552 F.3d 305 (3rd Cir. 2008), 07-1689, In re Hydrogen Peroxide Antitrust Litigation

Docket Nº:07-1689.
Citation:552 F.3d 305
Party Name:In re: HYDROGEN PEROXIDE ANTITRUST LITIGATION Arkema Inc., Arkema France S.A., FMC Corp., Kemira Chemicals Canada, Inc., Kemira OYJ, Appellants.
Case Date:December 30, 2008
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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552 F.3d 305 (3rd Cir. 2008)


Arkema Inc., Arkema France S.A., FMC Corp., Kemira Chemicals Canada, Inc., Kemira OYJ, Appellants.

No. 07-1689.

United States Court of Appeals, Third Circuit.

December 30, 2008

Argued April 17, 2008.

As Amended Jan. 16, 2009.

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Steven E. Bizar, Esquire (Argued), Landon Y. Jones III, Esquire, Thomas P. Manning, Esquire, Howard D. Scher, Esquire, Buchanan Ingersoll & Rooney, Philadelphia, PA, for Appellants, Arkema Inc. and Arkema France SA.

Michael I. Frankel, Esquire, Joseph A. Tate, Esquire, Christine C. Levin, Esquire, Dechert LLP, Philadelphia, PA, for Appellant, FMC Corporation.

Jeffrey S. Cashdan, Esquire, Stephen P. Cummings, Esquire, Christine A. Hopkinson, Esquire, Catherine M. O'Neil, Esquire, King & Spalding, Atlanta, GA, Joanna J. Cline, Esquire, Barbara W. Mather, Esquire, Pepper Hamilton, Philadelphia, PA, for Appellants, Kemira OYJ and Kemira Chemicals Canada, Inc.

Gregory K. Arenson, Esquire (Argued), Robert N. Kaplan, Esquire, Kaplan Fox & Kilsheimer, New York, N.Y., Anthony J. Bolognese, Esquire, Bolognese & Associates, Philadelphia, PA, William P. Butterfield, Esquire, Cohen Milstein Hausfeld & Toll, Washington, D.C., for Appellees, Artco Chemical, Inc., Astro Chemicals, Inc., Borden & Remington Corporation, Chem/Ser, Inc., EMCO Chemical Distributors, Inc., Finch Pruyn and Company, Inc., Interstate Chemical Company, Lensco Products, Inc., Lincoln Paper & Tissue, LLC, Ohio Chemical Services, Inc., James R. Pacific, Robert Chemical Company, Inc., Safer Textile Processing Corporation,

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Young Chemical Company, City of Philadelphia, Borough of Middletown and Middletown Borough Authority.

Steven A. Kanner, Esquire, Freed Kanner London & Millen, Bannockburn, IL, for Appellees, Direct Purchaser Plaintiffs and EMCO Chemical Distributors, Inc.

Before: SCIRICA, Chief Judge, AMBRO and FISHER, Circuit Judges.


SCIRICA, Chief Judge.

At issue in this antitrust action are the standards a district court applies when deciding whether to certify a class. We will vacate the order certifying the class in this case and remand for proceedings consistent with this opinion.

In deciding whether to certify a class under Fed.R.Civ.P. 23, the district court must make whatever factual and legal inquiries are necessary and must consider all relevant evidence and arguments presented by the parties. See Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 166, 167 (3d Cir.2001) (citing Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676 (7th Cir.2001); Manual for Complex Litigation (Third) § 30.1 (1995)). In this appeal, we clarify three key aspects of class certification procedure. First, the decision to certify a class calls for findings by the court, not merely a " threshold showing" by a party, that each requirement of Rule 23 is met. Factual determinations supporting Rule 23 findings must be made by a preponderance of the evidence. Second, the court must resolve all factual or legal disputes relevant to class certification, even if they overlap with the merits-including disputes touching on elements of the cause of action. Third, the court's obligation to consider all relevant evidence and arguments extends to expert testimony, whether offered by a party seeking class certification or by a party opposing it.


Purchasers of hydrogen peroxide and related chemical products brought this antitrust conspiracy action against chemical manufacturers.1 An inorganic liquid, hydrogen peroxide is used most prominently as a bleach in the pulp and paper industry with smaller amounts appearing in chemicals and laundry products, environmental applications, textiles, and electronics. Hydrogen peroxide is available in solutions of different concentrations and grades depending on its intended use. Major concentrations are 35, 50, and 70 percent. The grades, roughly in order from least- to most-expensive, are: standard, food/cosmetic (which must meet FDA standards), electronic, and propulsion. All defendants sold the standard grade, but not all defendants sold all other grades. Defendants sold different amounts of each of the grades. Each grade has different supply and demand conditions because the grades are sold to end-users in a variety of industries with different economic characteristics. According to defendants, the different

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grades are not economic substitutes for each other, but plaintiffs disagree. Prices diverge dramatically among grades; electronic or propulsion grade can be as much as five times more expensive than standard grade.

The other two products at issue are sodium percarbonate and sodium perborate, together known as persalts, which are granular solids containing hydrogen peroxide used primarily as detergents. Among the defendants, only Solvay produced and sold sodium percarbonate in the United States during the class period. Solvay Chemicals, Degussa Corp., and FMC sold sodium perborate in the United States during the class period. Akzo, Arkema, and Kemira did not sell or produce sodium perborate in the United States during the class period.

After the United States Department of Justice and the European Commission began investigating possible violations of the antitrust laws in the hydrogen peroxide industry,2 several plaintiffs filed class action complaints against producers of hydrogen peroxide and persalts under § 4 of the Clayton Act, 15 U.S.C. § 15, alleging a conspiracy in restraint of trade violating § 1 of the Sherman Act, 15 U.S.C. § 1. The Judicial Panel on Multidistrict Litigation transferred all cognate federal actions to the United States District Court for the Eastern District of Pennsylvania, which consolidated the cases. See In re Hydrogen Peroxide Antitrust Litig., 374 F.Supp.2d 1345 (J.P.M.L.2005). The consolidated amended complaint alleged that during an eleven-year class period (January 1, 1994-January 5, 2005) defendants (1) communicated about prices they would charge, (2) agreed to charge prices at certain levels, (3) exchanged information on prices and sales volume, (4) allocated markets and customers, (5) agreed to reduce production capacity, (6) monitored each other, and (7) sold hydrogen peroxide at agreed prices.

The District Court denied defendants' motion to dismiss the complaint for failure to state a claim. Following extensive discovery,3 plaintiffs moved to certify a class of direct purchasers of hydrogen peroxide, sodium perborate, and sodium percarbonate, over an eleven-year class period. In support of class certification, plaintiffs offered the opinion of an economist. Defendants, opposing class certification, offered the opinion of a different economist. Defendants separately moved to exclude the opinion of plaintiffs' economist as unreliable under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). Concluding plaintiffs' expert's opinion was admissible and supported plaintiffs' motion for class certification, the District Court certified a class of direct purchasers of hydrogen peroxide, sodium perborate, and sodium percarbonate under Fed.R.Civ.P. 23(b)(3). See In re Hydrogen Peroxide Antitrust Litig., 240 F.R.D. 163 (E.D.Pa.2007). The District Court identified seven issues to be tried on a class-wide basis: (1) whether defendants and others engaged in a combination

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and conspiracy to fix, raise, maintain, or stabilize prices; allocate customers and markets; or control and restrict output of hydrogen peroxide, sodium perborate, and sodium percarbonate sold in the United States; (2) the identity of the participants in the alleged conspiracy; (3) the duration of the alleged conspiracy and the nature and character of defendants' acts performed in furtherance of it; (4) the effect of the alleged conspiracy on the prices of hydrogen peroxide and persalts during the class period; (5) whether the alleged conspiracy violated the Sherman Act; (6) whether the activities alleged in furtherance of the conspiracy or their effect on the prices of hydrogen peroxide and persalts during the class period injured named plaintiffs and the other members of the class; and (7) the proper means of calculating and distributing damages. The class was defined as:

All persons or entities, including state, local and municipal government entities (but excluding defendants, their parents, predecessors, successors, subsidiaries, and affiliates as well as federal government entities) who purchased hydrogen peroxide, sodium perborate, or sodium percarbonate in the United States, its territories, or possessions, or from a facility located in the United States, its territories, or possessions, directly from any of the defendants, or from any of their parents, predecessors, successors, subsidiaries, or affiliates, at any time during the period from September 14, 1994 to January 5, 2005.

We granted defendants' petition for an interlocutory appeal under Fed.R.Civ.P. 23(f).4


Class certification is proper only " if the trial court is satisfied, after a rigorous analysis, that the prerequisites" of Rule 23 are met.5 Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982); see Beck v. Maximus, Inc., 457 F.3d 291, 297 (3d Cir.2006); see also Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 615, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (Rule 23(b)(3) requirements demand a " close look" )." A class certification decision requires a thorough examination of the factual and legal allegations." Newton, 259 F.3d at 166.6

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The trial court, well-positioned to decide which facts and legal arguments are most important to each Rule 23 requirement, possesses broad discretion to control proceedings and frame issues for consideration under Rule 23. See Amchem, 521 U.S. at 630, 117 S.Ct. 2231 (Breyer, J., concurring in part and...

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