Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ohio: Settlements approved in polyurethane foam class action, (Mar 2, 2015)

By Edward L. Puzzo, J.D.

In the latest ruling in an ongoing multidistrict antitrust action by a class of direct purchasers against manufacturers of polyurethane foam, the federal district court in Toledo, Ohio has granted final approval to settlements between the class of direct purchasers and polyurethane foam manufacturers Leggett & Platt and Carpenter Co. Under the settlements, direct purchasers will receive $39.8 million from Leggett & Platt and $108 million from Carpenter (In re Polyurethane Foam Antitrust Litigation, February 26, 2015, Zouhary, J.).

In these consolidated proceedings, it was alleged that polyurethane foam manufacturers conspired to fix, raise, and maintain the price of slabstock, fabricated foam, and carpet underlay. On November 6, 2014, the court granted preliminary approval to direct purchasers’ motion for class-wide settlements with defendant Leggett & Platt—a leading U.S. manufacturer of components for residential furniture and bedding, office furniture components, and automotive seat support and lumbar systems—and with defendant Carpenter Co.—the world’s largest producer of comfort cushioning products. The plaintiffs now moved for final approval.

Settlements sought. Based upon testimony of a damages expert, the court noted, class-wide overcharges were estimated to be $815 million, prior to trebling, in a best-case outcome at trial. Leggett & Platt and Carpenter sales would account for nearly $310 million of those overcharges, based on their 38 percent share of the affected product markets. Under the settlements, direct purchasers will receive $39.8 million from Leggett & Platt and $108 million from Carpenter, roughly 48 percent of the overcharges attributable to the two defendants under the above-referenced estimate.

In evaluating whether the claims of a certified class should be settled, the court explained, it must consider (1) the risk of fraud or collusion; (2) the complexity, expense and likely duration of the litigation; (3) the amount of discovery engaged in by the parties; (4) the likelihood of success on the merits; (5) the opinions of class counsel and class representatives; (6) the reaction of absent class members; and (7) the public interest.

Risk of fraud. Courts are entitled to presume the absence of fraud or collusion in antitrust class settlements. The court expressed its confidence that the settlement terms were the product of hard-fought, arms-length negotiation between experienced antitrust lawyers.

Expense of litigation. If the case were to proceed to trial in April 2015 as scheduled, the trial would be lengthy, costly, and time consuming, the court stated. If a jury verdict were obtained, it would likely be appealed, and post-trial motions could review, among other determinations, the class certification. Settlement would avoid further expense, as well as the risks associated with further litigation.

Amount of discovery. The discovery record in this case was enormous, the court stated. Direct purchasers combed through 219 defendant and third-party document productions, totaling 2.4 million documents spanning 5.4 million pages, and participated in or attended over 200 depositions. One of the experts worked with a transactional dataset with roughly 50 million entries, the court noted, and a dozen other experts were deposed. The discovery gave each side a clear picture of the relative merits of claims and defenses.

Likelihood of success. A recent summary judgment briefing provided insight into the relative strengths and weaknesses of the direct purchasers’ claims, the court stated. The defendants have strong jury arguments regarding how a fact-finder should evaluate competitor communications, “opportunities-to-conspire” evidence, and the like. A no-liability verdict with respect of some or all of the defendants, or substantially smaller damages figures, was certainly possible if the case were to be argued before a jury, the court stated. Therefore, a settlement figure that equates to roughly 18 percent of the best-case-scenario class-wide overcharges is an impressive result in view of these possible trial outcomes, opined the court.

Opinion of class counsel. Counsel for each side opined that settlement was in the best interests of the class. Counsel for the class noted that the proposed settlement was impressive considering they were working without an active parallel criminal investigation, which exists in some other antitrust multidistrict litigation. Counsel for the defendants also praised the settlement given the substantial risks direct purchasers face in further litigation.

Absent class member reaction. The court noted that, despite tens of thousands of class members receiving notice of the class settlement, only one class member objected. The overwhelming majority of direct purchasers opted to remain members of the settlement classes.

Public interest. There is a strong public interest in voluntary resolution of complex antitrust actions and no legitimate countervailing interest that weighs in favor of denying settlement approval.

For the above reasons, the court was satisfied that the Leggett & Platt and Carpenter settlements were entitled to final approval.

Attorneys’ fees. Class counsel sought 30 percent of the settlement fund for attorneys’ fees, roughly $44.3 million, plus $8.1 million in expenses, leaving $95.3 million, or 64.5 percent, of the settlement fund to be divided among class members. For many of the reasons supporting a finding that the settlement is fair, reasonable, and adequate, the court concluded that class counsel’s fee request was reasonable. For the direct purchaser class, even after the fees for respected antitrust practitioners, they will have recovered more than $100 million from settling defendants and paid legal fees substantially less than class counsel’s estimated lodestar.

The case is Civil Action No. 1:10-md-02196-JZ.

Attorneys: Stephen R. Neuwirth (Quinn, Emanuel, Urquhart, Oliver & Hedges), William A. Isaacson (Boies, Schiller & Flexner), and William C. Price (Wood & Lamping LLP) for Direct Purchaser Class. James H. Walsh (McGuire Woods LLP), and Kendall Millard (Barnes & Thornburg LLP) for Defendants Liaison Counsel.

Companies: Leggett & Platt, Inc.; Carpenter Co.; E.R. Carpenter L.P.; Carpenter Holdings, Inc.

Cases: Antitrust OhioNews