Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: Research firm must provide industry information, not proprietary analysis, in drywall price-fixing action, (May 21, 2014)

By Linda O’Brien, J.D., LL.M.

In multi-district litigation against domestic drywall manufacturers for conspiring to fix prices in the United States, a subpoena issued to a non-party construction industry research company was modified to require disclosure of industry information but to protect proprietary analysis, the federal district court in Philadelphia has ruled. Thus, the non-party’s motion to quash a subpoena was granted in part and denied in part (In re Domestic Drywall Antitrust Litigation, May 15, 2014, 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 in the sale of domestic drywall. The plaintiffs alleged that several manufacturers colluded to increase prices for drywall in 2011 and 2012. In December 2013, the plaintiffs served non-party, Thompson Research Group, LLC (TRG), with a subpoena that made several requests for documents. TRG moved to quash the subpoena.

TRG conducts research on the construction materials industry that is published in reports sold to large institutional investors as a tool in providing investment advice. One method TRG uses to generate research for its reports is to conduct surveys and interviews with various sources whose identities are kept confidential. Through its subpoena, the plaintiffs sought various documents, including (1) all reports, studies, analyses, presentations, or surveys relating to the market for wallboard; (2) all documents concerning statements made in any of the specific documents, including materials used to prepare those documents; and (3) all communications with or concerning any defendant or other wallboard manufacturer relating to pricing of or use of job quotes for wallboard.

After balancing TRG’s entitlement to protection of the requested documents with the plaintiffs’ substantial need for the documents, the court found in favor of partial disclosure. Federal Rule of Civil Procedure Rule 45 provides protections for non-parties subject to subpoena and allows a court to quash or modify a subpoena unless the subpoenaing party can show a substantial need for the requested material. The plaintiffs demonstrated that the requested reports and investigative files were reasonably calculated to lead to information on the pricing behaviors of drywall manufacturers during the time of the alleged conspiracy, which met the requisite degree of relevance required for non-party discovery, according to the court. Additionally, the defendants demonstrated that the analysis contained in TRG’s reports was expert opinion, its investigative files which constitute confidential commercial information and research, and the identities of its confidential sources were protected from disclosure under Rule 45.

The court determined that the plaintiffs could obtain TRG’s published reports that included statements from sources since the disclosure of these excerpts did not pose a risk revealing the source’s identity or expose TRG to financial harm. The plaintiffs were also permitted access to TRG’s investigative files where they could show evidence that a specific file, time period, or company contains information that TRG’s reports may have been used to share non-public pricing information to participants in the alleged conspiracy.

However, TRG’s proprietary analysis was protected and portions of the reports that contained expert analysis and conclusions should be redacted. The names of TRG’s confidential sources should also be redacted from its investigative files since TRG’s financial interest relied heavily on preserving the confidentiality of its sources. Moreover, the plaintiffs must provide TRG reasonable compensation for the cost of disclosing the documents and for the disclosure of its intellectual property. Finally, TRG could designate any disclosure as highly confidential which would limit its available under the previously issued protective order, the court concluded.

The case is No. 13-MD-2437.

Attorneys: Scott D. Gilchrist (Cohen & Malad LLP) and Jeffrey B. Gittleman (Barrack, Rodos & Bacine) for plaintiffs. Ronald G. Harris (Neal & Harwell) for Thompson Research Group.

Companies: Thompson Research Group

Cases: Antitrust PennsylvaniaNews