FILED UNDER SEAL CIVIL ACTION NO 05-CV-666 MDL NO.

1682 THIS DOCUMENT CONTAINS CONFIDENTIAL AND HIGHLY CONFIDENTIAL INFORMATION SUBJECT TO THE STIPULATED PROTECTIVE ORDER APPROVED BY THE COURT DATED NOVEMBER 8. 2005 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA ____________________________________ IN RE: : : HYDROGEN PEROXIDE ANTITRUST : LITIGATION : ____________________________________: : This Document Relates To: : : DIRECT PURCHASER LITIGATION : ____________________________________:

CIVIL ACTION NO. 05-CV 666(SD) MDL NO. 1682

[PROPOSED] REPLY IN FURTHER SUPPORT OF DIRECT PURCHASER PLAINTIFFS MOTION TO COMPEL DEFENDANT FMC CORPORATION TO (1) PROVIDE FURTHER ANSWERS TO INTERROGATORY (2) PRODUCE FOR DEPOSITION EXECUTIVES OF FMC FORET, S.A. (3) PROVIDE FURTHER DOCUMENT PRODUCTION AND (4) PROVIDE FURTHER INFORMATION WITH RESPECT TO FMCS PRIVILEGE LOG The Direct Purchaser Plaintiffs submit this reply brief in further support of their above-captioned motion (Plaintiffs Motion to Compel). A. FMC Misconstrues the Nature of Control Required by Fed. R.Civ. P. 34 In its memorandum in opposition to Plaintiffs Motion to Compel (FMC Mem.), Defendant FMC Corporation (FMC) argues that because it purportedly chooses to treat its wholly owned subsidiary, FMC Foret, S.A. (FMC Foret), as an operationally independent company, Third Circuit law requires this Court to undertake a very factspecific inquiry to determine whether the relationship between FMC and FMC Foret is

sufficiently close and intertwined as to demonstrate that the two entities operated as one, demonstrated access to the documents of the subsidiary in the normal course of business, and whether any agency relationship existed between the two entities. FMC Mem. at 9-11, citing, inter alia, Camden Metal & Iron, Inc. v. Marubeni Am. Corp., 138 F.R.D. 138, 442 (D. N.J. 1991); Playboy Entmt Group. Inc. v. United States, 1997 WL 873550, at * 3 (D. Del. December 13, 1997) and Pitney Bowes, Inc. v. Kern Intl, Inc., 239 F.R.D. 62, 66 (D. Conn. 2006). As shown below, these cases do not stand for the proposition for which they are cited by FMC. As the court held in Camden Iron, 138 F.R.D. at 441 (citations omitted), and as FMC itself concedes,1 Control is defined as the legal right, authority or ability to obtain documents upon demand. Even if, as FMC claims, FMC has elected to forego exercise of some of its legal rights to accommodate the independent-minded sensitivities of its 100% owned subsidiary, the fact remains that FMC actually possess these rights vis--vis FMC Foret -- which is all that is required to establish control of a subsidiarys documents under the Federal Rules of Civil Procedure. Camden Iron, 138 F.R.D. at 441 (citations omitted) (Federal courts construe control very broadly under Rule 34. Courts have held that a litigating parent corporation has control over documents in the physical possession of its subsidiary corporation where the subsidiary is wholly owned or controlled by the parent).2 Although FMC attempts at great length to minimize the operational ties between itself and FMC Foret, nowhere in its memorandum does FMC deny that, discretionary

See FMC Mem. at 9, citing Inline Connection Corp. v. AOL Tine Warner, Inc., 2006 WL 2864586, at *1 (D. Del. October 6, 2006) (citation omitted).

See also Memorandum in Support of Direct Purchaser Class Purposes Motion to Compel [Directed to] Defendant FMC Corporation (Pl. Mem.) at 12-14 and n. 20. 2

practices and hands off policies aside, FMC has the fundamental legal right and authority to command FMC Foret to produce the documents in dispute. In altogether evading this controlling question, FMC itself reveals the impropriety of its refusal to produce to Plaintiffs relevant documents in the possession of its wholly owned subsidiary, FMC Foret. In a similar fashion, FMCs position is also undermined by its misplaced reliance upon cases that do not involve the circumstances at issue here, i.e., a request for documents in the possession of a non-party subsidiary that is wholly owned by a corporate defendant. In this situation, the corporate defendants legal right, authority or ability to obtain documents upon demand is so pronounced that it can be fairly presumed. See Camden Iron, 138 F.R.D. at 441, 443. By contrast, the cases cited by FMC involve requests for documents in the possession of a non-party parent of a corporate subsidiary party a situation where a subsidiarys control over the activities of its parent is subject to reasonable doubt, which introduces an issue that naturally lends itself to the type of factintensive inquiry that FMC needlessly urges upon the Court here. After recognizing the general proposition that a litigating parent corporation does have control over documents in the physical possession of its subsidiary corporation when the subsidiary is wholly owned or controlled by the parent,3 the Camden Iron court addressed the convers[e] situation where the litigating corporation is the subsidiary and the parent possesses the records. Camden Iron, 138 F.R.D. at 441-42. In that very different context, the court found that a subsidiary could be deemed to control its parent,

Despite Camden Irons and other cases cited previously by Plaintiffs (Pl. Mem. at 12-14), FMC tries to persuade the Court that its 100% ownership of FMC Forets stock is an unremarkable fact. FMC Mem. at 2. Far from being unremarkable, 100% stock ownership is a fact of central importance to the question of a parents control over a subsidiary for purposes of Fed. Civ. P. 34. 3

provided that a variety of alternate grounds existed -- such as where (1) both corporate entities were alter egos; (2) the subsidiary was an agent of the parent in the transaction giving rise to the lawsuit; (3) the relationship was such that the agent-subsidiary could secure documents of the principal-parent to meet its own business needs and documents helpful for use in litigation; and (4) the subsidiary had access to the parents documents when the need arose in the ordinary course of business. Id. (citing Gerling Intern. Ins. Co. v. C. I. R., 839 F.3d 131, 140-41 (3d Cir. 1988). The alternate grounds germane to the question of a subsidiarys control over documents in the possession of its parent that were explored in Camden Iron, Playboy Entmt Group. Inc., Pitney Bowes and other cases4 are wholly irrelevant to the analytically distinct, and much less difficult, question of a parent corporations control over documents in the possession of its wholly owned subsidiary. There is, in law or logic, no basis for FMCs unsupported contention (highlighted in a caption of its memorandum no less) that Control under Rule 34 Requires a Fact-Specific Inquiry Into Whether a Parent Corporation Has Operational Access to its Subsidiarys Documents. FMC Mem. at 9. Rule 34 requires no such thing, nor is there any established Third Circuit authority demonstrating that it does.

In US International Trade Commission v. Asat, Inc., 411 F.3d 245, 254 *D.C. Cir. 2005), the Court of Appeals for the District of Columbia Circuit observed that Camden Irons set forth the applicable grounds for finding control of documents, and it analyzed the alternative grounds set forth in that case for determining whether a subsidiary corporationhas the requisite control of documents that are in a parent company's possession. 4

B. The Factual Record Establishes that FMC Controls FMC Foret In their opening memorandum, Plaintiffs demonstrated FMCs legal control over FMC Foret through a variety of established facts, including adjudicated findings by the European Commission (EC Decision)5 and evidence uncovered by Plaintiffs through discovery in this litigation. As detailed more specifically in Plaintiffs original brief, the documents and sworn testimony provided by defendants show, among other things, that (1) FMC Foret executives attended meetings in which North American price-fixing activities were a topic of conversation (Pl. Mem. at 4-5); (2) FMC publicly touted the business capabilities of FMC Foret as an integral part of its own global business enterprise (Pl. Mem 16-17); and (3) FMC management met with FMC Foret executives to consider strategies for FMCs North American hydrogen peroxide business, and FMC Foret regularly received reports and memoranda pertaining to that business (Pl. Mem at 17-18). In the face of this record evidence, FMC insists that FMC Foret has forever been operationally independent from FMC. However, contradictory or highly equivocal statements made in FMCs memorandum in opposition to this motion underscore the falsity of that assertion. For example, while implicitly denying that FMC has any legal right or authority necessary to influence the business of FMC Foret, FMC affirmatively admits that two successive FMC Foret Chief Executive Officers (Afredo Bernad and Juan Leivar) reported directly to senior executives of FMC in the United States during the Class

See Pl. Mem. at 2-3 and n. 1 and n. 4, 16 and n. 17; Exhibit 1 to Compendium of Exhibits in Support of Plaintiffs Motion to Compel (Pl. Ex.). While FMC may disagree with the findings in the EC Decision (FMC Mem. at 16-17 and n. 13-15), and it attempts to rebut a collateral estoppel argument that Plaintiffs have never made in this litigation (FMC Mem. at 16-17 and n. 13-15), the ECs findings are persuasive evidence of FMCs control over FMC Foret. 5

Period. FMC. Mem. at 5-6. Such direct reporting relationships would not exist at all if FMC Foret were genuinely as independent as FMC pretends.6 Likewise, FMC admits that at least one executive, Joe Netherland, did serve for a time on the boards of directors of both FMC and FMC Foret. FMC Mem. at 5. With respect to the executive roles of other officials, the best that FMC can muster is the cautiously worded statement that no employee of FMC generally serves in any operational role of Foret, and no Foret employee generally serves in any operational role at FMC. FMC Mem. at 5 (emphasis supplied). See also, id. at n. 5 (emphasis supplied) ([A]s a general rule, individuals have not served as functional employees of FMC and Foret concurrently). In the absence of any context or specificity, FMCs ultra-qualified representations are devoid of meaning, except to the extent they do prove that there was at least some degree of overlap of executive responsibilities and operational functions between FMC and FMC Foret. This conclusion is reinforced substantially by testimony provided by FMC representative Michael P. Smith at a Rule 30(b)(6) deposition conducted by Plaintiffs on November 15, 2007. See FMC Mem. at Ex. A (Smith Tr.). FMCs deposition testimony confirms the following undisputed facts: 1. FMC Controlled FMC Foret Through Direct Reporting Relationships and Overlapping Directorates. Alfredo Bernad, a party to several cartel contracts identified by the EC, served as managing director and CEO of FMC Foret and, at the same time, as a

Given these direct reporting relationships and other factors described above, the Court cannot take seriously FMCs argument that it has not even taken the steps that would be necessary to exert any meaningful control over Foret. FMC. Mem. at 12. The steps taken by FMC in that regard are significant and transparent.

vice president of FMC. EC Decision at 391 (Pl. Ex. 1)); Smith Tr. at 28:1929:7.7 As FMCs Vice President and President of FMC Europe, Bernad served, in a sense, as a major an executive representing FMC to European political organizations. Smith Tr. at 30. (Emphasis supplied.) The head of FMC Foret evidently made annual budget presentations to FMC executives in the Unites States in a fashion similar to those made by FMCs United States-based hydrogen peroxide division manager. Smith Tr. at 116-117. As FMC conceded (FMC Mem. at 5), Joseph Netherland, a long-time FMC executive, served simultaneously as a board member of both FMC and FMC Foret. Smith Tr. at 254. Netherland was also an Executive Vice President of FMC. Id. Senior FMC Foret personnel (including Bernad and Javier Carratala) attended meetings of FMC global management personnel at various times during the Class Period. Smith Tr. at 37-38; 74-75. 2. FMC Repeatedly Furnished FMC Foret Personnel With North American Price Increase and Other Information Before issuance of North American hydrogen peroxide price increases, FMCs hydrogen peroxide division regularly prepared internal memoranda (including Price Increase Q&A summaries), the purpose of which was to supply FMC personnel with talking points to justify the price increases. Smith Tr. at 103-104. FMC regularly disseminated these memoranda to FMC Foret personnel, using FMCs internal international e-mail system.8 Id. See Exhibits C, D and E, price increase Q&A packages sent to Foret personnel in 1998, 1999 and 2002. FMC transmitted monthly hydrogen peroxide division performance summaries to FMC Foret personnel. Smith Tr. at 242-243. See also Pl. Ex. 32.
7

The EC found that Bernads role as FMC vice president support[ed] the view that FMC knew or should have known about [FMC Forets] participation the cartel activities. Pl. Mem. at 3, quoting EC Decision at 391. Given FMCs description of Bernad as a model worldwide executive that enhanced the reputation of FMC throughout the world (Pl. Mem. at 3. n 3, quoting FMC Annual Report for 2000), it is equally true that FMC knew about and participated in FMCs conspiratorial activities in the United States. The fact that FMC Foret personnel communicated with FMC personnel in the United States through the same internal FMC e-mail system (Smith Tr. at 92-93, 106) demonstrates that FMC Foret was deeply integrated into FMCs business operations. This is hardly consistent with the total operational segregation described by FMC in its opposition to this motion.
8

3.

FMC Foret Personnel Had Access to Internal Job Openings Posted by FMC

FMC posted internal job openings on an internal FMC company intranet. Smith Tr. at 67-68; 70-71. Javier Carratala, a long-time FMC Foret employee who became head of FMCs North American hydrogen peroxide division in 2004, was evidently apprised of the availability of that position by viewing an internal FMC job posting on the companys passwordprotected intranet system. Id. at 68-69. 4. FMC Foret Supplied Sodium Perborate Products to FMCs North American Customers Although FMC did not produce sodium perborate in North America, FMCs North American customers were able to purchase it from FMC Foret, who shipped sodium perborate to North America from its plants in Europe. Smith Tr. at 86; 88; 220. While the issue of control of a corporate parent over its subsidiary for purposes of document production under Rule 34 does not require the convoluted factual inquiry proposed by FMC, and there was no need for Plaintiffs to undertake the type of discovery that might be otherwise necessary in different corporate contexts or on a motion to dismiss for lack of personal jurisdiction, the facts adduced by Plaintiffs are more than sufficient to require FMC to produce documents within its control that are presently within the possession and custody of its wholly owned subsidiary, FMC Foret. For the above reasons, and for the reasons previously expressed in their original memorandum, Plaintiffs respectfully request the Court to grant their motion to compel FMC to discharge its outstanding discovery obligations in this lawsuit.

Dated: November 27, 2007

Respectfully submitted, BOLOGNESE & ASSOCIATES LLC By: ________________________ Anthony J. Bolognese Joshua H. Grabar John G. Narkin Two Penn Center Plaza 1500 JFK Boulevard, Suite 320 Philadelphia, PA 19102 (215) 814-6750 Robert N. Kaplan Gregory K. Arenson Jason A. Zweig KAPLAN FOX & KILSHEIMER LLP 850 Third Avenue, 14th Floor New York, NY 10022 (212) 687-1980 Michael D. Hausfeld William P. Butterfield Reena Gambhir COHEN MILSTEIN HAUSFELD & TOLL, PLLC 1100 New York Avenue, N.W., Suite 500 Washington, DC 20005 (202) 408-4600 Steven A. Kanner William H. London Douglas A. Millen FREED KANNER LONDON & MILLER, LLC 2201 Waukegan Road, Suite 130 Bannockburn, IL 60015 (224) 632-4500 Class Counsel for Direct Purchaser Plaintiffs