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Defendants Win Class Certification Battle Of The Experts In Plastics Antitrust Case

Posted  September 13, 2010

A federal judge has declared a defense expert the winner in a battle of the experts over class certification in a suit alleging price-fixing conspiracies in the markets for plastics additives.

Relying heavily on expert testimony, U. S. District Court Judge Legrome D. Davis for the Eastern District of Pennsylvania has denied plaintiffs’ motion to certify a class of direct purchasers of organotin heat stabilizers (“tins”) and epoxidized soybean oil (“ESBO”) –  plastics additives used in the manufacture of polyvinyl chloride (“PVC”) – in the case of In re: Plastic Additives Antitrust Litigation.

The decision is a victory for defendants Dow Chemical Co., Union Carbide Corp., Rohm & Haas Co. and Arkema Inc., who argued that their economics expert had demonstrated flaws in the plaintiffs’ case showing that the announcements of price increases bore little or no relation to the actual prices paid by the purchasers.

The legal basis for the court’s decision was that plaintiffs failed to establish that they could show impact by evidence common to the class.  The heart of the decision, however, was the court’s lambasting of the opinion of plaintiffs’ expert witness, Dr. John Beyer.

The ruling comes after the Third Circuit Court of Appeals vacated Judge Davis’ decision in 2006 granting certification of the class.  The case was remanded back to the district court for further proceedings consistent the Circuit’s 2008 decision in In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305 (3d Cir. 2008).

When Judge Davis granted certification to class plaintiffs in 2006, he followed what he believed to be common practice of the time:  he declined to balance the credibility of the parties’ experts on the issue of the predominance of common evidence demonstrating antitrust impact.  But the Third Circuit’s 2008 decision in Hydrogen Peroxide up-ended what Judge Davis considered “common practice.”  On remand Judge Davis relied on language from Hydrogen Peroxide, explicitly affirming a district court’s obligation to consider all relevant evidence and arguments, including expert testimony.  Id. at 307.

Under this framework, Judge Davis evaluated and ultimately picked apart plaintiffs’ arguments that they can demonstrate antitrust impact by evidence common to the class, rather than individual to its members, and in particular Dr. Beyer’s opinion in support of these arguments.

The court swatted away plaintiffs’ first argument that all class member were impacted by the alleged price-fixing conspiracy because they paid higher prices for tins and ESBO than they would have in the absence of the conspiracy by pointing out the fact that the prices paid by some customers have no relationship with Defendants’ price increases.  Judge Davis reached this conclusion by referring to several charts and graphs provided by defendants’ expert Mr. David Kaplan.  In addition, Judge Davis drew attention to specific testimony of plaintiffs’ expert, Dr. Beyer, who admitted that he “did not do an empirical analysis of each and every announced price increase to see to what extent, if at all, transaction prices . . . increased.”

Next the court discredited Dr. Beyer’s testimony regarding certain market characteristics, and in particular, the interchangeability of tins and the interchangeability of ESBO.  Though the court assessed the merits of plaintiffs’ arguments, its conclusion rejecting plaintiffs’ arguments can be reduced to Judge Davis’ palpable belief that Dr. Beyer was out of his league.  Dr. Beyer, noted the court, “has no independent expertise in the products at issue, his opinion is based on his interpretation of defendants’ documents and his review of deposition testimony, informed by his expertise in general applied economics.”  In contrast, Judge Davis extolled the industry credentials of defendants’ second testifying expert, Dr. John Summers, finding that Dr. Summers “was actually familiar with the products themselves.”

Dr. Beyer’s next attempt to show antitrust impact through evidence common to the class was by presenting a “pricing structure analysis.”  Judge Davis discarded Dr. Beyer’s testimony, holding that his pricing structure analysis cannot serve as proof of impact as evidence shows that prices did not behave similarly for all products and customers.  In reaching this conclusion, the court took pains to detail the incompleteness of Dr. Beyer’s empirical work.  “In total,” wrote the court, “he analyzed pricing information for 18 of the 265 tin products at issue in this litigation and less than two dozen of the 508 tin class members, as well as less than two dozen of the 503 ESBO class members.

Finally, the court rejected the regressions that plaintiffs put forward as a proof of impact common to the class members.  In short, the court held that the Dr. Beyer’s regressions, by his own admission, do nothing to assist plaintiffs in meeting their burden, since his regressions do not address individual class member experience.   “Dr. Beyer,” the court wrote, “did not do anything … to confirm that his industry-wide regressions accurately represented any individual class member’s pricing experiences during the class period.”

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