In re GEO Specialty Chems. Ltd.

• Decision Date: 04 December 2017
• Docket Number: Case No.: 04–19148(RG) (Jointly Administered)
• Citation: 577 B.R. 142
• Parties: IN RE: GEO SPECIALTY CHEMICALS LIMITED, et al., Debtors.
• Court: U.S. Bankruptcy Court — District of New Jersey

577 B.R. 142

IN RE: GEO SPECIALTY CHEMICALS LIMITED, et al., Debtors.

Case No.: 04–19148(RG) (Jointly Administered)

United States Bankruptcy Court, D. New Jersey.

Signed December 4, 2017

THOMPSON HINE LLP, BY: Alan R. Lepene, Esq., 3900 Key Center, 127 Public Square, Cleveland, Ohio 44114, Counsel for the Reorganized Debtors, GEO Specialty Chemicals, Inc. and GEO Specialty Chemicals Limited

THOMPSON HINE LLP, BY: Barry M. Kazan, Esq., 335 Madison Avenue, New York, New York 10017, Counsel for the Reorganized Debtors, GEO Specialty Chemicals, Inc. and GEO Specialty Chemicals Limited

CARELLA BYRNE CECCHI, OLSTEIN, BRODY & AGNELLO, P.C., BY: James E. Cecchi, Esq., Lindsey H. Taylor, Esq., 5 Becker Farm Road, Roseland, New Jersey 07068, Counsel for Direct Purchaser Plaintiffs

QUINN EMANUEL, URQUHART & SULLIVAN, L.P., BY: Sami H. Rashid, Esq., Margaret Schmidt, Esq., 51 Madison Avenue, New York, New York 10010, Counsel for Direct Purchaser Plaintiffs

QUINN EMANUEL, URQUHART & SULLIVAN, L.P., BY: Eric Winston, Esq., 865 S. Ferguson Street, 10^th Floor, Los Angeles, California 90017–2543, Counsel for Direct Purchaser Plaintiffs

STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON, P.A., BY: Jay B. Shapiro, Esq., Drew M. Dillworth, Esq., 150 West Flagler Street, suite 22oo, Miami, Florida 33130, Counsel for Indirect Purchaser Plaintiffs

MILLER LAW LLC, BY: Marvin A. Miller, Esq., 115 S. LaSalle Street, Suite 2910, Chicago, Illinois 60603, Counsel for Indirect Purchaser Plaintiffs

LERNER, DAVID, LITTENBERG, KRUMHOLZ & MENTLIK, LLP, BY: William L. Mentlik, Esq., Roy H. Wepner, Esq., Aaron S. Eckenthal, Esq., 600 South Avenue West, Westfield, New Jersey 07090

MATTER BEFORE THE COURT

ROSEMARY GAMBARDELLA, BANKRUPTCY JUDGE

Before the Court is a Motion to Reopen Chapter 11 Case For The Limited Purpose of Enforcing the Chapter 11 Plan Discharge and Injunction filed by GEO Specialty Chemical Inc. and GEO Specialty Chemicals, Ltd. (collectively "GEO" or the "Reorganized Debtors"). GEO is seeking an order reopening its chapter 11 case pursuant to 11 U.S.C. § 350(b), enforcing the Chapter 11 Plan Discharge and Injunction ordered by this Court in its December 20, 2004 Confirmation Order, and directing dismissal of all claims asserted by Plaintiffs in the consolidated antitrust action In re: Liquid Aluminum Sulfate Antitrust Litigation, Civil Action No. 16–md–2687 currently pending in the United States District Court for the District of New Jersey and similar claims asserted by plaintiffs in other jurisdictions which arose or are attributed to conduct or events occurring prior to December 31, 2004, the Effective Date of GEO's Plan of Reorganization. The Direct Purchaser Plaintiffs ("DP Plaintiffs") and Indirect Purchaser Plaintiffs ("IP Plaintiffs") each filed Opposition to GEO's Motion, and GEO filed a Reply. This Court conducted a Hearing on February 28, 2017, at which time the Court reserved decision. The following constitutes this Court's findings of fact and conclusions of law pursuant to Fed. R. Bank. P. 7052.

JURISDICTION

This Court has jurisdiction over this matter pursuant to 28 U.S.C.§ 1334 and the Standing Order of Reference from the United States District Court for the District of New Jersey dated July 23, 1984 and amended September 18, 2012. This matter constitutes a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(I) and (J). See District Court Opinion and Order Denying Motions to Withdraw the Reference, In re GEO Specialty Chemicals, Inc., et al., 16–8405/16–8463 (JLL), ECF Nos. 11, 12.

FACTUAL BACKGROUND¹

A. General Background

GEO, originally founded in 1992, develops manufactures, sells, and markets specialty chemical products sold to major industrial customers for various end-use applications, including water treatment, paints and coating products, construction, industrial rubber, oil and gas production, electronics, and resins used to meet health, safety and environmental regulations. (Mem. of Law in Supp. of Reorganized Debtors Mot., ECF No. 1320). On March 18, 2004, GEO along with its wholly owned subsidiary, GEO Specialty Chemicals Limited, filed voluntary petitions under chapter 11 of the Bankruptcy Code.² GEO confirmed a Plan of Reorganization on December 20, 2004, which became effective on December 31, 2004. GEO's Bankruptcy Case was closed on June 28, 2006, at which time GEO emerged from bankruptcy as a reorganized debtor.

In October 2015, several years after GEO emerged from bankruptcy, GEO's alleged participation in an antitrust conspiracy came to light when Frank Reichl, an employee of General Chemical Corporation ("GenChem"), one of GEO's competitors, pled guilty under the Sherman Act 15 U.S.C. § 1 for his role in a conspiracy concerning the marketing and sale of liquid aluminum sulfate ("LAS"), a water treatment chemical.³ Shortly thereafter, GenChem and GEO, along with several other companies and individuals were named as defendants in various civil antitrust class actions lawsuits filed in jurisdictions throughout the United States. On February 4, 2016, the antitrust class actions lawsuits were consolidated by the Judicial Panel on Multidistrict Litigation in the United State District Court for the District of New Jersey ("District Court") and are now pending before the Honorable Jose L. Linares, Chief Judge, in a case captioned In re: Liquid Aluminum Sulfate Antitrust Litigation, No. 16–md–2687 (JLL) (JAD) (the "Antitrust Action").

The Antitrust Action is brought by thirteen named plaintiffs on their own behalf, and on behalf of all entities and persons who purchased LAS from one or more of the Defendants during the period from January 1, 1997 through February 2011. In general, the Plaintiffs allege that GEO conspired with other manufacturers of LAS to fix the price of LAS by not competing for each other's business as well as historical customers and territories. On June 16, 2017, in a related criminal proceeding before Judge Linares, GEO pled guilty to its role in the conspiracy and was sentenced to pay a $5 million fine.

The Plaintiffs in the Antitrust Action are separated into two groups. The first group, the Direct Purchaser Plaintiffs ("DP Plaintiffs"), represents a proposed class of persons and entities who purchased LAS directly from GEO, one or more of Defendants including GEO, from January 1, 1997 through at least February 2011. The named Plaintiffs and Class include public bodies and private water companies which use LAS in their water and treatment process, and paper and pulp manufacturers which use LAS to remove impurities from the water used to make paper. See Consolidated Amended Complaint, In re: Liquid Aluminum Sulfate Antitrust Litigation, No. 16–md–2687, ECF No. 220 ("DP Complaint"). The DP Plaintiffs have asserted a single claim against Defendants pursuant to the Sherman Act. Id. The second group, the Indirect Purchaser Plaintiffs ("IP Plaintiffs"), represents a purported class of entities and persons who purchased LAS through intermediary distributors, resellers, retailers, wholesalers, and chemical supply companies. See Consolidated Class Action Complaint, In re: Liquid Aluminum Sulfate Antitrust Litigation, No. 16–md–2687, ECF No. 242 ("IP Complaint"). The IP Plaintiffs have asserted claims against the Defendants pursuant to several state antitrust and consumer protection statutes. Id.

B. The Alleged Conspiracy ⁴

The Plaintiffs allege that during the period from January 1, 1997 through at least February 2011 (the "Class Period"), Defendants and their co-conspirators entered into and engaged into a conspiracy to suppress and eliminate competition in the sale and marketing of LAS by agreeing to allocate customers and territories and fix, stabilize and maintain the price of LAS sold to direct purchasers and distributors in the United States. IP Complaint, ¶ 5. LAS is a water treatment chemical that removes impurities and other substances from water. DP Complaint, ¶ 53. Municipalities and private water companies routinely purchase LAS through a publically advertised bidding process. Id.¶ 56. Plaintiffs allege that Defendants agreed to "stay away" from each other's "historical" customers and territories. IP Complaint, ¶ 6. Plaintiffs allege that Defendants routinely met and communicated with each other to conspire and ensure compliance with the conspiracy:

they (1) agreed to allocate customers and fix prices; (2) rigged bids to direct purchasers of LAS; and (3) actively policed each other to ensure compliance and punish cheating. Id. at ¶¶ 7–8. As a result of these efforts, Defendants were able to raise or maintain the price of LAS at supra-competitive levels. Id. at ¶ 9. Those artificially inflated and supra-competitive prices were passed on by Defendants through wholesalers, distributors and other resellers (DP Plaintiffs) to indirect purchasers (IP Plaintiffs), who paid higher prices for LAS than they would have absent Defendants' unlawful behavior. Id.

Plaintiffs allege that GEO was an active participant in the conspiracy prior to, during, and following GEO's emergence from Bankruptcy. Plaintiffs allege that the conspiracy originated following a "price war" that occurred in the "mid–1990s" between GenChem and GEO in which each company bid aggressively for the accounts of the other company. DP Plaintiffs' Compl., ¶ 72. However, the "price war" ended in 1997 when executives from GEO and GenChem met and came to an agreement that they would no longer fight for each other's customers. Id.¶ 73. Important for purposes of this Decision, Plaintiffs assert that GEO reaffirmed and continued its participation in the conspiracy after in emerged from Bankruptcy from December 20, 2004, through at least 2011.

IP Plaintiffs' Complaint contains the following allegations specific to GEO:

31. Around March 18, 2004, GEO filed a voluntary Chapter 11 petition in the United States District Court for the District of New Jersey. Effective December 20, 2004 GEO was discharged from bankruptcy under a plan of

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