322 F.R.D. 188
E.D. Pa.2017Background
- In 2012–2013 several U.S. drywall manufacturers announced and implemented uniform, large price increases and eliminated longstanding "job quotes." Plaintiffs allege a horizontal price‑fixing conspiracy causing supra‑competitive drywall prices.
- Direct Purchaser Plaintiffs (DPPs) moved to certify a nationwide class of direct purchasers of paper‑backed gypsum wallboard (approx. 14,000 entities) under Fed. R. Civ. P. 23(b)(3). Defendants opposed, contesting standing for some named plaintiffs and arguing predominance and damages cannot be proven classwide.
- The court previously denied summary judgment for most defendants, finding admissible evidence that could support a jury finding of an agreement to fix prices. That summary judgment record played into the class analysis.
- Plaintiffs’ class proof relied primarily on economist Dr. Russell Lamb’s regressions and industry evidence; Defendants attacked those models through Dr. Jerry Hausman and econometric tests (Hausman, Chow, F‑test). A court‑retained technical advisor (Dr. Church) reviewed the econometrics.
- The court conducted a rigorous Rule 23 inquiry (including evidentiary hearings), credited much of Plaintiffs’ documentary and expert evidence, found Lamb admissible under Daubert, and concluded Plaintiffs met their burden by a preponderance to show predominance and measurable damages on a classwide basis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of purchasers who bought from a defendant’s wholly owned subsidiary (L&W purchasers) | L&W purchases fall within the Illinois Brick control exception because parent USG Corp. dominated/directly controlled L&W, so purchasers are direct purchasers for antitrust purposes | Defendants: Illinois Brick precludes indirect purchasers; control exception is questionable and inapplicable here | Court: Control exception remains viable in Third Circuit; evidence supports USG control of L&W; L&W purchasers have standing |
| Standing of New Deal (purchased via cooperative PRSCO) | New Deal claims via ownership/control of PRSCO and via an express assignment from PRSCO | Defendants: No control by New Deal over PRSCO; assignment invalid because not board‑authorized at time executed | Court: No evidence New Deal dominated PRSCO; but PRSCO expressly assigned claims in 2013 and later reauthorized; assignment valid — New Deal has standing |
| Predominance — can antitrust impact be proven with common, classwide evidence (econometrics + documentary proof)? | Plaintiffs: Industry characteristics, documentary evidence of coordination, and Dr. Lamb’s regression(s) (showing common overcharge; purchaser impact tests) establish classwide impact for all or virtually all purchasers | Defendants: Lamb’s regressions suffer from measurement error, structural break, improper benchmark, and assume a national market; thus they over‑attribute price increases to conspiracy rather than demand; econometric tests (Hausman, Chow, F) fatal | Court: Weighed experts and technical advisor; found Lamb admissible and persuasive enough, rejected Defendants’ national/local market and benchmark arguments largely, acknowledged econometric criticisms but concluded they do not defeat classwide proof; predominance met |
| Measurable damages — does the damages model match liability theory and permit classwide measurement (Comcast) | Plaintiffs: Lamb’s regression yields an aggregate/average overcharge and provides an allocable damages formula tied to the price‑fixing theory; possible subclasses later if needed | Defendants: Average/aggregate model masks variation and does not isolate damages attributable only to the accepted theory of impact | Court: Comcast concerns not present (single theory of impact tied to price fixing); aggregate regression is a workable classwide damages method at certification; predominance satisfied as to damages |
Key Cases Cited
- In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305 (3d Cir. 2008) (district court must perform a rigorous, evidence‑weighing predominance inquiry and may resolve expert conflicts at certification)
- Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016) (Supreme Court approved representative/aggregate expert evidence for classwide proof when admissible and persuasive for individual claims)
- Comcast Corp. v. Behrend, 569 U.S. 27 (2013) (damages model at certification must measure damages attributable to the theory of liability)
- Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) (rule barring indirect purchasers from federal antitrust damages, with limited exceptions like the control exception)
- In re K‑Dur Antitrust Litig., 686 F.3d 197 (3d Cir. 2012) (Third Circuit affirmed certification where plaintiffs’ expert overcame variations among purchasers)
- In re Processed Egg Prods. Antitrust Litig., 312 F.R.D. 171 (E.D. Pa. 2015) (certifying class based on industry characteristics, price co‑movement, and regression showing average effect)
- Petruzzi’s IGA Supermarkets, Inc. v. Darling‑Delaware Co., 998 F.2d 1224 (3d Cir. 1993) (Third Circuit endorsing multiple regression as admissible and helpful in antitrust cases)