Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: Price-fixing charges against drywall manufacturers dismissed, (Jun 24, 2016)

By Michael Menzhuber, J.D., LL.M.

A motion to dismiss homebuilders’ claims against certain drywall manufacturers, which insufficiently alleged that they entered into price-fixing agreements for 2014 and 2015, was granted by the federal district court in Philadelphia (In Re: Domestic Drywall Antitrust Litigation, June 22, 2016, Baylson, M.).

Two groups of plaintiffs ("Class Action plaintiffs" and "Homebuilder plaintiffs") alleged that USG Corporation, Certain Teed Gypsum, Inc. (Teed), Continental Building Products, Inc. (Continental) and certain other domestic drywall manufacturers (collectively, "defendants") entered into agreements to fix prices and eliminate job quotes. The Class Action plaintiffs were substantially further along with the litigation process and the Homebuilder plaintiffs had access to all of their discovery.

The Homebuilder plaintiffs alleged that, beginning in 2011, the defendants conspired to fix prices and eliminate job quotes. Their 122-page second amended complaint included detailed allegations with respect to 2011 and 2012 (the same conspiracy period alleged by the Class Action plaintiffs) that the defendants agreed to fix prices for calendar years 2012 and 2013. However, they only made a few general allegations related to the allegedly collusive price increases in 2014 and 2015.

The defendants responded by filing a motion to dismiss many of the Homebuilder plaintiffs’ claims. The court, however, considered only two issues: (1) the portions of the motion requesting dismissal of all of the claims based on the defendants’ conduct occurring after the price increase effective January 1, 2013; and (2) Teed’s individual motion to dismiss.

The court agreed with the defendants that the Homebuilder plaintiffs failed to state a plausible claim for relief based on the 2014 and 2015 price increases because they alleged, in only conclusory terms, that the defendants raised prices, had an incentive to conspire, and had opportunities to conspire. The court determined that, in light of the intervening litigation, these allegations were insufficient to set out any plausible claims based on the 2014 and 2015 price increases, even accepting that they alleged sufficient facts as to the prices increases for 2012 and 2013.

Teed argued that the Homebuilder plaintiffs’ claims against it should be dismissed because the court had dismissed the claims brought against it by the Class Action plaintiffs. The court disagreed because: (1) the Homebuilder plaintiffs had plausibly alleged Teed’s participation in the drywall conspiracy for 2012 and 2013; and (2) the Homebuilder plaintiffs were entitled to an opportunity to discover and show facts that the Class Action plaintiffs may have missed.

The court dismissed the Homebuilder plaintiffs’ claims against Continental because the claims were based on activity that occurred after the 2013 price increase.

The case is No: 2:13-md-02437-MMB.

Attorneys: Brian Russell Strange (Strange & Butler Law Office) for Ashton Woods Holdings LLC, Beazer Homes Holdings Corp. and D.R. Horton Los Angeles Holding Co., Inc. Steven E. Bizar (Dechert LLP) and Lester C. Houtz (Kirkland & Ellis) for USG Corp. and New NGC, Inc. Mark W. Nelson (Cleary Gottlieb Steen & Hamilton LLP) for Lafarge North America, Inc.

Companies: Ashton Woods Holdings LLC; Beazer Homes Holdings Corp.; D.R. Horton Los Angeles Holding Co., Inc.; USG Corp.; New NGC, Inc.; Lafarge North America, Inc.

Cases: Antitrust PennsylvaniaNews