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From Antitrust Law Daily, September 30, 2014

Denial of motion for class decertification upheld in urethane price fixing case

By Linda O’Brien, J.D., LL.M.

In an antitrust action against Dow Chemical Company and other chemical producers over an alleged conspiracy to fix prices for chemicals used in the manufacture of polyurethane products, the district court properly granted class certification since common questions predominated and the key elements of the price fixing claims were capable of class-wide proof, the U.S. Court of Appeals in Denver has decided. Thus, the district court order denying Dow’s motion for class decertification was affirmed (In re Urethane Antitrust Litigation, September 29, 2014, Bacharach, R.).

A series of class actions were filed against Dow Chemical Company and other producers of certain chemicals used in the manufacture of polyurethane products. Seegott Holdings, Inc., Industrial Polymers, Inc., and Quabaug Corporation, industrial purchasers of polyurethane products, alleged that the polyurethane manufacturers conspired to fix prices and allocate customers and markets in violation of Section 1 of the Sherman Act. The district court certified a plaintiff class including all industrial purchasers of polyurethane products during the alleged conspiracy period. The case went to trial and a jury returned a verdict against Dow. The district court entered judgment for the plaintiffs and denied Dow’s motions for decertification of the class and judgment as a matter of law. Dow appealed.

Class certification. The district court did not abuse its discretion by certifying the class in finding that common questions predominated over individualized issues. The class was certified based on the plaintiffs’ evidence of an artificially inflated baseline, including parallel issuance of similar product price lists and price increase announcements. The district judge could reasonably weigh the evidence and conclude that price fixing would have affected the entire market and raised baseline prices for all buyers. Moreover, the presence of individual damages issues did not change the conclusion since class-wide proof was not required for all issues, in the appellate court’s view.

Expert testimony. The court also found no error in the district court allowing the plaintiffs’ expert testimony on statistics since Dow’s arguments related to the weight of the expert testimony and not its admissibility. Dow’s argument that the impact and damages models used were unreliable because the expert improperly selected variables and benchmark years based on what would yield the greatest damages was rejected. According to the appellate court, the district court reasonably concluded that the expert had accounted for the major factors affecting demand and included other evidence that substantiated his statistical conclusions.

Sufficiency of evidence. The appellate court determined that the evidence was sufficient regarding Dow’s liability and the district court did not err in denying Dow’s motion for judgment as a matter of law. In rejecting Dow’s argument that there was insufficient evidence that the price fixing conspiracy was effectively implemented, the court noted that, in addition to evidence of parallel price increase announcements, the plaintiffs’ evidence included admissions of industry insiders, collusive behavior, susceptibility of the industry to collusion, and setting of prices at supra-competitive levels. Moreover, from testimony at trial that manufacturers used the price increase announcements to avoid price decreases, a jury could have inferred that a conspiracy existed and caused higher prices that they would have been in a market free of collusion.

Damages award. The damages award was supported by the evidence. Although the plaintiffs’ expert calculated greater damages, the jury had an evidentiary basis for reducing the figure, according to the court. In rejecting Dow’s argument that the jury’s award was speculative, the court noted that the jury could adjust the expert’s calculations without using the calculations of a damages model with “mathematical certainty.” Finally, Dow did not establish a violation of the Seventh Amendment in the district court’s decision to permit allocation of the jury’s reduced damages award according to the plaintiffs’ expert’s damages model. Such distribution method would not take from the jury the question of liability and assessment of damages and Dow failed to identify any reason that the judgment would fail to bind all class members, the court concluded.

The case is No. 13-3215.

Attorneys: Carter G. Phillips (Sidley Austin LLP) for Dow Chemical Co. Paul D. Clement (Bancroft PLLC) for Seegott Holdings, Inc., Industrial Polymers, Inc., and Quabaug Corporation.

Companies: Dow Chemical Company; Seegott Holdings, Inc.; Industrial Polymers, Inc.; Quabaug Corporation

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