Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: Direct, indirect purchasers denied use of settlement funds for drywall price fixing suit, (Apr 14, 2016)

By Linda O’Brien, J.D., LL.M.

In an action against domestic drywall manufacturers for engaging in a conspiracy to fix the prices of drywall products sold in the United States, the federal district court in Philadelphia has denied requests by direct and indirect drywall purchasers for authorization to use funds from settlements with drywall manufacturers TIN Inc. and USG Corp. for ongoing litigation expenses (In re Domestic Drywall Antitrust Litigation, April 13, 2016, Baylson, M.).

Direct and indirect purchasers of domestic drywall products that were used in commercial and residential construction projects filed a series of class action suits against drywall manufacturers, alleging that the manufacturers engaged in a conspiracy to fix prices and eliminate job quotes in the sale of domestic drywall. The plaintiffs alleged that several manufacturers colluded to increase prices for drywall in 2011 and 2012.

In August 2015, the court granted final approval of proposed settlements between the direct and indirect purchasers and TIN Inc. and USG Corp. The court also granted the request for the direct and indirect purchasers to use of a portion of the settlement proceeds for payment of for common litigation expenses that had been already incurred in the case. However, the court deferred decision regarding future litigation expenses. Following resolution of the remaining defendants’ motions for summary judgment, the plaintiffs filed renewed motions for use of the settlement funds.

Under the terms of the settlement, TIN, Inc. paid $5.25 million and USG Corp. paid $39.25 million for a total of $44.5 million for the direct purchasers. For the indirect purchasers, TIN, Inc. paid $1.75 million, and USG Corp. paid $8.75 million for a total of $10.5 million.

The court granted the request for the direct and indirect purchasers to be reimbursed for common litigation expenses that had been already incurred in the case.

The court determined that the requests lacked specificity about how the funds were to be used or an accounting of the money that had already been expended. The direct purchaser plaintiffs provided no specific information on how the funds would be used. The indirect purchaser plaintiffs indicated that the requested funds would be used to offset future expenses—primarily expert witness fees—and included a general description of those expenses.

In the court’s view, the indirect purchaser plaintiffs were requesting a high percentage (23.8 percent) of the settlement fund and plaintiffs’ counsel should reasonably be expected to shoulder a portion of the expenses themselves, pending final resolution of the case. Furthermore, the direct and indirect plaintiffs did not show that they will cooperate as much as possible to economize on the use of experts and avoid duplicative expert reports. Because of the lack of specificity in the plaintiffs’ motions, the requests were denied.

The case is MDL No. 2437.

Attorneys: Eugene A. Spector (Spector Roseman Kodroff & Willis PC), Kit A. Pierson (Cohen Milstein Sellers & Toll PLLC), and Michael C. Dell’Angelo (Berger & Montague PC) for Direct Purchaser Plaintiffs. Robert S. Green (Green & Noblin PC), Michael G. McLellan (Finkelstein Thompson LLP) and Whitney E. Street (Block & Leviton LLP) for Indirect Purchase Plaintiffs. David L. Hanselman, Jr. (McDermott Will & Emery LLP) and Thomas S. Brown (Butler Pappas Weihmuller Katz Craig LLP) for American Gypsum Company LLC and Eagle Materials Inc. Steven E. Bizar (Dechert LLP) and Everett J. Bowman (Robinson Bradshaw & Hinson PA) for New NGC, Inc. Bradley C. Weber (Locke Lord LLP) for PABCO Building Products, LLC. Mark W. Nelson (Cleary Gottlieb Steen & Hamilton LLP) for Lafarge North America Inc.

Companies: USG Corp.; TIN, Inc.; American Gypsum Company LLC; Eagle Materials Inc.; New NGC, Inc.; PABCO Building Products, LLC; Lafarge North America Inc.

Cases: Antitrust PennsylvaniaNews