Antitrust Law Daily Wrap Up, ANTITRUST—7th Cir.: Insulation distributor’s price fixing counterclaim properly deemed time-barred, (May 4, 2016)

By Greg Hammond, J.D.

In an action by a fiberglass insulation manufacturer against a former distributor to recover unpaid invoices, the federal district court in Indianapolis properly concluded that the distributor’s price fixing conspiracy counterclaim was time-barred, the U.S. Court of Appeals in Chicago has decided. In affirming the lower court’s order granting summary judgment in favor of the manufacturer, the appellate court concluded that the distributor failed to exercise minimal diligence by failing to realize it had been removed from a class action against the manufacturer and that, upon removal, the statute of limitations governing its antitrust claim had resumed running (Knauf Insulation, Inc. v. Southern Brands, Inc., May 3, 2016, Posner, R.).

Knauf Insulation, Inc.—a fiberglass insulation manufacturer—filed suit against Southern Brands, Inc. (SBI), alleging that SBI owed Knauf more than $3.5 million. SBI’s owners allegedly signed a personal guaranty of their company’s debt to Knauf. The district court granted summary judgment in favor of Knauf. SBI and its owners appealed.

Guaranty. SBI’s owners challenged the district court’s ruling that their guaranty made them personally liable for all of SBI’s debts to Knauf. Specifically, the owners claimed that they did not intend or contemplate being sued by Knauf in Indiana on its much larger clams against SBI and that SBI did not have minimum contacts with Indiana that would subject it to Indiana’s jurisdiction. The arguments lacked merit, the court found. First, the court determined that the guaranty was explicit in covering future, as well as current, obligations. Second, SBI did have significant contacts with Indiana, according to the court, by virtue of its dealings with Knauf over many years.

Price fixing. Allegations that Knauf and its competitors colluded in violation of the Sherman Act to lift the price of insulation above the competitive price were properly dismissed as time-barred, the court concluded. SBI was originally a member of the proposed class in Columbus Drywall, but was later dropped from the class because it was not a contractor. SBI filed its price fixing counterclaim five years after the Columbus Drywall settlement was approved. The appellate court concluded that SBI failed to exercise minimal diligence by either not learning of, or losing track of, the class action and by failing to realize that removal from the class caused the statute of limitations governing its antitrust claim to resume running. The court further noted, “SBI couldn’t’ just sit on its fanny for nine years, making no inquiry into the status of the Columbus Drywall litigation, and insist that its indolence tolled the statute of limitations.”

The case is No. 15-3157.

Attorneys: Anne L. Cowgur (Taft Stettinius & Hollister LLP) for Knauf Insulation, Inc. Robert E. Rigrish (Bodker, Ramsey, Andrews, Winograd & Wildstein, PC) for Southern Brands, Inc.

Companies: Knauf Insulation, Inc.; Southern Brands, Inc.

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