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In re Sulfuric Acid Antitrust Litigation

March 21, 2007

IN RE SULFURIC ACID ANTITRUST LITIGATION


The opinion of the court was delivered by: Honorable David H. Coar

This Document Relates to: ALL RELATED ACTIONS

MEMORANDUM OPINION AND ORDER

Plaintiffs have filed a suit on behalf of a putative class of sulfuric acid consumers against several producers of the commodity (collectively "Defendants") for violations of Section 1 of the Sherman Act, 15 U.S.C. §1. See Third Cons. Am. Class Action Compl. at ¶ 1 (Docket No. 327) (hereinafter "Third Am. Compl."). Before this Court is Plaintiffs' motion for class certification under Federal Rule of Civil Procedure 23.

FACTS

The instant action centers on allegedly anti-competitive behavior that took place in the sulfuric acid market in Canada and the United States from 1988 through 2001.

Sulfuric acid is an inorganic chemical produced and sold throughout the world, and used in a wide variety of industrial processes. Apart from the usual market influences, sulfuric acid production and pricing are impacted by the two different means by which it is created: so-called "involuntary" or "non-discretionary" sulfuric acid is simply a by-product of the metal-smelting process which is sold on the open market so as to avoid the strict environmental regulations of disposal or the corrosive effects of long-term storage; and "voluntary" or "discretionary" sulfuric acid that makes up the remainder of sulfuric acid production and is largely accomplished by burning sulfur. Whatever the source, the commodity is sold in a variety of grades and different concentrations, with 93% pure sulfuric acid being the most commonly traded form.

In the late 1980s, a number of factors combined to create an oversupply of sulfuric acid in the United States, the commodity's primary market. A group of sulfuric acid producers allegedly responded to this threat by conspiring to lower voluntary output and coordinate prices in an attempt to manipulate the market. Sulfuric acid consumers filed a variety of suits in United States Federal courts, many of which were consolidated and transferred to this court by the Multidistrict Litigation Panel on July 1, 2003. Plaintiffs first moved for class certification on October 14, 2003 (Docket No. 17), and re-filed their motion on May 5, 2004 (Docket No. 55). The Plaintiffs propose a class made up of:

All persons (excluding federal, state, and local governmental entities and political subdivisions, the Defendants, and their respective parents, subsidiaries and affiliates) who purchased sulfuric acid in the United States directly from one or more of the Defendants or their parents, subsidiaries, affiliates, or joint ventures during the period January 1, 1988 through January 16, 2003.

Cert. Mot. at 1. For the reasons stated below, Plaintiffs' motion is GRANTED.

STANDARD OF REVIEW

Rule 23 of the Federal Rules of Civil Procedure sets forth the relevant standards for maintaining class action suits in federal court. Under Rule 23(a), a proposed class must satisfy four conditions before a court will grant certification: (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation. Fed. R. Civ. P. 23(a). In addition, the Plaintiff must satisfy Rule 23(b), which offers only three potential bases for establishing that the class action mechanism is a suitable means for proceeding. See Fed.R.Civ.P. 23(b). In the case before the Court, Plaintiff seeks certification under Rule 23(b)(3), which authorizes class actions where the "questions of law or fact common to the members of the class predominate over any questions affecting individual members, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy." The burden of proof on a motion for class certification rests with the Plaintiff. See Gen. Tel. Co. v. Falcon, 457 U.S. 147, 162, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982).

ANALYSIS

Plaintiffs contend that all of the demands of Rule 23 are met by the putative class in this matter. Defendants predictably respond that certification should be denied, arguing that individual issues do not predominate and class treatment is not preferable because: regional variations in the market are too varied; the product is not generally fungible due to the use of different concentrations and quality levels; pricing systems are too loose and unstructured to allow for nation-wide analysis; transactions between market buyers and sellers are not standardized, precluding universal damages determinations; and Plaintiffs' proposed expert has failed to adequately explain how these problems can be overcome through statistical analysis. The overarching reasoning behind these arguments is that the sulfuric acid market is not one that can be characterized at the national level, and therefore questions of injury, proof, standards, and damages will all have to be addressed on an individual or regional basis.

Though this case has been brought under section one of the Sherman Act, the validity of a private action based on antitrust violations is actually determined according to section four of the Clayton Act. See Indiana Grocery, Inc. v. Super Valu Stores, Inc., 864 F.2d 1409, 1419 (7th Cir. 1989). Accordingly, the standing of all putative class members to maintain this action will be determined by their ability to establish: (1) that defendants violated the antitrust laws; (2) that the alleged violations caused plaintiffs to suffer some injury to their "business or property"; and (3) that the extent of this injury can be quantified with requisite precision. In re Industrial Gas Antitrust Litig., 100 F.R.D. 280 (D.C. Ill. 1983) (citing Windham v. Am. Brands, Inc., 565 F.2d 59, 65 (4th Cir. 1977) (en banc), cert. denied, 435 U.S. 968, 98 S.Ct. 1605, 56 L.Ed.2d 58 (1978)).

a. Numerosity

Rule 23(a)(1) requires that the class be "so numerous that joinder of all members is impracticable." Although there is no "magic number" of class members for numerosity purposes, case law indicates that when a class numbers at least 40, joinder will be considered impracticable. Swanson v. Am. Consumer Indus., 415 F.2d 1326, 1333 (7th Cir. 1969). The proposed class in this instance would consist of "[a]ll persons...who purchased sulfuric acid in the United States directly from one or more of the Defendants." While Plaintiffs have acknowledged that the precise size of the class has been difficult to determine, it is largely because the records on which this determination is to be based have been in the exclusive control of Defendants. Third Am. Compl. ΒΆ 54. In any event, ...


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