Haley Paint Company v. E.I. Dupont De Nemours and Company et al
Filing
337
MEMORANDUM OPINION. Signed by Judge Richard D Bennett on 8/28/2012. (aos, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
IN RE: TITANIUM DIOXIDE ANTITRUST
LITIGATION
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THIS DOCUMENT RELATES TO:
ALL ACTIONS
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CIVIL ACTION NO.: RDB-10-0318
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MEMORANDUM OPINION
This case concerns an alleged price-fixing conspiracy in the market for titanium
dioxide. Plaintiffs Haley Paint Company and Isaac Industries, Inc., and Intervening Plaintiff
East Coast Colorants, LLC d/b/a Breen Color Concentrates (collectively, “Plaintiffs”) claim
that Defendants E.I. du Pont de Nemours & Co. (“DuPont”), Huntsman International LLC
(“Huntsman”), Kronos Worldwide Inc. (“Kronos”), and Millennium Inorganic Chemicals,
Inc. (“Millennium”) (collectively, “Defendants”) engaged in an unlawful conspiracy in
violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, to fix, raise, or maintain the price
of titanium dioxide in the United States.1 Plaintiffs allege that as a consequence of the
1
In addition to the named Defendants, Plaintiffs have named several co-conspirators, including,
inter alia, Tronox Inc. („Tronox”) and The National Titanium Dioxide Company Ltd. (d/b/a
“Cristal”). Tronox filed for Chapter 11 bankruptcy protection in January 2009, and is therefore
precluded from being named as a defendant. See 11 U.S.C. § 362(a). Plaintiffs originally sought to
include Cristal as a named defendant in this case, but this Court dismissed Cristal for want of
jurisdiction on March 31, 2011. See Mem. Op. and Order, ECF Nos. 101 & 102. Subsequently,
Plaintiffs have sought formal reconsideration of that decision on two occasions. On April 3, 2012,
this Court denied the Plaintiffs first motion for reconsideration by Memorandum Order (ECF No.
268). At the August 13, 2012 Class Certification hearing, this Court again denied the Plaintiffs‟
request to add Cristal as a defendant. See Order, ECF No. 332.
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unlawful conspiracy, Defendants were successful in charging artificially inflated prices for
titanium dioxide products—thereby injuring all Plaintiffs.
Presently pending is Plaintiffs‟ Motion for Class Certification and for Appointment of
Class Counsel (ECF No. 246). This Court has reviewed the record, as well as the pleadings
and exhibits, and conducted a full-day class certification hearing on August 13, 2012. For
the reasons that follow, Plaintiffs‟ Motion for Class Certification will be GRANTED.
BACKGROUND
I. THE PLAINTIFFS’ FACTUAL ALLEGATIONS
The allegations contained in the Plaintiffs‟ Consolidated Amended Complaint (ECF
No. 51) were fully set forth in this Court‟s previous Memorandum Opinion entered on
March 29, 2011. See Haley Paint Co. v. E.I. du Pont de Nemours & Co., 804 F. Supp. 2d 419 (D.
Md. 2011) (denying Defendants‟ motion to dismiss complaint). That background is repeated
here, in part, so as to provide context for the pending motion for class certification.
Defendants are the leading suppliers of titanium dioxide (“TiO2”) in the world, and
control approximately 70 percent of the global production capacity. Consol. Am. Compl.
(“CAC”) ¶ 1. TiO2, a so-called “quality of life” product, is a dry chemical powder that is the
“world‟s most widely used pigment for providing whiteness, brightness, and opacity . . . to
many products, particularly paints and other coatings.” Id. ¶ 33. TiO2 has few competitive
substitutes, and demand for it tends to be inelastic. Id. ¶ 35. Plaintiffs allege that, as a result
of a declining market for TiO2, Defendants conspired to fix, raise, maintain, and stabilize the
price of the product. Id. ¶ 2, 69. This conspiracy is alleged to have occurred between
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February 1, 2003, through the present (hereinafter referred to as the “Class Period”). 2 Id. ¶
21. During the Class Period, TiO2 prices increased, and Defendants earned billions of
dollars in revenue. Id. ¶ 3, 1.
II. The Titanium Dioxide Market
As previously mentioned, Defendants are the market leaders in the production of
TiO2. The market is global in scope, with the majority of trade conducted internationally.
Id. ¶ 49. The market for the chemical has high barriers to entry—it is estimated that a new
plant would require $450-500 million and three to five years to build. Id. ¶ 43. As a result,
the industry is highly centralized. Id. ¶ 42-48. Beginning in the early 1990s, prices for TiO2
began to decline for a variety of reasons, such as global overcapacity and customer
consolidation. Id. ¶ 68. Prices increased in the late 1990s, but fell significantly in 2001. Id.
Plaintiffs allege, that as a result of declining prices and declining demand, “Defendants were
motivated to reach, and did reach, an agreement or understanding in or about early 2002 to
increase prices and improve margins in the industry.” Id. ¶ 69.
A. Alleged Conspiracy to Fix Prices of Titanium Dioxide
It is alleged that on January 24, 2002, a TiO2 industry meeting took place in Finland.
Id. ¶ 54. Shortly thereafter, and in spite of flat or declining demand for TiO2, Defendants
and their co-conspirators announced price increases to be effective March 1, 2002. Further
price increases were announced and implemented in the summer of 2002. Id. The following
2
Plaintiffs originally defined the Class Period as beginning in March of 2002. Plaintiffs have since
modified the Class Period to begin on February 1, 2003 because “[t]he evidence shows that while
the Cartel behavior began as early as 2002, it does not appear to have become fully effective until
February 2003. [citation omitted] As a result, and to be conservative, Plaintiffs propose to delay the
start of the Class period until February 1, 2003, despite the evidence of illegal antitrust activity
before that date.” Pls.‟ Class Mem. at 3 n.2, ECF No. 247.
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year, a TiO2 conference took place in Miami, Florida. That conference was attended by
Defendants, and the former Vice President of Defendant Millennium specifically told
attendees to expect further price increases.
Id. ¶ 55.
Numerous other meetings and
conferences were held over the next several years, and those meetings neatly corresponded
to TiO2 price increases during the Class Period. Id. ¶¶ 52, 56-61. Plaintiffs allege that it was
at these conferences where Defendants agreed and conspired to fix the price and supply and
capacity of TiO2 . Id. ¶ 62.
In addition to conferences and trade meetings, Plaintiffs also allege that the
conspiracy was furthered through industry publications and through conversations with
industry consultants, customers, and others. Id. ¶ 51. “After having reached an unlawful
agreement or understanding . . . , Defendants used consultants, customers, and others as
conduits to signal or confirm intended pricing and other actions to each other.” Id. These
conversations and signals allowed Defendants to monitor the conspiracy and cut down on
potential “cheating,” whereby one participant could undercut the others by reducing their
prices. Id. Plaintiffs also allege that Defendants privately discussed industry conditions and
TiO2 pricing at dinner meetings before and after the various trade association and industry
meetings. Id. ¶ 53. In short, Plaintiffs allege that Defendants had ample ability to conspire
to fix the price and capacity of TiO2 .
B. Titanium Dioxide Pricing
According to the Plaintiffs, in the face of declining demand, reduced costs, and
increased production capacity, see ¶¶ 54, 69, 71, 74, 81-82, 84, 102, the price of TiO2 actually
increased substantially during the Class Period. Id. ¶ 103. Plainitffs allege that Defendant
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DuPont, the titanium dioxide market leader, typically would announce a price increase which
would be quickly followed by all other Defendants. Id. ¶¶ 67, 72-75, 77-78, 80, 82-101.
According to the Plaintiffs, Defendants announced and implemented multiple and nearly
simultaneous TiO2 price increases in lock-step fashion. Of crucial importance to Plaintiffs
case is their contention that these price increases were implemented in the midst of market
conditions, such as declining demand, decreasing manufacturing costs, and excess
production capacity, that Plaintiffs allege are completely incompatible with across the board
price increases among the market leaders of a product.
Although the price increases were spaced out over five years, they increased in
frequency in 2008. Plaintiffs allege that “over the course of approximately 14 weeks, from
late May 2008 to early September 2008, Defendants and their co-conspirators announced
three separate Titanium Dioxide price increases and at least two energy surcharges,” and that
these price increases were made amidst declining demand for TiO2. Id. ¶ 99.
In light of the market conditions for TiO2, Plaintiffs allege that the price increases
implemented by Defendants cannot be explained as anything other than an illegal agreement
to fix prices and supply of the chemical. In support of this contention, Plaintiffs draw an
analogy to the period in the 1990s—where there is no price fixing conspiracy alleged—when
industry overcapacity lead to lower prices and slim profit margins. Id. ¶ 102. Plaintiffs allege
that the price increases were profitable for Defendants. The average price per ton of TiO2
increased nearly a third between 2002 and 2006, and Defendants increased their operating
incomes and margins. Id. ¶ 103.
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As a result of this alleged conspiracy, Plaintiffs contend that price competition in the
sale of TiO2 by Defendants (who control approximately 70 percent of global production
capacity) has been restrained, suppressed, and eliminated throughout the United States. Id. ¶
104. Plaintiffs further allege that prices for TiO2 have been raised, fixed, maintained, and
stabilized at artificial levels, and as a result, direct purchasers of TiO2 have been “deprived of
the benefit of free and open competition in the purchase” of the chemical. Id.
III. CLASS CERTIFICATION ARGUMENTS—FRAMING THE ISSUES
In Plaintiffs‟ Motion for Class Certification, they seek certification of the following
class:
All persons and entities who purchased titanium dioxide in the United States
directly from one or more Defendants or Tronox, or from any predecessors,
parents, subsidiaries, or affiliates thereof, between February 1, 2003 and the
present (“Class Period”). Excluded from the Class are Defendants, their coconspirators, parent companies, predecessors, subsidiaries and affiliates, and
all governmental entities.
Pls. Class Mot. at 1, ECF No. 246. According to the Plaintiffs, “[t]his case is directly
analogous to the legion of antitrust price fixing cases that federal courts have routinely
certified as class actions.” Pls.‟ Class Mem. at 2. In that regard, Plaintiffs maintain that all
the Rule 23 requirements are satisfied, and in particular, the predominance requirement of
Rule 23(b)(3) has been met insofar as “[t]he trial will focus almost entirely on proving that
the Cartel Members formed a cartel and conspired to artificially inflate prices for titanium
dioxide, that they were successful in raising prices to supra-competitive levels, and that, as a
result of this conspiracy, Class members sustained injury and damages when they paid
artificially-inflated prices on their purchases of titanium dioxide.” Id. at 2-3.
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Defendants argue that this case is not amenable to class treatment and contest
certification of this class on the grounds that: (1) the named Plaintiffs have not satisfied the
Rule 23(a) requirements of typicality and adequacy of representation; and (2) the Rule
23(b)(3) requirements of predominance cannot be met insofar as the Plaintiffs have set forth
a flawed methodology for proving individual antitrust impact and damages on a class-wide
basis. More specifically, Defendants argue that the named Plaintiffs‟ claims are not typical of
the class because they are small purchasers of TiO2, are located in narrow geographies, and
have individual interests antagonistic to the class as a whole. In this regard, Defendants
argue that the named Plaintiffs are not adequate class representatives.
Regarding the
predominance prong of Rule 23(b), Defendants argue that even if the Plaintiffs could prove
the existence of a price-fixing conspiracy, proof of individual injury and damages cannot be
computed in a class-wide manner, and therefore must be resolved on an individual basis.
On the typicality and adequacy of representation prongs of Rule 23(a), Plaintiffs
maintain that each named Plaintiff suffered the same injury—i.e., they paid artificially inflated
prices for TiO2—and therefore their interests are aligned with the class as a whole. On the
predominance prong of Rule 23(b), Plaintiffs contend that they have sufficient class-wide
proof to establish individual impact and damages. Plaintiffs plan to present evidence that
Defendants colluded to fix the price of TiO2 in the United States in the form of: (1) proof
that Defendants implemented lock-step price increase announcements; (2) proof that
Defendants regularly attended industry meetings that facilitated the workings of the
conspiracy; and (3) expert analysis regarding the structure of the TiO2 market and how that
structure facilitates collusive agreements.
To prove common impact, Plaintiffs plan to
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present expert testimony showing that, as a result of the cartel, TiO2 prices were supracompetitive across the class, and as a result affected each individual member of the class. To
prove damages, Plaintiffs rely on the same expert analysis and methodology to show that the
“aggregate” overcharge was felt uniformly across the class.
Accordingly, while each element of the Rule 23 class certification analysis will be
addressed, this Court will focus on the issues most closely contested by the Defendants—
typicality and adequacy of representation, and predominance of common issues.
THE LEGAL STANDARD FOR CLASS CERTIFICATION UNDER RULE 23 OF THE
FEDERAL RULES OF CIVIL PROCEDURE
To obtain class certification, the Plaintiffs must meet all four requirements of Federal
Rule of Civil Procedure 23(a), and at least one of the requirements of Rule 23(b). Gunnells v.
Healthplan Servs., Inc., 348 F.3d 417, 423 (4th Cir. 2003). Here, Plaintiffs seek certification of
the proposed class under Rule 23(b)(3), which requires that common questions of law
predominate. “Class certification requires a finding that each of the requirements of Rule 23
has been met” by a preponderance of the evidence. In re Hydrogen Peroxide Antitrust Litig., 552
F.3d 305, 320 (3d Cir. 2008).
“The class action is an exception to the usual rule that litigation is conducted by and
on behalf of the individual named parties only.” Wal-Mart Stores, Inc. v. Dukes, __ U.S. __,
131 S. Ct. 2541, 2550 (2011) (internal quotation marks and citation omitted). As recently
noted by the Supreme Court in the Wal-Mart opinion, “Rule 23 does not set forth a mere
pleading standard. A party seeking class certification must affirmatively demonstrate his
compliance with the Rule—that is, he must be prepared to prove that there are in fact
sufficiently numerous parties, common issues of law or fact, etc.” Id. at 2551. In ruling on a
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class certification motion, a court must take a close look at the facts relevant to the
certification question, even if those facts “tend to overlap with the merits of the case.” Thorn
v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 319 (4th Cir. 2006); accord Gariety v. Grant Thornton,
LLP, 368 F.3d 356, 366 (4th Cir. 2004) (“[W]hile an evaluation of the merits is not part of a
Rule 23 analysis, the factors spelled out in Rule 23 must be addressed through findings, even
if they overlap with issues on the merits.”).
The Supreme Court recently noted that “„sometimes it may be necessary for the court
to probe behind the pleadings before coming to rest on the certification question,‟ and that
certification is proper only if „the trial court is satisfied, after a rigorous analysis, that the
prerequisites of Rule 23(a) have been satisfied.‟” Wal-Mart 131 S. Ct. at 2551 (quoting Gen.
Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 160 (1982)) (emphasis added); see also Coopers &
Lybrand v. Livesay, 437 U.S. 463, 469 (1978) (“[T]he class determination generally involves
considerations that are „enmeshed in the factual and legal issues comprising the plaintiff‟s
cause of action.‟”) (quoting Mercantile Nat. Bank v. Langdeau, 371 U.S. 555, 558 (1963)).
The “rigorous analysis” that must be undertaken in the class certification context
extends to disputes between experts: “Resolving expert disputes in order to determine
whether a class certification requirement has been met is always a task for the court—no
matter whether a dispute might appear to implicate the „credibility‟ of one or more experts . .
. .” In re Hydrogen Peroxide, 552 F.3d at 323-24. Of course, there are limits to a court‟s
resolution of expert disputes, and “a court should only engage itself in statistical dueling of
experts if such dueling presents a valid basis for granting or denying class certification.” In re
Rail Freight Fuel Surcharge Antitrust Litig., __ F. Supp. 2d __, 2012 WL 2870207, at *17
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(D.D.C. June 21, 2012) (internal quotations, citations, and alterations omitted). As noted by
the Third Circuit, “[t]hat weighing expert opinions is proper does not make it necessary in
every case or unlimited in scope[,]” and “[r]igorous analysis need not be hampered by a
concern for avoiding credibility issues; as . . . findings with respect to class certification do
not bind the ultimate fact-finder on the merits. A court‟s determination that an expert‟s
opinion is persuasive or unpersuasive on a Rule 23 requirement does not preclude a different
view at the merits stage of the case.” In re Hydrogen Peroxide, 552 F.3d at 324.
ANALYSIS
I. RULE 23(a) FINDINGS & CONCLUSIONS
As previously noted, Plaintiffs must first establish—by a preponderance of the
evidence—the four requirements of Rule 23(a): numerosity, commonality, typicality, and
adequacy of representation. Each will be addressed in turn.
A. Numerosity
Rule 23(a)(1) provides that one of the requirements to bring a class action is that the
class be “so numerous that joinder of all members is impracticable.” The Fourth Circuit has
held that “[n]o specified number is needed to maintain a class action.” Brady v. Thurston
Motor Lines, 726 F.2d 136, 145 (4th Cir. 1984) (quoting Cypres v. Newport News Gen. &
Nonsectarian Hosp. Ass’n, 375 F.2d 648, 653 (4th Cir. 1967)). This Court has previously noted
that, generally speaking, “courts find classes of at least 40 members sufficiently large to
satisfy the impracticability requirement.” Peoples v. Wendover Funding, Inc., 179 F. R.D. 492,
497 (D. Md. 1998).
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Here, Plaintiffs assert that at least 700, and as many as several thousand TiO2
purchasers were affected by the Defendants‟ alleged conspiracy. See Pls. Class Mem. at 18.
Defendants do not contest this assertion, and this Court finds that the numerosity
requirement is met in this case.
B. Commonality
Rule 23(a)(2) requires a question of law or fact common to the class. “A common
question is one that can be resolved for each class member in a single hearing,” and does not
“turn[ ] on a consideration of the individual circumstances of each class member.” Thorn v.
Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 319 (4th Cir. 2006) (internal quotation marks and
citation omitted). The Fourth Circuit has held that, “in a class action brought under Rule
23(b)(3), the „commonality‟ requirement of Rule 23(a)(2) is „subsumed under, or superseded
by, the more stringent Rule 23(b)(3) requirement that questions common to the class
predominate over‟ other questions.” Lienhart v. Dryvit Systems, Inc., 255 F.3d 138, 147 n.4 (4th
Cir. 2001) (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 609 (1997)). Therefore, in
the Fourth Circuit “[t]he common questions must be dispositive and overshadow other
issues.”
Lienhart, 255 F.3d at 146.
“Thus, the commonality requirement is relatively
toothless in comparison with the related requirements of typicality and predominance.” In re
Puerto Rican Cabotage Antitrust Litig., 269 F.R.D. 125, 131 (D.P.R. 2010).
As the Supreme Court recently noted, “[c]ommonality requires the plaintiff to
demonstrate that the class members have suffered the same injury.” Wal-Mart, 131 S. Ct. at
2551 (internal quotations and citation omitted). Here, Plaintiffs allege a multi-year pricefixing conspiracy that led to all class members being subjected to artificially inflated prices
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for TiO2. Generally speaking, in the antitrust context, “courts have held that the existence
of an alleged conspiracy or monopoly is a common issue that will satisfy” the commonality
requirement.” 1 HERBERT B. NEWBERG & ALBA CONTE, NEWBERG ON CLASS ACTIONS §
3.10 (4th ed. 2002); see also 7A CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY
KANE, FEDERAL PRACTICE AND PROCEDURE § 1763 (3d ed. 2005) (“the claimed existence
of a conspiracy to fix prices . . . in violation of the antitrust laws has been found to present
common questions in actions brought by plaintiffs who asserted that they had been harmed
by those activities”) (hereinafter “FEDERAL PRACTICE AND PROCEDURE”); In re Florida
Cement and Concrete Antitrust Litig., 2012 WL 27668, at *3 (S.D. Fla. Jan. 3, 2012) (collecting
cases).
Plaintiffs have identified several questions that they assert are common to the class.
Most notably, Plaintiffs maintain that the existence of the conspiracy is the central issue in
this litigation. Defendants acknowledge this point in noting that “the commonality element
of Rule 23(a) is satisfied because there is at least one common question—namely, whether
the alleged conspiracy in fact existed.” Defs.‟ Class Opp‟n at 15, ECF no. 293. Accordingly,
this Court finds by a preponderance of the evidence that the existence of the alleged
conspiracy, standing alone, is sufficient to establish commonality.
In other words, the
Plaintiffs‟ claims “depend upon a common contention,” and that common contention is “of
a nature that is capable of classwide resolution—which means that its truth or falsity will
resolve an issue that is central to the validity of each one of the claims in one stroke.” WalMart, 131 S. Ct. at 2551.
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C. Typicality & Adequacy of Representation3
Rule 23(a)(3) requires that “the claims or defenses of the representative parties are
typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). Courts have
recognized that the commonality and typicality requirements of Rule 23(a) tend to merge.
“Both serve as guideposts for determining whether . . . the named plaintiff‟s claim and the
class claims are so interrelated that the interests of the class members will be fairly and
adequately protected . . . .” Gen. Tel. Co. of the SW. v. Falcon, 457 U.S. 147, 157 n.13 (1982).
As this Court has previously noted, the typicality requirement determines “whether a
sufficient relationship exists between the injury to the named plaintiff and the conduct
affecting the class, so that the court may properly attribute a collective nature to the
challenged conduct.” Bullock v. Bd. of Educ. of Montgomery County, 210 F.R.D. 556, 560 (D. Md.
2002) (citations omitted). The class representative “must be part of the class and possess the
same interest and suffer the same injury as the class members.” Broussard v. Meineke Discount
Muffler Shops, Inc., 155 F.3d 331, 338 (4th Cir. 1998). Essentially, the typicality requirement
ensures that “only those plaintiffs who can advance the same factual and legal arguments
may be grouped together as a class.” Id. at 340. “The essence of the typicality requirement
is captured by the notion that „as goes the claim of the named plaintiff, so goes the claims of
the class.‟” Deiter v. Microsoft Corp., 436 F.3d 461, 466 (4th Cir. 2006) (citing Broussard, 155
F.3d at 340).
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In their Class Opposition Memorandum, Defendants make the same arguments for both the
typicality and adequacy of representation prongs of Rule 23. See Defs.‟ Class Opp‟n at 42-46.
Because the typicality inquiry “tend[s] to merge with the adequacy of representation requirement,”
Falcon, 457 U.S. at 158 n.13, the Court will address these elements together.
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The final prerequisite under Rule 23(a) is that the persons representing the proposed
class must be able “fairly and adequately to protect the interests” of all members of the class.
The adequacy inquiry under Rule 23(a)(4) “serves to uncover conflicts of interest between
named parties and the class they seek to represent.” Amchem, 521 U.S. at 625 (citing Falcon,
457 U.S. at 157-58 n.13.). As noted by the Fourth Circuit, for a conflict to defeat class
certification, the conflict “must be more than merely speculative or hypothetical;” it “must
be fundamental” and “go to the heart of the litigation.” Gunnells v. Healthplan Servs., Inc., 348
F.3d 417, 430-31 (4th Cir. 2003) (internal quotations and citations omitted).
The typicality requirement “has been liberally construed by courts . . . [and] in the
antitrust context, typicality will be established by plaintiffs and all class members alleging the
same antitrust violations by defendants.”
In re Rail Freight, 2012 WL 2870207, at *26
(quoting Meijer, Inc. v. Warner Chilcott Holdings Co. III, Ltd., 246 F.R.D. 293, 301 (D.D.C.
2007)). Notwithstanding courts‟ liberal reading of the typicality requirement in price-fixing
cases, Defendants maintain that the named Plaintiffs‟ claims are not typical of the putative
class for several reasons. For example, Defendants argue that the named Plaintiffs‟ claims
are not typical of the proposed class because they “(1) represent a very small portion of the
total volume of titanium dioxide sold, (2) purchased a small number of the total titanium
products offered by defendants, and (3) are located in narrow geographies.” Defs.‟ Class
Opp‟n at 42.
This Court finds these arguments unavailing. As noted, to establish the typicality
prong of Rule 23(a), “a class representative must be part of the class and possess the same
interest and suffer the same injury as the class members.” Deiter, 436 F.3d at 466. While
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some factual differences between the named Plaintiffs and the putative class may exist, they
all seek the same relief: overcharge damages as a result of a price-fixing conspiracy in
violation of Section 1 of the Sherman Act. See In re Polyester Staple Antitrust Litig., 2007 WL
2111380, at *10 (W.D.N.C. July 19, 2007) (“In determining whether the claims of the class
representatives are typical of the class, the Court looks to the nature of the claims asserted
(i.e, the legal theory) rather than any specific factual differences amongst class members.”)
(citations omitted, emphasis added). Because Plaintiffs‟ claims arose from the same alleged
conduct, their claims are typical insofar as they will seek relief under the same legal theory
and will “tend to advance the interests of the absent class members.” Deiter, 436 F.3d at 466.
Defendants also argue that each named Plaintiff will not adequately represent the
interests of the class because of specific disqualifying problems. For example, Defendants
argue that because Plaintiff Isaac is a chemical wholesaler, it is unlike the majority of the
putative class members that are in the business of manufacturing products using TiO2.
Moreover, Defendants point out that Isaac purchased only a small volume of TiO2 in 2004,
and later sold that product at a profit. Defendants argue that it is therefore unlikely that
Isaac suffered any actual injury as a result of the alleged conspiracy. 4 See Defs.‟ Class Opp‟n
at 43-44.
With respect to Intervener Plaintiff Breen, Defendants highlight deposition
testimony by Breen‟s class representative that indicates Breen was not aware of any pricefixing until 2011—years after the filing of the lawsuit.
Finally, Defendants argue that
Plaintiff Haley is also an inadequate class representative. Defendants argue that because
4
To the extent that this argument overlaps with the predominance inquiry relating to impact, that
argument will be addressed infra.
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Haley ceased purchasing TiO2 in 2008, it therefore has no incentive to “prove a conspiracy
beyond mid-2008 when it sold its manufacturing business and no longer had a need to
purchase titanium dioxide.” Defs.‟ Class Opp‟n at 45. When Haley did purchase TiO2, it
purchased the product through a buying group that negotiated low prices, thereby lessening
any alleged impact of the price-fixing conspiracy.5 Moreover, Defendants argue that they
have unique defenses pertaining to Haley, particularly with respect to the statute of
limitations.
Notwithstanding these minor issues identified by the Defendants, this Court can
discern no “fundamental” conflict that goes to the “heart of the litigation.” Gunnells, 348
F.3d at 430-31. The thrust of the litigation will concern the Defendants‟ conduct and the
existence of the alleged conspiracy. Accordingly, the named Plaintiffs and the putative class
will “share common objectives and the same factual and legal positions,” and therefore
“have the same interest in establishing the liability of [Defendants].” Id. at 431. As such,
this Court finds, by a preponderance of the evidence, that Plaintiffs have satisfied the
typicality and adequacy of representation prongs of Rule 23(a). 6
5
See supra note 4.
6
Pursuant to the 2003 amendments to Rule 23, the Court‟s inquiry into the qualifications and
experience of Plaintiffs‟ counsel are no longer investigated under Rule 23(a), but instead are to be
determined under Rule 23(g). See infra at Section IV for that discussion.
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II. RULE 23(b)(3) FINDINGS & CONCLUSIONS
Having determined that the Plaintiffs have satisfied Rule 23(a)‟s requirements, the
Court now turns Rule 23(b)(3) which requires a finding that common questions
“predominate over any questions affecting only individual members, and that a class action
is superior to other available methods for fairly and efficiently adjudicating the controversy.”
Fed. R. Civ. P. 23(b)(3). “The Rule 23(b)(3) predominance inquiry tests whether proposed
classes are sufficiently cohesive to warrant adjudication by representation.” Amchem, 521
U.S. at 623.
Although the predominance inquiry of Rule 23(b)(3) is similar to the
commonality requirement of Rule 23(a), the Fourth Circuit has held that the predominance
requirement is “more stringent” than the Rule 23(a) requirement. Thorn, 445 F.3d at 319
(quoting Leinhart v. Dryvit Sys., Inc., 255 F.3d 138, 147 n.4 (4th Cir. 2001)); see also Amchem,
521 U.S. at 624 (the Rule 23(b)(3) criterion is “far more demanding” than the commonality
requirement). In determining whether the Plaintiffs have satisfied their burden, this Court
must conduct a “rigorous analysis” of the Rule 23(b)(3) requirements and the Plaintiffs‟
methodology for proving those requirements, and must act as finder of fact in the face of
conflicting expert testimony. In re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 323-24. In
order to meet the predominance prong of Rule 23(b)(3), a plaintiff must “demonstrate that
the element[s] of [the legal claim] is capable of proof at trial through evidence that is
common to the class rather than individual.” Id. at 311. “Because the nature of the evidence
that will suffice to resolve a question determines whether the question is common or
individual, a district court must formulate some prediction as to how specific issues will play
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out in order to determine whether common or individual issues predominate in a given
case.” Id. (internal quotations and citations omitted).
With that standard in mind, the Court notes at the outset that, like many courts
confronting class certification motions involving horizontal price-fixing claims, it is
presented with a battle of the experts with regard to the predominance prong of Rule
23(b)(3). Both parties rely heavily on their respective—and diametrically opposed—expert
declarations.7 Nevertheless, this Court has rigorously analyzed the conflicting testimony,
making credibility findings as needed, in order to determine whether Plaintiffs have met their
burden on each class certification requirement. See In re Hydrogen Peroxide Antitrust Litig., 552
F.3d at 324. Because much of the conflicting expert testimony is informed by competing
factual characterizations regarding the nature of the market for TiO2, this Court will first
make the necessary factual findings regarding that market before proceeding on to the
substantive requirements of Rule 23(b)(3). See Blades v. Monsanto Co., 400 F.3d 562, 575 (8th
Cir. 2005) (“[I]n ruling on class certification, a court may be required to resolve disputes
concerning the factual setting of the case. This extends to the resolution of expert disputes
concerning the import of evidence concerning the factual setting—such as economic
evidence as to business operations or market transactions.”).
A. The Titanium Dioxide Market—Findings of Fact
As will be discussed infra, in order for this Court to certify a class in this case, it must
be satisfied that the Plaintiffs have set forth a plausible methodology for proving class-wide
7
At the August 13, 2012 class certification hearing, the parties did not introduce live expert
testimony—instead, they introduced excerpts of deposition testimony, and excerpts of the expert
declarations.
18
impact as a result of the alleged conspiracy. In other words, assuming the alleged conspiracy
existed, Plaintiffs still must be able to show that each class member was injured, or
“impacted” by that conspiracy through evidence that is common to the class as a whole.
Generally speaking, this will require the Plaintiffs to show that the class members paid a
higher price for TiO2 purchased from Defendants than they would have absent the existence
of a conspiracy. See Hanover Shoe v. United Shoe Machinery Corp., 392 U.S. 481, 489 (1968)
(“when a buyer shows that the price paid by him . . . is illegally high and also shows the
amount of the overcharge, he has made out a prima facie case of injury and damage”).
Seemingly following the plaintiff-side class certification script8 for horizontal price
fixing cases, Plaintiffs have introduced an expert declaration that relies, in part, on certain
oligopolistic tendencies in the TiO2 market that Plaintiffs allege facilitate collusion and
proves common impact. Specifically, Plaintiffs‟ Expert, Dr. Russell Lamb, maintains that (1)
the multiple nearly simultaneous price increase announcements indicate coordinated pricing;
(2) the TiO2 market is dominated by Defendants; (3) TiO2 is a commodity-like product that
is interchangeable across suppliers; (4) there are many buyers in the market for TiO2; (5)
there are high barriers to entry in the market for TiO2; (6) demand for TiO2 was stable or
declining during the Class Period; and (7) competition occurs primarily on the basis of price
in the TiO2 market. See Report of Dr. Russell Lamb (“Lamb Report”) ¶¶ 28-62. These
factors undergird Dr. Lamb‟s conclusion that if a price-fixing conspiracy occurred, that
8
For example, Dr. John Beyer, a frequent plaintiffs‟ expert in class certification cases, has outlined
the relevant market factors used to prove common impact in The Role of Economics in Class Certification
and Class-Wide Impact, in LITIGATING CONSPIRACY: AN ANALYSIS OF COMPETITION CLASS ACTIONS
(Stephen Pitel ed. 2006).
19
conspiracy would have impacted all members of the class by way of artificially inflated prices
for TiO2.
Following their own script,9 Defendants argue that certain of these market factors are
not present in the market for TiO2, and as a result, Dr. Lamb‟s conclusion that common
proof of class-wide impact exists is therefore erroneous. Specifically, Defendants‟ expert,
Dr. Michelle Burtis, contends that: (1) Defendants produce hundreds of different TiO2
products, and therefore TiO2 cannot be considered a commodity-like product; (2) TiO2
pricing is highly complex, individualized, and is not the primary basis for competition among
Defendants; and (3) class members had the ability to purchase TiO2 from producers that are
not alleged cartel members, thereby necessitating individual inquiry. See Report of Dr.
Michelle Burtis (“Burtis Report”) ¶¶ 14-57.
Each of these TiO2 market characteristics will be analyzed below.
Price increase announcements indicate coordinated behavior. After analyzing “more than ten
years‟ worth of price increase announcements issued by the Cartel Members,” Dr. Lamb
concludes that “throughout the Class Period, the Cartel Members announced multiple nearly
simultaneous price increases that applied across the board to all users of titanium dioxide,
and to all products and grades of titanium dioxide sold by the Cartel Members.” Lamb
Report ¶ 29. Furthermore, Dr. Lamb concludes that these price increase announcements
occurred close-in-time to meetings in which many of the cartel members participated.
Accordingly, Dr. Lamb posits that “[w]hile [firms] can certainly announce price increases
9
See John H. Johnson & Gregory K. Leonard, Economics and the Rigorous Analysis of Class Certification
in Antitrust Cases, 3 J. COMPETITION L. & ECON., 341, 344-345 (2007) (taking issue with the
“prototypical plaintiffs‟ argument and arguing that “the requirement of common proof of antitrust
injury should usually present a substantial hurdle for plaintiffs.”).
20
without coordination, it is hard to explain the same, or nearly the same, price increases being
repeatedly announced nearly simultaneously by different firms supposedly acting
independently.”
Id. ¶ 28.
In support of his conclusions, Dr. Lamb presents a table
summarizing the price increase announcements announced by the Defendants in this case.
See id. at Table 2. Importantly, Dr. Lamb concludes that the price increase announcements
“were efforts by the Cartel Members to confirm their cartel behavior and signal to each
other and to their customers that price increases would be implemented and enforced
market-wide.” Id. ¶ 29.
In response, Defendants‟ expert, Dr. Burtis does not take issue with the existence of
the price increase announcements, but rather, with the interpretation of those announcements.
Specifically, Dr. Burtis maintains that the price increase announcements by Defendants are
not necessarily evidence of collusion. Citing a textbook on industrial organization, Dr.
Burtis contends that parallel pricing behavior is a natural consequence of competition in
oligopolies, and therefore “it would be expected that a unilateral price increase
announcement by one Defendant would influence the decisions of the other Defendants,
and that a plausible response would be to announce similar price increases quickly.” Burtis
Report ¶ 117. Finally, Dr. Burtis argues that even if price increases were announced nearly
simultaneously, there is no evidence that they were implemented in any uniform way. Id. ¶ 116.
This Court finds credible Dr. Lamb‟s conclusions that the Defendants implemented
multiple nearly simultaneous price increases throughout the class period, and those price
increases can be used to prove coordinated pricing. As noted, Dr. Burtis does not dispute
21
the fact that the price increase announcements were made, but does dispute the inferences
that can be drawn from those announcements.
TiO2 Market Dominance by Defendants.
In Plaintiffs‟ Consolidated Amended Complaint, they allege that Defendants are the
leading suppliers of TiO2 in the world, and control approximately 70 percent of the global
production capacity. CAC ¶ 1. Dr. Lamb, using publicly available documents common to
the class as a whole, confirmed this assertion, and concludes “class-wide evidence shows that
the Cartel Members controlled the vast majority of sales of titanium dioxide to the Class
members during the Class Period in this matter.” Lamb Report ¶¶ 30-31. The Defendants‟
Annual Reports and SEC filings confirm this finding and indicate that the Defendants
produce between 70 to 75 percent of the world‟s supply of TiO2 . See id. ¶ 31. Furthermore,
Dr. Lamb‟s analysis concludes that the Cartel Members controlled 98 percent of the North
American market for TiO2 during the Class Period. Id. ¶ 34, and Table 4. Dr. Lamb
concludes that “[w]hen a small group of firms dominate the market for a product, it makes it
easier for them to form a cartel such as the one alleged here.” Id. ¶ 36.
Dr. Burtis does not directly contradict Dr. Lamb‟s assertions regarding the market
power belonging to the alleged conspirators in this case. Instead, she argues that evidence
exists showing that TiO2 customers had the ability to purchase the product from producers
other than the alleged co-conspirators throughout the relevant period. Burtis Report ¶ 57.
In this regard, Dr. Burtis argues that the ability to purchase TiO2 from other producers
necessitates individual inquiry into “each putative class member‟s ability to use TiO2
products produced „offshore‟ and the extent to which they used this ability to negotiate
22
prices with Defendants. Id. However, because Dr. Burtis does not dispute Dr. Lamb‟s
general conclusions that the market for TiO2 is a highly concentrated one, this Court will
take that fact as established, and will address the import of Dr. Burtis‟ argument in the
predominance section infra.
TiO2 as a commodity-like product & competition based primarily on price
According to Dr. Lamb, TiO2 is a commodity-like product and is interchangeable10
across suppliers. Lamb Report ¶ 37. This factor has two main implications: first, when a
product is characterized as a commodity, competition is based primarily on price and,
second, when a product is interchangeable with other similar products produced by
competitors, coordination among firms is facilitated because “firms wishing to form a cartel
can more easily monitor and detect defections from a price-fixing agreement.” Id. Dr.
Lamb concludes that TiO2 is a commodity-like product even though each Defendant
produces numerous different grades of the product for many different applications. In so
concluding, Dr. Lamb relies on the Defendants‟ SEC filings, market research reports, and
internal documents indicating that the different grades of TiO2 produced by one Defendant
were fungible with those produced by other Defendants. See id. ¶ 40. According to Dr.
Lamb, this factor “makes the Cartel for titanium dioxide far more likely.”
Dr. Burtis and Defendants take great issue with Dr. Lamb‟s conclusion that TiO2 is a
commodity-like product. Dr. Burtis contends that, although the TiO2 products produced by
the Defendants all contain the same chemical, they vary widely in their intended use and
10
“Interchangeability implies that one product is roughly equivalent to another for the use to which
it is put; while there may be some degree of preference for one over the other, either would work
effectively.” Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 437 (3d Cir. 1997) (citation
omitted).
23
application. Dr. Burtis points to evidence indicating that when TiO2 purchasers considered
changing suppliers, they frequently needed to test the new product to make sure it would
work in their production process. Burtis Report ¶ 16. Furthermore, certain TiO2 purchasers
were required to reformulate their production processes to accommodate different TiO2
products. Id. In short, Dr. Burtis has provided substantial evidence indicating that the TiO2
products produced by the different Defendants were not identical to each other, and that the
individual Defendants spent time and money attempting to differentiate their products from
those of their competitors.
Notwithstanding this, after reviewing all the evidence, Defendants‟ contention that
titanium dioxide is not a commodity-like product is simply belied by their own
characterization of the chemical.
For example, in its 2006 Form 10-K,11 Defendant
Millennium stated: “[d]ue to the commodity nature of certain of [its] products, competition in
[the global titanium dioxide market] is based primarily on price . . .” Lamb Report ¶ 38.
Similarly, in its 2010 10-K, Defendant Kronos stated that “the majority of our grades and
substantially all of our production are considered commodity pigments with price and
availability being the most significant competitive factors.” Id. Defendants also produced
so-called “crosswalk” documents that note which products offered by competitors are
compatible or interchangeable with their own. See id. ¶ 40 n. 93 and accompanying text.
11
Required by the Securities and Exchange Commission, the Form 10-K is a comprehensive annual
report summarizing a company‟s performance and financial condition.
24
Accordingly, while there is certainly some differentiation among TiO2 products
produced by the Defendants, the Court credits Dr. Lamb‟s conclusion that TiO2 is a
commodity-like product and that competition among produces is based primarily on price. 12
Many buyers in the TiO2 market.
Dr. Lamb concludes that each cartel member maintains a large customer base and
that there are numerous purchasers of TiO2. In this regard, Dr. Lamb asserts that “[w]hen
there are many buyers in a market for a particular good, a cartel such as the one alleged here
is more likely to be effective.” Lamb Report ¶ 44. “This is because the incentive to a cartel
member for undercutting the conspiracy is lower when there are many smaller purchasers
since each potential sale is small while the risk of disrupting the cartel can carry large
penalties.” Id. Dr. Burtis does not dispute the fact that the buying side of the TiO2 market
is unconcentrated. Accordingly, the Court will take this fact as established.
High barriers to entry.
Next, Dr. Lamb concludes that there are high barriers to entry in the market for
TiO2. Specifically, there is a significant level of capital investment required to build a
competitive TiO2 manufacturing facility—it is estimated that a new plant would require
$250-500 million and three to five years to build. Lamb Report ¶¶ 49-50. Additionally, the
current TiO2 producers hold patents for the proprietary productions processes, which would
impose another significant barrier to entry into the market. Defendants and Dr. Burtis do
12
This conclusion relates only to the commodity-like nature of TiO2. Defendants‟ arguments
that pricing for TiO2 is determined by individual negotiations and varied contract terms will
be discussed in the predominance section infra.
25
not dispute the fact that there are high barriers to entry in the TiO2 market, and this Court
will take this fact as established.
Stable or declining demand for titanium dioxide and excess production capacity
Dr. Lamb concludes that demand for TiO2 experienced a 34.8 percent decline
between 2002 and 2009. Lamb Report ¶ 60. Moreover, he concludes that during this
period, there was significant excess capacity in the production of the chemical—meaning
that TiO2 producers were producing less of the chemical than their capabilities allowed. Id. ¶
71-74. According to Dr. Lamb, standard economic theory predicts that, in the absence of a
cartel, these factors would lead to falling prices for TiO2 as a result of competition for
market share among competitors. See id. ¶ 69. However, Dr. Lamb determined that prices
for TiO2 did not fall as economic theory predicts, but instead rose significantly during the
Class Period. Id. ¶ 70. According to Dr. Lamb, “[t[his combination of stable or falling
demand and increasing prices constitutes common proof that the effect of the
anticompetitive behavior which forms the heart of this Cartel was to raise prices above those
that would have prevailed in the market otherwise.” Id.
While Dr. Burtis disputes Dr. Lamb‟s conclusion that these market factors constitute
common proof of class-wide impact, she does not directly refute his underlying findings—
that demand for TiO2 declined during the Class Period and that substantial excess capacity
existed in the industry. Accordingly, this Court will take those facts as established, and will
consider their import below.
26
B. Predominance
In considering the Rule 23(b)(3) predominance requirement, “a court‟s rigorous
analysis begins with the elements of the underlying cause of action.” In re Rail Freight, 2012
WL 2870207, at *30. “If proof of the essential elements of the cause of action requires
individual treatment, then class certification is unsuitable.” In re Hydrogen Peroxide Antitrust
Litig., 552 F.3d at 311.
To establish an antitrust violation, a plaintiff must prove three elements: (1) a
violation of the antitrust laws—here, Section 1 of the Sherman Act; (2) individual injury
resulting from that violation; and (3) measurable damages. See 15 U.S.C. § 1; Deiter v.
Microsoft Corp., 436 F.3d 461, 467 (4th Cir. 2006). However, at the class certification stage,
Plaintiffs need only show by a preponderance of the evidence that these elements are
“capable of proof at trial through evidence that is common to the class rather than individual to
its members.” In re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 311-12 (emphasis added).
Each element is addressed in turn.
i. Violation of Antitrust Law
Plaintiffs allege that Defendants conspired to fix the price of TiO2. CAC ¶ 2. This
type of horizontal price-fixing scheme, if it existed, is a per se violation of the Sherman Act.
See Texaco, Inc. v. Dagher, 547 U.S. 1, 5 (2006). Defendants do not dispute that this element
may be proved by common evidence. See Defs.‟ Class Opp‟n at 15; see also 7AA FEDERAL
PRACTICE AND PROCEDURE § 1781 (3d ed. 2005) (“whether a conspiracy exists is a common
question that is thought to predominate over the other issues in the case and has the effect
of satisfying the first prerequisite in Rule 23(b)(3)”). The question of whether a conspiracy
27
to fix the price of TiO2 existed is a fact capable of common proof because “plaintiffs‟
allegations of price fixing indisputably will focus on the actions of the defendants, and, as
such, proof for these issues will not vary among class members.” In re Rail Freight, 2012 WL
2870207, at *31 (quotation and citations omitted). Accordingly, this Court finds by a
preponderance of the evidence that the element of antitrust injury is capable of proof at trial
through evidence that is common to the class.
The Court now turns to the real crux of Defendants‟ opposition to class
certification—that is, whether the Plaintiffs can prove the elements of common impact and
damages on a class-wide basis.
ii. Impact
The second element the Plaintiffs will need to establish is that the class members
suffered injury from the alleged price-fixing conspiracy.13 This element, commonly referred
to as “impact,” can be “likened to the causation element in a negligence cause of action. The
term means simply that the antitrust violation caused injury to the antitrust plaintiff.” In re
Urethane Antitrust Litig., 252 F.R.D. 629, 634 (D. Kan. 2008) (quoting State of Alabama v. Blue
Bird Body Co., 573 F.2d 309, 317 (5th Cir. 1978)). Of course, at this stage in the litigation, the
13
This elements involves two distinct questions: “One is the familiar factual question whether the
plaintiff has indeed suffered harm, or „injury-in-fact.‟ The other is the legal question whether any
such injury is „injury of the type the antitrust laws were intended to prevent and that flows from that
which makes defendants‟ acts unlawful.” Cordes & Co. Fin. Servs., Inc. v. A.G. Edwards & Sons, Inc.,
502 F.3d 91, 106 (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)).
Because Plaintiffs in this case allege only one injury—that they were subjected to artificially inflated
prices for TiO2 as a result of a price-fixing conspiracy in violation of Section 1 of the Sherman
Act—the Defendants do not challenge this element. See Cordes, 502 F.3d at 107 (“Because each class
member allegedly suffered the same type of injury, the legal question of whether such an injury is „of
the type the antitrust laws were intended to prevent and that flows from that which makes
defendants‟ acts unlawful,‟ Brunswick, 429 U.S. at 489, is a common one.”). Accordingly, the legal
question of injury is common to the class, and this Court will focus on the first prong of the impact
analysis—whether the class members suffered “injury-in-fact.”
28
Plaintiffs need not prove this element, “[i]nstead, the task for plaintiffs at class certification is
to demonstrate that the element of antitrust impact is capable of proof at trial through evidence
that is common to the class rather than individual to its members.” In re Hydrogen Peroxide
Antitrust Litig., 552 F.3d at 311-12 (emphasis added). In other words, Plaintiffs‟ burden of
showing antitrust impact is “satisfied by its proof of some damage flowing from the unlawful
conspiracy; inquiry beyond this minimum point goes only to the amount and not the fact of
damage. It is enough that the illegality is shown to be a material cause of the injury.” Zenith
Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n.9 (1969) (emphasis added).
To meet their burden, therefore, Plaintiffs must show, using evidence common to the
class, that class members paid a higher price for TiO2 from Defendants than they would
have absent the alleged conspiracy. See Hanover Shoe, 392 U.S. 481, 489. In Blades v. Monsanto
Co., the Eighth Circuit defined common proof as follows:
The nature of the evidence that will suffice to resolve a question determines
whether the question is common or individual. If, to make a prima facie
showing on a given question, the members of a proposed class will need to
present evidence that varies from member to member, then it is an individual
question. If the same evidence will suffice for each member to make a prima
facie showing, then it becomes a common question.
400 F.3d at 566 (citations omitted).
As is often the case in horizontal price fixing cases, Plaintiffs here seek to show this
element is capable of common proof by comparing a hypothetical “but-for” price—i.e., the
price that would have been paid in the absence of the conspiracy—with the prices actually
paid by the Plaintiffs during the Class Period. See In re EPDM Antitrust Litig., 256 F.R.D. 82,
88 (D. Conn. 2009). In this kind of but-for comparison, prices are analyzed in a scenario
that is “free of the restraints and conduct alleged to be anticompetitive.” In re Rail Freight,
29
2012 WL 2870207, at *41 (quoting Blades v. Monsanto, Co., 400 F.3d at 569. If Plaintiffs can
show that they paid a higher actual price than the but-for price using evidence common to
the class, they have met their burden on the impact element.
As the Rail Freight court recently summarized, there are various methods by which
plaintiffs may prove that common evidence is capable of proving impact:
[O]ne way of showing that common questions predominate on the issue of
injury-in-fact
is to show that there is a common method for proving that the
class plaintiffs paid higher actual prices than in the but-for
world, such as using an economic regression model
incorporating a variety of factors to demonstrate that a
conspiracy variable was at work during the class period, raising
prices above the “but-for” level for all plaintiffs.
In re EPDM Antitrust Litig., 256 F.R.D. at 88. . . .
Comparing but-for prices with actual transaction prices by regression
analysis, however, is not the only way for plaintiffs to succeed in a motion for
class certification. Other accepted types of evidence for establishing classwide injury-in-fact include: evidence of lock-step increases of national price
lists; proof that defendants conspired to maintain an inflated base price from
which all negotiations began; and evidence of structural factors that make an
industry susceptible to successful collusion. Ultimately, the question is
whether plaintiffs have shown by a preponderance of the evidence—through
regressions, structural industry factors, or any other persuasive means—that
methods of common proof exist to show class-wide impact.
In re Rail Freight, 2012 WL 2870207, at *41 (internal quotations and citations omitted).
Plaintiffs in this case seek to prove impact by way of all the enumerated methods
above—they proffer class-wide evidence in the form of: (1) industry characteristics tending
to show that the TiO2 industry was ripe for collusion before the alleged conspiracy; (2)
evidence of nearly simultaneous (lock-step) price increase announcements during the
relevant period; (3) Defendants‟ own transactional data showing that prices rose over the
30
period; (4) evidence showing that even if the price increase announcements were not
“implemented” uniformly, they nevertheless served to set an artificially high base level upon
which the Defendants‟ began negotiations; (5) a multiple regression model designed by Dr.
Lamb that attempts to show that, absent the alleged conspiracy, the but-for prices for TiO2
would have been lower; and (6) a pricing structure analysis that attempts to show that prices
for TiO2 would have responded similarly to coordinated pricing activity.
In arguing that common evidence exists to show impact on a class-wide basis,
Plaintiffs rely heavily on the fact that defendants announced multiple nearly simultaneous
price increase announcements throughout the class period. Plaintiffs argue that these price
increase announcements amount to common proof insofar as they served to raise prices for
TiO2 across the board for all purchasers. Defendants counter that, regardless of the price
increase announcements, the evidence shows that price increases were not implemented
uniformly, and more importantly, individual TiO2 transactions between buyers and sellers
were the result of extensive negotiations between the parties. This is a valid point, and there
certainly is substantial evidence showing that the end prices paid by TiO2 customers were the
product of individual negotiation. See, e.g. Burtis Report ¶¶ 34-56. However, according to
the Plaintiffs, these price increase announcements served to set an artificially high baseline
for price negotiations, and point to compelling evidence supporting this proposition. See,
e.g., Lamb Rebuttal ¶ 91 nn. 115-16 and accompanying text, ECF No. 306-1.
Having reviewed the submissions and the parties‟ arguments, this Court concludes
that the evidence of the nearly simultaneous price increase announcements, in conjunction
with the structural factors present in the TiO2 industry, see supra, makes the element of
31
antitrust impact “capable of proof at trial through evidence that is common to the class
rather than individual to its members.” In re Hydrogen Peroxide Antitrust Litig., 552 F.3d at
311-12. As discussed in In re Rail Freight, “this case falls within the line of cases holding that
class-wide injury-in-fact can be proven at trial by showing that the allegedly conspiratorial
[price increases] were the starting point from which negotiations for discounts began.” 2012
WL 2870207, at *62 (collecting cases).
Next, the Plaintiffs argue that class-wide impact can be demonstrated by showing that
the prices actually paid by TiO2 customers were higher than they would have been but-for
the conspiracy. To do this, Plaintiffs rely on a multiple regression model created by Dr.
Lamb. As described in a reference guide published by the Federal Judicial Center:
Multiple regression analysis is a statistical tool used to understand the
relationship between or among two or more variables. Multiple regression
involves a variable to be explained—called the dependent variable—and
additional explanatory variables that are thought to produce or be associated
with changes in the dependent variable. For example, . . . in an antitrust cartel
damages case, the plaintiff‟s expert might utilize multiple regression to
evaluate the extent to which the price of a product increased during the period
in which the cartel was effective, after accounting for costs and other variables
unrelated to the cartel. The defendant‟s expert might use multiple regression
to suggest that the plaintiff‟s expert had omitted a number of pricedetermining variables.
DANIEL L. RUBINFELD, REFERENCE GUIDE ON MULTIPLE REGRESSION 305-06 (Fed.
Judicial Ctr., 3d ed. 2011).
In his report, Dr. Lamb explains the variables used in his regression analysis to isolate
the effect of the cartel on prices for TiO2. Lamb Report ¶¶ 75-95. He concludes that, as a
result of the cartel, prices for TiO2 were more than seven percent higher during the Class
32
Period. Id. ¶ 94. Defendants attack Dr. Lamb‟s regression model on numerous grounds
which will not be discussed in detail here. That is because:
The real question before this court is whether the plaintiffs have established a
workable multiple regression equation, not whether plaintiffs‟ model actually
works, because the issue at class certification is not which expert is the most
credible, or the most accurate modeler, but rather have the plaintiffs
demonstrated that there is a way to prove a class-wide measure of [impact14]
through generalized proof.
In re EPDM Antitrust Litig., 256 F.R.D. at 100.
In short, this Court finds that Dr. Lamb‟s regression analysis accurately reflects the
characteristics of the titanium dioxide industry, and the facts in this case. While his model
may not be perfect,15 this Court concludes that a regression model is certainly capable of
proving class-wide impact at trial. In light of the structural factors in the TiO2 industry, this
case falls squarely within the type of case that courts have found well-suited to regression
analyses. See, e.g. In re Rail Freight Antitrust Litig., 2012 WL 2870207, at *72 (collecting cases).
Defendants‟ quibbles with Dr. Lamb‟s regression model largely center on the results of his
analysis—in other words, Defendants argue that if Dr. Lamb included more data, or
extended certain dates, his very own regression would show that prices of TiO2 did not
increase during the time period. However, by “merely disputing the results of the plaintiffs‟
experts‟ analysis rather than the feasibility of using a single formula methodology,”
Defendants raise a “merits issue, not a class certification issue.” In re EPDM Antitrust Litig.,
14
The EPDM court made this statement in the context of evaluating the damages prong of the
predominance inquiry. However, it is equally applicable on the “impact” prong as well.
15
Dr. Lamb notes that his model is “preliminary, given that discovery is ongoing.” He states that
he is “highly confident that a model similar to this one will be capable of showing the degree to
which prices were artificially inflated as a result of the Cartel and computing aggregate overcharges
to the Class as a whole at trial.” Lamb Report ¶ 82.
33
256 F.R.D. at 96. Considering similar arguments, the United States District Court for the
Southern District of New York recently stated:
[D]efendants do not assert that plaintiffs have failed to prove some factual
predicate necessary for demonstrating causation and artificiality on a classwide basis. Instead, defendants‟ objections go solely to whether plaintiffs‟
models will in fact demonstrate causation and artificiality, and hence, are
unrelated to the requirements of class certification. Indeed, by arguing that
plaintiffs‟ models, as corrected by defendants‟ expert, show that Amaranth did
not cause any artificiality during the Class Period, defendants impliedly
concede that causation can be evaluated on a class-wide basis.
In re Amaranth Natural Gas Commodities Litig., 269 F.R.D. 366, 385 (S.D.N.Y. 2010).
Accordingly, this Court concludes that Dr. Lamb‟s multiple regression model is “capable” of
proving class-wide impact at trial “through evidence that is common to the class rather than
individual to its members.” In re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 311-12.
Defendants will be free to attack the probativeness of that model or its perceived
shortcomings as they see fit.
As previously noted, “[b]ecause the nature of the evidence that will suffice to resolve
a question determines whether the question is common or individual, a district court must
formulate some prediction as to how specific issues will play out in order to determine whether
common or individual issues predominate in a given case.” Id. (internal quotations and
citations omitted, emphasis added). It does not take a crystal ball to predict the way this case
will play out at trial—Plaintiffs will overwhelmingly rely on common evidence to prove the
existence of a price-fixing conspiracy.
Accordingly, “[c]ommon questions predominate
where „even if each Class Member . . . were to bring suit individually, each plaintiff would
have to allege and prove virtually identical facts.‟” In re EPDM Antitrust Litig., 256 F.R.D. at
34
103 (quoting In re Merrill Lynch & Co. Research Reports Sec. Litig., 246 F.R.D. 156, 165
(S.D.N.Y. 2007).
iii. Damages
The final element Plaintiffs will have to prove at trial is that they suffered
“measurable damages.” In re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 311. In contrast to
the “impact” prong of the Rule 23(b) analysis, which asks only “whether the plaintiffs were
harmed,” the damages prong asks “by how much.” In re EPDM Antitrust Litig., 256 F.R.D.
at 88. At the class certification stage, Plaintiffs must show, by a preponderance of the
evidence, that they will be able to prove damages using common proof. In re Rail Freight,
2012 WL 2870207, at *74.
In this case, Plaintiffs argue that common proof of damages exists in in the form of
Dr. Lamb‟s regression analysis.
Dr. Lamb contends that his regression method is “a
standard economic method [ ] that is capable of being used to compute aggregate damages
to the class as a whole.” Lamb Report ¶ 114. Briefly, he uses his regression analysis to
arrive at a seven percent overcharge during the course of the alleged conspiracy (i.e., prices
for TiO2 were seven percent higher than they would have been absent the conspiracy). He
then proposes to multiply the total volume of TiO2 purchases by Class Members during the
period by that percentage overcharge to arrive at “the total amount of damages owed to the
Class.” Id. ¶ 116. In other words, Dr. Lamb‟s regression is only capable of calculating an
“aggregate” overcharge that is not capable of distinguishing between individual class
members.
35
As the well-developed economic literature on cartels, relied on by Plaintiffs for their
“impact” argument, makes clear, certain structural factors in an industry make collusion
more attractive or more feasible. At the same time, however, that same literature teaches
that one cannot assume an illegal price-fixing agreement would damage each class member
in the same manner. That is because those very same structural factors that encourage
collusion also encourage “cheating” by co-conspirators, thereby rendering individual damage
amounts different among the members of a class. This theory, first enunciated by Nobel
laureate George Stigler in A Theory of Oligopoly, 72 J. Pol. Econ. 44, 46 (1964), is wellestablished in the antitrust context. See, e.g., RICHARD A. POSNER, ANTITRUST LAW 60-69
(2d ed. 2001). As demonstrated by Stigler, the empirical evidence indicates that even where
a horizontal price-fixing agreement has been reached, that agreement will likely result in a
range of impacts across the class. 72 J. Pol. Econ. At 46.
The Fourth Circuit has consistently held that “average” or “aggregate” damages are
not an appropriate measure of damages in an antitrust case. For example, in Windham v. Am.
Brands, Inc., the court stated, “[t]he language that Congress used in [the Antitrust statute] . . .
leaves no room for awarding damages to some amorphous „fluid class‟ rather than, or in
addition, to one or more actually injured persons. It likewise does not permit any person to
recover damages sustained not by him, but by someone else who happens to be a member of
such class.” 565 F.2d 59, 66 (4th Cir. 1977) (quotations and citation omitted). While
individual issues do not predominate for the purposes of this Court‟s “impact” analysis,
individual issues certainly overshadow common issues with respect to damages.
For
example, as the Defendants have clearly shown, some level of individual negotiation took
36
place between buyers and sellers of TiO2 regarding rebates, price, non-price terms, and the
like. If a price-fixing conspiracy existed, it is clear that such a conspiracy would necessarily
have damaged the individual class members differently.
The need to inquire into individual damage calculations, however, is not an
impediment to class certification. As summarized by the Fourth Circuit, a damages inquiry
necessarily requires individual proof:
. . . Rule 23 contains no suggestion that the necessity for individual damage
determinations destroys commonality, typicality, or predominance, or
otherwise forecloses class certification. In fact, Rule 23 explicitly envisions
class actions with such individualized damage determinations. See Fed. R. Civ.
P. 23 advisory committee‟s note (1966 Amendment, subdivision (c)(4)) (noting
that Rule 23(c)(4) permits courts to certify a class with respect to particular
issues and contemplates possible class adjudication of liability issues with “the
members of the class . . . thereafter . . . required to come in individually and
prove the amounts of their respective claims.”); see also 5 Moore’s Federal Practice
§ 23.23[2] (1997) (“[T]he necessity of making an individualized determination
of damages for each class member generally does not defeat commonality.”).
Indeed, “[i]n actions for money damages under Rule 23(b)(3), courts
usually require individual proof of the amount of damages each member
incurred.” Id. at § 23.46[2][a] (1997) (emphasis added). When such
individualized inquiries are necessary, if “common questions predominate over
individual questions as to liability, courts generally find the predominance
standard of Rule 23(b)(3) to be satisfied.” Id.
Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 427-28 (4th Cir. 2003). Given the inherent
difficulties in assessing individual damages questions in this type of case, the Court notes
that it has several options with which to consider damages at a future date. As discussed by
the Second Circuit, there are at least five methods to deal with the individual damages
inquiry:
37
(1) bifurcating liability and damage trials with the same or different juries; (2)
appointing a magistrate judge or special master to preside over individual
damages proceedings; (3) decertifying the class after the liability trial and
providing notice to class members concerning how they may proceed to prove
damages; (4) creating subclasses; or (5) altering or amending the class.
In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 141 (citations omitted). Indeed,
the Fourth Circuit in the Gunnells case reiterated its previous admonition to “take full
advantage of the provision in [Rule 23(c)(4)] permitting class treatment of separate issues . . .
to reduce the range of disputed issues in complex litigation.” 348 F.3d at 426 (quoting In re
A.H. Robins Co., Inc., 880 F.2d 709, 740 (4th Cir. 1989)).
Accordingly, while there exist numerous individual questions of damages, that is not
enough to defeat class certification, and one or more of the above-listed methods may need
to be utilized as this case progresses. See Gunnells, 348 F.3d at 427 (“class certification
„provides a single proceeding in which to determine the merits of the plaintiffs‟ claims, and
therefore protects the defendant from inconsistent adjudications.‟”) (quoting 5 Moore’s Federal
Practice § 23.02 (1999)).
C. Superiority
The final requirement of Rule 23(b)(3) is that this Court must determine that “a class
action is superior to other available methods for fairly and efficiently adjudicating the
controversy.” Fed. R. Civ. P. 23(b)(3). “In deciding whether certification of a class is
superior to other trial methods, the Court considers whether the resolution of common
issues advances the litigation as a whole, as opposed to leaving a large number of issues for
case-by-case adjudication.” In re Polyester Staple Antitrust Litig., 2007 WL 2111380, at *31
(W.D.N.C. July 19, 2007) (internal quotation and citation omitted). Here, the Defendants
38
have not specifically argued that the superiority prong has not been met, and this Court
concludes that because common issues predominate, class action treatment is superior to
other available methods of adjudicating the Plaintiffs‟ claims. In short, class treatment will
“achieve economies of time, effort, and expense, and promote . . . uniformity of decision as
to persons similarly situated, without sacrificing procedural fairness or bringing about
undesirable results.” Amchem, 521 U.S. at 615.
III. ADDITIONAL ISSUES
Rule 23(c)(1)(C) of the Federal Rules of Civil Procedure provides simply that “[a]n
order that grants or denies class certification may be altered or amended before final
judgment.” Fed. R. Civ. P. 23(c)(1)(C). This Court has previously stated that “[a] district
court has „broad discretion in determining whether the action may be maintained as a class
action,‟ . . . and so long as the court considers the proper criteria, it is permitted to exercise
such discretion.” Doe v. Lally, 467 F. Supp. 1339, 1345 (D. Md. 1979) (citations omitted). As
this court previously held, “[a] federal district court possesses the same broad discretion in
determining whether to modify or even decertify a class.” Wu v. MAMSI Life & Health Ins.
Co., 256 F.R.D. 158, 162 (D. Md. 2008) (citing Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147,
160 (1982)). In fact, a federal district court judge has an affirmative obligation to ensure that
the class membership remains at all times consistent with the underlying facts and
procedural posture of the case. See Richardson v. Byrd, 709 F.2d 1016, 1019 (5th Cir. 1983)
(“Under Rule 23 . . . the district judge must define, redefine, subclass, and decertify as
appropriate in response to the progression of the case from assertion to facts.”); Chisolm v.
TranSouth Fin. Corp. 194 F.R.D. 538, 544 (E.D. Va. 2000) (“[T]he Court is duty bound to
39
monitor its class decision and, where certification proves improvident, to decertify,
subclassify, alter, or otherwise amend its class certification.”).
Here, in opposing class certification, the Defendants have raised several additional
issues that do not fit neatly into the previously discussed Rule 23 categories. For example,
Defendants claim that many members of the putative class entered into contracts with
Defendants that contain mandatory arbitration provisions, forum-selection clauses, and jury
waiver provisions. Neither party briefed these issues extensively, and they were only briefly
addressed at the August 13 class certification hearing. Because it is unclear to what extent
the putative class members have this type of contractual provision, and to what extent the
Defendants will seek to uphold those agreements, this Court concludes that “the possible
arbitration [or other contractual bar] of some class members does not, by itself, defeat class
certification.” In re Rail Freight Antitrust Litig., 2012 WL 2870207, at *28 (internal quotation
and citation omitted).
Accordingly, to the extent certain putative class members‟ contracts render them
atypical of the class as a whole, this Court will exercise its discretion to amend its class
certification Order as necessary.
IV. RULE 23(g)—APPOINTING CLASS COUNSEL
Pursuant to the 2003 amendments to Rule 23, the qualifications and experience of
Plaintiffs‟ counsel are now considered under Rule 23(g). Rule 23(g)(1) provides that “a court
that certifies a class must appoint class counsel.” Fed. R. Civ. P. 23(g)(1). In appointing
class counsel, a court must consider:
(i)
the work counsel has done in identifying or investigating potential
claims in the action;
40
(ii)
(iii)
(iv)
counsel‟s experience in handling class actions, other complex litigation,
and the types of claims asserted in the action;
counsel‟s knowledge of the applicable law; and
the resources that counsel will commit to representing the class[.]
Id. This Court has already appointed the following interim co-lead class counsel: Gold
Bennett Cera & Sidener LLP; Leiff, Cabraser, Heimann & Bernstein LLP; and the Joseph
Saveri Law Firm. See Amended Case Mgmt. Order, ECF No. 326. Those law firms, with
the addition of Eric L. Cramer of Berger & Montague, P.C. and Linda Nussbaum of Grant
& Eisenhofer, P.A. have been appointed members of the Plaintiffs‟ Executive Committee.
See Case Mgmt. Order, ECF No. 106. Finally, Paul Mark Sandler of Shapiro Sher Guinot &
Sandler has been appointed Liaison Counsel. See id. As noted by the Plaintiffs:
Since their initial appointment, the above-listed firms . . . have devoted
substantial time and resources to this case, including complex legal matters on
a variety of motions, case management, discovery planning, and extensive
meetings and conferrals with Defendants regarding ongoing discovery.
Moreover, proposed Class Counsel have demonstrated their extensive
experience and expertise prosecuting antitrust, class action, and complex civil
litigation cases and have successfully litigated antitrust class actions and other
similar cases in courts throughout the United States.
Pls. Class Mem. at 41-42.
Defendants do not object or disagree with the Plaintiffs‟ characterization of their
representation. This Court has reviewed the Rule 23(g)(1) requirements, and concludes that
Plaintiffs‟ proposed co-lead counsel are well qualified to represent the class in this case.
Accordingly, those counsel listed above will be appointed class counsel.
41
CONCLUSION
For the reasons stated above, this Court finds by a preponderance of the evidence
that the Plaintiffs have established each necessary element of Rule 23 of the Federal Rules of
Civil Procedure.
Accordingly, Plaintiffs‟ Motion for Class Certification and for
Appointment of Class Counsel (ECF No. 246) will be GRANTED.
Dated: August 28, 2012
A separate Order follows.
/s/___________________
Richard D. Bennett
United States District Judge
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