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In re Urethane Antitrust Litigation

United States District Court, Tenth Circuit

December 16, 2013

IN RE: URETHANE ANTITRUST LITIGATION.
v.
BASF SE, et al., and Woodbridge Foam Corporation, et al. This Document Relates to the following Polyether Polyol Cases: Carpenter Co., et al.
v.
BASF SE, et al., and Dash Multi-Corp, Inc., et al.
v.
BASF SE, et al.

MEMORANDUM AND ORDER

JOHN W. LUNGSTRUM, District Judge.

This matter comes before the Court on plaintiffs' motion for partial summary judgment (Doc. # 2951). For the reasons set for below, the motion is denied.

In this multi-district litigation, the "direct action" plaintiffs in these three cases opted out of the class action that was tried earlier this year in this Court. In the class action, the jury found that defendant Dow Chemical Company ("Dow") participated in a conspiracy in violation of federal antitrust law. Plaintiffs now seek a summary judgment that would preclude Dow from relitigating the issue of the existence of a conspiracy involving Dow, and would thus establish that fact for purposes of these direct actions. See Fed.R.Civ.P. 56(a) ("The court shall grant summary judgment if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law."); Fed.R.Civ.P. 56(g) (the court "may enter an order stating any material fact... that is not genuinely in dispute and treating the fact as established in the case").

As a preliminary matter, the Court rejects Dow's argument that this issue should be decided by the transferor court upon remand. Plaintiffs have raised the issue in the context of a motion for summary judgment, and the issue may be decided as a pretrial matter. Moreover, an earlier ruling on this issue allows the parties more time to plan for trial. Accordingly, the Court concludes that the issue may be and is better addressed by this Court, and it therefore will resolve the issue raised by plaintiffs.

Pursuant to the doctrine of issue preclusion or collateral estoppel, plaintiffs seek to preclude Dow from denying that it participated in a conspiracy with one or more competitors (Bayer, BASF, Huntsman, and/or Lyondell) to fix prices for one or more products (MDI, TDI, polyols, and/or systems) at some point in the class period (1999 through 2003), as found by the jury in the class action. Plaintiffs argue that the general requirements for application of collateral estoppel are met here: the issue of the existence of a conspiracy involving Dow was presented to and decided by the jury in the first action, the first action was finally adjudicated on the merits, and Dow had a full and fair opportunity to litigate the issue in the first action. See B-S Steel of Kan., Inc. v. Texas Indus., Inc., 439 F.3d 653, 662 (10th Cir. 2006) (listing requirements for collateral estoppel).

Because these plaintiffs were not parties in the class action, however, they seek to apply nonmutual offensive collateral estoppel, a doctrine first recognized by the Supreme Court in Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979). In that case, the Court noted that, although the possibility of defensive collateral estoppel gives a plaintiff a strong incentive to join all potential defendants in the first action if possible, the offensive use of collateral estoppel creates the opposite incentive-"[s]ince a plaintiff will be able to rely on a previous judgment against a defendant but will not be bound by the judgment if the defendant wins, the plaintiff has every incentive to adopt a wait and see' attitude, in the hope that the first action by another plaintiff will result in a favorable judgment." See id. at 329-30 (citations omitted). Thus, the Court noted that "offensive use of collateral estoppel does not promote judicial economy in the same manner as defensive use does, " as the total amount of litigation may be increased. See id. at 329. The Court also noted that offensive use of collateral estoppel may be unfair to a defendant, giving the following examples: the defendant may have had little incentive to defend the first action vigorously, perhaps because the first suit involved only a small amount of damages; the judgment relied on may be inconsistent with previous judgments; and the second action may afford "procedural opportunities unavailable in the first action that could readily cause a different result" (for instance, if the first action was in an inconvenient forum and the defendant was unable to engage in full-scale discovery or call witnesses). See id. at 330-31 & n. 15 (citations and footnotes omitted). The Court then summarized its holding as follows:

We have concluded that the preferable approach for dealing with these problems in the federal courts is not to preclude the use of [nonmutual] offensive collateral estoppel, but to grant trial courts broad discretion to determine when it should be applied. The general rule should be that in cases where a plaintiff could easily have joined in the earlier action or where, either for the reasons discussed above or for other reasons, the application of offensive estoppel would be unfair to a defendant, a trial judge should not allow the use of offensive collateral estoppel.

See id. at 331 (footnote omitted).

Plaintiffs argue that the Court should apply nonmutual offensive collateral estoppel in these cases. They argue that preclusion here would further the purpose of finality and the minimization of the possibility of inconsistent decisions, as well as the purpose of judicial economy. See Montana v. United States, 440 U.S. 147, 153-54 (1979) (footnote omitted) (noting benefits of collateral estoppel). With respect to the latter purpose, plaintiffs suggest that preclusion would have the effect of streamlining the evidence in their cases, as Dow would not be permitted to introduce evidence solely to deny the existence of and its participation in a conspiracy. Plaintiffs further argue that preclusion would not be unfair to Dow for any of the reasons discussed in Parklane Hosiery. Specifically, plaintiffs argue that they could not have easily joined the class action because are alleging a longer conspiracy period (1994 through 2003).

In response, Dow relies on Premier Electrical Construction Co. v. National Electrical Contractors Association, Inc., 814 F.2d 358 (7th Cir. 1987), in which the Seventh Circuit declined to apply Parklane Hosiery and instead adopted a "categorical rule" prohibiting the application of nonmutual offensive collateral estoppel in favor of class members who have opted out of the class action to which they seek to give preclusive effect. See id. at 367. The Premier court concluded that the common-law rule of issue preclusion cannot overcome Fed.R.Civ.P. 23, which was amended in 1966 to do away with one-way intervention in class actions in favor of the present opt-out procedure. See id. at 364. The court reasoned:

Whether class members should get the benefit of a favorable judgment, despite not being bound by an unfavorable judgment, was considered and decided in 1966. That decision binds us still.

See id. Moreover, the court stated that it lacked "a sound reason to deviate from the plan of 1966." See id. at 365. The Seventh Circuit noted that fewer issues might be present in a second action if preclusion were permitted, but that the possibility of preclusion could actually increase the number of lawsuits, thereby undermining any potential judicial economy, as class members would have an incentive to opt out of a class action. See id. at 365-66. The court also rejected the argument that preclusion would allow for equality among class members, for the reason that opt-outs have specifically chosen to be treated differently from other class members. See id. at 367.

The Seventh Circuit's holding in Premier is consistent with the reasoning of the Fourth Circuit from an earlier case. See id. at 365 (citing Polk v. Montgomery County, Md., 782 F.2d 1196 (4th Cir. 1986)). In Polk, the court reversed the district court's decision to allow nonmutual offensive collateral estoppel, concluding in part that there had not been a final adjudication in the first action and that it could not be ascertained that the issues were sufficiently identical in the two cases. See Polk, 782 F.2d at 1201-02. The Fourth Circuit further held, however, that collateral estoppel should also have been denied for the separate reason that the first action was a class action that the plaintiff in the second action had declined to join. See id. at 1202.

Other court have followed or recognized the categorical rule adopted in Premier. See, e.g., Tardiff v. Knox County, 567 F.Supp.2d 201, 212 (D. Me. 2008); In re Vitamins Antitrust Litig., 2000 WL 34230081, at *4 (D.D.C. July 28, 2000); Yeager's Fuel, Inc. v. Pennsylvania Power & Light Co., 162 F.R.D. 482, 488 (E.D. Pa. 1995). Plaintiffs have not been able to cite any case in which the court rejected the Seventh Circuit's rule from Premier. The Tenth Circuit[1] has not addressed Premier, but the Premier court relied in part on Sarasota Oil Co. v. Greyhound Leasing & Financial Corp., 483 F.2d 450 (10th Cir. 1973), see Premier, 814 F.2d at 365 (citing Sarasota Oil ), in which the Tenth Circuit noted ...


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