In re Domestic Drywall Antitrust Litig.

163 F.Supp.3d 175

In re: Domestic Drywall Antitrust Litigation

This Document Relates to:

All Direct Purchaser Actions

All Indirect Purchaser Actions

MDL No. 2437

13-MD-2437

United States District Court, E.D. Pennsylvania.

Filed February 18, 2016

MEMORANDUM RE: DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

Judge Michael M. Baylson, United States District Ct Judge

TABLE OF CONTENTS

I. Introduction...180

II. Procedural History...181

III. Plaintiffs' Allegations in Amended Complaints...182

IV. Discovery...183

V. Settling Defendants...184

VI. Motions for Summary Judgment...184

A. American...185

B. National...186

C. Lafarge...187

D. PABCO....187

E. CertainTeed...187

VII. Summary Judgment Standard...188

VIII. Legal Analysis in Oligopoly Cases...189

A. Matsushita Elec. Indust. Co., Ltd. v. Zenith Radio Corp. ...191

B. Petruzzi's IGA Supermarkets Inc. v. Darling–Delaware Co. Inc. ...191

C. In re Baby Food Antitrust Litig. ...192

D. In re Flat Glass Antitrust Litig. ...193

E. In re Chocolate Confectionary Antitrust Litig. ...194

IX. Undisputed Background Facts...194

A. Wallboard Industry Background...194

1. Market Share...195

2. Demand...195

3. Capacity...195

4. Job Quotes...196

B. Trade Association Membership & Meetings...196

X. Bourjaily and Application of the Co-Conspirator Hearsay Exception...197

A. Brief History of the Co-Conspirator Exception...197

B. Impact of Federal Rules of Evidence...198

C. Bourjaily Ends the Rule Against Bootstrapping...199

D. Admissibility of Hearsay Statements in Antitrust Suits Under the Co-Conspirator Exception Post-Bourjaily ...200

1. Big Apple BMW, Inv. v. BMW of N. Am., Inc. ...201

2. In re Flat Glass Antitrust Litig. ...202

E. Role of the Co-Conspirator Exception in this Case...203

XI. Chronology of Material Facts...203

A. February—October 2011...204

B. 2012 Activity...217

XII. Evidentiary Findings Pursuant to Fed. R. Evid. 104...228

A. Parties' Statements...228

B. Business Records...228

C. Co-Conspirator Statements & Bourjaily ...228

XIII. Plaintiffs' Theory of the Drywall Conspiracy...231

A. Timing and Similarity of Defendants' Announcements Related to Elimination of Job Quotes and the 2012 and 2013 Price Increases...231

1. Pricing Practices Prior to Fall 2011...231

2. Price Increase and Elimination of Job Quotes Effective January 2012...232

a. American Announcement...232

b. USG Announcement...233

c. National Announcement...233

d. CertainTeed Announcement...233

e. Lafarge Announcement...234

f. TIN Announcement...234

g. PABCO Announcement...234

h. Implementation & Results...234

3. Events Leading up to the 2013 Price Increase...––––235

a. Pricing Guidance Following the Drake Group Meeting...236

b. Fall 2012 Pricing Announcements...236

B. Intercorporate Communications...237

1. Keith Metcalf's April and Early September Communications...238

2. September L&W Phone Calls...239

3. PABCO & American Phone Call...240

4. National's Reference to “[V]erbal [A]greements for a [L]arge [P]rice [I]ncrease in 2013”...240

C. Communications with Research Analysts...241

1. Analyst Background Information...242

2. Legal Viability of Plaintiffs' Conduit Theory...242

a. Authority Supporting Plaintiffs' Conduit Theory...242

b. Authority Undermining Plaintiffs' Conduit Theory...243

3. Evidence Allowing Inferences of Defendants' Using Analysts As Conduits... 244

a. National Signaling Through Thompson and Longbow?...244

b. Lafarge Signaling Through Longbow?...246

D. Defendants' Non-Price Conduct...248

1. Limiting Supply...248 a. Limiting Supply Prior to 2012 Increase...248

b. Limiting Supply Prior to 2013 Increase...249

2. Declining to Compete for Customers...250

XIV. Analysis—Consideration of Plus Factors...251

A. Motive ...252

B. Actions Against Self-Interest...252

C. Traditional Conspiracy Evidence...254

1. American...256

2. National...256

3. PABCO...256

4. Lafarge...257

5. CertainTeed...257

D. Conclusion...259

I. Introduction

In fall 2011, several U.S. gypsum wallboard manufacturers announced substantial changes to their pricing, ending a long-standing pricing practice and scheduling a very large price increase to commence in January 2012 and to be effective for the entire year. Then, in fall 2012, these manufacturers again announced similar price increase to take effect in January 2013. In this multidistrict litigation (“MDL”), Plaintiffs allege that the Defendants' 2012 and 2013 price increases and other changes in pricing practices were the result of an agreement, in violation of federal and state antitrust laws.

Currently before the Court are four motions for summary judgment: Defendants' Joint Motion for Summary Judgment (ECF 206), Defendant CertainTeed's Motion for Summary Judgment (ECF 207-08), Defendant Lafarge's Motion for Summary Judgment (ECF 204), and Defendant PABCO's Motion for Summary Judgment (ECF 205). For the reasons that follow, the court GRANTS the Motions for Summary Judgment as to CertainTeed and DENIES the Motions for Summary Judgment as to American, National, Lafarge, and PABCO.

At the outset of these consolidated cases, the Court convened a pretrial conference on September 18, 2013 to discuss pretrial issues including discovery and initial pleadings. Defendants' counsel indicated that it was not their intention to file Rule 12 motions, although their clients strenuously disputed the truth of the allegations against them. Eventually, a consensus was reached among counsel and the Court that discovery would be initially limited to whether there was an agreement between any Defendants in violation of Sherman Act § 1. (ECF 64). Thus, the Court postponed discovery on issues such as class action, damages, antitrust injury, etc.

By and large, discovery proceeded without any need for intervention. There was substantial production of documents by Defendants, and a deposition program was initiated and completed.

Following the close of discovery, Defendants, as planned, filed motions for summary judgment. As detailed below, each Defendant has supported its motion for summary judgment by declarations and deposition testimony by their officers and managers involved with the pricing of their drywall products. These testimonial materials assert that there was no agreement between their employer and any other Defendant.

Against this forceful show of denial, Plaintiffs have come forward with detailed facts that Plaintiffs assert show a genuine dispute that would allow a jury to find that there was an agreement by all of Defendants concerning prices.

Included within the factual material are excerpts from documents and testimony by the two third-party research organizations that had been subpoenaed and provided documents and deposition testimony, Longbow Research (“Longbow”) and Thompson Research Group (“Thompson”).

As required by the Court's practice order, Defendants have supported their motions for summary judgment with statements of undisputed facts. Plaintiffs have come forward with responses to many of these assertions, claiming there are disputed facts, and have added additional facts to which Defendants have responded.

As of result of this mélange of factual materials, the Court believes that the “core facts” of the case, as contained in documents produced by all of Defendants, or third parties, along with deposition testimony by their officers and managers, are largely undisputed. The task of the court is to determine whether inferences favorable to Plaintiffs can be drawn from these factual materials.

In proceeding towards the appropriate analysis, the Court believes that there are three issues that must first be analyzed in detail, as follows:

First, the Court will review the history of the drywall industry in the United States, which satisfies the accepted definition of an oligopoly, and the drywall manufacturers' efforts to raise prices following the well-documented housing slump in 2008-2010.

Second, the Court will provide the legal analysis of the decision by the Supreme Court in the Matsushita case and a number of Third Circuit opinions analyzing antitrust claims involving oligopoly industries such as drywall. The Court must recognize the unique economic discipline that applies to price fixing allegations against companies in an oligopoly setting, and the required hesitation, if not disinclination, to find any type of conspiracy from merely ambiguous evidence, but also, a duty to consider what courts have called “plus factors.”

Third, the Court will review the evidence rules concerning alleged co-conspirator statements.

In making this review and analysis, the Court recognizes that this is not an occasion for fact finding. Defendants' motions assert their innocence; Plaintiffs assert their liability with equal vigor. The Court's role is not take sides, find facts, or determine liability or innocence, but only to determine what, if any, inferences can be drawn consistent with the governing case law on antitrust price fixing and the rules of evidence on allegedly co-conspirator statements.

After laying the groundwork on the industry background and legal principles, the Court will embark upon a chronological review of the factual materials, highlighting those facts that Plaintiffs have asserted are the strongest towards showing an agreement. The Court will then explain its decision as to admissibility of hearsay evidence, and separately, the ability of the jury to draw reasonable inferences of agreement based on the record in this case.

II. Procedural History

In April 2013, the Judicial Panel on Multidistrict Litigation ordered consolidation in this District before the undersigned of various drywall antitrust cases from this and other Districts for pretrial proceedings. The original Defendants were U.S. domestic drywall manufacturers, namely CertainTeed Gypsum (“CertainTeed”), United States Gypsum Company (“USG”) and its parent USG Corporation (“USG Corp.”), New NGC, Inc. (“National”), LaFarge North America Inc. (“LaFarge”), American Gypsum Company LLC (“American”) and its parent company Eagle Materials Inc. (“Eagle”), TIN, Inc. (“TIN”), and PABCO Building Products, LLC (“PABCO”).

By May 2013,...