768 F.3d 1245 (10th Cir. 2014), 13-3215, In re Urethane Antitrust Litigation

Docket Nº:13-3215
Citation:768 F.3d 1245
Opinion Judge:BACHARACH, Circuit Judge.
Party Name:IN RE: URETHANE ANTITRUST LITIGATION. DOW CHEMICAL COMPANY, Appellant, v. SEEGOTT HOLDINGS, INC.; INDUSTRIAL POLYMERS, INC.; QUABAUG CORPORATION, (Class Plaintiffs), Appellees, and CHAMBER OF COMMERCE OF THE UNITED STATES and AMERICAN INDEPENDENT BUSINESS ALLIANCE, Amici Curiae
Attorney:Carter G. Phillips, Sidley Austin LLP, Washington, D.C. (Joseph R. Guerra, C. Frederick Beckner III, Kathleen Moriarty Mueller, Jeffrey S. Beelaert, Sidley Austin LLP, Washington, D.C.; and Charles J. Kalil, General Counsel, the Dow Chemical Company, Duncan A. Stuart, Associate General Counsel, t...
Judge Panel:Before LUCERO, MURPHY, and BACHARACH, Circuit Judges.
Case Date:September 29, 2014
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
SUMMARY

This antitrust class action stemmed from an allegation that Dow Chemical Company conspired with its competitors to fix prices for polyurethane chemical products. Over Dow’s objection, the district court certified a plaintiff class including all industrial purchasers of polyurethane products during the alleged conspiracy period. The action went to trial, and the jury returned a verdict against Dow.... (see full summary)

 
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768 F.3d 1245 (10th Cir. 2014)

IN RE: URETHANE ANTITRUST LITIGATION. DOW CHEMICAL COMPANY, Appellant,

v.

SEEGOTT HOLDINGS, INC.; INDUSTRIAL POLYMERS, INC.; QUABAUG CORPORATION, (Class Plaintiffs), Appellees, and CHAMBER OF COMMERCE OF THE UNITED STATES and AMERICAN INDEPENDENT BUSINESS ALLIANCE, Amici Curiae

No. 13-3215

United States Court of Appeals, Tenth Circuit

September 29, 2014

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[Copyrighted Material Omitted]

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Appeal from the United States District Court for the District of Kansas. (D.C. No. 04-MD-01616-JWL-JPO).

Carter G. Phillips, Sidley Austin LLP, Washington, D.C. (Joseph R. Guerra, C. Frederick Beckner III, Kathleen Moriarty Mueller, Jeffrey S. Beelaert, Sidley Austin LLP, Washington, D.C.; and Charles J. Kalil, General Counsel, the Dow Chemical Company, Duncan A. Stuart, Associate General Counsel, the Dow Chemical Company, Midland, MI, on the briefs) for Defendant-Appellant.

Paul D. Clement, Bancroft PLLC, Washington, D.C. (Zachary D. Tripp, Candice Chiu, William R. Levi, Bancroft PLLC, Washington, D.C.; Roberta D. Liebenberg, Donald L. Perelman, Gerard A. Dever, Matthew Duncan, Fine, Kaplan, & Black, RPC, Philadelphia, PA; Richard A. Koffman, Kit A. Pierson, Christopher J. Cormier, Sharon K. Robertson, Laura A. Alexander, Cohen Milstein Sellers & Toll, PLLC, Washington, D.C.; Joseph Goldberg, Freedman Boyd Hollander Goldberg Urias & Ward, P.A., Albuquerque, N.M.; Michael J. Guzman, Rebecca A. Beynon, Michael N. Nemelka, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, D.C.; and Robert W. Coykendall, Roger N. Walter, Morris, Laing, Evans, Brock & Kennedy, Chartered, Wichita, KS, on the briefs) for Plaintiffs-Appellees.

Kathryn Comerford Todd, Tyler R. Green, National Chamber Litigation Center, Inc., Washington, D.C.; Jeffrey L. Kessler, George E. Mastoris, Winston & Strawn LLP, New York, NY; and Gene C. Schaerr, Robert F. Ruyak, William A. Roach, Jr., Winston & Strawn LLP, Washington, D.C., filed an Amicus Curiae brief for the Chamber of Commerce of the United States.

Jonathan D. Selbin, Jason L. Lichtman, Lief Cabraser Heimann & Bernstein, LLP, New York, NY; Jordan Elias, Lief Cabraser Heimann & Bernstein, LLP, San Francisco, CA; and Ian J. McLoughlin, Rachel M. Brown, Shapiro Haber & Urmy, LLP, Boston, MA, filed an Amicus Curiae brief for the American Independent Business Alliance.

Before LUCERO, MURPHY, and BACHARACH, Circuit Judges.

OPINION

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BACHARACH, Circuit Judge.

This antitrust class action stems from an allegation that Dow Chemical Company conspired with competitors to fix prices for polyurethane chemical products. Over Dow's objection, the district court certified a plaintiff class including all industrial purchasers of polyurethane products during the alleged conspiracy period. The action went to trial, and the jury returned a verdict against Dow. The district court entered judgment for the plaintiffs, denying Dow's motions for decertification of the class and judgment as a matter of law.

Dow appeals, raising four arguments:

o First, Dow contends that class certification was improper because common questions did not predominate over individualized questions. We reject this contention. The district court decided that common questions predominated because: (1) the existence of a conspiracy and impact raised common questions, and (2) these common liability-related questions predominated over individualized questions regarding the extent of each class member's damages. This decision fell within the district court's discretion. Thus, we reject Dow's challenge to class certification.

o Second, Dow argues that the district court should have excluded the testimony of the plaintiffs' expert witness on statistics. According to Dow, the impact and damages models were unreliable because the expert witness inappropriately selected variables and benchmark years based on what would yield the greatest damages. We disagree. The district court acted within its discretion in allowing the testimony, and Dow's arguments relate to the weight of the expert's testimony, not admissibility. o Third, Dow challenges the sufficiency of the evidence regarding liability. Viewing the evidence in the light most favorable to the plaintiffs, as we must, we conclude that the evidence sufficed on liability. o Fourth, Dow asserts that the damages award lacked an evidentiary basis and that the resulting judgment violated the Seventh Amendment. These arguments are invalid. The award of $400,049,039 was supported by the evidence. Dr. McClave calculated even greater damages ($496,680,486), and the jury had an evidentiary basis for reducing this figure to $400,049,039. In allocating this award, the court did not violate the Seventh Amendment; and Dow has no interest in the method of distributing the aggregate damages award among the class members.

I. The Polyurethane Market

This appeal involves four categories of urethane chemical products: (1) polyether polyols; (2) toluene diisocyanate (TDI); (3) methylene diphenyl diisocyanate (MDI);

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and (4) polyurethane systems.1 These products--collectively, " polyurethanes" --are used in various consumer and industrial components such as mattress foams, insulation, sealants, and footwear.

The polyurethane market comprises a " myriad of products, pricing structures, individualized negotiations, and contracts." AA 413. Buyers negotiate individually with manufacturers regarding price and other terms, sometimes entering into long-term contracts and other times purchasing on a " spot" basis. The price depends on multiple factors, including supply and demand, the balance of bargaining power between the buyer and manufacturer, and the availability of a substitute product to meet the buyer's needs. Apart from price, buyers can negotiate on other terms, such as rebates, most-favored-nation clauses, early payment discounts, and protection from future price hikes.

Prices are set in some of the contracts, but not in others. When there is no set price, a contract typically requires the manufacturer to give the buyer advance notice of price increases. Accordingly, price increases are announced by letter 30 to 45 days in advance. But these announcements did not always result in actual price increases. For example, buyers sometimes avoided price hikes by negotiating with the supplier.

II. The Price-Fixing Claim

The plaintiffs are industrial purchasers of polyurethane products who sued under the Sherman Antitrust Act, 15 U.S.C. § 1, and the Clayton Antitrust Act, 15 U.S.C. § 15(a), alleging that a group of polyurethane manufacturers--Bayer AG, Bayer Corporation, Bayer Material Science, BASF Corporation, Huntsman International LLC, Lyondell Chemical Company, and Dow Chemical Company--conspired to fix prices and allocate customers and markets from January 1, 1999, to December 31, 2004. AA 369. As the case progressed, it underwent three significant changes. First, the plaintiffs settled with all defendants except for Dow. Second, the plaintiffs dropped their allocation theory, leaving the price-fixing theory as the sole basis of the lawsuit. Third, the plaintiffs chose to pursue a shorter conspiracy--one lasting from January 1, 1999, to December 31, 2003--than was initially alleged.

The price-fixing claim arises under § 1 of the Sherman Act, which " prohibits contracts and conspiracies that restrain trade." Smalley & Co. v. Emerson & Cuming, Inc., 13 F.3d 366, 367 (10th Cir. 1993). For a § 1 violation, the class had to prove:

o the existence of an agreement or conspiracy

o among actual competitors o that had the purpose or effect of raising, depressing, fixing, pegging, or stabilizing prices o in interstate commerce.2

Cayman Exploration Corp. v. United Gas Pipe Line Co., 873 F.2d 1357, 1360 (10th Cir. 1989). Because the plaintiffs sought damages under § 4 of the Clayton Act, 15 U.S.C. § 15(a), they also had to prove antitrust injury, or " impact," which is " 'an injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendant's acts unlawful.'" Elliott Indus. Ltd. v. BP Am. Prod. Co., 407 F.3d 1091, 1124 (10th Cir. 2005) (quoting Reazin v. Blue Cross & Blue

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Shield of Kan., Inc., 899 F.2d 951, 962 n.15 (10th Cir. 1990)).

III. Certification of the Class

The plaintiffs moved for class certification under Rule 23(b)(3) of the Federal Rules of Civil Procedure. Dow opposed the motion, arguing that certification was improper because common questions did not predominate over individualized questions. The district court disagreed, holding that common questions predominated because the key elements of the price-fixing claim--the existence of a conspiracy and impact--involved common questions that were capable of class-wide proof.

The court rejected Dow's argument that the impact element caused individualized questions to predominate, relying in part on a report prepared by the plaintiffs' expert, Dr. John Beyer. Dr. Beyer examined the polyurethane industry and concluded that a price-fixing conspiracy for polyurethane products would affect all buyers. Crediting Dr. Beyer's report and his supporting models, the court determined that impact involved a common question susceptible to class-wide proof.

This determination was unaffected by the fact that prices were individually negotiated. The court reasoned that the industry's standardized pricing structure--reflected in product price lists and parallel price-increase announcements--" presumably establishe[d] an artificially inflated baseline" for negotiations. AA 410. Consequently, any impact resulting from a price-fixing conspiracy would have permeated all...

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