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In re Urethane Antitrust Litigation
Citations: 913 F. Supp. 2d 1145; 2012 WL 6610878; 2012 U.S. Dist. LEXIS 180365Docket: MDL No. 1616; Case No. 04-1616-JWL
Court: District Court, D. Kansas; December 17, 2012; Federal District Court
Plaintiffs in a multi-district class action allege that Dow Chemical Company conspired with other manufacturers to fix prices for urethane chemical products, violating the Sherman Act. The Court has consolidated cases related to two types of urethane products: settled Polyester Polyol cases and active Polyether Polyol cases, the latter involving Dow and other defendants. A class of plaintiffs was certified for those who purchased specific urethane products in the U.S. from January 1, 1999, to December 31, 2004. After settling with other defendants, Dow remains the sole defendant. The plaintiffs claim a price-fixing conspiracy occurred between 1999 and 2003. Dow's motion for summary judgment on all claims has been denied. Summary judgment is warranted only when there is no genuine dispute over material facts and the moving party is entitled to judgment as a matter of law. The Court assesses evidence favorably towards the nonmoving party, determining that a genuine issue of fact exists if reasonable jurors could decide differently. The moving party must show the absence of genuine issues of material fact, while the nonmoving party must present specific facts to establish a trial issue, supported by affidavits or depositions. The Court emphasizes that summary judgment serves to facilitate the efficient resolution of cases. Section 1 of the Sherman Act prohibits contracts, combinations, or conspiracies that restrain trade, and class plaintiffs allege a horizontal price-fixing conspiracy involving Dow and other defendants, constituting a per se violation of the Act. To establish this claim, plaintiffs must demonstrate: (1) an agreement or conspiracy; (2) among competitors; (3) aiming to manipulate prices; and (4) affecting interstate or foreign commerce. In seeking summary judgment, Dow contests the adequacy of the plaintiffs' evidence for such a conspiracy. The court applies traditional summary judgment standards, requiring plaintiffs to present either direct or circumstantial evidence of an agreement. Direct evidence must be explicit and not require inferences. If direct evidence is weak, additional circumstantial evidence is necessary to withstand a summary judgment motion. While parallel conduct may suggest an antitrust conspiracy, it is insufficient alone; it must be supported by evidence indicating an understanding between parties. Evidence that parties acted against their own interests or had motivation for collusion can bolster claims of conspiracy. Moreover, mere information exchanges about prices are not inherently illegal without evidence of an agreement for unlawful conduct. In reviewing summary judgment standards in antitrust cases, Dow references the Supreme Court's rulings in *Matsushita Electric Industrial Co. v. Zenith Radio Corp.* and *Monsanto Co. v. Spray-Rite Service Corp.* The Court emphasized that, on summary judgment, inferences from facts must favor the non-moving party, but antitrust law restricts permissible inferences from ambiguous evidence. Specifically, conduct that could support both lawful competition and illegal conspiracy does not alone imply conspiracy. To counter a summary judgment motion, a plaintiff must present evidence that tends to exclude the possibility of independent action by alleged conspirators. The Supreme Court highlighted that the absence of a plausible motive for conspiracy is crucial in determining whether a genuine issue for trial exists. If alleged conspirators lack a rational economic motive and their conduct is consistent with other explanations, it cannot support an inference of conspiracy. Furthermore, even if a plausible motive existed, ambiguous conduct alone is insufficient to establish a triable issue of conspiracy. Dow advocates for a thorough examination of evidence to ascertain whether it excludes the possibility of independent actions by the alleged conspirators, emphasizing that the totality of evidence must favor the plaintiff for a triable issue to arise. The *Gibson v. Greater Park City Co.* case reiterates that evidence is ambiguous if it aligns as well with legal interests as with an illegal conspiracy. The Court evaluates whether the class plaintiffs have presented sufficient evidence of a conspiracy, considering if the evidence is ambiguous (consistent with both collusion and competition) or if a reasonable jury could infer a conspiracy from either direct or circumstantial evidence. Dow contends that the alleged price-fixing conspiracy lacks economic plausibility, as prices remained flat or decreased while costs increased, asserting that this undermines the likelihood of a price stabilization effort. The Court rejects this argument, stating that it does not diminish the value of direct evidence of a conspiracy. Citing the Champagne Metals case, the Court underscores that concerns over inference reasonableness pertain mainly to circumstantial evidence, not direct evidence. The Court concludes that the alleged conspiracy is economically plausible, highlighting the industry's concentrated oligopoly structure and barriers to entry as conducive to price-fixing motives. It notes that, regardless of rising costs, defendants had incentives to engage in collusion, referencing the Matsushita case regarding motive. The Court ultimately determines that the plaintiffs have provided sufficient direct evidence to support the existence of a price-fixing conspiracy, particularly through the testimony of Stephanie Barbour, who recounted meetings with Dow executives discussing agreements with competitors Bayer and BASF to set and enforce prices. Ms. Barbour testified that Peter Davies, Dow’s head of polyurethane systems, informed her of BASF's dissatisfaction regarding Dow not implementing a full price increase due to price caps in their contract with a specific customer. Davies warned her against sharing their conversation, threatening to deny it and label her a liar if she did. Additionally, a Bayer representative acknowledged the impropriety of discussing pricing but mentioned they were "being good" amidst a price increase. Ms. Barbour relayed these incidents to Dow's in-house counsel, alongside pricing discussions involving Mr. Fischer and competitors. Two Bayer employees provided evidence of a price-fixing agreement. Michele Blumberg recounted a meeting where Wolfgang Friedrich, Bayer’s global MDI head, assured her that low pricing from competitors was not a concern due to prior discussions with them. He dismissed the legality of such conversations in their country. Blumberg also noted Friedrich advised against adjusting prices for a bid, indicating a mutual understanding among competitors. Gerard Phelan corroborated Friedrich's claims of an agreement on MDI prices with competitors. In response, Dow argued that these witnesses lacked firsthand knowledge of illegal agreements and that no documentation supported their claims. However, the court maintained that at the summary judgment stage, evidence must be viewed favorably for the plaintiffs. While some testimonies might be seen as circumstantial, other statements constituted direct evidence of an agreement, especially Ms. Barbour's compelling account linking Bayer and BASF as conspirators with Dow. Collectively, the evidence could lead a reasonable jury to conclude that an agreement existed, creating a factual question for trial. Direct evidence of a conspiracy is reinforced by circumstantial evidence, primarily involving witness testimonies that imply a price-fixing agreement among competitors. Key testimony comes from Larry Stern, Bayer’s head of polyurethanes (2000-2002), who recounted inappropriate discussions with competitors about future pricing intentions and the necessity for mutual support of price hikes, notably with executives from Dow, BASF, and Huntsman. Robert Kirk, a Bayer vice president, expressed discomfort during a conversation with Dow’s David Fischer regarding planned price increases, indicating past support from Bayer for such actions. Edward Dineen from Lyondell recounted a dinner where BASF’s Jean-Pierre Dhanis suggested a need for price increases, which raised Dineen's suspicions of coordinated pricing efforts. Further evidence includes simultaneous announcements of price increases by the alleged conspirators during the conspiracy period. Numerous communications and meetings among executives, often coinciding with price announcements, suggest collusion. Notable examples include a message from Bayer’s Hans Kogelnik to BASF’s Bill Bernstein regarding a September price increase shortly after a golf outing, and various meetings and communications between Dow, BASF, and Bayer that indicate coordinated efforts to support price increases. For instance, after a meeting on June 22, 2000, Dow and BASF executives had discussions about pricing strategies, while internal memos indicated mutual support for price hikes. Additionally, on March 2001, BASF and Huntsman announced identical price increases following significant communications between their executives. High-ranking executives from the involved companies engaged in communications and meetings that could influence product pricing. Evidence suggests these executives took steps to conceal their discussions, particularly regarding pricing, with specific instances cited, such as Mr. Stern's use of a pay phone and prepaid card to call Mr. Fischer, clandestine meetings to avoid eavesdropping, and assurances given regarding the destruction of sensitive documents. Additional examples include off-site discussions to maintain confidentiality and instances where executives denied or omitted details about pricing conversations. The market structure facilitated price-fixing, and evidence indicates that some companies prioritized maintaining prices over increasing market share, as demonstrated by Mr. Friedrich’s reprimand of subordinates at Bayer. Expert testimony confirmed that prices were higher than they would have been without collusion during the alleged conspiracy. Dow disputes the evidence and claims that participants denied any price-fixing agreements, asserting that stable or decreasing prices during the period undermine the conspiracy allegation. However, an illegal conspiracy could involve agreements to prevent price reductions. Dow also questions the plaintiffs’ motives for adjusting the conspiracy period's end date. The court maintains that it must evaluate the sufficiency of the evidence presented rather than delve into plaintiffs’ intentions, leaving these arguments for jury consideration and affirming that plaintiffs' evidence is adequate to withstand summary judgment. Dow asserts that its communications with competitors were justified by legitimate business reasons, presenting evidence of competitive conduct among the alleged conspirators. Dow contends that plaintiffs have not eliminated the possibility of competitive rather than collusive behavior. However, the court finds that plaintiffs' evidence, which includes direct proof of a conspiracy, is sufficient to suggest a price-fixing agreement involving Dow, leading to the denial of Dow's summary judgment request. Regarding the duration and scope of the alleged conspiracy, Dow argues for summary judgment on claims before July 2000, asserting that Ms. Barbour's evidence is insufficient as she joined Dow in 2000. The court rejects this, noting that plaintiffs' evidence extends beyond the testimonies of Mr. Stern and Ms. Barbour. There are indications that the conspiracy may have been ongoing since 2000, supported by Mr. Stern’s adherence to prior practices of secretive competitor discussions. Furthermore, events from 1999, including a concerning meeting among competitors and subsequent synchronized price increases, suggest the existence of a conspiracy. Although this 1999 evidence alone may not be conclusive, it contributes to establishing a factual question about the existence of a price-fixing conspiracy. The court concludes that the duration of the conspiracy and its scope, including its relation to specific products like MDI and related polyols, are matters for the jury to decide. Conspirators allegedly engaged in parallel conduct, specifically price increases for MDI and TDI, indicating a possible conspiracy related to MDI as well. Testimonies from individuals such as Ms. Barbour, Ms. Blumberg, and Mr. Phelan suggest that the conspiracy involved both MDI and its polyols. Despite Dow's claims that the conspirators operated differently in the systems market, plaintiffs argue that the alleged price-fixing conspiracy impacted system prices, a position the Court has previously upheld. Regarding the statute of limitations, Dow seeks summary judgment on claims before November 24, 2000, citing a four-year limit under 15 U.S.C. § 15b. Plaintiffs assert that the statute should be tolled due to the conspirators’ fraudulent concealment of their actions. To prove this, they must demonstrate: (1) the use of fraudulent means, (2) successful concealment from plaintiffs, and (3) plaintiffs' inability to discover their claims despite due diligence. The Court has previously outlined three standards to evaluate the first requirement: the "self-concealing" standard, which allows a plaintiff to prove concealment simply by showing a self-concealing violation; the "separate and apart" standard, requiring independent evidence of concealment; and an intermediate "affirmative acts" standard that combines both approaches. The Court previously rejected the defendants' proposed separate-and-apart standard for fraudulent concealment, determining that plaintiffs’ allegations were adequate under either of the lesser standards. At the summary judgment stage, Dow reiterated its support for the separate-and-apart standard, but the Court found no basis to revisit its prior decision, as Dow failed to present new arguments or authorities. The Court referred to Tenth Circuit precedents, which do not necessitate that acts of concealment be separate from the conspiracy itself. Specifically, in King Enterprises v. Champlin Petroleum Co., the Tenth Circuit applied an intermediate standard, requiring proof of an affirmative act of concealment without separating those acts from the antitrust violation. Similar conclusions were reached in other cases outside the antitrust context, affirming that affirmative acts of concealment need not be distinct from the wrongful acts. The Court criticized the district court's reliance on Western Paving, noting it did not adequately analyze the standards and misinterpreted cases that distinguished between acts within and outside a conspiracy. The Fourth Circuit also rejected the separate-and-apart standard, highlighting the challenges it poses in differentiating conspiratorial acts. Conversely, class plaintiffs advocated for the less stringent self-concealing standard, which aligns with Tenth Circuit rulings, notably referenced in King, where the requirement for fraudulent concealment included instances of inherently self-concealing conduct. In Ashland, an appellate court case not binding in this jurisdiction, a self-concealing standard for fraudulent concealment was referenced but not deemed applicable in antitrust cases. The Tenth Circuit, in King, required affirmative proof of concealment rather than the self-concealing standard, emphasizing that the Tenth Circuit has consistently mandated such proof to toll the statute of limitations for fraudulent concealment claims. The court also supported Dow's argument that applying a self-concealing standard broadly in price-fixing cases would undermine the statute of limitations. The Fourth Circuit's analysis in Supermarket of Marlinton was endorsed, favoring an intermediate standard that better aligns with the policies of the statute of limitations and fraudulent concealment. Regarding the scope of evidence for the fraudulent concealment claim, plaintiffs contend that conspirators concealed their actions through false price increase announcements and other secretive measures. Dow asserts that plaintiffs should only rely on the announcements, as they were the only aspect pled with particularity per Federal Rule of Civil Procedure 9(b). The court rejected this limitation, noting that the pretrial order—controlling the claims—incorporated allegations beyond just the announcements, including acts of secrecy, without Dow's objection. Thus, plaintiffs are allowed to pursue their claim based on both the announcements and secrecy actions. The court clarified that its previous ruling did not dismiss the legal validity of the secrecy claim but required more specificity, which was later provided in the pretrial order. Dow's concerns about the unilateral nature of the pretrial order contentions are dismissed, as it was obligated to object to any new claims it believed were unfounded. Dow has not demonstrated any prejudice regarding the plaintiffs’ allegations of fraudulent concealment based on secretive actions, which are pertinent to establishing a conspiracy. The plaintiffs argue that these acts justify their discovery efforts. Since Dow has failed to show prejudice, the plaintiffs' allegations in the pretrial order will remain valid, and the Court will consider both types of fraudulent concealment evidence presented by the plaintiffs. Additionally, Dow's motion for summary judgment based on the statute of limitations is challenged by the Court, which finds that the issue of fraudulent concealment should be decided by a jury. In reference to the Tenth Circuit decision in King, the Court notes that where there is a dispute over fraudulent concealment, it is a jury question. The King case established that the evidence of fraudulent concealment was so compelling that it warranted a finding as a matter of law. The plaintiffs have provided evidence of acts of secrecy comparable to the evidence in King. This includes instances where Bayer's Mr. Stern made calls to Dow's Mr. Fischer from a gas station payphone using a prepaid card to ensure confidentiality, and prior advice from Mr. Stern's predecessor to conduct sensitive conversations outside the office due to past antitrust issues. This evidence indicates a concerted effort to conceal price-fixing activities among the alleged conspirators. A meeting in October 2000 at a Bayer facility involved Messrs. Kogelnik, Stern, and Fischer, who discussed future pricing strategies outside to avoid detection. In August 2002, Mr. Stern shared confidential Bayer pricing information with Mr. Hankins of Huntsman, who had assured him the document would be destroyed, yet reports from the meeting omitted any mention of pricing discussions. Additionally, Mr. Stern and Mr. Bernstein of BASF had off-site conversations regarding future pricing to maintain confidentiality. After a discussion about Dow's pricing issues, Mr. Davies threatened Ms. Barbour of Dow with denial of their conversation if it were disclosed. A February 1999 dinner in Belgium involved discussions on price coordination, with Mr. Dhanis omitting his BASF colleagues from the expense report. Numerous off-site meetings occurred around price increase announcements between executives, and communications often took place after hours. Dow claims these interactions were for legitimate business purposes and argues that the secrecy doesn't equate to fraudulent concealment, as no fiduciary duty existed. However, the actions taken by the alleged conspirators indicated deliberate concealment, creating a factual question regarding fraudulent concealment. Consequently, the Court determined that Dow could not claim summary judgment on the statute-of-limitations defense based on these arguments. The Court has determined that sufficient evidence exists to suggest that the alleged conspirators engaged in acts of concealment, making it unnecessary to evaluate the plaintiffs' secondary claim regarding false price increase announcements. Nonetheless, the Court confirms that plaintiffs can utilize these announcements as evidence in their fraudulent concealment claim. Dow contends that the plaintiffs cannot prove that the factual statements about market conditions in the announcements were false. However, the plaintiffs assert that the announcements were misleading because they attributed price increases to market conditions without disclosing the price-fixing conspiracy as a contributing factor. The Court clarifies that these announcements are not merely omissions but represent affirmative acts of concealment. The misrepresentation alleged involves the assertion that price increases were due to market conditions, while in reality, they were part of a price-fixing conspiracy. This distinction is significant, as it goes beyond mere silence about the conspiracy. Previous case law supports the notion that justifications for price increases can mislead plaintiffs regarding the existence of a conspiracy and constitute affirmative concealment. Dow has failed to provide legal support for its position and has not addressed the precedents cited by the plaintiffs, which illustrate that misleading statements about pricing can create factual disputes suitable for trial. Plaintiffs may continue to pursue their fraudulent concealment claim, supported by price announcements that suggest possible affirmative acts of concealment by the alleged conspirators. Dow's argument for summary judgment on the grounds of plaintiffs’ lack of reliance and due diligence is rejected. Dow contended that plaintiffs did not read or rely on the price announcements and that any reliance would be unjustified due to the sophistication of the purchasers. However, the court noted that Dow's argument only addressed the price announcements and did not account for the plaintiffs' reliance on acts of secrecy, which were also part of their claim. The court emphasized that the elements of the fraudulent concealment doctrine do not require reliance but rather focus on whether plaintiffs were aware or should have been aware of their potential cause of action. Dow failed to demonstrate a lack of material fact regarding plaintiffs' knowledge of the conspiracy or the acts of secrecy. The court highlighted that the sophistication of purchasers does not imply they had insight into a potential price-fixing conspiracy, and cited that the determination of when a plaintiff should have known of a cause of action is typically a question for the jury. Consequently, the court denied Dow's motion for summary judgment regarding the statute-of-limitations issue. The court ordered that Dow's motion remains pending concerning claims from direct action plaintiffs who opted out of the class. The Supreme Court in Matsushita determined that the alleged conspiracy lacked economic viability, highlighting that the proposed predatory pricing scheme was speculative, involved 21 companies, and presented a strong incentive for conspirators to cheat, which would undermine the conspiracy's success. The conspiracy had failed to achieve significant market share after 20 years, necessitating a prolonged success to recover losses from predatory pricing. The current case does not reflect such an improbable conspiracy. Furthermore, Dow has not sufficiently addressed other pricing factors, leaving its argument regarding price stabilization without merit. Although Dow submitted an affidavit from Mr. Dineen denying a link between pricing discussions and a previous conversation, evidence indicates attempts by BASF's Mr. Dhanis to coordinate pricing with Lyondell and Dow executives. Dow's motion to exclude the plaintiffs' expert econometrician's opinions is pending. Even if this evidence were excluded, sufficient evidence exists to deny summary judgment. Plaintiffs did not rely solely on their expert’s opinion regarding collusion but referenced all pricing announcements during the conspiracy period, which the Court acknowledges despite Dow's earlier assumption limiting plaintiffs to three announcements. Thus, the Court will not restrict the plaintiffs' reliance to those three specific announcements.