In re Polyurethane Foam Antitrust Litig., Case No. 1:10 MD 2196.

86 F.Supp.3d 769

In re POLYURETHANE FOAM ANTITRUST LITIGATION.

Case No. 1:10 MD 2196.

United States District Court, N.D. Ohio, Western Division.

Signed Feb. 6, 2015.

Stephen R. Neuwirth, Quinn, Emanuel, Urquhart, Oliver & Hedges, New York, NY, William A. Isaacson, Melissa Felder, Melissa B. Willett, Boies, Schiller & Flexner, Sathya S. Gosselin, Seth R. Gassman, Hausfeld, Washington, DC, William C. Price, Wood & Lamping, Cincinnati, OH, Aaron M. Sheanin, Pearson Simon & Warshaw, Robert C. Schubert, Schubert & Reed, San Francisco, CA, Adam B. Wolfson, Quinn, Emanuel, Urquhart, Oliver & Hedges, Brian R. Strange, Strange & Carpenter, Michael H. Steinberg, Adam S. Paris, Sullivan & Cromwell, Los Angeles, CA, Carmen A. Medici, Robbins Geller Rudman & Dowd, San Diego, CA, David W. Wicklund, Shumaker, Loop & Kendrick, Kimberly A. Conklin, Kerger & Hartman, Toledo, OH, Eric W. Wiechmann, Vanessa R. Avery, McCarter & English, Hartford, CT, Hollis L. Salzman, Meegan F. Hollywood, Robins, Kaplan, Miller & Ciresi, Stephen A. Weiss, Seeger Weiss, New York, NY, James P. Lynch, Williams & Connolly, Washington, DC, Kurt M. Rupert, Hartzog Conger Cason & Neville, Oklahoma City, OK, Lee Albert, Glancy Binkow & Goldberg, Robert G. Eisler, Grant & Eisenhofer, Ronald J. Aranoff, Bernstein Liebhard, Sanford I. Weisburst, Quinn Emanuel Urquhart & Sullivan, New York, NY, William J. Blechman, Douglas H. Patton, Kenny Nachwalter, Miami, FL, William Liston, III, Liston Lancaster, Jackson, MS, Lori A. Fanning, Marvin A. Miller, Miller Law, Chicago, IL, Richard M. Kerger, Kerger & Hartman, Mindee J. Reuben, Lite DePalma Greenberg & Rivas, Philadelphia, PA, Chahira Solh, Crowell & Moring, Irvine, CA, for Plaintiffs.

James H. Walsh, Bethany G. Lukitsch, McGuire Woods, Richmond, VA, Kendall Millard, Deborah Pollack—Milgate, Barnes & Thornburg, Indianapolis, IN, Michael R. Hoernlein, Alston & Bird, Charlotte, NC, for Defendants.

David M. Bernick, Dechert, New York, NY, M. Neal Rains, Frantz Ward, Cleveland, OH, for Intervenors.

David Rosenblum Cohen, Law Office of David R. Cohen, Cleveland, OH, pro se.

MEMORANDUM OPINION AND ORDER RE: DEFENDANT FXI'S SUMMARY JUDGMENT MOTION

JACK ZOUHARY, District Judge.

Introduction

In these consolidated proceedings, Plaintiffs allege that dominant firms in the flexible polyurethane foam market engaged in a decade-long conspiracy to fix, raise, and maintain the price of flexible foam products in violation of Section 1 of the Sherman Act. This Court certified a class of Direct Purchasers who bought foam directly from the Defendant firms (see Doc. 1102 at 6–7). Defendant Foamex Innovations, Inc. (“FXI”) moves for summary judgment on Direct Purchasers' claims (Doc. 1326). For the reasons below, this Court grants in part and denies in part FXI's Motion.

Background

This Court previously set forth in great detail the factual background surrounding the polyurethane foam market and the alleged conspiracy, so does not repeat it here (Doc. 1102 at 2–12). It suffices to note that FXI is currently one of the largest polyurethane foam manufacturers in the United States, “produc[ing] foam for the home, healthcare, electronics, industrial, personal care, and transportation markets,” with “$247 million in 2009 sales” (id. at 8). Direct Purchasers assert FXI, with other Defendants, participated in a “conspiracy to fix the prices of flexible polyurethane foam and to allocate customers throughout the United States” (Doc. 1326–1 at 6). Direct Purchasers further assert FXI participated in this conspiracy “throughout the class period” (Doc. 1343 at 62), defined as “from January 1, 1999 to July 31, 2010” (Doc. 1102 at 6).

Like other Defendants, FXI insists it did not engage in the alleged conspiracy and that the undisputed material facts do not support Direct Purchasers' claim against it. Unlike the other Defendants, however, FXI's Motion for Summary Judgment does not argue the innocent nature of its own alleged overt acts during the ten years the conspiracy allegedly existed. Rather, FXI observes it did not even come into existence until May 2009, near the end of the class period. FXI explains it was incorporated for the purpose of purchasing the assets of Foamex International, Inc. (“Foamex”), which was bankrupt. FXI then argues it is entitled to summary judgment because: (1) it is unrelated to Foamex and does not succeed to any antitrust liability Foamex may have had; and (2) FXI did not independently join the existing conspiracy.

The undisputed facts relevant to these arguments are set out below.

History of Foamex and FXI

Foamex Bankruptcies

Foamex came into existence around 1993, well before the beginning of the Class Period. Within several years, partly through acquisitions, Foamex became the largest manufacturer of polyurethane foam in the United States. In September 2005, however, Foamex filed for protection under Chapter 11 of the Bankruptcy Code. See In re Foamex Int'l, Inc., Case No. 05–BK–12685 (Bankr.D.Del.).

A year and a half later, in February 2007, the bankruptcy court confirmed a Joint Plan of Reorganization, ordering “discharge of all debts of, Claims against, Liens on, and Interests in [Foamex], [its] respective assets and properties, arising at any time before [February 12, 2007], regardless of whether a proof of Claim or Interest with respect thereto was filed” (Doc. 1326–4 at 32). Accordingly, as of February 12, 2007, all general unsecured claims against Foamex were discharged. With a restructured balance sheet, Foamex emerged from bankruptcy and continued business.

In early 2009, Foamex was a public company controlled by two investment management firms: D.E. Shaw and Goldman Sachs. Despite the 2007 bankruptcy reorganization, Foamex again found itself unable to continue servicing its debts. Hoping to avoid another bankruptcy, Foamex contacted a competitor, the Carpenter Company, to inquire whether Carpenter was interested in purchasing the Foamex assets. The discussions failed and, in February 2009, some two years after the first bankruptcy, Foamex again sought relief under Chapter 11 of the Bankruptcy Code. See In re Foamex Int'l, Inc., Case No. 09–BR–10560 (Bankr.D.Del.).

Foamex now owed its first lien lenders $324.8 million, plus interest, fees, and expenses. Over half of this debt was owed to two creditors: a fund managed by MatlinPatterson Global Advisers, and a fund managed by Black Diamond Capital Management. In March 2009, the bankruptcy court approved a $95 million debtor-in-possession loan facility (“DIP Loan”) among Bank of America, Foamex, and an entity known as “MP–Foam–DIP”—the latter created by MatlinPatterson Global Advisers for the purpose of securing working capital. The bankruptcy court found the DIP Loan agreement was reached after “extensive negotiations conducted in good faith and at arm's length,” and the court concluded the terms of the DIP Loan were “fair and reasonable” (Doc. 1326–6 at 42).

Foamex and MP–Foam–DIP then entered into an Asset Purchase Agreement (“March APA”) which was publicly available on the bankruptcy court docket. The March APA specifically excluded MP–Foam–DIP's assumption of, among other things, “any and all customer claims against [Foamex] ... to the extent accruing, arising out of or relating to events, occurrences, acts or omissions occurring or existing prior to the Closing Date” (Doc. 1326–7 at 29). Thereafter, Foamex filed a motion proposing to sell substantially all of its assets through an auction process, pursuant to the terms and conditions of the March APA. The bankruptcy court approved this proposal, designating MP–Foam–DIP as the stalking horse bidder for the Foamex assets and giving MP–Foam–DIP the right to credit-bid its claims under the DIP Loan (see generally Doc. 1326–9). MP–Foam–DIP's initial bid of $105 million was comprised of $78.4 million in cash and the assumption of $26.6 million in specified liabilities.

The bankruptcy court approved the manner and form of Notice to be used regarding the proposed auction sale of assets; specifically, requiring written notice to (among others) counsel for the unsecured creditors committee, all parties requesting notice pursuant to Bankruptcy Rule 2002, and all parties with executory contracts or known to have expressed an interest in buying the assets. In addition, a Notice was required to be published in the Wall Street Journal (Doc. 1326–9 at 3–4, 7). The bankruptcy court then approved the bidding procedures, which were specifically incorporated into the Notice, and which provided that the sale of assets would be “free and clear of all pledges, liens, security interests, encumbrances, claims, charges, options and interest thereon and there against (collectively, “Claims and Interests”), such Claims and Interests to attach to the net proceeds of the sale of the [Assets]” (Doc. 1326–9 at 15). In other words, claims on the assets followed the sale proceeds; the claims did not stay with the assets themselves.

The asset auction took place in May 2009, and three competing bidders appeared: MP–Foam–DIP, Wayzata Investment Partners, and RBF Capital. Following lively bidding, Foamex sought approval from the bankruptcy court of an all-cash bid of $141.5 million from Wayzata, and a ruling that the MP–Foam–DIP bid, which included cash and credit, was not qualified. The bankruptcy court determined that MP–Foam–DIP could credit-bid and ordered Foamex to resume the auction (Doc. 1326–9 at 108). When the auction concluded, Foamex selected the MP–Foam–DIP credit bid of $155 million (made jointly with Black Diamond) as the highest and best bid. This auction history shows that, although MP–Foam–DIP ultimately succeeded in securing the purchase of assets, this result was certainly not a foregone conclusion.

Following a hearing, the bankruptcy court, on May 27, 2009, approved the action procedures and the Asset Sale. Among other findings, the bankruptcy court concluded:

• [MP–Foam–DIP] in no way induced or caused the chapter 11 filings by [Foame

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