    The nature of the cases makes proof and defense practically or economically
impossible. The Court is not aware of any indirect purchaser case ever being tried in North
Carolina, or nationally for that matter. Settlement is virtually certain. Because the individual



                                                 20
class members’ damages are usually so small that administration of distribution of a fund is
impossible or impractical, a cy pres settlement is the norm. This case is a classic example. Since
the states with indirect purchaser standing are limited, defendants want them all settled at once.
Plaintiffs’ counsel are happy to agree as the settlement fund from which they claim a fee is
larger. Simultaneous settlement ensures that multistate distributions to individuals are practically
impossible. That leads to forum shopping to get a nationwide class action settlement approved.
The parties have a common interest in making the selected judge happy.
    {55} These motions present the flip side of the coin if there is no standing requirement for
indirect purchaser cases in North Carolina. In the event there is no standing requirement, most
cases will involve individual clams for which it would be impossible to economically distribute
small sums to consumers. These cases will result in cy pres distributions such as those proposed
in this case. The economics of litigation dictate that defendants resolve all the individual state
litigation at one time. Hence, there has developed the practice of counsel for plaintiffs and
defendants choosing a state where they can get court approval of a nationwide settlement that
encompasses claims from all states which recognize indirect purchaser status. Such distributions
have the salutary benefit of not permitting the guilty price fixer to escape from paying state law
claims in addition to the direct claims for which they are liable under federal law. The question
raised in light of the realities of this kind of litigation is what responsibilities lawyers for the
North Carolina class and North Carolina judges have to see that these “nationwide” settlements
are fair to North Carolinians.
    {56} Here the parties chose Tennessee. 4 The reason for that selection is not obvious from
the facts of the case.          It is obvious that local institutions in Tennessee will benefit
disproportionately to other states. It is arguable that some North Carolina residents may go to St.
Jude’s Children’s Hospital for treatment and that some North Carolina residents may receive
scholarships from the Special Operations Warrior Fund. All the recipients are worthy charities,
and the Court is sure Judge McAfee was conscientious in his selection.
    {57} The Court has reached two conclusions based upon its experience with these cases.
First, if a nationwide settlement is approved in another state, it is unlikely that North Carolina
residents will benefit in any significant way and the public policy embodied in section 1-267.10

4
 In another case pending before this Court the parties selected New Mexico. See Thai Holding of Charlotte, Inc. v.
Archer Daniels Midland Co., No. 03 CVS 15096 (N.C. Super. Ct. Sept. 3, 2003). The use of nationwide class action
settlements presided over by state judges can be troublesome. See infra ¶ 60.


                                                       21
will be ignored. Local judges selected by the lawyers get to decide where the cy pres money
goes.
   {58} Second, no money goes to people who have allegedly been injured. The lawyers
benefit directly, and the fees and expenses often consume fifty percent of the settlement funds.
Indirect purchaser cases have become a means of generating legal fees without any
corresponding value to the persons allegedly injured. If we are to punish those who are guilty of
antitrust violations, it seems appropriate that the funds generated by such suits be distributed to
victims, a fund they have a connection to, or at least in a manner consistent with the established
public policy set by the Legislature. This settlement distributes funds in a manner totally
unrelated to the alleged victims and without regard to North Carolina public policy.
   {59} This area of the law is in serious need of attention. The appellate courts may find that
there is no standing requirement. If so, some guidance to trial judges about their obligations to
protect the public from settlements that only benefit the lawyers and the citizens of other states
would be useful.    This Court has attempted to discern the public policy indicated by the
Legislature in section 1-267.10 in a manner to make the settlement of North Carolina claims
comport with North Carolina public policy. The Legislature itself could clarify the situation by
amending the statute to make clear that if injured persons do not receive any distribution, cy pres
funds, whether generated by state or nationwide settlement, should be dispersed to a fund with
some beneficial relationship to the victims or as a default as directed in the statute. Judges
should not be making those decisions. As the Financial Times noted in an article critical of cy
pres class action settlements, “[g]overnments, Legislatures and elected representatives should
look after society as a whole; courts and lawyers should stick to the task of compensating
victims.” Patti Waldmeir, Charitable Giveaway That Cheats Justice: Microsoft’s Offer to Settle
a Legal Case by Giving Computers to Poor Children Illustrates a Disturbing Tendency for US
Courts to Assume the Role of Social Policy Arbiters, Fin. Times, Nov. 29, 2001, at 19.
   {60} The dangers inherent in and problems created when the parties join in selection of one
state forum for settlement of nationwide claims underlie the rationale for the federal Class Action
Fairness Act. See Class Action Fairness Act of 2005, 

 Stat. 4 (codified in
scattered sections of 28 U.S.C.); see also Anna Andreeva, Comment, Class Action Fairness Act
of 2005: The Eight-Year Saga Is Finally Over, 

, 393–94 (2005)
(describing congressional concern with forum shopping in class action litigation). One need only



                                                22
look at the outcome for North Carolina residents of Moody v. Sears, Roebuck & Co., 

 (N.C. Super. Ct. May 7, 2007), to see the impact locally.                Moody involved a
nationwide class action settlement administered in Illinois in which North Carolina citizens
received a total of $66 in cash and coupons and the entire nationwide class received cash and
coupons totaling only $2,402, while the lawyers got close to a million dollars in cash. Id. ¶ 2.
North Carolina courts should not abdicate to judges in foreign jurisdictions the determination of
cy pres distributions of settlement funds which belong in part to North Carolina residents and
should ensure that North Carolina public policy is followed. The even more difficult question is
whether the North Carolina courts should permit dismissal of North Carolina class actions where,
as here, no allocation of damages has been made among the states having indirect purchase
standing. It can be done. See Thai Holding of Charlotte, Inc. v. Archer Daniels Midland Co.,

 (N.C. Super. Ct. May 7, 2007).
   {61} The message from this decision should be clear. If North Carolina lawyers and class
representatives undertake the representation of North Carolina citizens, they must ensure that the
state’s interests and the interests of its injured citizens come first. North Carolina courts will and
should be reluctant to approve dismissal of any purported North Carolina class action where the
North Carolina share of the settlement proceeds is not disbursed to its injured citizens or for their
benefit in a cy pres fund related to North Carolina victims or in conformity with the public policy
established in section 1-267.10. That is especially true where North Carolina is in the minority
of states which recognize indirect purchaser standing.
   {62} Class representatives and class counsel should see that (1) a fair share of damages is
allocated to North Carolina, (2) victims receive damages if possible, (3) cy pres funds bear some
relation to the class of victims, or (4) the North Carolina funds are distributed in accordance with
section 1-267.10. At least in the fallback position, the statute promotes access to the court
system by North Carolina citizens.
   {63} This Court reluctantly approves the dismissal of this action. It does so because it has
held that there is no standing and therefore no reason not to approve the payment of funds by the
other defendants. Neither Mr. Teague nor his counsel have adequately represented the class in
this action. Had they secured a settlement that distributed funds to North Carolina victims of the
alleged violation or secured a cy pres distribution in conformity with the interests of the North




                                                 23
Carolina class or North Carolina public policy as embodied in section 1-267.10 they would have
fulfilled their obligation even if it was in the context of a multistate settlement.
    {64} The Court hopes that in the future class counsel will become more attuned to the
interests of the class members and that either the appellate courts or the Legislature will bring
some rationality to a flawed process.


                                                  III.
                                           CONCLUSION
    {65} Based upon the foregoing, it is hereby ORDERED, ADJUDGED, and DECREED as
follows:
            1. Defendants’ motion to dismiss is GRANTED.                Plaintiff’s complaint against
                Defendants Crompton Corporation, Uniroyal Chemical Company, DSM
                Copolymer, Inc., DSM Elastomers Europe, B.V., and ExxonMobil Chemical
                Company is hereby dismissed.
            2. Plaintiff’s Motion for Leave to Dismiss with Prejudice Defendants Bayer
                Corporation, Bayer MaterialScience, LLC, and Bayer AG is GRANTED.
            3. Plaintiff’s Motion to Dismiss Defendants Dow Chemical Company, E.I. DuPont
                De Nemours & Company and DuPont Dow Elastomers, LLC is GRANTED.
            4. Within sixty days from the date of entry of this Order, Plaintiff’s counsel shall file
                with the Court an affidavit showing publication on two successive Sundays of a
                legal notice in the Citizen-Times of Asheville and The News & Observer of
                Raleigh. The notice published in these newspapers shall be four columns wide
                and printed in ten-point font. The notice shall detail the following:
                    a. The total amount of the settlement.
                    b. The recipients of the settlement distribution.
                    c. The benefit to North Carolina class members.
                    d. The amount of fees and expenses paid to counsel representing the North
                        Carolina class.
                    e. The total amount of fees paid to class counsel.
                    f. The costs of notice and other administrative expenses.




                                                  24
IT IS SO ORDERED, this the 7th day of May, 2007.




                                    25