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 : CIVIL ACTION NO. 05-CV 666(SD) LITIGATION : ____________________________________: MDL NO. 1682 : This Document Relates To: : : DIRECT PURCHASER LITIGATION : ____________________________________:

[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 FMC’S 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 fact-

specific” 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 Entm’t Group. Inc. v. United States, 1997 WL

873550, at * 3 (D. Del. December 13, 1997) and Pitney Bowes, Inc. v. Kern Int’l, 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-à-vis FMC

Foret -- which is all that is required to establish control of a subsidiary’s 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

1 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). 2 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.

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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, FMC’s 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 subsidiary’s “control” over the activities of its parent is subject to

reasonable doubt, which introduces an issue that naturally lends itself to the type of “fact-

intensive” 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,

3 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 Foret’s 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 parent’s “control” over a subsidiary for purposes of Fed. Civ. P. 34.

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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 parent’s 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 subsidiary’s “control” over

documents in the possession of its parent that were explored in Camden Iron, Playboy

Entm’t Group. Inc., Pitney Bowes and other cases4 are wholly irrelevant to the analytically

distinct, and much less difficult, question of a parent corporation’s “control” over

documents in the possession of its wholly owned subsidiary. There is, in law or logic, no

basis for FMC’s 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 Subsidiary’s Documents.” FMC Mem. at 9. Rule

34 requires no such thing, nor is there any established Third Circuit authority

demonstrating that it does.

4 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 corporation…has the requisite control of documents that are in a parent company's possession.”

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B. The Factual Record Establishes that FMC Controls FMC Foret

In their opening memorandum, Plaintiff’s demonstrated FMC’s 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 FMC’s 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 FMC’s 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

5 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 EC’s findings are persuasive evidence of FMC’s control over FMC Foret.

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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, FMC’s 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.”). FMC’s 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

6 Given these “direct reporting” relationships and other factors described above, the Court cannot take seriously FMC’s 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.

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vice president of FMC. EC Decision at ¶ 391 (Pl. Ex. 1)); Smith Tr. at 28:19-29:7.7

As FMC’s 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 FMC’s 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, FMC’s

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 FMC’s 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 Bernad’s role as FMC vice president “support[ed] the view that FMC knew or should have known about [FMC Foret’s] participation the cartel activities.” Pl. Mem. at 3, quoting EC Decision at ¶ 391. Given FMC’s 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 FMC’s conspiratorial activities in the United States. 8 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 FMC’s business operations. This is hardly consistent with the total operational segregation described by FMC in its opposition to this motion.

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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 FMC’s 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 company’s password-protected intranet system. Id. at 68-69.

4. FMC Foret Supplied Sodium Perborate Products to FMC’s North American Customers

Although FMC did not produce sodium perborate in North America, FMC’s

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.

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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

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