Antitrust Law Daily Wrap Up, ANTITRUST—D. Minn.: Contractor’s claims in spray foam equipment price-fixing litigation time-barred, (Mar 12, 2014)

By Linda O’Brien, J.D., LL.M.

In a class action against a manufacturer of fast-set spray foam installation equipment and several distributors for conspiring to exclude competition and fix prices for fast-set equipment, antitrust claims by a contractor that used fast-set equipment were barred by the four-year statute of limitations, the federal district court in Minneapolis has decided (Insulate SB, Inc. v. Advanced Finishing Systems, Inc., March 11, 2014, Montgomery, A.).

Graco Inc. manufactures fast-set equipment that is used primarily by contractors to install spray foam insulation in residential and commercial buildings. The sale of fast-set equipment occurs almost exclusively through specialized distributors, who act as intermediaries between the manufacturer and contractors. In 2013, Insulate SB, Inc., a contractor using fast-set spray foam equipment, filed a putative class action complaint, alleging that Graco conspired with its distributors to deny its competitors access to the fast-set equipment distribution network in violation of Sections 1 and 2 of the Sherman Act. Specifically, Insulate SB alleged that Graco and the distributors entered into exclusivity agreements, boycotted competing products, fixed prices, and controlled geographic distribution areas. Graco and the distributors moved for dismissal.

Statute of limitations. The court found that the contractor’s antitrust claims were barred by the four-year limitations period. The defendants argued that any alleged injury to Insulate occurred in 2005 and 2008 when Graco acquired its two remaining competitors in fast-set equipment manufacturing business. According to the court, the doctrine of fraudulent concealment did not apply, since Insulate failed to exercise diligence in attempting to discover the conspiracy after prices increased and competition was eliminated by Graco’s acquisitions. Moreover, litigation in 2008 between Graco and former employees of one of the acquired companies also uncovered information that would have given Insulate notice of its claims.

Additionally, the statute of limitations was not restarted by the continuing violation doctrine. If there was any conspiracy to boycott competitors, the defendants’ continued compliance would be reflected in agreements alleged to be made in 2007, and Insulate did not allege any new acts were required to maintain the unlawful agreements. Insulate ’s argument that a February 2012 letter from Graco to its distributors, “reminding” them not to carry a competing product line, constituted an overt act restarting the statute of limitations was rejected on a determination that the letter merely reaffirmed an alleged prior agreement.

Price-fixing conspiracy claims. The contractor also failed to state a claim for a vertical retail price-fixing conspiracy. The plaintiff made no factual allegations identifying which distributors charged anti-competitive prices or controlled certain geographic areas, or presented any communications indicating concerted or conspiratorial action by the distributors. The claim that the defendants conspired to eliminate new entrants to the fast-set equipment market through the use of exclusionary contracts also failed to state a plausible claim for relief. The complaint failed to state facts showing (1) more than unilateral action by Graco or (2) that the distributors conspired with Graco and each other by entering into the exclusivity arrangements, the court concluded.

The case is No. 13-2664.

Attorneys: Christopher A. Nedeau (Nossaman LLP) and Richard A. Lockridge (Lockridge Grindal Nauen PLLP) for Insulate SB, Inc. Stephen P. Safranski (Robins Kaplan Miller & Ciresi, LLP) for Graco Inc. and Graco Minnesota, Inc. Lewis A. Remele (Bassford Remele P.A.) for Advanced Finishing Systems, Inc., Airtech Spray Systems, C.H. Reed, Inc., C.J. Spray, Inc., Coast Industrial Systems, Inc., Coatings Holdings, Ltd., Demilec (USA), LLC, Engineered Distribution Specialties, LLC, Golden State Paint Corp., Intech Equipment & Supply, LLC, Marco Group International, Inc., MCC Equipment & Service Center, Specialty Products, Inc., Spray Foam Systems, LLC, Spray-Quip, Inc., and Ultimate Linings, Ltd.

Companies: Insulate SB, Inc.; Graco Inc.; Graco Minnesota, Inc.; Advanced Finishing Systems, Inc.; Airtech Spray Systems; C.H. Reed, Inc.; C.J. Spray, Inc.; Coast Industrial Systems, Inc.; Coatings Holdings, Ltd.; Demilec (USA), LLC; Engineered Distribution Specialties, LLC; Golden State Paint Corp.; Intech Equipment & Supply, LLC; Marco Group International, Inc.; MCC Equipment & Service Center; Specialty Products, Inc.; Spray Foam Systems, LLC; Spray-Quip, Inc.; Ultimate Linings, Ltd.

Cases: Antitrust MinnesotaNews