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A federal judge has ruled that a group of plaintiffs who recently “opted out” of a class-action antitrust case in order to pursue their own claims must set aside a percentage of any settlement or judgment they win to compensate the team of plaintiffs’ lawyers who worked on the case for more than five years. “This case warrants the establishment of a system to ensure that designated counsel are compensated for their efforts in managing the litigation,” Senior U.S. District Judge Jan E. DuBois wrote in Re: Linerboard Antitrust Litigation. The ruling is a huge victory for plaintiffs’ attorneys Howard I. Langer of Golomb Honik & Langer and Eugene A. Spector of Spector Roseman & Kodroff who were appointed lead counsel in a class action brought by purchasers of corrugated paper products that accused paper manufacturers of conspiring to decrease their production so that supply would plummet and prices would rise. In recent months, a slew of big-name plaintiffs have opted out of the class and filed their own lawsuits, including Proctor & Gamble Co., Kellogg Co., Sara Lee Corp., Coca-Cola Co., Colgate-Palmolive Co., General Mills Corp. and Hallmark Cards Inc. DuBois found that the opt-out plaintiffs have benefited from the years of work already done by the lead lawyers on the case and therefore must pay for that benefit. “This is the rare antitrust case in which major entities and their counsel awaited the development of the case by designated counsel and only filed suit on the eve of the conclusion of discovery,” DuBois wrote. DuBois ordered the lead lawyers and opt-out lawyers to meet and attempt to reach an agreement on the percentage of funds that should be sequestered from the opt-out plaintiffs’ recoveries. In a separate opinion handed down Aug. 26, DuBois approved an $8 million settlement by two of the 12 defendants in the class-action after finding that it could motivate the other defendants to settle. “This settlement has significant value as an ‘ice-breaker’ settlement — it is the first settlement in the litigation — and should increase the likelihood of future settlements,” DuBois wrote. “An early settlement with one of many defendants can ‘break the ice’ and bring other defendants to the point of serious negotiations. That is precisely what occurred in this case,” DuBois wrote. Just prior to the settlement between the plaintiffs and Temple-Inland Inc. and Gaylord Container Corp., lawyers told DuBois that they had intended to report to the court that there was no interest in settlement negotiations. But within days of the announcement of the “agreement in principle” between the class plaintiffs and the two defendants, DuBois said, the non-settling defendants reported that they were willing to proceed with mediation before Senior U.S. District Judge Lowell A. Reed Jr. The plaintiffs in the suit are two classes of purchasers — those who purchased corrugated containers directly from the defendants, and those who purchased corrugated sheets. Langer has served as lead counsel for the first class, the so-called “box plaintiffs,” and Spector has served as lead counsel for the “sheets plaintiffs.” The defendants are manufacturers of “linerboard,” a term that refers to 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. After DuBois certified the suit as a class action, the defendants invoked a relatively new Federal Rule of Civil Procedure — Rule 23(f) — that allows either side to petition the Court of Appeals to hear an immediate appeal of class certification decisions. Two high-powered lawyers were hired to argue the appeal for the defense — Kenneth Starr of Kirkland Ellis in Washington, D.C., and Barbara W. Mather of Pepper Hamilton in Philadelphia. In the appeal, the defendants argued that DuBois erred by failing to hold that the two classes of plaintiffs had “individual issues” that made class certification inappropriate. The defense lawyers insisted that since the plaintiffs were relying on a theory of “fraudulent concealment” to avoid dismissal on statute of limitations grounds — meaning that the defendants conspired to hide their price-fixing scheme — the court would be forced to examine whether each plaintiff was truly entitled to make such a claim. But the 3rd U.S. Circuit Court of Appeals flatly disagreed, saying the focus in such a claim is not on what the plaintiffs knew, but on the alleged conduct of the defendants in conspiring to hide the alleged scheme. “It is the fact of concealment that is the polestar in an analysis of fraudulent concealment,” Senior U.S. Circuit Judge Ruggero J. Aldisert wrote. “It is the camouflage that demands attention, the cover up, the acts of obscuring or masking. These allegations of proof are all common to the defendants, not the plaintiffs. It is not the conspiracy of the defendant that is relevant on the issue of tolling the statute of limitations, it is the act of concealing the conspiracy,” Aldisert wrote. In the suit, plaintiffs allege that even though demand for linerboard was strong and rising between 1989 and 1992, the manufacturers’ prices for linerboard had fallen. They said in the suit that the linerboard manufacturers attempted to increase prices during 1991, 1992 and the first half of 1993, but the price increase announcement did not “stick” and, therefore, the manufacturers had to rescind them. At that point, they alleged in the suit that Roger Stone, the president of Stone Container Corp., the largest corrugated paper manufacturer, masterminded a two-fold plan among the manufacturers to lower the industry inventory to a five-week supply for a 2.5 million ton threshold, in order to implement price increases. In the first step of Stone’s alleged plan, the manufacturers would close their mills for “market downtime,” thereby reducing industry inventory at mills and box plants. Stone then planned to purchase inventory from other manufactures while idling its own mills. The suit alleges that Stone conducted a telephone survey of his competitors and coordinated the industry-wide downtime, agreeing to have his company purchase a significant volume of linerboard from its competitors rather than meet the requirements from its own production. Stone shut down six of its mills during the following months, the suit says. The plan allegedly worked. By October 1993, the linerboard manufacturers had concerted their actions and had lowered total inventories to the desired level of less than a five-week supply. The suit said inventory reached “a 20-year low” and that the manufacturers successfully increased their prices for containerboard and boxes for the first time in more than two years. Each manufacturer allegedly raised its container prices by an identical amount, the suit says, and linerboard prices in the eastern United States rose in six consecutive escalations from a low of around $270 to $290 per ton in the third quarter of 1993 to $530 per ton by April 1995.

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