Antitrust Law Daily Wrap Up, ANTITRUST—S.D. Cal.: Indirect purchaser settlement approved in food service equipment hardware price fixing case, (Jul 18, 2013)

By Jeffrey May, J.D.

The federal district court in San Diego has approved a $720,000 settlement in a class action against sellers of specialty hardware components for conspiring to fix prices and allocate customers and markets for component hardware used in food service equipment. The settlement resolves claims brought on behalf of purchasers of individual food service hardware components, such as hinges, brackets, latches, and fasteners used in food storage appliances, as well as purchasers of food service equipment, such as walk-in freezers for cafeterias, that contain such hardware. The settlement was found to be fair, adequate, and reasonable under Rule 23(e) of the Federal Rules of Civil Procedure (Rigo v. Kason Industries, Inc., July 16, 2013, Anello, M.).

The settlement resolves the claims of indirect purchasers, such as wholesalers, retailers and consumer/operators, who purchased from manufacturers, distributors, and service companies. It does not cover direct purchasers of the components, including manufacturers of the food storage equipment and replacement parts distributors and service companies. The related direct purchaser case settled for $1,800,000.

The defendants in this case are Kason Industries, Inc. and Component Hardware Group, Inc. (CHG) and two former company executives—one from Kason and one from CHG. Kason and the executives also were charged by the Department of Justice Antitrust Division and each pleaded guilty to the related criminal charges.

The named plaintiff brought the action, seeking injunctive relief under the Sherman Act and actual and treble damages and costs of suit, including attorney fees, under the California Cartwright Act. The plaintiff alleged that the defendants’ customer allocation and price fixing conspiracy resulted in inflated prices on components, which inflated the price of equipment, which was borne by the indirect purchasers. Because the market for the components is “inextricably intertwined” with the market for food storage equipment, the cost of the components directly affects the price of equipment, according to the plaintiff.

Under the terms of the settlement, claimants will be entitled to a cash refund out of the net settlement fund, which will consist of $720,000 less fees and costs. Class members who purchased individual food service hardware components will receive a full refund of the purchase price. Class members who purchased appliances that contain these components will receive a fixed 1.4% of the amount they paid for the appliance.

The court approved the settlement after balancing the continuing risks of litigation against the benefits afforded to members of the class and the immediacy and certainty of the recovery. It also was noted that the class members would likely receive awards above and beyond their actual damages and that the class members were fairly and adequately represented during settlement negotiations by competent counsel.

As far as the reaction of the class to the proposed settlement, only one class member had opted out of the class. Moreover, no objections to the settlement agreement or attorney fees request were received by the court.

Attorney Fees, Costs

The court also approved an award of attorney fees in the amount of $216,000 and $5,052.10 in out-of-pocket costs reasonably incurred in connection with the prosecution of the litigation by class counsel. The award, which was 30% of the common fund, was reasonable in light of (1) the favorable results achieved; (2) the risks of litigation; (3) the skill required and the quality of work; (4) the contingent nature of the fee; (5) the burdens carried by class counsel; and (6) the awards made in similar cases.

In addition, the court approved payment of $79,954.84 in administration costs to the class administrator and an incentive award of $2,500 for the named plaintiff for his more than two years of service to the case.

The case is No. 11-CV-64-MMA(DHB).

Attorneys: Alan McQuarrie Mansfield (The Consumer Law Group) for John Rigo. James Robert McGibbon (Sutherland, Asbill & Brennan, LLP) for Kason Industries, Inc. Andrew T. Dustin (Kirkland & Ellis, LLP) for Component Hardware Group, Inc.

Companies: Kason Industries, Inc.; Component Hardware Group, Inc.

Cases: Antitrust CaliforniaNews