Antitrust Law Daily $1.2 Billion Judgment Entered Against Dow Chemical in Urethane Price Fixing Litigation
Thursday, May 16, 2013

$1.2 Billion Judgment Entered Against Dow Chemical in Urethane Price Fixing Litigation

By Tobias J. Gillett, J.D., LL.M.

In class action antitrust litigation alleging that Dow Chemical Company participated in a conspiracy to fix prices for chemicals used in the manufacture of polyurethanes, the federal district court in Kansas City, Kansas has denied Dow’s motions to decertify the class and for judgment as a matter of law or for a new trial, and has therefore entered a $1.2 billion judgment against Dow (In re: Urethane Antitrust Litigation, May 15, 2013, Lungstrum, J.).

On February 20, 2013, following a four-week trial, a jury returned a verdict that Dow had participated in a conspiracy with other chemical manufacturers to fix the prices of certain chemicals used to manufacture polyurethanes. The jury determined that the conspiracy caused the plaintiffs to suffer damages in the amount of $400,049,039, an amount subject to the trebling provision of the Clayton Act. After the trial, Dow filed motions to decertify the class for judgment as a matter of law or for a new trial.

Motion to decertify class. The court first refused to decertify the class because Dow’s motion to decertify was untimely. Dow filed its motion one day before trial began, and did not provide "any reason why it could not have filed its motion much earlier and why it instead filed its motion literally on the eve of trial." Reconsidering the certification order at this time would "cause severe prejudice to plaintiffs."

Nonetheless, the court observed that Dow’s arguments for decertification would have failed on their merits even if they had not been untimely. The court rejected Dow’s contention that every class member had to have suffered an injury, noting that members of the class may have been impacted by elevated prices resulting from the conspiracy, even if some members managed to mitigate their damages, and that case law demonstrated that the inevitability that a class would contain some persons that did not suffer injury from the defendant’s conduct did not preclude decertification. Moreover, the plaintiffs had shown that only a very small percentage of the class may not have suffered damages.

Further, the court rejected Dow’s argument that the model produced by the plaintiff’s damages expert could not show damages on a class-wide basis. Although 2004 purchases had been included in the class even though the plaintiffs had abandoned any argument as to conspiracy during that year, the court found modifying the class to exclude 2004 purchases preferable to decertifying the class. The court noted that Dow had not suffered any prejudice, because it knew the plaintiffs were not including 2004 purchases in the scope of their conspiracy "well before trial," and the court "instructed the jury as if the class included only purchasers through 2003. The court also refused to decertify the class based on Dow’s argument that the plaintiffs’ fraudulent concealment claim "presented individual issues too substantial to allow for class certification," because Dow did not show that the argument could be a basis for post-trial decertification."

Finally, the court rejected Dow’s attack on the plaintiffs’ damages expert based on the Supreme Court’s March 27, 2013 decision in Comcast Corp. v. Behrend, 113 S. Ct. 1426. Dow contended that the expert’s model outlined in his expert report could not provide a causal connection between the price fixing and the impact on the class, because other prohibited conduct, such as allocating customers, may have actually caused prices to exceed competitive levels. The court observed that the case differed from Comcast because Dow did not raise the issue until after trial, and the expert’s report had not been in evidence at trial. The expert provided testimony at trial linking the price-fixing conspiracy to the injury suffered by the plaintiffs, and Dow did not object to his testimony on the basis that the injury could have resulted from some other conduct. Therefore, there was no reason to believe that the expert’s "methodology could not provide a proper causal link between plaintiff’s theory of liability and the classwide impact," in the court’s view.

Motion for judgment as a matter of law. The court first rejected Dow’s argument that it should receive judgment as a matter of law because the plaintiffs had alleged a conspiracy from 1999 through 2003, while the jury awarded damages beginning in 2000. The court found that "[t]he fact that plaintiffs failed to prevail with respect to the entire period [did] not provide a basis to award Dow judgment on the entire claim."

The court also refused to grant judgment to Dow based on its argument that the plaintiffs had not provided sufficient evidence of classwide impact and damages. The plaintiffs did not have to "show injuries and damages suffered by each and every class member." The plaintiffs’ evidence that Dow participated in a conspiracy to fix prices, that it involved high-ranking executives with the power to decide prices, that the conspirators adjusted their pricing in lockstep, that the pricing decisions were effective, that the industry was conducive to collusion, and that prices were supracompetitive was sufficient to show injury to the class, in the court’s view.

Moreover, the jury’s failure to award damages for the period before November 2000 did not demonstrate that it had rejected the plaintiff’s expert’s model. "[T]he verdict suggest[ed] that the jury accepted that model in finding liability and awarding damages for the later period," and the difference may have resulted from their acceptance of alternative explanations for the earlier period without rejecting the model entirely.

Further, the expert’s use of estimated damages for some class members did not mean that the plaintiffs had not shown classwide injury. Dow had not previously challenged the reliability of the expert’s methods on that basis, the expert had testified that the model showed nearly all class members paid overcharges, and the plaintiffs provided evidence of classwide injury other than the expert’s testimony.

Finally, the court rejected Dow’s argument that the jury’s damages verdict was not supported by evidence because the jury did not use a damages amount mentioned by the plaintiff’s expert. The jury was permitted to estimate damages, and could have had a number of different reasons for reducing the damages from the $496,680,486 suggested by the expert.

The also concluded that Dow’s argument that the plaintiffs did not provide sufficient evidence to support a finding that Dow participated in the conspiracy did not warrant granting Dow judgment as a matter of law. The plaintiffs provided evidence of more than just parallel conduct, including evidence of agreements regarding pricing, executives’ pricing discussions, lockstep price announcements and increases, communications around the time of the increases, efforts to maintain secrecy, actions contrary to the conspirators’ interests, an industry structure conducive to collusion, and supracompetitive prices. This evidence, as well as the jury’s ability to judge the credibility of witnesses, was enough "to allow a reasonable inference of collusion."

Moreover, the court rejected Dow’s argument that the plaintiffs did not provide sufficient evidence of an agreement to penalize cheaters within the conspiracy. The jury did not have to find such an agreement to reach its verdict, and a plaintiffs’ expert had testified that he saw evidence of such an agreement.

Motion for a new trial. The court first refused to grant a new trial based on Dow’s contention that the court erred in crafting the verdict form. Dow did not cite authority requiring a more detailed form, and the jury did not have to find that a conspiracy existed for the entire time alleged by the plaintiffs or that it involved all alleged conspirators or products.

The court also rejected Dow’s arguments that the court erred in instructing the jury. The jury could find a conspiracy shorter than the one the plaintiffs alleged, and so the court did not err in refusing to instruct that it had to find a conspiracy for the entire alleged period. The court also did not misstate the law by requiring the jury to "find an agreement to act together and that Dow knowingly entered into that agreement," rather than defining an agreement as "a meeting of the minds in which each party makes a conscious commitment to a common scheme," as Dow proposed.

The jury instructions also adequately stated the applicable law by instructing that evidence that urethane chemical manufacturers engaged in competition might bear on whether a conspiracy existed, and Dow did not show why the further instruction that a conspiracy could still exist even if the participants did engage in some competition was erroneous. The instructions also did not improperly state the law by not including language from the Supreme Court’s decision in Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 (1986) to the effect that the plaintiffs had to produce evidence that "tends to exclude" the possibility that Dow acted independently, and Dow did not cite "authority suggesting that such language was required in the jury instructions."

The court also did not err in refusing to instruct the jury that evidence that Dow destroyed certain documents could not "support a finding or inference of conspiratorial or other improper conduct." Evidence that Dow attempted to cover up its activities would be relevant, and Dow did not address the court’s ruling that Dow waived the argument by not objecting to testimony regarding the document destruction in a timely manner. Moreover, the evidence did not have a "legal component" that would require explanation for the jury, and the court did not err in refusing to "invade the province of the jurors" by instructing them to agree with Dow and not draw "inferences properly urged by plaintiffs."

Finally, the court did not err in rejecting an instruction that the jury should not consider an investigation within Dow concerning one of its employees. Dow itself designated deposition for use at trial testimony from the employee that contained references to the investigation, and it failed to register a timely objection to other testimony about it, and therefore Dow waived any argument "that objectionable testimony was admitted and that a curative instruction was therefore necessary." The court also refused to allow either side to present evidence about the investigation at trial when the issue was raised in a timely manner.

The court also did not err in excluding evidence regarding a witness’s agreement with the Department of Justice immunizing him from criminal prosecution in exchange for his testimony. Dow’s contention that the witness had a motive to "embellish" his testimony was "pure speculation," because Dow did not have information regarding the terms of the immunity agreement. Moreover, his agreement required him to tell the truth, and therefore the court concluded that his motive to be truthful was at least as strong as his motive to lie. Furthermore, the "probative value of this evidence was substantially outweighed by a danger of unfair prejudice, confusion, and undue delay."

Finally, the court declined to grant a new trial on the basis of Dow’s argument that the imposition of joint and several liability violated the Due Process Clause because the damages were "vastly disproportionate to the effects of Dow’s own conduct." Dow waived this argument by failing to preserve it in the pretrial order. Moreover, one member of a conspiracy is liable for the acts of its co-conspirators in furtherance of the conspiracy, and therefore "all of the damages awarded by the jury effectively related to Dow’s own conduct." Further, courts had "consistently imposed joint and several liability in civil antitrust actions."

The case is No. 04-1616-JWL, MDL No. 1616.

Attorneys: George A. Hanson (Stueve Siegel Hanson LLP) for plaintiffs. Brian R. Markley (Stinson Morrison Hecker LLP) for Dow Chemical Co.

Companies: Dow Chemical Co.

MainStory: TopStory Antitrust KansasNews

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