Filed: Sep. 29, 2014
Latest Update: Mar. 02, 2020
Summary: FILED United States Court of Appeals PUBLISH Tenth Circuit UNITED STATES COURT OF APPEALS September 29, 2014 Elisabeth A. Shumaker TENTH CIRCUIT Clerk of Court IN RE: URETHANE ANTITRUST LITIGATION. _ DOW CHEMICAL COMPANY, No. 13-3215 Appellant, v. SEEGOTT HOLDINGS, INC.; INDUSTRIAL POLYMERS, INC.; QUABAUG CORPORATION, (Class Plaintiffs), Appellees, and CHAMBER OF COMMERCE OF THE UNITED STATES and AMERICAN INDEPENDENT BUSINESS ALLIANCE, Amici Curiae. Appeal from the United States District Court f
Summary: FILED United States Court of Appeals PUBLISH Tenth Circuit UNITED STATES COURT OF APPEALS September 29, 2014 Elisabeth A. Shumaker TENTH CIRCUIT Clerk of Court IN RE: URETHANE ANTITRUST LITIGATION. _ DOW CHEMICAL COMPANY, No. 13-3215 Appellant, v. SEEGOTT HOLDINGS, INC.; INDUSTRIAL POLYMERS, INC.; QUABAUG CORPORATION, (Class Plaintiffs), Appellees, and CHAMBER OF COMMERCE OF THE UNITED STATES and AMERICAN INDEPENDENT BUSINESS ALLIANCE, Amici Curiae. Appeal from the United States District Court fo..
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FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS September 29, 2014
Elisabeth A. Shumaker
TENTH CIRCUIT Clerk of Court
IN RE: URETHANE ANTITRUST
LITIGATION.
____________________________
DOW CHEMICAL COMPANY, No. 13-3215
Appellant,
v.
SEEGOTT HOLDINGS, INC.;
INDUSTRIAL POLYMERS, INC.;
QUABAUG CORPORATION, (Class
Plaintiffs),
Appellees,
and
CHAMBER OF COMMERCE OF THE
UNITED STATES and AMERICAN
INDEPENDENT BUSINESS
ALLIANCE,
Amici Curiae.
Appeal from the United States District Court
for the District of Kansas
(D.C. No. 04-MD-01616-JWL-JPO)
Carter G. Phillips, Sidley Austin LLP, Washington, D.C. (Joseph R. Guerra, C.
Frederick Beckner III, Kathleen Moriarty Mueller, Jeffrey S. Beelaert, Sidley
Austin LLP, Washington, D.C.; and Charles J. Kalil, General Counsel, the Dow
Chemical Company, Duncan A. Stuart, Associate General Counsel, the Dow
Chemical Company, Midland, MI, on the briefs) for Defendant-Appellant.
Paul D. Clement, Bancroft PLLC, Washington, D.C. (Zachary D. Tripp, Candice
Chiu, William R. Levi, Bancroft PLLC, Washington, D.C.; Roberta D.
Liebenberg, Donald L. Perelman, Gerard A. Dever, Matthew Duncan, Fine,
Kaplan, & Black, RPC, Philadelphia, PA; Richard A. Koffman, Kit A. Pierson,
Christopher J. Cormier, Sharon K. Robertson, Laura Alexander, Cohen Milstein
Sellers & Toll, PLLC, Washington, D.C.; Joseph Goldberg, Freedman Boyd
Hollander Goldberg Urias & Ward, P.A., Albuquerque, N.M.; Michael J.
Guzman, Rebecca A. Beynon, Michael N. Nemelka, Kellogg, Huber, Hansen,
Todd, Evans & Figel, PLLC, Washington, D.C.; and Robert W. Coykendall,
Roger N. Walter, Morris, Laing, Evans, Brock & Kennedy, Chartered, Wichita,
KS, on the briefs) for Plaintiffs-Appellees.
Kathryn Comerford Todd, Tyler R. Green, National Chamber Litigation Center,
Inc., Washington, D.C.; Jeffrey L. Kessler, George E. Mastoris, Winston &
Strawn LLP, New York, NY; and Gene C. Schaerr, Robert F. Ruyak, William A.
Roach, Jr., Winston & Strawn LLP, Washington, D.C., filed an Amicus Curiae
brief for the Chamber of Commerce of the United States.
Jonathan D. Selbin, Jason L. Lichtman, Lief Cabraser Heimann & Bernstein,
LLP, New York, NY; Jordan Elias, Lief Cabraser Heimann & Bernstein, LLP,
San Francisco, CA; and Ian J. McLoughlin, Rachel M. Brown, Shapiro Haber &
Urmy, LLP, Boston, MA, filed an Amicus Curiae brief for the American
Independent Business Alliance.
Before LUCERO, MURPHY, and BACHARACH, Circuit Judges.
BACHARACH, Circuit Judge.
This antitrust class action stems from an allegation that Dow Chemical Company
conspired with competitors to fix prices for polyurethane chemical products. Over
2
Dow’s objection, the district court certified a plaintiff class including all industrial
purchasers of polyurethane products during the alleged conspiracy period. The action
went to trial, and the jury returned a verdict against Dow. The district court entered
judgment for the plaintiffs, denying Dow’s motions for decertification of the class and
judgment as a matter of law.
Dow appeals, raising four arguments:
First, Dow contends that class certification was improper because common
questions did not predominate over individualized questions. We reject this
contention. The district court decided that common questions predominated
because: (1) the existence of a conspiracy and impact raised common
questions, and (2) these common liability-related questions predominated over
individualized questions regarding the extent of each class member’s damages.
This decision fell within the district court’s discretion. Thus, we reject Dow’s
challenge to class certification.
Second, Dow argues that the district court should have excluded the testimony
of the plaintiffs’ expert witness on statistics. According to Dow, the impact
and damages models were unreliable because the expert witness
inappropriately selected variables and benchmark years based on what would
yield the greatest damages. We disagree. The district court acted within its
discretion in allowing the testimony, and Dow’s arguments relate to the weight
of the expert’s testimony, not admissibility.
Third, Dow challenges the sufficiency of the evidence regarding liability.
Viewing the evidence in the light most favorable to the plaintiffs, as we must,
we conclude that the evidence sufficed on liability.
Fourth, Dow asserts that the damages award lacked an evidentiary basis and
that the resulting judgment violated the Seventh Amendment. These
arguments are invalid.
The award of $400,049,039 was supported by the evidence. Dr. McClave
calculated even greater damages ($496,680,486), and the jury had an
evidentiary basis for reducing this figure to $400,049,039.
3
In allocating this award, the court did not violate the Seventh Amendment; and
Dow has no interest in the method of distributing the aggregate damages award
among the class members.
I. The Polyurethane Market
This appeal involves four categories of urethane chemical products: (1) polyether
polyols; (2) toluene diisocyanate (TDI); (3) methylene diphenyl diisocyanate (MDI); and
(4) polyurethane systems.1 These products—collectively, “polyurethanes”—are used in
various consumer and industrial components such as mattress foams, insulation, sealants,
and footwear.
The polyurethane market comprises a “myriad of products, pricing structures,
individualized negotiations, and contracts.” AA 413. Buyers negotiate individually with
manufacturers regarding price and other terms, sometimes entering into long-term
contracts and other times purchasing on a “spot” basis. The price depends on multiple
factors, including supply and demand, the balance of bargaining power between the buyer
and manufacturer, and the availability of a substitute product to meet the buyer’s needs.
Apart from price, buyers can negotiate on other terms, such as rebates, most-favored-
nation clauses, early payment discounts, and protection from future price hikes.
Prices are set in some of the contracts, but not in others. When there is no set
price, a contract typically requires the manufacturer to give the buyer advance notice of
price increases. Accordingly, price increases are announced by letter 30 to 45 days in
1
The litigation initially involved another category of urethane products—polyester
polyols—but those defendants settled.
4
advance. But these announcements did not always result in actual price increases. For
example, buyers sometimes avoided price hikes by negotiating with the supplier.
II. The Price-Fixing Claim
The plaintiffs are industrial purchasers of polyurethane products who sued under
the Sherman Antitrust Act, 15 U.S.C. § 1, and the Clayton Antitrust Act, 15 U.S.C.
§ 15(a), alleging that a group of polyurethane manufacturers—Bayer AG, Bayer
Corporation, Bayer Material Science, BASF Corporation, Huntsman International LLC,
Lyondell Chemical Company, and Dow Chemical Company—conspired to fix prices and
allocate customers and markets from January 1, 1999, to December 31, 2004. AA 369.
As the case progressed, it underwent three significant changes. First, the plaintiffs settled
with all defendants except for Dow. Second, the plaintiffs dropped their allocation
theory, leaving the price-fixing theory as the sole basis of the lawsuit. Third, the
plaintiffs chose to pursue a shorter conspiracy—one lasting from January 1, 1999, to
December 31, 2003—than was initially alleged.
The price-fixing claim arises under § 1 of the Sherman Act, which “prohibits
contracts and conspiracies that restrain trade.” Smalley & Co. v. Emerson & Cuming,
Inc.,
13 F.3d 366, 367 (10th Cir. 1993). For a § 1 violation, the class had to prove:
● the existence of an agreement or conspiracy
● among actual competitors
● that had the purpose or effect of raising, depressing, fixing, pegging, or
stabilizing prices
5
● in interstate commerce.2
Cayman Exploration Corp. v. United Gas Pipe Line Co.,
873 F.2d 1357, 1360 (10th Cir.
1989). Because the plaintiffs sought damages under § 4 of the Clayton Act, 15 U.S.C.
§ 15(a), they also had to prove antitrust injury, or “impact,” which is “‘an injury of the
type the antitrust laws were intended to prevent and that flows from that which makes
defendant’s acts unlawful.’” Elliott Indus. Ltd. v. BP Am. Prod. Co.,
407 F.3d 1091,
1124 (10th Cir. 2005) (quoting Reazin v. Blue Cross & Blue Shield of Kan., Inc.,
899
F.2d 951, 962 n.15 (10th Cir. 1990)).
III. Certification of the Class
The plaintiffs moved for class certification under Rule 23(b)(3) of the Federal
Rules of Civil Procedure. Dow opposed the motion, arguing that certification was
improper because common questions did not predominate over individualized questions.
The district court disagreed, holding that common questions predominated because the
key elements of the price-fixing claim—the existence of a conspiracy and impact—
involved common questions that were capable of class-wide proof.
The court rejected Dow’s argument that the impact element caused individualized
questions to predominate, relying in part on a report prepared by the plaintiffs’ expert,
Dr. John Beyer. Dr. Beyer examined the polyurethane industry and concluded that a
price-fixing conspiracy for polyurethane products would affect all buyers. Crediting Dr.
2
Dow stipulated to the interstate commerce element; accordingly, that issue was not
submitted to the jury.
6
Beyer’s report and his supporting models, the court determined that impact involved a
common question susceptible to class-wide proof.
This determination was unaffected by the fact that prices were individually
negotiated. The court reasoned that the industry’s standardized pricing structure—
reflected in product price lists and parallel price-increase announcements—“presumably
establishe[d] an artificially inflated baseline” for negotiations. AA 410. Consequently,
any impact resulting from a price-fixing conspiracy would have permeated all
polyurethane transactions, causing market-wide impact despite individualized
negotiations.
The court acknowledged that the determination of damages might be
individualized. But the court concluded that:
● class certification was appropriate for resolution of “the more difficult,
threshold liability issues,” and
● if individualized questions were to overwhelm the damages issue, “‘the
more appropriate course of action would be to bifurcate a damages phase
and/or decertify the class as to individualized damages determinations.’”
Id. at 413-14 (quoting In re Urethane Antitrust Litig.,
237 F.R.D. 440, 452 (D. Kan.
2006)).
IV. Dow’s Motion to Exclude Expert Testimony
Before trial, Dow moved to exclude the testimony of Dr. James McClave, the
plaintiffs’ statistical expert. Dr. McClave used a multiple-regression analysis to develop
models predicting prices that would have existed in a competitive market. He then
7
compared these prices to the actual prices during the conspiracy period, estimating
overcharges of 15.6% for MDI, 14% for TDI, and 14.9% for polyether polyols. SA 6297.
Using these overcharge estimates and sample data from roughly 50% of class sales, Dr.
McClave extrapolated damages for the entire class and distilled the calculations into a
damages model.3
Dr. McClave proposed to testify about these models, and Dow objected on
grounds that he picked variables and the time period to get the result that he wanted.
First, Dow accused Dr. McClave of selecting variables based on whether they
would produce supra-competitive prices for the conspiracy period. The district court
rejected this argument, holding that Dr. McClave had “a basis, beyond statistical fit,
rooted in general economic theory and particular documents” for selecting the variables
that he did. AA 504. Thus, the court concluded that Dow’s argument affected the weight
of the testimony rather than its admissibility.
Id.
Dow’s second challenge involved Dr. McClave’s decision to move 2004 from the
conspiracy period to the competitive/benchmark period. According to Dow, Dr.
McClave manipulated the benchmark to generate supra-competitive prices for the
conspiracy period. The district court was unpersuaded, reasoning that: (1) Dr. McClave
3
Dr. McClave did not create a regression model for systems. Instead, he assumed
that prices for systems increased proportionately with increases in the price of MDI, the
basic chemical comprising the system. AA 1036, 2087-88. Estimating that MDI
constituted approximately 74% of a system, Dr. McClave assumed that all systems were
subject to an overcharge equal to 74% of the average overcharge for MDI, resulting in a
7.2% average overcharge for systems.
Id. at 1036-40.
8
could have had legitimate reasons to modify the benchmark, and (2) Dow’s argument was
untimely.
V. The Trial, the Verdict, & the Post-Trial Rulings
At trial, the plaintiffs attempted to prove that Dow had conspired with competitors
to fix prices for polyurethane products. The plaintiffs’ theory was that the conspiracy had
begun in January 1999, when the polyurethane market was depressed. In an effort to turn
the industry around, executives allegedly coordinated “lockstep” price-increase
announcements and agreed to try to make the price increases stick in individual contract
negotiations.
The plaintiffs supported their theory with testimony from industry insiders,
evidence that the defendants behaved collusively, evidence that the industry was
susceptible to collusion, and evidence that prices exceeded a competitive level.
On the day before the trial was to begin, Dow moved to decertify the class.4
Nonetheless, the trial proceeded, and the jury ultimately found that: (1) Dow had
participated in a price-fixing conspiracy, (2) the conspiracy caused the plaintiffs to pay
more for polyurethane products than they would have paid in a competitive market, (3)
the injury did not precede November 24, 2000, and (4) the plaintiffs suffered damages of
4
Dow did not include its motion in the appendix. Because the appeal involves the
denial of the motion to decertify the class, Dow had an obligation to include the motion
in the appendix. See 10th Cir. R. 10.3(D)(2), 30.1(A)(1). But we exercise our discretion
to take judicial notice of the motion. See Guttman v. Khalsa,
669 F.3d 1101, 1127 n.5
(10th Cir. 2012).
9
$400,049,039. After trebling the damages and deducting the amounts paid by the settling
defendants, the court entered judgment against Dow for $1,060,847,117.
The court then granted the plaintiffs’ request to permit allocation of the award
according to Dr. McClave’s damages model, with a pro rata reduction to reflect the jury’s
award of a lesser amount. With this ruling, the court rejected the Seventh Amendment
challenge, adding that Dow had no interest in the way damages were distributed among
the class members.
Over a month after the trial ended, Dow renewed its motion to decertify the class.
In its reply brief, Dow relied for the first time on the Supreme Court’s then-recent
opinion in Comcast Corp. v. Behrend, __ U.S. __,
133 S. Ct. 1426 (2013). Invoking
Comcast, Dow argued that Dr. McClave’s models had failed to supply a nexus between:
● the liability theory and
● the impact on class members.5
The court held that Comcast did not apply and declined to decertify the class.
VI. Dow’s Arguments
Dow raises four challenges on appeal, which involve: (1) the certification of a
class and refusal to order decertification, (2) the admission of Dr. McClave’s testimony,
(3) the sufficiency of the evidence, and (4) the damages award.
5
Dow raised this argument for the first time in a post-trial brief. The court
characterized the argument as “arguably untimely,” but addressed the merits “in light of
the intervening Supreme Court decision and the fact that plaintiffs were given an
opportunity to file a sur-reply addressing the Comcast opinion.” AA 528.
10
VII. Certification & the Motion for Decertification
Dow challenges the orders certifying a class and declining to decertify the class.
In evaluating these challenges, we review de novo whether the district court applied the
correct legal standard. Carpenter v. Boeing Co.,
456 F.3d 1183, 1187 (10th Cir. 2006).
If the proper standard was applied, we will reverse only for abuse of discretion.
Id. An
abuse of discretion occurs “when the district court bases its decision on either a clearly
erroneous finding of fact or conclusion of law or by manifesting a clear error of
judgment.” DG ex rel. Stricklin v. Devaughn,
594 F.3d 1188, 1194 (10th Cir. 2010).
The class was certified under Rule 23(b)(3) of the Federal Rules of Civil
Procedure, which requires “that the questions of law or fact common to class members
predominate over any questions affecting only individual members.” Fed. R. Civ. P.
23(b)(3). Dow maintains that common questions did not predominate and that the district
court’s contrary rulings run afoul of Wal-Mart Stores, Inc. v. Dukes, __ U.S. __, 131 S.
Ct. 2541 (2011), and Comcast Corp. v. Behrend, __ U.S. __,
133 S. Ct. 1426 (2013).
A. Dow’s Wal-Mart Arguments
Wal-Mart involved a gender-discrimination claim under Title VII. The plaintiffs,
who were female employees, alleged that their supervisors had discriminated in decisions
on pay and promotions. For the gender-discrimination claims, the district court certified
a class of female employees. See
Wal-Mart, 131 S. Ct. at 2549. The Ninth Circuit Court
of Appeals upheld certification, reasoning that the evidence had raised a common
question involving the reason for gender-based disparities on pay and promotion. See
id.
11
The Supreme Court disagreed, concluding that the evidence did not show a
company-wide policy of discrimination or “a common mode of exercising discretion that
pervade[d] the entire company.”
Id. at 2553-55. Thus, there was no “glue” holding
together the reasons for the alleged injury, and the district court could not resolve the
individual claims “in one stroke.”
Id. at 2551-52. The Court emphasized that “[w]hat
matters to class certification . . . is not the raising of common ‘questions’—even in
droves—but, rather the capacity of a classwide proceeding to generate common answers
apt to drive the resolution of the litigation.”
Id. at 2551 (quoting Nagareda, Class
Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97, 132 (2009)). The
problem for the plaintiffs was that the common question (the reason for the pay and
promotion disparities) was incapable of yielding a common answer. Therefore,
individual trials were needed to resolve the claims.
The district court held that class-wide liability could be decided based on a sample
of class members. See
id. at 2560-61. This procedure was invalidated by the Supreme
Court.
Id. at 2561. Calling the procedure a “trial by formula,” the Supreme Court
reasoned that the determination of liability would violate Wal-Mart’s right “to litigate its
statutory defenses to individual claims.”
Id.
Dow contends that the certification here violated Wal-Mart in two ways: (1) by
denying Dow the right to show in individualized proceedings that certain class members
suffered no injury, and (2) by allowing the class to proceed on the basis of extrapolated
impact and damages. We reject both contentions.
12
1. The Need for Individualized Proceedings
Dow argues that it was entitled to show in individualized proceedings that certain
class members could not have been injured by the alleged conspiracy. To support this
argument, Dow points to ways that the plaintiffs could have avoided the announced price
increases, such as negotiating for a lower price or switching to a substitute product.
It is true that some of the plaintiffs may have successfully avoided damages. But
Dow has not shown that the district court abused its discretion in finding that class-wide
issues predominated over individualized issues.
The district court determined that common questions predominated because the
key elements of the price-fixing claim—the existence of a conspiracy and impact—raised
common questions that were capable of class-wide proof. Dow disagrees, contending
that impact involved individualized questions because the class members experienced
varying degrees of injury, with some avoiding injury altogether.
The district court did not abuse its discretion in determining that impact involved a
common question that would override other individualized issues. Under the prevailing
view, price-fixing affects all market participants, creating an inference of class-wide
impact even when prices are individually negotiated. E.g., In re Linerboard Antitrust
Litig.,
305 F.3d 145, 151-52 (3d Cir. 2002);6 In re Foundry Resins Antitrust Litig., 242
6
In In re Linerboard Antitrust Litigation, the Third Circuit Court of Appeals upheld
class certification based in part on expert testimony by John Beyer,
Ph.D. 305 F.3d at
153-54. There, Dr. Beyer testified that antitrust impact could be proven on a class-wide
basis despite variations for particular products or customers. See
id. This testimony was
13
F.R.D. 393, 409-10 (S.D. Ohio 2007).7 The inference of class-wide impact is especially
strong where, as here, there is evidence that the conspiracy artificially inflated the
baseline for price negotiations. See In re Rail Freight Fuel Surcharge Antitrust Litig.,
287 F.R.D. 1, 61 (D.D.C. 2012) (holding that common proof could be used to prove
injury by raising the starting point for negotiations), vacated in part on other grounds,
725 F.3d 244 (D.C. Cir. 2013); In re Cardizem CD Antitrust Litig.,
200 F.R.D. 326, 345-
47 (E.D. Mich. 2001) (holding that injury was provable through class-wide evidence
involving inflation of the baseline for individual negotiations); In re Commercial Tissue
Prods.,
183 F.R.D. 589, 595 (N.D. Fla. 1998) (holding that impact of price-fixing was
provable through class-wide evidence notwithstanding individualized negotiations for
every distributor); see also In re Scrap Metal Antitrust Litig.,
527 F.3d 517, 535 (6th Cir.
2008) (“[E]ven where there are individual variations in damages, the requirements of
Rule 23(b)(3) are satisfied if the plaintiffs can establish that the defendants conspired to
interfere with the free-market pricing structure.”).
The district judge certified a class based on the plaintiffs’ evidence of an
artificially inflated baseline, including parallel issuance of similar product price lists and
among the evidence relied on by the district court and the appeals court.
Id. Here, the
district court relied on similar testimony by Dr. Beyer.
7
In In re Foundry Resins Antitrust Litigation, the district court relied on Dr.
Beyer’s testimony in holding that impact could be proven through class-wide evidence
notwithstanding the defendants’ reliance on “individualized pricing negotiations” and
“market competition between the [d]efendants
themselves.” 242 F.R.D. at 409-10.
14
price-increase announcements.8 When the district judge denied the motion for
decertification, he had the benefit of the trial testimony. At trial, some of Dow’s
witnesses acknowledged that price-increase announcements had affected the starting
point for price negotiations. See SA 4095-4103, 4156-57 (testimony of Richard Beitel);
id. at 3885-86 (testimony of Robert Wood).
The district judge could reasonably weigh the evidence and conclude that price-
fixing would have affected the entire market, raising the baseline prices for all buyers.
Based on the reasonableness of this finding, the judge had the discretion to treat impact as
a common question that was capable of class-wide proof. See Blades v. Monsanto Co.,
400 F.3d 562, 566 (8th Cir. 2005) (“If the same evidence will suffice for each [class]
member to make a prima facie showing, then it becomes a common question.”).
The presence of individualized damages issues would not change this result.
Class-wide proof is not required for all issues. Instead, Rule 23(b)(3) simply requires a
showing that the questions common to the class predominate over individualized
questions. Amgen v. Conn. Ret. Plans & Trust Funds, __ U.S. __,
133 S. Ct. 1184, 1196
(2013).
In price-fixing cases, courts have regarded the existence of a conspiracy as the
overriding issue even when the market involves diversity in products, marketing, and
8
The appendices do not include the evidence submitted to the district court for or
against class certification. But we exercise our discretion to take judicial notice of the
evidence presented on the motion for certification. See Guttman v. Khalsa,
669 F.3d
1101, 1127 n.5 (10th Cir. 2012).
15
prices. In re Flat Glass Antitrust Litig.,
191 F.R.D. 472, 484-85 (W.D. Penn. 1999); In re
Alcoholic Beverages Litig.,
95 F.R.D. 321, 327 (E.D.N.Y. 1982); In re Fine Paper
Antitrust Litig.,
82 F.R.D. 143, 151-53 (E.D. Penn. 1979); In re Folding Carton Antitrust
Litig.,
75 F.R.D. 727, 734 (N.D. Ill. 1977); see also In re Scrap Metal Antitrust Litig.,
527 F.3d 517, 535 (6th Cir. 2008) (stating that “‘[p]redominance is a test readily met in
certain cases alleging . . . violations of the antitrust laws,’ because proof of the
conspiracy is a common question that is thought to predominate over the other issues of
the case” (citation omitted) (quoting Amchem Prods., Inc. v. Windsor,
521 U.S. 591, 625
(1997))). Therefore, the district court acted within its discretion by treating common
issues (involving the existence of a conspiracy) as predominant over individualized issues
(involving negotiated prices). See Gold Strike Stamp Co. v. Christensen,
436 F.2d 791,
796 (10th Cir. 1970) (“[W]here the question of basic liability [in antitrust cases] can be
established readily by common issues, then it is apparent that the case is appropriate for
class action [under Rule 23(b)(3)].”).
With this determination, the district court acted within its discretion in certifying
the class under Rule 23(b)(3), and nothing in Wal-Mart suggests an abuse of that
discretion. In Wal-Mart, individualized proceedings were necessary because the common
questions—the reasons for the pay and promotion disparities—could not yield a common
answer “in one stroke.”
Wal-Mart, 131 S. Ct. at 2551-52.
Here, however, there were two common questions that could yield common
answers at trial: the existence of a conspiracy and the existence of impact. The district
16
court reasonably concluded that these questions drove the litigation and generated
common answers that determined liability in a single “stroke.”
Id.
2. The Use of Extrapolation Techniques
Dow contends that the district court violated Wal-Mart by allowing the plaintiffs
to use extrapolations to prove class-wide impact and damages. This contention is based
on the plaintiffs’ reliance on Dr. McClave’s regression models (used to show impact) and
his extrapolation models (used to estimate damages). Dow complains that: (1) the use of
these models violated Wal-Mart’s prohibition against “trial by formula,” and (2) the
models were defective because Dr. McClave did not use representative sampling. We
reject both complaints.
When certifying the class, the district court relied on:
● the report and supporting models of Dr. Beyer, which Dow has not
challenged on appeal, and
● the evidence of a standardized pricing structure, including price lists and
parallel announcements of price increases.
The court did not even have Dr. McClave’s models or any other sort of extrapolation
evidence. Thus, the court could not have erred by relying on Dr. McClave’s models
when the class was initially certified.
But the plaintiffs did present Dr. McClave’s models before the district court ruled
on Dow’s motion to decertify the class. For two reasons, we conclude that the court
acted within its discretion when it denied the motion to decertify: (1) the motion was
filed late, and (2) liability was not proven through a sampling of class members.
17
First, the court acted reasonably in determining that the motion was late. Dow
waited until the day before trial to seek decertification even though it had received Dr.
McClave’s report 21 months earlier. The court reasonably held that decertification at that
juncture would have prejudiced the plaintiffs, who had “prepared for a long and complex
trial at great expense” and who would have found it “much more difficult to assert
individual claims at [that] time.” AA 523-24; see Davis v. Avco Fin. Servs., Inc.,
739
F.2d 1057, 1062 (6th Cir. 1984) (“Despite the fact that as the case developed individual
questions became more prominent vis a vis common questions of law and fact, there still
were and are significant common questions such that we would not be justified in
decertifying the class at this late date.”), overruled on other grounds by Pinter v. Dahl,
486 U.S. 622, 649-50 & n.25 (1988).
Second, reliance on Dr. McClave’s models did not result in a “trial by formula.”
The Wal-Mart Court used this term to describe a novel method of calculating damages,
where the district court determined the merits of individual claims by extrapolating from
a sample set of class members.
Wal-Mart, 131 S. Ct. at 2561. This method proved
problematic because it displaced the “established . . . procedure for trying pattern-or-
practice cases” under Title VII and, in doing so, deprived Wal-Mart of the right “to
litigate its statutory defenses to individual claims.”
Id.
Our circumstances are different. The plaintiffs did not seek to prove Dow’s
liability through extrapolation. Rather, Dow’s liability as to each class member was
proven through common evidence; extrapolation was used only to approximate damages.
18
Wal-Mart does not prohibit certification based on the use of extrapolation to calculate
damages. See Leyva v. Medline Indus., Inc.,
716 F.3d 510, 514 (9th Cir. 2013).
Dow also complains that the models were defective because Dr. McClave did not
use representative sampling. But Dow makes no attempt to:
● explain how the allegedly unrepresentative samples caused individualized
questions to predominate, or
● tie its unrepresentative-sampling argument to an abuse of discretion by the
district court.
We need not consider these issues, however, because Dow did not raise its present
argument in the district court.9 See, e.g., Walker v. Mather (In re Walker),
959 F.2d 894,
896 (10th Cir. 1992).
B. Dow’s Comcast Argument
Comcast involved a class action based on the antitrust laws. The proposed class
had alleged four theories of antitrust impact, three of which were rejected by the district
court as incapable of class-wide proof. See Comcast Corp. v. Behrend, __ U.S. __,
133
S. Ct. 1426, 1430-31 (2013). The Supreme Court held that the class had not satisfied its
burden of proving damages on a class-wide basis.
Id. at 1434-35.
Class-wide damages were to be proven in Comcast solely through the testimony of
Dr. McClave. The Court regarded Dr. McClave’s model as defective because it had
“assumed the validity of all four theories of antitrust impact initially advanced,”
9
In its brief opposing class certification, Dow argued that systems purchases should
be excluded from the class definition. But that argument differs fundamentally from the
one Dow is now asserting.
19
including the three that had been rejected by the district court.
Id. at 1434. Because the
model measured aggregate damages for all of the initial theories, the plaintiffs had no
way to prove class-wide damages. And without such proof, the Court concluded,
individualized questions would “inevitably overwhelm questions common to the class.”
Id. at 1433.
Dow argues that Dr. McClave’s model here suffers from the “precise flaw” that
precluded certification in Comcast: a “failure to distinguish between the impact and
damages attributable to the liability theory [that was] pursued at trial and another liability
theory” that was not. Appellant’s Opening Br. at 42 (emphasis removed). For the sake
of argument, we can assume that Dow is correct.10 But Comcast did not rest on the
10
This assumption is generous because Dr. McClave used different types of
benchmarks in Comcast and the present action.
In Comcast, Dr. McClave created a benchmark by constructing a hypothetical
market that would have existed in eighteen counties if the defendant had not engaged in
four separate types of anticompetitive conduct. See
Comcast, 133 S. Ct. at 1429 & n.1,
1431, 1434-35; Behrend v. Comcast Corp.,
655 F.3d 182, 205 (3d Cir. 2011), rev’d, __
U.S. __,
133 S. Ct. 1426 (2013);
Behrend, 655 F.3d at 217-18 (Jordan, J., dissenting); see
infra pp. 21-22. But before trial, the district court rejected the claims on three of the four
types of anticompetitive conduct.
Comcast, 133 S. Ct. at 1431; see infra p. 22. Though
the plaintiffs’ claims changed, Dr. McClave’s model did not.
Comcast, 133 S. Ct. at
1431. Thus, Dr. McClave’s benchmark in Comcast included thirteen counties no longer
encompassed in the allegations of anticompetitive conduct.
Id. at 1433-35; Behrend, 655
F.3d at 217-18 (Jordan, J., dissenting).
This defect does not exist in the benchmark that Dr. McClave used here because it
was not based on any subsets of the market (such as counties where the alleged
misconduct took place). Instead, the benchmark was based on the entire market, with Dr.
McClave comparing actual prices to the prices that would have prevailed in a competitive
market. Though one theory (customer allocation) dropped from the case, the market
20
ability to measure damages on a class-wide basis. Instead, the decision was premised on
the majority’s conclusion that without a way to measure damages on a class-wide basis,
individualized questions would “inevitably overwhelm questions common to the class.”
Comcast, 133 S. Ct. at 1433. Comcast does not control because: (1) the decision turned
on a concession that is absent here, and (2) we know from the actual trial that
individualized issues did not predominate.
First, unlike the claimants in Comcast, our plaintiffs did not concede that class
certification required a method to prove class-wide damages through a common
methodology. This distinction was highlighted in the Comcast dissent, which explained
that the plaintiffs’ concession on this point—an “oddity” specific to that case—was
outcome determinative.
Id. at 1436-37 (Ginsburg & Breyer, JJ., dissenting).
Second, the procedural setting in Comcast was different. There, the issue was
whether the district court could determine before trial that the plaintiffs could prove
damages on a class-wide basis. In making that determination, the district court had only
Dr. McClave’s expert report, which based damages on a comparison between actual
prices and a model addressing theories already rejected by the district court. These
circumstances are absent here.
Comcast involved a class action against providers of cable television service. See
id. at 1430. According to the suit, the cable television providers violated the antitrust
examined by Dr. McClave did not change. Thus, there was no need to adjust the
benchmark (as there had been in Comcast).
21
laws by clustering services in a 16-county region. The class proposed 4 theories of
damages from the clustering:
1. The clustering created an incentive for the cable operators to withhold
sports programming from competitors.
2. The clustering reduced the level of competition from companies building
cable networks in areas already being serviced.
3. The clustering reduced the “benchmark” competition that cable customers
used to compare prices.
4. The clustering strengthened the cable operators’ power to bargain with
companies providing content.
See
id. at 1430-31. Before trial, the district court rejected three of these theories, holding
that the plaintiffs could prove class-wide damage through only a single theory: reduction
of competition from companies building cable networks in areas already being serviced.
See
id.
This ruling created a problem of proof for the class. It relied on a pretrial model
by Dr. McClave that compared actual prices in the 16-county region to the prices that
would have existed if the cable operators had not gained an incentive to withhold sports
programming from competitors, reduced competition from companies building rival
networks in areas already serviced, reduced price competition from rival cable
companies, and strengthened the defendants’ bargaining power with companies providing
content. See
id. And the district court had already held that many of these alleged
problems could not be used to prove class-wide damage. See
id. With this ruling, Dr.
McClave’s benchmarks became useless.
Id. at 1433-35. And without another way to
22
prove class-wide damage, all class members would need to prove their own damages.
Id.
at 1433. The necessity of individual determinations on damages proved fatal to
certification because the plaintiffs had not questioned the necessity of a methodology
capable of measuring damages on a class-wide basis.
Id. at 1430, 1434-35.
These problems do not exist here because Dow waited until after trial to raise the
issue. Thus, by the time Dow presented its argument, Dr. McClave had already testified
at trial.
In the trial, Dr. McClave testified “that nearly all class members had been
impacted or overcharged” during the pertinent period. AA 940. In light of this
testimony, the district court had the discretion to find a “fit” between the plaintiffs’
theory of liability (a nationwide conspiracy to fix prices) and the theory of class-wide
damages.
This “fit” had been missing in Comcast. Without any other evidence of class-wide
damages, the Supreme Court predicted that “[q]uestions of individual damage
calculations [would] inevitably overwhelm questions common to the class.”
Comcast,
133 S. Ct. at 1433.
This problem was absent here. The district court did not need to predict what
would predominate at trial because by the time Dow raised this issue, the trial had already
taken place. And because Dow did not request individualized determinations on
23
damages,11 the plaintiffs presented only class-wide evidence of damages. As a result, the
district court knew from the actual trial that common issues of damages had
predominated.
Dow complains that this approach masks a “disconnect” between Dr. McClave’s
expert report and his theory of damages. But the expert report was never introduced in
evidence. In Comcast, the district court had to rely on Dr. McClave’s expert report
because the trial had not taken place. Here, the district court had the benefit of seeing
what ultimately took place at trial. The court had no need to make a prediction based on
11
At oral argument, counsel for Dow argued that it had sufficiently requested
individualized damages calculations in its objection to class certification. Oral Arg.
15:34. But this objection did not constitute a request for individualized findings.
In the objection, Dow argued that the plaintiffs had failed to show that common
evidence could be used to measure damages “for each putative class member.” ASA 126.
The district court overruled the objection, but suggested a willingness to bifurcate the
trial and decertify the class to obtain individualized findings on damages. AA 413-14.
Even with this suggestion by the district court, Dow never asked for individualized
findings on damages. Instead, Dow asked for a single finding on class-wide damages.
See, e.g., Dow’s Proposed Verdict Form & Written Questions at 2 (Jan. 17, 2013) (Doc.
2696-1) (“The total damages sustained by the members of the Class caused by that
conspiracy were $________.” (emphasis added)); Dow’s Proposed Jury Instructions at 50-
51 (Jan. 14, 2013) (Doc. 2690-2) (“Dow does not object to the proposed [damages] jury
instruction with the proposed modifications.”); Dow’s Memorandum in Support of
Dow’s Proposed Verdict Form at 6-7 (Jan. 17, 2013) (Doc. 2696) (“If the jury answers
“YES,” then in response to Question 2(d) the jury must specify the total damages Class
members sustained as a result of that conspiracy.”).
When questioned about the failure to seek individualized findings on damages,
Dow’s counsel asserted that the district court had limited discovery to the named
plaintiffs. Oral Arg. 16:00-16:08. We are not persuaded. Dow did not raise this excuse
in its appellate briefs, and it has not pointed us to any such order limiting discovery.
24
the expert report. Instead, the district court could see that common issues of liability had
predominated over individualized issues. In these circumstances, the court did not abuse
its discretion by declining to decertify the class.
VIII. The Admissibility of Dr. McClave’s Testimony
Dow also argues that the district court erroneously allowed Dr. McClave’s expert
testimony. We disagree.
A. Standard of Review
“We review de novo whether the district court applied the proper standard in
determining whether to admit or exclude expert testimony.” Norris v. Baxter Healthcare
Corp.,
397 F.3d 878, 883 (10th Cir. 2005). If the proper standard was applied, we will
reverse only for abuse of discretion.
Id. An abuse of discretion occurs when a ruling is
“‘arbitrary, capricious, whimsical or manifestly unreasonable or when we are convinced
that the district court made a clear error of judgment or exceeded the bounds of
permissible choice in the circumstances.’”
Id. (quoting Dodge v. Cotter Corp.,
328 F.3d
1212, 1223 (10th Cir. 2003)).
B. Admissibility Requirements
Expert testimony is admissible only if it is relevant and reliable. Kumho Tire Co.
v. Carmichael,
526 U.S. 137, 152 (1999). To ensure reliability, district courts play an
essential “gatekeeping” role.
Id. at 141. This role requires assessment of the expert
witness’s qualifications and the reliability of the opinions. Ralston v. Smith & Nephew
Richards, Inc.,
275 F.3d 965, 969 (10th Cir. 2001).
25
C. Dow’s Arguments
Dow argues that Dr. McClave’s testimony was unreliable because of flaws in his
multiple-regression analysis. Multiple-regression analysis is a statistical tool used to
determine the relationship between an unknown variable (the “dependent” variable) and
one or more “independent” variables that are thought to impact the dependent variable.
Saks, Michael J., et al., Reference Manual on Scientific Evidence 179, 181 (2d ed. 2000).
The dependent variable in Dr. McClave’s models was market price. To identify
the independent variables driving prices in a competitive market, Dr. McClave chose a
benchmark period and tested various independent variables to find the combination that
would accurately predict prices during the benchmark period. That combination of
variables was then applied to the conspiracy period to calculate the prices that would
have existed but for the conspiracy. Dr. McClave testified that when he compared the
prices expected in a competitive market and the actual prices, he detected overcharges for
the relevant products and attributed the overcharges to “something other than
competition.” AA 1072-73, 1119.
Dow argues that the testimony was inadmissible because Dr. McClave
manufactured supra-competitive prices through “variable shopping” and “benchmark
shopping.” We disagree.
26
1. “Variable Shopping”
In Dow’s view, Dr. McClave engaged in “variable shopping” by choosing
variables based on whether they would generate supra-competitive prices. This argument
bore on the weight of Dr. McClave’s opinions, not their admissibility.
a. The Need to Include the Major Factors
The validity of a regression analysis depends on selection of the appropriate
independent variables. E.g., Segar v. Smith,
738 F.2d 1249, 1261 (D.C. Cir. 1984).
Consequently, the exclusion of major variables or the inclusion of improper variables
may diminish the probative value of a regression model. Bazemore v. Friday,
478 U.S.
385, 400 (1986). But such defects do not generally preclude admissibility, and courts
allow use of a regression model as long as it includes the variables accounting for the
major factors. See
id. (“Normally, failure to include variables will affect the [regression]
analysis’ probativeness, not its admissibility.”); see also Koger v. Reno,
98 F.3d 631, 637
(D.C. Cir. 1996) (“Following Bazemore, courts have taken the view that a defendant
cannot undermine a regression analysis simply by pointing to variables not taken into
account that might conceivably have pulled the analysis’s sting.”).
Dow challenges Dr. McClave’s exclusion of: (1) domestic demand variables for
TDI, and (2) various demand variables for MDI and polyether polyols.
b. TDI
The district court reasonably concluded that Dr. McClave had a reliable
evidentiary foundation to tie TDI exports to price. Dow challenges the exclusion of
27
domestic demand variables, but does not question the relevance of TDI exports. The
exclusion of domestic demand variables was not fatal because Dr. McClave had no need
to consider every measurable factor―just the “major” ones.
Bazemore, 478 U.S. at 400.
The district court reasonably found that Dr. McClave had accounted for the major factors
affecting demand, and Dow’s arguments bore on the weight of Dr. McClave’s opinions,
not their admissibility.
Dow argues that Dr. McClave mistakenly selected variables based on the data
instead of picking variables that “made economic sense.” Appellant’s Opening Br. at 46.
This argument does not invalidate the district court’s contrary finding.
For this argument, Dow relies on a law review article by Franklin Fisher. Franklin
M. Fisher, Multiple Regression in Legal Proceedings, 80 Colum. L. Rev. 702 (1980).
There, Dr. Fisher states that in multiple regression, the analyst “specifies the major
variables that are believed to influence the dependent variable,” then tests the accuracy of
the chosen variables.
Id. at 705-06, 715. According to Dow, Dr. McClave did the
opposite, picking variables based on his own data rather than picking variables based on
what he would have expected.
But the district court could reasonably infer that Dr. McClave followed the
protocol urged by Dow. Dr. McClave stated under oath that for TDI, he tested variables
that best explained the changes in price, then tested how well these variables served to
predict price changes. AA 2081, 2085. With this explanation, the district court
concluded that TDI exports could reliably be used as a proxy for demand.
Id. at 503. In
28
drawing this conclusion, the court pointed out that none of Dow’s experts had questioned
the sufficiency of a relationship between TDI exports and demand.
Id. Even now, Dow
does not refer to any such evidence.12
Instead, Dow argues that Dr. McClave should have considered other independent
variables addressing domestic demand. But Dr. McClave tested domestic demand
variables and concluded they did not bear a statistically significant relationship to price.
Id. at 2221. He explains that when he tested domestic demand variables, price decreased
as demand increased.
Id. at 2161. Dr. McClave regarded this finding as a “nonsensical
negative sign[],” which made domestic demand unusable as an independent variable
affecting TDI prices.
Id.
Dr. McClave pointed to other evidence substantiating his statistical conclusions
that domestic demand proved less significant than exports. For example, a 2004 Bayer
document identified exports as a driver of TDI prices. And the plaintiffs’ economic
expert (John Solow, Ph.D.) opined that “the marginal demand driver for TDI was not
12
In district court, Dow appeared to criticize Dr. McClave’s inclusion of TDI
exports as a variable. Dow’s Mot. to Exclude Dr. McClave’s Test. at 20 (Aug. 17, 2012)
(Doc. 2391) (stating that it was improper for Dr. McClave to use TDI exports rather than
measures of U.S. demand). But on appeal, Dow appears to retract its criticism of Dr.
McClave’s decision to include TDI exports as a demand variable. Dow’s Reply Br. at
15-16 (“The problem . . . is not the inclusion of TDI exports as a demand variable . . . .”).
29
domestic demand . . . but rather export demand”). Corrected Solow Report at 22 n.71
(June 16, 2011).13
Dr. McClave’s treatment of domestic demand is open to debate. But the district
court had the discretion to accept Dr. McClave’s explanation for omitting variables
addressing domestic demand. Thus, the district court did not abuse its discretion in
concluding that Dow’s complaints bore on the weight of Dr. McClave’s testimony rather
than its admissibility.
c. MDI and Polyols
In its opening brief, Dow devotes two sentences to the choice of variables for MDI
and polyether polyols: “In specifying his MDI and polyols models, in contrast, Dr.
McClave used only domestic demand variables and did not include a variable for exports.
He continued his results-oriented approach in the MDI and polyols models by selectively
picking and choosing among the variables used as a proxy for domestic demand.”
Appellant’s Opening Br. at 46-47 (citations omitted). Dow followed the two sentences
with a chart comparing Dr. McClave’s proxies for domestic demand with a report of the
top uses in 2002.
Id. at 47.
We question whether the two sentences and the chart fairly develop a claim
challenging the use of variables for MDI and polyols. See Thompson R2-J Sch. Dist. v.
Luke P., ex rel. Jeff P.,
540 F.3d 1143, 1148 n.3 (10th Cir. 2008). But even if we were to
13
Dr. Solow’s report was omitted from the appendices. But the report was filed in
district court as an attachment and is subject to judicial notice. See Guttman v. Khalsa,
669 F.3d 1101, 1127 n.5 (10th Cir. 2012).
30
construe these sentences and the chart as a separate appeal point, it was not raised in
Dow’s motion to exclude Dr. McClave’s testimony. See Dow’s Mot. to Exclude Dr.
McClave’s Test., passim (Aug. 17, 2012) (Doc. 2391). Thus, if Dow has presented an
appeal point for MDI and polyols, we would confine our review to the plain-error
standard. See McKenzie v. Benton,
388 F.3d 1342, 1350-51 (10th Cir. 2004).
Dow’s brief assertions do not show an obvious error in Dr. McClave’s choice of
variables for MDI or polyols. As a result, even if we were to construe Dow’s brief
references to MDI and polyols as a separate argument, it would not warrant reversal
under the plain-error standard. See, e.g., Royal Maccabees Life Ins. Co. v. Choren,
393
F.3d 1175, 1181-82 (10th Cir. 2005) (stating that the plain-error standard requires
demonstration of an error “that is plain or obvious under existing law”).
2. “Benchmark Shopping”
Dow also argues that Dr. McClave engaged in “benchmark shopping,” arguing
that he moved 2004 from the conspiracy period to the competitive/benchmark period in
order to manufacture supra-competitive prices during the conspiracy period. The
plaintiffs maintain that this decision was made for legitimate reasons. But even if Dow
could prove otherwise, its benchmark-shopping argument does not implicate the
reliability of Dr. McClave’s methodology.
Reliability “is primarily a question of the validity of the methodology employed
by an expert, not the quality of the data used in applying the methodology or the
conclusions produced.” Manpower, Inc. v. Ins. Co. of Penn.,
732 F.3d 796, 806 (7th Cir.
31
2013). Accordingly, a district court must admit expert testimony as long as it is based on
a reliable methodology. It is then for the jury to evaluate the reliability of the underlying
data, assumptions, and conclusions.
Id. at 806-08.
Dow argues that Dr. McClave skewed the results by including 2004 data in the
prices for the benchmark period. This argument involves a swearing match. Dow
asserted to the district court that Dr. McClave had moved 2004 to the “benchmark”
period in order to maximize damages. The plaintiffs disagreed, presenting Dr.
McClave’s explanation that he had included 2004 as part of the benchmark period based
on test results reflecting that 2004 prices “were more consistent with competition than
collusion.” AA 2081, 2215. The district court resolved this swearing match in favor of
the plaintiffs. SA 498. We have no basis to regard this resolution as an abuse of
discretion. See Hollander v. Sandoz Pharm. Corp.,
289 F.3d 1193, 1204 (10th Cir.
2002).
IX. Sufficiency of the Evidence
Dow also challenges the sufficiency of the evidence regarding liability, arguing
that the district court erred in denying the motion for judgment as a matter of law. We
reject this challenge.
A. Standard of Review
32
We engage in de novo review of the district court’s denial of judgment as a matter
of law, applying the same standard as the district court. Myklatun v. Flotek Indus., Inc.,
734 F.3d 1230, 1233-34 (10th Cir. 2013). This standard requires us to determine whether
the evidence allowed a verdict for the plaintiffs. See Wolfgang v. Mid-Am. Motorsports,
Inc.,
111 F.3d 1515, 1522 (10th Cir. 1997). In applying this standard, we view the
evidence and related inferences in the light most favorable to the plaintiffs. See
Myklatun, 734 F.3d at 1234. Judgment as a matter of law should not be granted “[u]nless
the proof is all one way or so overwhelmingly preponderant in favor of the movant as to
permit no other rational conclusion.” Greene v. Safeway Stores, Inc.,
98 F.3d 554, 557
(10th Cir. 1996).
This evidence, viewed in the light most favorable to the plaintiffs, was sufficient
for a finding of liability.
B. Dow’s Arguments
Dow argues that: (1) there was insufficient evidence that the alleged price-fixing
agreement was effectively implemented, (2) there was insufficient evidence of a
conspiracy involving Lyondell, and (3) the jury necessarily rejected Dr. McClave’s
models, leaving insufficient evidence of impact and damages. We reject each argument.
1. Implementation of the Conspiracy
Dow does not dispute:
● the existence of an agreement to coordinate price-increase announcements
and try to make them stick, or
33
● the existence of evidence involving coordination in announcing price
increases.
Rather, Dow questions the existence of evidence that the conspirators followed through
with the agreement by requiring suppliers to make the price increases stick. Without
evidence of follow-through, Dow argues, the price-fixing claim fails as a matter of law.
We reject Dow’s argument.
a. Parallel Announcements of Price Increases
The argument rests on a purported distinction between two categories of price-
fixing conspiracies: (1) those involving an agreement to set prices directly, and (2) those
involving an agreement to announce price increases and try to make them stick.
Conspiracies falling into the second category, Dow submits, require an evidentiary link
between the price-increase announcements and subsequent prices. According to Dow,
this evidentiary link is necessary because parallel price-increase announcements do not
prove a conspiracy.
For the sake of argument, we can assume that evidence of parallel price-increase
announcements would not establish a price-fixing conspiracy. But the plaintiffs did more
than show parallel announcements. The evidence included admissions by industry
insiders, collusive behavior, susceptibility of the industry to collusion, and setting of
prices at a supra-competitive level.
For example, the plaintiffs presented testimony by Ms. Stephanie Barbour (Dow),
who admitted that Dow had participated in a price-fixing conspiracy. Ms. Barbour
34
directly implicated at least three Dow executives in the conspiracy: Mr. Marco Levi, Mr.
David Fischer, and Mr. Peter Davies.
Another key witness for the plaintiffs was Mr. Lawrence Stern (Bayer), who
recounted numerous conversations he had had with his counterparts at Dow, BASF, and
Huntsman. Mr. Stern described these conversations as “inappropriate,” for they pertained
to future pricing and “the possibility of raising prices.” SA 912-14. Mr. Stern added that
he had:
● discussed prices with David Fisher (Dow) on eight to fifteen occasions, and
● exchanged confidential pricing information with competitors to spur
industry-wide price increases.
Id. at 896-97, 905.
Mr. Stern also testified that he had taken “unusual steps” to conceal his
conversations with Bayer’s competitors.
Id. at 881. For instance, he would use pay
telephones instead of calling from his office and would use a prepaid phone card.
Id.
Other times, Mr. Stern met with competitors at off-site locations, such as coffee shops or
hotels. Commenting on these secretive communications, the plaintiffs’ expert
econometrician told the jury that “economists associate secrecy with collusion.”
Id. at
2688.
Testimony about a conspiracy also came from others, such as:
● Mr. Edward Dineen (Lyondell), who implicated Mr. Jean Pierre Dhanis
(BASF) and Mr. Robert Wood (Dow) in the conspiracy,
35
● Mr. Robert Kirk (Bayer), who confirmed Mr. David Fischer’s (Dow)
involvement, and
● two Bayer executives (Ms. Michelle Blumberg and Mr. Gerald Phelan) who
had grounds to suspect their colleague, Mr. Wolfgang Friedrich, of price-
fixing.
The jury also heard from the plaintiffs’ expert, Dr. John Solow, who testified
about: (1) collusive conduct he had observed in the polyurethane industry, and (2) the
industry’s susceptibility to collusion.
Dr. Solow had observed four types of collusive conduct.
First, the defendant companies had issued “a series of . . . lockstep price increase
announcements,” which came within weeks of each other, communicated the same or
similar price increases, and were to take effect at about the same time.
Id. at 2678-79,
2682.
Second, Dr. Solow noticed “a widespread pattern of communication” among the
top executives of the defendant companies.
Id. at 2679. Dr. Solow was struck not only
by the frequency and secrecy of these communications but also by their timing, for the
contacts frequently occurred within days of a lockstep price-increase announcement.
Id.
at 2706-09. This proximity suggested that the price-increase announcements had been
coordinated.
Id.
Third, Dr. Solow detected a “price over volume strategy,” where the companies
would stick to their list prices even if it meant walking away from opportunities to earn
business or make sales at lower, but still profitable, prices.
Id. at 2679. In Dr. Solow’s
36
view, these actions would not take place in a competitive market and the companies were
acting contrary to their interests.
Id. at 2711-12.
Fourth, the defendant companies monitored one another to prevent cheating and to
discipline any supplier that was found cheating.
Id. at 2723.
Dr. Solow also testified that the polyurethane industry was “ripe for collusion”
based on six features:14
1. Sales of polyurethane products were “concentrated in the hands of only a
handful of firms” during the conspiracy period;15
2. the market had high barriers to entry;16
3. polyurethane products are homogenous;17
4. there were no close product substitutes available to customers;18
5. there was excess capacity for MDI, TDI, and polyether polyols during the
conspiracy period, meaning that the companies could “produce more
output than the customers actually want[ed] to buy,” putting a “strong
downward pressure on prices;”19 and
14
SA 2675.
15
Id. at 2644.
16
Id. at 2645.
17
Id. at 2646.
18
Id. at 2649.
19
Id. at 2651-52.
37
6. the industry has several trade associations, which provided “an opportunity
to engage in price fixing behavior.”20
The evidence also included testimony by Dr. McClave. He testified that class
members had been overcharged for polyurethane products because of “something other
than competition.” AA 1072-73, 1119; SA 6297.
The evidence, viewed favorably to the plaintiffs, goes beyond parallel
announcements of price increases.
b. Announcements of Price Increases v. Actual Price Increases
Dow argues that even if a conspiracy existed, it did not work because the plaintiffs
could not tie the announcements to actual price hikes. But the plaintiffs had no reason to
connect the two, for they were not trying to prove that the price-increase announcements
caused supra-competitive prices. Instead, the plaintiffs were trying to prove that the
supra-competitive prices were caused by the conspiratorial agreement; the price-increase
announcements were merely an instrument used to effectuate that agreement.
The jury could have inferred that the announcements proved successful, for the
trial included testimony that: (1) manufacturers sometimes used the announcements to
avoid price decreases,21 and (2) some of the announcements were partially or fully
20
Id. at 2660-61.
21
SA 1964 (testimony of Mr. Jean-Pierre Dhanis).
38
accepted.22 From this testimony, the jury could have inferred that a conspiracy existed
and that it caused prices to be higher than they would have been in a marketplace free of
collusion.
2. Involvement of Lyondell
Dow argues the evidence was insufficient regarding Lyondell’s involvement in the
conspiracy. This argument fails legally and factually.
The argument fails legally because even if the evidence had not shown Lyondell’s
involvement, Dow would not have been exonerated. A defendant can incur liability for a
conspiracy under § 1 of the Sherman Act so long as the defendant did not act unilaterally.
See Copperweld Corp. v. Independence Tube Corp.,
467 U.S. 752, 768 (1984). And, for
the reasons discussed above, there is sufficient evidence of a conspiracy between Dow
and the other defendant companies, regardless of Lyondell’s involvement.
Dow’s argument also fails factually because the evidence allowed a reasonable
fact-finder to infer Lyondell’s participation in the conspiracy. The inference was possible
based on evidence that: (1) Lyondell and Dow communicated before three price hikes,
22
SA 892-93 (testimony of Mr. Larry Stern);
id. at 4156 (testimony of Mr. Richard
Beitel that price increases were fully paid for 40-50% of the announcements);
id. at 299-
300 (Bayer memorandum stating that “the price increases [are] becoming effective and
being paid”);
id. at 304 (Bayer memorandum stating that announcements of price
increases allowed Bayer to benefit from the full impact);
id. at 341-42 (Dow e-mails
acknowledging that Dow had obtained “the full increases”);
id. at 482 (Dow
announcement in connection with pricing, stating “Its [sic] Working!!!!!!!”);
id. at 3438,
3502-03 (testimony of Dr. McClave that prices exceeded competitive levels from 1999 to
2003);
id. at 2732 (testimony of Dr. Solow that the alleged conspiracy succeeded because
nearly all class members had to pay the higher prices).
39
(2) other conspirators discussed collusion in front of Lyondell’s representative, and (3)
other manufacturers colluded.
First, the plaintiffs presented evidence that Mr. Mario Portela (Lyondell) had
communicated with Mr. Marco Levi (Dow) immediately before at least three lockstep
price-increase announcements. See SA 3147-51, 3224-30; AA 1772-92.
Second, the evidence included testimony by Mr. Edward Dineen (Lyondell), who
told the jury that: (1) he had attended a dinner with Mr. Jean-Pierre Dhanis (BASF) and
Mr. Robert Wood (Dow), and (2) during the dinner, Mr. Dhanis made “comments
regarding pricing and market conditions for urethanes” that made Mr. Dineen feel
“uncomfortable from an antitrust perspective.” SA 1984-85. The fact that Mr. Dhanis
felt comfortable discussing prices in front of Mr. Dineen suggests the involvement of one
or more Lyondell executives.
Finally, the evidence suggested participation by virtually every large
manufacturer. This evidence could have led the jury to infer participation by Lyondell.
See In re Flat Glass Antitrust Litig.,
385 F.3d 350, 363 (3d Cir. 2004) (“If six firms act in
parallel fashion and there is evidence that five of the firms entered into an agreement, . . .
it is reasonable to infer that the sixth firm acted consistent with the other five firms’
actions because it was also a party to the agreement.”).
3. Effect of the Jury Verdict on Dr. McClave’s Models
The jury found no injury for the 23-month period preceding November 24, 2000.
AA 513-14. From this finding, Dow infers that the jury partially rejected Dr. McClave’s
40
models. With this inference, Dow argues that Dr. McClave’s models are invalid; and
without valid models, Dow continues, the plaintiffs lack sufficient evidence of impact
and damages. This series of inferences does not allow us to disturb the jury’s
unequivocal findings on impact and damages.
We conclude that:
● the plaintiffs’ failure to prove a conspiracy for part of the alleged
conspiracy period does not invalidate the finding of liability for part of this
period, and
● we have no reason to believe that the jury rejected Dr. McClave’s models in
their entirety.
As the district court recognized, the jury may have fully credited Dr. McClave’s models,
but found the evidence insufficient to find an injury before November 24, 2000.
Citing In re Rail Freight Fuel Surcharge Antitrust Litigation, Dow contends that
the models are invalid because they “detect[] injury where none could exist.” Appellant’s
Opening Br. at 51 (quoting In re Rail Freight Fuel Surcharge Antitrust Litig.,
725 F.3d
244, 252 (D.C. Cir. 2013)). This case does not apply.
In In re Rail Freight, an expert witness found damages for plaintiffs who were
bound by rates agreed to before the alleged
conspiracy. 725 F.3d at 252. Thus, the
plaintiffs could not have been harmed by the conspiracy.
Id. And, under Comcast, the
D.C. Circuit Court of Appeals regarded certification as questionable because damages
might not be provable through class-wide evidence.
Id. at 252-53. This analysis does not
apply here for two reasons.
41
First, In re Rail Freight involved a certification challenge decided on interlocutory
review; at that stage, the Court of Appeals could only predict whether common issues
would predominate for purposes of class certification. Here, we have the benefit of
knowing what happened at the trial: Common issues predominated over individualized
issues. Thus, the D.C. Circuit’s concern lacks any bearing on whether common issues
predominated here.
Second, Dr. McClave’s model does not suffer from the same flaw identified in In
re Rail Freight. There, the appeals court could not credit the expert’s opinion because his
methodology yielded damages for a time period in which prices had been freely set.
Thus, the expert found damages for plaintiffs who could not possibly have suffered
injury. Here, by contrast, Dow has not identified a single class member for whom injury
was impossible.
Rather, Dow asks us to infer a flaw based on the jury’s finding of no damages for
a specific time period. We cannot draw that inference, for the jury could have limited the
time period for the conspiracy based on Dow’s explanation for prices before November
24, 2000. Thus, the jury might have limited the conspiracy period while agreeing with
Dr. McClave’s analysis of pricing after November 24, 2000.
For both reasons, the flaw in In re Rail Freight does not exist here, and the jury’s
finding does not imply a failure to prove impact or damages after November 24, 2000.
X. The Damages Award
42
Dow’s final challenge involves the award of damages. Dow argues that: (1) the
damages award had no evidentiary basis, and (2) the resulting judgment violated the
Seventh Amendment.
A. Evidentiary Support for the Award
The jury assessed damages of $400,049,039 even though Dr. McClave had
calculated damages of $496,680,486. AA 514. Dow contends that the jury’s assessment
was speculative because it deviated from Dr. McClave’s figure and lacked any other
evidentiary support. We reject this contention.
In evaluating this argument, we must view the evidence in the light most favorable
to the plaintiffs,23 upholding the jury’s damages award unless it is “clearly, decidedly or
overwhelmingly against the weight of the evidence.”24
In entering judgment based on the damages award, the district court reasoned that
the jury might have discounted Dr. McClave’s figure based on:
● Dow’s arguments regarding systems,
● skepticism about Lyondell’s involvement in the conspiracy, or
● a belief that the conspiracy had a shorter duration than Dr. McClave
assumed.
23
Snyder v. Moab,
354 F.3d 1179, 1187-88 (10th Cir. 2003).
24
Black v. Hieb’s Enters.,
805 F.2d 360, 363 (10th Cir. 1986).
43
Id. at 537. Dow does not question these possibilities. Instead, Dow insists that the jury
had no evidentiary basis for a smaller amount because the plaintiffs had not “introduce[d]
the underlying calculations or provide[d] the jury with the information necessary to adjust
[Dr.] McClave’s . . . damages figures if they disagreed with any of his assumptions.”
Appellant’s Opening Br. at 63. We reject Dow’s argument.
Dow assumes that the jury could not adjust Dr. McClave’s damages figure without
his “underlying calculations” or some other “tool.”
Id. at 63-64. This assumption is
incorrect, for a jury can reduce an expert’s calculations on damages even when unable to
“run the exact numbers and calculations of [a damages] model with ‘mathematical
certainty.’” MedCom Holding v. Baxter Travenol Labs., Inc.,
106 F.3d 1388, 1400-01
(7th Cir. 1997); see Russo v. Ballard Med. Prods.,
550 F.3d 1004, 1018 (10th Cir. 2008)
(rejecting the defendant’s argument that the jury’s award “exceeded what the record
evidence could support” when the jury awarded an amount lying “somewhere in between
the extremes suggested by the evidence received at trial”); see also In re Scrap Metal
Antitrust Litig.,
527 F.3d 517, 533-34 (6th Cir. 2008) (rejecting the defendant’s argument
that “the jury must have resorted to speculation” to arrive at a damages award of $11.5
million, when the expert calculated damages of $20.9 million); Tuf Racing Prods., Inc. v.
Am. Suzuki Motor Corp.,
223 F.3d 585, 591 (7th Cir. 2000) (rejecting the defendant’s
argument that the jury’s award should be set aside as “‘speculative’” when the plaintiff’s
expert calculated damages of $1.2 million, but “the jury awarded only a bit more than 10
percent of that”).
44
B. The Seventh Amendment
Dow also challenges the district court’s decision to permit allocation of the
damages award according to Dr. McClave’s damages model. According to Dow, this
method of distribution violates the Seventh Amendment by taking from the jury “the
question of liability and the extent of the injury by an assessment of damages.” Dimick v.
Schiedt,
293 U.S. 474, 486 (1935). We disagree.
Because this argument implicates a constitutional question, our review is de novo.
J.R. Simplot v. Chevron Pipeline Co.,
563 F.3d 1102, 1115 (10th Cir. 2009).
According to Dow, the Seventh Amendment problem arises not from the use of
Dr. McClave’s model to distribute damages, but from the application of a pro rata
reduction to reflect the jury’s award of a lesser amount. The court’s across-the-board
reduction is problematic, Dow says, because the reason for the jury’s reduction is
unknown. Dow argues that: (1) the reduction was based on a finding that certain class
members suffered no injury, and (2) as a result, Dow was unable to have a jury determine
which class members had suffered less damage than Dr. McClave had figured.
Appellant’s Opening Br. at 65.
We reject this argument because Dow has no interest in the method of distributing
the aggregate damages award among the class members. See Allapattah Servs., Inc. v.
Exxon Corp.,
333 F.3d 1248, 1258 (11th Cir. 2003) (“[A] defendant has no interest in
how the class members apportion and distribute a[n] [aggregate] damage [award] among
themselves.”); Six (6) Mexican Workers v. Ariz. Citrus Growers,
904 F.2d 1301, 1307
45
(9th Cir. 1990) (“Where the only question is how to distribute the damages, the interests
affected are not the defendant’s but rather those of the silent class members.”). And Dow
cannot complain about the uncertainties inherent in an aggregate damages award because
Dow never requested individualized findings on damages. See supra pp. 23-24 & note
11.
Dow claims an interest in the allocation of damages to ensure that all class
members are bound by the judgment. But Dow fails to identify any threat to the binding
effect of the judgment. The three cases that it cites are inapplicable.
In Phillips Petroleum Co. v. Shutts, the defendant challenged the trial court’s
jurisdiction over the class plaintiffs, raising a legitimate concern that the judgment would
not bind all class members.
472 U.S. 797, 805 (1985).
Carrera v. Bayer Corp. likewise involved a class-wide judgment with an uncertain
binding effect.
727 F.3d 300, 310 (3d Cir. 2013). The class there had been decertified
because there was insufficient evidence of an ascertainable class. As a result, the class
members could argue that they were not bound by the judgment.
Id.
Dimick v. Schiedt was a case about additur.
293 U.S. 474 (1935). There, the
Supreme Court held that the Seventh Amendment is violated when a court “assess[es] an
additional amount of damages” beyond that found by the jury.
Id. at 486-87.
Unlike the defendants in Phillips and Carrera, Dow has not identified any reason
to believe that the judgment here would fail to bind all class members. And the district
46
court reduced the jury’s damages award, rather than add to it as in Dimick. Accordingly,
these cases do not apply.
We conclude that Dow has not established a Seventh Amendment violation.
XI. Conclusion
We affirm, rejecting Dow’s challenges to the order for class certification, the
refusal to decertify the class, the admission of Dr. McClave’s testimony, the sufficiency
of the evidence, and the award of damages.
47