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In a class action price-fixing case, the named plaintiffs don’t have to show that they purchased the product from each one of the named defendants in order to represent the class, a federal judge has ruled. In his 52-page opinion in In Re: Linerboard Antitrust Litigation, Judge Jan E. DuBois of the U.S. District Court for the Eastern District of Pennsylvania found that since antitrust law provides for joint and several liability of co-conspirators, each of the plaintiffs has an equal incentive to prove the defendants’ participation in the alleged conspiracy. “The court concludes that plaintiffs have an incentive to prove a case against all defendants. It is in plaintiffs’ interest to maximize potential recovery against all defendants and to demonstrate the full extent of the alleged conspiracy,” DuBois wrote. DuBois certified two classes of plaintiffs — a class of manufacturers of corrugated paper sheets and a class of manufacturers of the boxes made from those sheets — who allege that the manufacturers of linerboard conspired to drive up prices by slowing down production. Linerboard includes any grade of paperboard suitable for use in the production of corrugated sheets, which are in turn used in the manufacture of corrugated boxes and for a variety of industrial and commercial applications. Corrugated sheets are made by gluing a fluted sheet, known as the corrugating medium that is not made of linerboard, between facing sheets of linerboard. The alleged price-fixing conspiracy came to light in 1998 when the Federal Trade Commission filed a complaint against Stone Container Corp. that accused Stone of attempting to reduce linerboard inventories and “inviting” some of its competitors to join in a “coordinated price increase.” The FTC neither alleged that any other manufacturer had accepted Stone’s invitation nor the existence of any conspiracy. The case settled when Stone and the FTC entered into a consent decree in which Stone did not admit liability for its alleged unilateral misconduct. But soon after the FTC filed its complaint, three lawsuits were filed in the Northern District of Illinois on behalf of purchasers of corrugated sheets. Those cases named only Stone as a defendant, but the plaintiffs alleged that there were unnamed co-conspirators involved in the antitrust conspiracy, including Jefferson Smurfit Corp. Four other lawsuits were filed against Stone in the Eastern District of Pennsylvania on behalf of purchasers of corrugated boxes in late 1998. In February 1999, the Judicial Panel on Multidistrict Litigation transferred all of the cases to DuBois for all further pretrial proceedings. In May 1999, the box manufacturers filed an amended complaint that named Stone and 12 other companies — Jefferson Smurfit Corp., Smurfit-Stone Container Corp., International Paper Co., Georgia Pacific Corp., Weyerhaeuser Paper Co., Temple Inland Inc., Gaylord Container Corp., Union Camp Corp., Simpson Tacoma Kraft Co., Tenneco Inc., Tenneco Packaging and Packaging Corp. of America. The suit alleged that all 12 of the added defendants accepted Stone’s invitation to restrict the production of linerboard and artificially raise prices, resulting in an antitrust conspiracy in violation of the Sherman Act. At the same time, a separate class action complaint was filed on behalf of purchasers of corrugated sheets that named Stone and 11 other defendants — the same list as the box plaintiffs, but not including Tenneco Inc. The suits allege that in the early 1990s, Stone and the other defendants were experiencing financial difficulties, and Stone unsuccessfully attempted to increase the price of linerboard as part of an overall effort to increase the price of corrugated sheets and containers. The plaintiffs contend that Stone believed the failure of its price increase resulted from excess inventory of linerboard, creating a substantial industrywide imbalance of supply over demand. As a result, the suits say, Stone devised a strategy to invite its competitors to increase the price of linerboard. As part of this strategy, Stone planned to take downtime at its plants to reduce its production and inventory of linerboard substantially, and at the same time to purchase substantial amounts of linerboard from competitors — actions which, the plaintiffs allege, were extraordinary and not in the regular course of business. In mid-1993, the suits say, Stone advised its competitors that it intended to take linerboard mill downtime and draw down industry inventory levels of linerboard with an aim toward staging a successful price increase. Stone’s hope, the suits say, was to coordinate industrywide restrictions on output and price increases. The conspiracy succeeded, the suits say, when many of the major manufacturers of linerboard began to take production downtime at a time when demand in the industry was increasing. In August 1993, Stone implemented the first of a series of price increases for linerboard, which was joined by virtually every major manufacturer, the suits allege. Earlier this year, both sets of plaintiffs later asked DuBois to certify their suits as class actions on behalf of any company that purchased either linerboard or corrugated sheets between October 1993 and November 1995. During the proposed class period, the plaintiffs say, there were at least seven coordinated price increases of corrugated sheets. DuBois found that the plaintiffs easily met the first three requirements of Rule 23(a) of the Federal Rules of Civil Procedure — numerosity, commonality and typicality. But defense lawyers challenged the plaintiffs on the fourth requirement — adequacy of representation — and argued that certification should be denied because the named plaintiffs can’t represent the entire class. Since all but one of the named plaintiffs purchased only from Stone, the defense lawyers argued that they would have no incentive to pursue the claims of potential class members who purchased from other manufacturers. DuBois disagreed, citing the 1977 decision of the 3rd U.S. Circuit Court of Appeals in Bogosian v. Gulf Oil Corp., which held that “the fact that a customer has not made purchases from every co-conspirator does not prevent him from suing all — for each co-conspirator contributed to the charging of the supracompetitive price paid by the purchaser.” Defense lawyers also argued that the timing of the named plaintiffs’ purchases would distort their incentives in pursuing the case because each plaintiff will want to show that the period in which it purchased corrugated products was the period most effected by the conspiracy. But plaintiffs’ lawyers insisted that the timing of the purchases would not make the interests of the named plaintiffs antagonistic to the interests of each other or the proposed classes. DuBois agreed, saying, “It is well settled that a named plaintiff need not have made purchases from the defendants throughout the class period.” The defense team also argued that some of the named plaintiffs are open to “unique defenses” and therefore can’t represent the class since they may be deemed to have filed beyond the statute of limitations. DuBois disagreed. “There is no reason to believe that any of the named plaintiffs will be distracted by a relatively unique personal defense,” he wrote. Having found that the plaintiffs satisfied all of the requirements of Rule 23(a), DuBois turned to the requirements of Rule 23(b) — whether common questions “predominate” and whether a class action is “superior” to other methods of litigation. The defense team argued that individualized issues predominate because the plaintiffs are advancing a unique and complicated conspiracy theory that distinguishes the case from the traditional antitrust cases. But the plaintiffs argued that the case is not atypical. The evidence, they said, shows that the prices of corrugated sheets and boxes is directly related to the price of linerboard. DuBois agreed, saying “the fact that the plaintiffs’ conspiracy theory rests on the market effects of a reduction in output does not make it unsuitable for class certification. Rather, plaintiffs’ theory puts the case into an established category of antitrust cases.” The defense also argued that the plaintiffs can’t show “class-wide impact.” But DuBois found that “many courts have held that impact can be presumed upon proof of a conspiracy. This is such a case.” Finally, DuBois concluded that the superiority prong was met because “a class action is the fairest way to adjudicate the questions raised in this case, as the costs of maintaining individual actions in this sort of securities case would be prohibitive.” As a class action, DuBois said, the case “will not be inefficient or unmanageable” because each of the class member’s claims “center on common questions of law and fact … which require the same sort of proof.” Liaison lawyer to plaintiffs’ counsel is Howard I. Langer of Sandals & Langer. Liaison lawyer to defense counsel is Sherry Swirsky of Schnader Harrison Segal & Lewis.

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