In re Linerboard Antitrust Litigation

• Decision Date: 05 September 2002
• Docket Number: No. 01-4535.,01-4535.
• Parties: In Re: LINERBOARD ANTITRUST LITIGATION WINOFF INDUSTRIES, INC. v. STONE CONTAINER CORPORATION; Jefferson Smurfit Corp.; Smurfit-Stone Container Corp.; International Paper Co.; Georgia Pacific Corp.; Weyerhaeuser Paper Co.; Temple-Inland Inc.;* Gaylord Container Corp.; * Union Camp Corp.; Simpson Tacoma Kraft Co.; Tenneco, Inc.; Tenneco Packaging; Packaging Corporation of America General Refractories Company, on Behalf of Itself and All Others Similarly Situated v. Stone Container Corporation Stone Container Corporation, Jefferson Smurfit Corp., Smurfit-Stone Container Corp., International Paper Co., Georgia Pacific Corp., Weyerhaeuser Paper Co., Temple-Inland, Inc.,* Gaylord Container Corp.,* Union Camp Corp., Tenneco, Inc., Tenneco Packaging and Packaging Corporation of America, Appellants (* Amended per Clerk's Order dated 2/5/02)
• Court: U.S. Court of Appeals — Third Circuit

305 F.3d 145

In Re: LINERBOARD ANTITRUST LITIGATION

WINOFF INDUSTRIES, INC. v. STONE CONTAINER CORPORATION; Jefferson Smurfit Corp.; Smurfit-Stone Container Corp.; International Paper Co.; Georgia Pacific Corp.; Weyerhaeuser Paper Co.; Temple-Inland Inc.;* Gaylord Container Corp.; * Union Camp Corp.; Simpson Tacoma Kraft Co.; Tenneco, Inc.; Tenneco Packaging; Packaging Corporation of America

General Refractories Company, on Behalf of Itself and All Others Similarly Situated v. Stone Container Corporation

Stone Container Corporation, Jefferson Smurfit Corp., Smurfit-Stone Container Corp., International Paper Co., Georgia Pacific Corp., Weyerhaeuser Paper Co., Temple-Inland, Inc.,* Gaylord Container Corp.,* Union Camp Corp., Tenneco, Inc., Tenneco Packaging and Packaging Corporation of America, Appellants

(* Amended per Clerk's Order dated 2/5/02)

No. 01-4535.

United States Court of Appeals, Third Circuit.

Argued: July 19, 2002.

Filed: September 5, 2002.

COPYRIGHT MATERIAL OMITTED

Kenneth W. Starr (argued), Christopher Landau, Kannon K. Shanmugam, Grant M. Dixton, Kirkland & Ellis, Washington, DC, for Appellants International Paper Company, Union Camp Corporation, Weyerhaeuser Company, Gaylord Container Corporation, Tenneco, Inc., Tenneco Packaging and Packing Corporation of America.

Barbara W. Mather (argued), Pepper, Hamilton LLP, Philadelphia, PA, for Appellants Jefferson-Smurfit Corp., Stone Container Corp. and Smurfit-Stone Container Corp.

Steven J. Harper, Steven C. Seeger, Kirkland & Ellis, Chicago, IL, Daniel B. Huyett, Matthew W. Rappleye, Stevens & Lee, Reading, PA, for Appellants International Paper Company and Union Camp Corporation.

Douglas J. Kurtenbach, James H. Schink, Timothy A. Duffy, Barak S. Echols, Kirkland & Ellis, Chicago, IL, Ralph G. Wellington, Sherry Swirsky, Schnader, Harrison, Segal & Lewis LLP, Philadelphia, PA, for Appellants Weyerhaeuser Company, Gaylord Container Corporation, Tenneco, Inc., Tenneco Packaging and Packaging Corporation of America.

Edward M. Posner, Paul H. Saint-Antoine, Isabel C. Duffy, Drinker Biddle & Reath LLP, Philadelphia, PA, for Appellant Georgia Pacific Corporation.

R. Mark McCareins, Dane A. Drobny, Michael J. Mayer, Andrew D. Shapiro, Winston & Strawn, Chicago, IL, for Appellants Jefferson-Smurfit Corp., Stone Container Corp. and Smurfit-Stone Container Corp.

Richard C. Rizzo, Jennifer R. Clarke, Will W. Sachse, Donald C. Le Gower, Dechert Price & Rhoads, Philadelphia, PA, for Appellant Temple-Inland, Inc.

Howard I. Langer (argued), Sandals & Langer, LLP, Philadelphia, PA, for All Appellees.

Eugene A. Spector (argued), Jeffrey J. Corrigan, William G. Caldes, Spector Roseman & Kodroff, P.C., Philadelphia, PA, Michael J. Freed, Steven A. Kanner, William London, Much Shelist Freed Denenberg Ament & Rubenstein, P.C., Chicago, IL, for Appellees General Refractories Company and Co-Lead Counsel for Corrugated Sheet Plaintiffs.

Robert J. LaRocca, Kohn, Swift & Graf, P.C., Philadelphia, PA, for Appellees Oak Valley Farms, Inc., Garrett Paper, Inc. and Local Baking Products, Inc.

H. Laddie Montague, Martin Twersky, Berger & Montague, P.C., Philadelphia, PA, for Appellee Garrett Paper, Inc.

Roberta D. Liebenberg, Donald L. Perelman, Fine Kaplan & Black, Philadelphia PA, for Appellee Local Baking Products, Inc.

W. Joseph Bruckner, Janelle K. Beitz, Lockridge Grindal Nauen PLLP, Minneapolis, MN, for Appellees Oak Valley Farms, Inc., Garrett Paper, Inc. and Local Baking Products, Inc.

Mark Reinhardt, Mark Wendorf, Reinhardt & Anderson, First National Bank Building, St. Paul, MN, for Appellee Albert I. Halper Corrugated Box Company.

Before McKEE, FUENTES and ALDISERT, Circuit Judges.

OPINION OF THE COURT

ALDISERT, Circuit Judge.

This appeal by manufacturers of linerboard¹ requires us to decide if the district court erred in granting two motions for class certification by groups of plaintiffs who brought antitrust law suits alleging that the linerboard manufacturers engaged in a continuing combination and conspiracy in unreasonable restraint of trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Appellants contend that plaintiffs failed to establish that the putative class met the requirements of Rule 23(b)(3), Federal Rules of Civil Procedure, which compel the court to:

find[] that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.²

Appellants are represented through briefs and oral argument by two groups of manufacturers, the "International Paper Appellants"³ and the "Georgia Pacific Appellants."⁴

After individual law suits were filed in the Northern District of Illinois and the Eastern District of Pennsylvania,⁵ the cases were transferred by the Judicial Panel on Multidistrict Litigation to the Eastern District of Pennsylvania for coordinated and consolidated pretrial proceedings.

The district court established two classes:

All persons in the United States who purchased corrugated containers directly from any Defendant at any time during the period October 1, 1993 through November 30, 1995, but excluding Defendants, their respective parents, subsidiaries and affiliates and federal, state and local governmental entities and political subdivisions.

* * * * *

All individuals and entities who purchased corrugated sheets in the United States directly from any of the defendants during the class period from October 1, 1993 through November 30, 1995, excluding the defendants, their co-conspirators, and their respective parents, subsidiaries and affiliates, as well as any government entities.

In re Linerboard Antitrust Litig., 203 F.R.D. 197, 203 (E.D.Pa.2001) (emphasis added). These classes are presented before us as the "Box Appellees" and the "Sheet Appellees."

The district court concluded that the putative classes met the requirements of Rule 23(a) and noted that:

there is an overlap between the predominance requirement of Rule 23(b)(3) and the prerequisite of Rule 23(a)(2) that common questions exist. "The courts have repeatedly focused on the liability issues, in contrast to damage questions, and, if they found issues were common to the class, have held that Rule 23(b)(3) was satisfied." 4 NEWBERG ON CLASS ACTIONS, § 18-26.

Id. at 214.

The court then decided that the putative classes had met the requirements of Rule 23(b). The court determined first, that plaintiffs presented sufficient evidence to support claims that the conspiracy to raise the price of linerboard correspondingly raised the price of corrugated products. It went on to "conclude[ ] that plaintiffs' allegations regarding impact, like their allegations regarding conspiracy, will focus the inquiry on defendants' actions, not on individual questions relating to particular class members." Id. at 220.

I.

The International Paper Appellants argue that the district court erred in holding that Appellees have sufficiently demonstrated that they will be able to prove common impact at trial. In support of this major premise, they contend that the court erred in applying a legal presumption of impact and failing to apply rigorous scrutiny to plaintiffs' proffered impact evidence. They contend also that the court erred in ignoring the individual issues raised by plaintiffs' claim of fraudulent concealment.

For their part, the Georgia Pacific Appellants argue that the district court erred because here the existence of injury, and hence potential liability, requires an inherently individualized inquiry. Similarly, they argue that the court erred in certifying classes because the existence of fraudulent concealment also requires an inherently individualized inquiry.

We review a district court's grant of class certification under an abuse of discretion standard. Newton v. Merrill Lynch, Pierce, Fenner & Smith, 259 F.3d 154, 165-166 (3d Cir.2001).

In Katz v. Carte Blanche Corp., 496 F.2d 747, 756-757 (3d Cir.1974) (in banc), we articulated the standard of review applicable to class action decisions. We must decide whether the 23(a) prerequisites have been met, whether the district court correctly identified the issues involved and which are common, and whether it properly identified the comparative fairness and efficiency criteria. If the court's analysis on these points is correct, then, "it is fair to say that we will ordinarily defer to its exercise of discretion" embodied in the findings on predominance and superiority. Id.

Bogosian v. Gulf Oil Corp., 561 F.2d 434, 448 (3d Cir.1977).

The district court had jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1337(a). Pursuant to Rule 23(f), Federal Rules of Civil Procedure, Appellants timely petitioned this court for permission to appeal the district court's September 4, 2001, Order. We granted the petition and allowed the appeal by an order dated December 18, 2001, and now affirm.

II.

In presenting their theory of antitrust liability, Appellees averred that even though demand for linerboard was strong and rising between 1989 and 1992, the manufacturers' prices for linerboard had fallen; that the manufacturers attempted to increase prices during 1991, 1992 and the first half of 1993, but the price increase announcement did not "stick" and, therefore, the manufacturers had to rescind them. It was at this point in September 1993, plaintiffs allege, that Roger Stone, president of Stone Container Corporation, the largest corrugated paper manufacturer, reported that "the past five years have been the only five-year period (going back as far as the 1920's) when the containerboard industry has had consistently declining prices. It's never happened before, never happened in the depression, but it's happened these last five years." App. at 710.

According to plaintiffs, declining prices were attributed to excess...