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With a $92.5 million settlement by the final and largest defendant, a class action antitrust suit against the leading manufacturers of corrugated paper products has now resulted in combined settlements of more than $210 million — the largest ever in a price-fixing case in the Eastern District of Pennsylvania. Lead counsel for the plaintiffs, attorney Howard Langer of Golomb Honik & Langer, said the settlement with Smurfit-Stone Container Corp., if approved by the court, would end the class action portion of the case, but added that a significant portion of the litigation would continue because some of the biggest purchasers in the plaintiffs’ class “opted out” of the suit to pursue their own lawsuits. Among the companies that opted out of the class action are: Procter & Gamble Co., Kellogg Co., Sara Lee Corp., Coca-Cola Co., Colgate-Palmolive Co., General Mills Corp. and Hallmark Cards Inc. The recent $92.5 million settlement comes on the heels of two other large settlements in the case, a federal multidistrict litigation captioned In Re: Linerboard Antitrust Litigation. Pactiv Corp. agreed on Nov. 3 to pay $43 million, and on Sept. 23, three defendants — Weyerhaeuser Co., International Paper Corp. and Georgia-Pacific Corp. — agreed to pay a total of $68 million. Senior U.S. District Judge Jan E. DuBois has already approved the first settlement, a $7.2 million payment by defendants Temple-Inland Inc. and Gaylord Container Corp. Langer led a team of plaintiffs lawyers that included attorneys from four Philadelphia firms — Martin I. Twersky of Berger & Montague; Roberta D. Liebenberg and Donald L. Perelman of Fine, Kaplan & Black; Robert LaRocca of Kohn, Swift & Graf; and Eugene A. Spector of Spector Roseman and Kodroff — along with Joseph Goldberg of Freedman Boyd Daniels Hollander Goldberg & Cline in Albuquerque, N.M.; and W. Joseph Bruckner of Lockridge Grindal Nauen in Minneapolis. The plaintiffs consisted of two classes of purchasers — those who purchased corrugated containers directly from the defendants, and those who purchased corrugated sheets. 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, between facing sheets of linerboard. 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. The suit alleged 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, the suit alleged, Roger Stone, the president of Stone Container Corp., the largest of the manufacturers, masterminded a twofold plan among his competitors 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 alleged that Stone conducted a telephone survey of his competitors and coordinated the industrywide 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 said. The plan allegedly worked for a time. 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 said, 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. The litigation resulted in several significant opinions by DuBois and one by the 3rd U.S. Circuit Court of Appeals. In a significant win for the class action plaintiffs lawyers, DuBois ruled that the plaintiffs opted out of the class action — a group that included some of the largest purchasers — must set aside a percentage of any settlement or judgment they win to compensate the 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,” DuBois wrote. DuBois found that the opt-out plaintiffs 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. In an earlier decision, DuBois approved a relatively small $8 million settlement by two of the defendants — Temple-Inland Inc. and Gaylord Container Corp. — 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. Langer said the $8 million settlement was later reduced to $7.2 million due to the number of plaintiffs that opted out of the class. The plaintiffs also won a significant ruling from the 3rd Circuit in September 2002 when a unanimous three-judge panel upheld the decision by DuBois to certify the case as a class action. In the appeal, defense lawyers argued that DuBois erred by failing to find that the two classes of plaintiffs had “individual issues” that made class certification inappropriate. The defense 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. The 3rd Circuit 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 3rd Circuit Judge Ruggero J. Aldisert wrote in an opinion joined by Judges Theodore A. McKee and Julio M. Fuentes. “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. Aldisert found that while individual issues may exist, they were not fatal to class certification, but instead could be dealt with later. “Any individualized facts of fraudulent concealment may be adjudicated in the same fashion and at the same time as individual damages issues,” Aldisert wrote. Langer hailed the final settlement as proof of the continuing importance of private antitrust litigation. “The case represents a rare occasion in which private parties successfully prosecuted a major price-fixing suit without the benefit of a prior government action,” Langer said. “While the FTC [Federal Trade Commission] had brought a limited action against Stone Container in 1998, it made no charge of conspiracy with any other manufacturer. The results obtained in this suit demonstrate that the private class action retains its vitality as a powerful instrument of antitrust enforcement.”

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