A federal judge in Atlanta has awarded $25 million in legal fees to attorneys who forged a $75 million class action settlement with one of the nation’s largest insulation contractors in a massive price-fixing case.
U.S. District Judge Julie Carnes of the Northern District of Georgia approved the fee award Oct. 26, saying that her order was “in keeping with fee awards in highly complex, multi-year cases like this one—including a number of antitrust class actions.”
Carnes also approved more than $1.4 million in expenses associated with the protracted litigation with Masco Corp., a Michigan-based building supply company which owns brands that include Behr paints, Delta faucets and Milgard windows.
Masco denied any wrongdoing when the settlement was announced in August, just 48 hours before the case was to go to trial.
Carnes noted that no members of the class of 369 fiberglass insulation installation contractors that had sued Masco objected to the fee request. Masco lawyers also did not file any objections to the request.
Class counsel—including Atlanta attorneys Frank Lowrey IV, Michael Terry, Michael Caplan and Steven Rosenwasser of Bondurant, Mixson & Elmore; Craig Harley and James “Josh” Wilson Jr. of Chitwood Harley Harnes and sole practitioner Jeffrey Berhold—had requested that Carnes approve legal fees equal to one-third of the settlement fund for their work on the case, which was filed in 2004.
The judge also approved a $205,953 award to Wilson Insulation, an Augusta insulation contractor represented by Berhold that on its own had sued Masco in 2003. Wilson Insulation, Carnes wrote, uncovered documents from some of the manufacturers that reflected what it contended was “an illegal nationwide conspiracy to impose and maintain a spread between prices paid by Masco and other contractors.”
Wilson also agreed to a stay of its case so that the class case could proceed “without the risk of having to fight off attacks by Masco in the Wilson case that could have carried over to the class case,” the judge’s order stated.
“It seems unlikely that any of that documentary evidence would have come to light or led to a class action without the initiative and steadfast efforts of Wilson,” Carnes wrote.
Lowrey said that class lawyers “were pleased with the court’s order, and we believe the award is commensurate with other awards in antitrust cases of comparable complexity and duration and with results in this range.”
In a separate order handed down Wednesday, Carnes also approved $100,000 incentive awards to each of six plaintiff companies, including Wilson Insulation, that represented the class of 369 independent fiberglass insulation contractors.
In that order, Carnes said that in approving the award, she took into consideration evidence “that the class representatives were the subject of retaliation by two of the five manufacturers and faced the risk of similar treatment from the other manufacturers as well.”
Masco’s local counsel, S. Wade Malone of Nelson Riley Mullins & Scarborough in Atlanta, referred questions to Masco lawyers at Latham & Watkins in Washington. Masco also was defended by the Washington firm Howrey Simon Arnold & White and Detroit firm Honigman Miller Schwartz & Cohn.
Margaret Zwisler of Latham & Watkins said that because the fee award came out of the $75 million settlement, Masco did not take a position on it, and she would have no further comment.
At the heart of the price-fixing conspiracy were alleged efforts by five fiberglass insulation manufacturers—an oligopoly that virtually controlled the national fiberglass insulation market—to increase prices in what is essentially a static market, according to court orders in the case. Demand for fiberglass insulation is generally tied to housing starts, and customers buy according to their needs. As a result, lower product prices do not typically boost sales. Another company, Owens-Corning, filed for bankruptcy protection before the suit was filed and was not named as a defendant.
Four manufacturers accused of colluding with Masco—Johns Manville, CertainTeed Corp., Knauf Insulation GmbH and Guardian Fiberglass Inc.—in 2007 agreed to a $37.25 million settlement and were dismissed as defendants. In 2008, Carnes awarded class attorneys 30 percent of that settlement—$11,175,000, plus $1,988.708 in expenses.
The contractors who sued claimed in court documents that in order to boost revenue, the fiberglass manufacturers embarked on a conspiracy to increase prices but soon discovered that they needed the cooperation of Masco—their largest customer. Because Masco made bulk fiberglass insulation purchases, it was able to negotiate lower prices than its competitors.
According to court orders in the case, the plaintiff contractors claimed that Masco allegedly agreed to support manufacturers’ across-the-board price increases in exchange for a “guaranteed spread” between the prices Masco paid for fiberglass insulation and higher prices Masco’s competitors were billed.
The suggested price spread, according to evidence obtained during the litigation, was a minimum of 12 percent to 15 percent between the prices afforded to Masco and those paid by Masco’s smaller competitors.
According to court documents, the manufacturers policed their joint compliance in the alleged conspiracy by individually reporting violations directly to Masco.
In approving the $25 million fee award, Carnes noted that in a number of antitrust class actions and other similarly complex cases that were litigated for years before settling, “courts in this circuit and others have approved fee awards of 33 1/3 percent and higher from settlement funds equal to or exceeding this one.”
“A comparable award is warranted here,” Carnes’ order stated. “The eight-year litigation of this case was protracted, complicated and highly contested.”
The settlement, the judge wrote, constituted “a relatively high percentage of the potential recovery, as compared to other class action settlements. And, unlike some class settlements, the recovery here consists entirely of cash, rather than coupons or discounts on future purchases from [Masco.]“
In her order, Carnes also noted that class counsel invested more than 26,000 hours and “several million dollars in out-of-pocket expenses over eight years” to litigate the case.
“Unlike a number of class actions cases, this one did not settle before class counsel was required to undergo the full process of preparing to try this complex case to a jury in a trial that likely would have lasted six to seven weeks,” she wrote.
In addition, Carnes said, the antitrust case against Masco did not benefit from a federal prosecution. “Where a civil case follows government prosecution, the plaintiffs benefit significantly from the information obtained by the government, most notably from guilty pleas and cooperative witnesses seeking leniency,” her order stated. “That was not the case here. Instead, class counsel relied on reviews of millions of pages of documents, dozens of depositions and expert statistical analysis to prepare their case.”
Finally, Carnes wrote, the fee award was justified because litigating the case against Masco after the manufacturers settled and dropped out “was complicated by the fact that much of the evidence of Masco’s allegedly unlawful conduct was found in documents authored by the … manufacturers. Class counsel expended hundreds of hours in the weeks leading up to trial to ward off an attempt by Masco to eliminate much of the plaintiffs’ proof by excluding key documentary evidence on hearsay grounds.”
Carnes also noted that the case was litigated “entirely on a contingency fee basis.”
“In doing so, counsel assumed significant risk of investing tens of thousands of hours and millions of dollars in out-of-pocket expenses with no compensation,” she stated in her order. “Even the ‘ordinary’ antitrust class action (if there is such a thing) is always ‘uncertain in outcome.’”
Finally, Carnes’ order noted the “limited number of firms that both possess the required skills and would undertake this representation, knowing that it would likely require expenditure of tens of thousands of hours (on a contingent basis) and the advancement of millions of dollars in out-of-pocket expenses. Class counsels’ willingness to assume those risks,” the judge wrote, “should be reflected in the fee.”
The case is Columbus Drywall v. Masco Corp., No. 1:04-cv-3066.