Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ohio: Foam purchasers proceed with price fixing conspiracy claims against manufacturers, (Feb 10, 2015)

By Greg Hammond, J.D.

Manufacturers of flexible polyurethane foam were unable to dispose of claims they engaged in a price fixing conspiracy. The non-settling defendants’ five individual motions and one joint motion for summary judgment were largely denied by the federal district court in Toledo, which found that questions of fact exist that allow a jury to test the direct purchasers’ claims (In re Polyurethane Foam Antitrust Litigation, February 9, 2015, Zouhary, J.).

Background. Direct purchasers of polyurethane foam products—ranging from individuals that purchased foam pillows to large corporations like Ford Motor and Serta Mattress—filed an antitrust suit against some of the largest manufacturers of polyurethane foam, alleging that they conspired to fix the prices of their products. Specifically, the direct purchasers’ allege that the manufacturers and their co-conspirators communicated and reached agreements and understandings on the percentage amount and effective date of price increases, through the use of price increase announcements (PIAs).

The non-settling defendant manufacturers filed six motions for summary judgment, arguing that there was no evidence of an “express” or “global” and “overarching” agreement to coordinate the content and timing of PIAs; testimony of cooperating defendants did not implicate the non-settling defendants; any observed parallelism in PIA terms was natural and lawful; the PIAs did not always translate into price increases; it would be impossible for members of the alleged price fixing conspiracy to monitor transaction prices; and the non-settling defendants intensely competed for foam business.

In opposing summary judgment, the direct purchasers set forth several categories of evidence that supported their claims, including direct evidence of conspiracy; evidence of parallel business behavior; price discussions between the defendants; claims that the manufacturers’ price discussion ran counter to their independent economic interests; other “plus factors,” including market structure, opportunities the defendants had to conspire, and motives to enter into a price fixing conspiracy; and certain employees’ Fifth Amendment invocations during depositions.

Direct evidence. The direct purchasers’ so-called “direct evidence” of the defendants’ conspiracy to increase the prices of foam consisted of various documents memorializing direct communications among defendant executives in furtherance of the conspiracy; defendant admissions of specific conspiratorial acts; phone records; and various witnesses that testified to communications between defendants concerning prices. The court determined that none of the materials identified by the plaintiffs were direct evidence, as no admissions of guilt were made on any of the defendants that now move for summary judgment, and there was no evidence of the substance of the alleged phone calls. Consequently, the direct purchasers’ claims depended on circumstantial evidence and a theory of parallel pricing behavior resulting from coordination among the defendant manufacturers.

Parallel Pricing. Although the direct purchasers failed to identify direct evidence, their circumstantial evidence created questions of fact that the defendants priced in the parallel. Specifically, pricing parallelism revealed substantial similarity in PIAs with respect to the non-settling defendants. A substantial number of quarterly analyses revealed that the defendants issued identical or near identical price increases. Further, the non-settling defendants failed to allege any principle of antitrust law demonstrating that the substantial similarity in business behavior—standing alone—entitles them to judgment as a matter of law.

Plus factors. The court concluded that evidence of communications between competitors can serve as circumstantial evidence of price fixing. There was a “fairly dense web” of communications, according to the court, such as emails and faxes between high-level competitor employees that had pricing authority for foam products. These employees also shared PIAs after email or fax exchanges. However, the court also noted that some of the evidence could also be just as consistent with lawful conduct as it is with conspiracy.

Admissions by cooperating defendants that settled could also serve as further evidence of direct competitor pricing discussions involving the defendants, the court noted, ultimately concluding that the inference of concerted rather than interdependent action is stronger.

A reasonable jury could also conclude that the non-settling defendants shared pricing information with each other because there existed a common understanding of how the information would be used—not to compete, but to collude, and had the defendant manufacturers approached the task of PIA drafting independently, they would not have shared such information with each other.

In addition, the court noted that there were equally strong inferences of conspiracy and independent conduct with regard to market structure and opportunities and motives to conspire, which—standing alone—did not defeat summary judgment. Further, because other record evidence posed a jury question of whether the defendants had a conscious commitment to a common scheme of PIA coordination, the court did not rely on Fifth Amendment privilege evidence. The court ultimately determined that a jury could reasonably conclude each defendant joined in the conspiracy.

Impact evidence. In previously granting class certification to the direct purchasers, the court concluded that the plaintiffs offered methods of proving impact and damages on a class-wide basis, through the reports of their expert. However, the plaintiffs’ expert made slight modifications to his impact and damages model, introducing new cost variables, prorating defendants’ price increase announcements to reflect the timing of the announcements within each quarter, and performing a persistence-damages calculation. The defendants failed to demonstrate that the expert’s alternative approaches were unreasonable or otherwise relied on flawed premises. As such, the court determined that the evidence is admissible and created questions of fact.

Tolling the limitations period. Lastly, the defendants argued that as a matter of law, recovery for pre-December 2006 claims was barred because the direct purchasers produced no evidence of active concealment and failed to exercise due diligence. The court rejected this argument, finding that the issue of tolling the limitations period was a question for the jury.

The case number is 1:10 MD 2196.

Attorneys: Sanford I. Weisburst (Quinn Emanuel Urquhart & Sullivan), William A. Isaacson (Boies, Schiller & Flexner), and William C. Price (Wood & Lamping) for Direct Purchaser Class. James H. Walsh (McGuire Woods) and Kendall Millard (Barnes & Thornburg) for Defendants.

Cases: Antitrust OhioNews