U.S. Seventh Circuit Affirms Certification of Anti-Trust Action; Rejects Application of Previous Class Release

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Plaintiffs brought suit alleging that the defendants agreed to restrict the supply of containerboard by cutting capacity, slowing back production, taking downtime, idling plants, and tightly restricting inventory, thereby leading to an increase in the price of containerboard.  A nationwide class of direct purchasers was certified, and the Seventh Circuit Court of Appeals affirmed.

First, the court noted that the fact that some class members had signed releases as a part of a settlement of an earlier class action dealing with an alleged linerboard conspiracy in the 1993-1995 timeframe did not preclude a subsequent action: “The conduct at issue in the prior litigation was Defendants’ allegedly collusive behavior in the mid-nineties. The actions at issue here are coordinated market manipulation and price-increase announcements that occurred nearly a decade later…. Under Defendants’ argument, they are free to keep colluding in violation of antitrust laws so long as they conspire in the same way as they were alleged to have behaved in a prior settled case. The Court is unaware of any case supporting this argument; indeed, several cases are to the contrary.”

Next, the court addressed the basis for certification under 23(b)(3): “In order to secure class certification, the Purchasers had to demonstrate (not merely allege) that there is proof common to all class members, and that this proof would show that they suffered injuries that reflect the anticompetitive effect of either the violation or the anticompetitive acts made possible by the violation…. Purchasers tendered extensive evidence that, if believed, would be enough to prove the existence of the alleged conspiracy. Not surprisingly, it is largely circumstantial. But they offered voluminous written materials of various types, which in the aggregate pointed to the existence of both agreement and actions to violate the antitrust laws…. The more difficult question (though not too difficult in the end) is whether the common evidence could show the fact of injury on a classwide basis…. At base, Defendants argue that it is not enough for Purchasers to prove aggregate injury and one aggregate overcharge, without allocating how much of that overcharge was paid by each individual class member. They urge that Purchasers have the burden of showing that every class member must prove at least some impact from the alleged violation…. While we have no quarrel with the proposition that each and every class member would need to make such a showing in order ultimately to recover, we have not insisted on this level of proof at the class certification stage…. There is no evidence to make us think that the class defined by the district court either excludes too many purchasers or contains troublesome internal conflicts, either of which would indicate it should be rejected. We therefore move on to the adequacy of the Purchasers’ showing that the conspiracy had an effect on the prices they paid….”

Defendants argue that the approach is “the same kind of ‘trial-by-formula’ that the Supreme Court rejected in Wal–Mart. But in that case the Court disapproved the plaintiff’s attempt to take a sample of the class members, who alleged employment discrimination, to determine what percentage of that sample had actually experienced discrimination, and then to extrapolate that percentage for the whole class. The Purchasers here are doing nothing of the sort: they assert that every person or entity in North America paid the overcharges that resulted from Defendants’ collusive practices. Even for transactions where prices were negotiated individually or a longer term contract existed, the district court found, reasonably, that the ‘starting point for those negotiations would be higher if the market price for the product was artificially inflated….'”

Finally, while the defendants point to certain contractual defenses, (e.g. mandatory arbitration provisions, mediation clauses, forum-selection clauses, jury waivers, provisions shortening the statute of limitations, and clauses eliminating remedies such as treble damages), “Defendants have identified only 190 class members affected by this group of limitations, out of over 100,000 notices…. As the record stands, this smattering of individual contract defenses does not undermine the superiority of the (b)(3) class action.”

 

Kleen Products v. International Paper, No.15-2385, 2016 WL 4137371 (7th Cir. Aug. 4, 2016).

 

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