District Court Declines to Reverse Wallboard Price-Fixing Summary Judgment Denial In Light of Subsequent Third Circuit “Plus Factors” Opinion

Robert E. Connolly
Law Office of Robert E. Connolly

On October 11, 2018, Judge Michael Baylson of the Eastern District of Pennsylvania denied a renewed summary judgment motion by a defendant in the wallboard class action price fixing litigation. The defendant, PABCO, moved the Court to reconsider and reverse an earlier denial of summary judgment based on the recent Third Circuit opinion in Valspar Corporation v. DuPont, 873 F. 3d 185 (3d Cir. 2017). Valspar affirmed a district court ruling that dismissed a price fixing complaint on the grounds that it merely alleged parallel conduct (conscious parallelism). Judge Baylson had previously denied PABCO’s summary judgment motion in a published opinion. In re: Domestic Drywall Antitrust Litig., 163 F. Supp. 3d 175 (E.D. Pa. 2016). Judge Baylson reconsidered but declined to reverse his early ruling denying PABCO’s summary judgment motion. Valspar did not cause Judge Baylson to change his ruling because unlike Valspar’s case, “there was evidence of ‘traditional’ conspiratorial evidence, specifically as to PABCO.” Judge Baylson’s most recent decision is Ashton Woods Holdings LLC v. USG Corp. (In re Domestic Drywall Antitrust Litigation), 2018 U.S. Dist. LEXIS 174981 (E.D. Pa. October 11, 2018).

This class action was originally brought by twelve large homebuilders alleging wallboard manufacturers had conspired to fix prices. After several years of litigation, settlements were reached with both direct and indirect purchasers of drywall. One defendant, PABCO, had not settled. Judge Baylson had denied PABCO’s prior motion for summary judgment. PABCO, however, was seeking a second bite at the summary judgment apple, relying on the Third Circuit’s recent decision in Valspar Corporation v. Dupont, 873 F. 3d 185 (3d Cir. 2017). PABCO argued that this decision required Judge Baylson to reconsider and change his prior decision denying PABCO summary judgment. The Court accepted PABCO’s invitation to review its prior decision, but rejected the request to change its ruling in light of Valspar.

Valspar was the latest in a line of Third Circuit cases applying summary judgment standards to price fixing allegations in the context of oligopoly markets and pricing historically referred to as “conscious parallelism.” Valspar, in turn, built on three recent Third Circuit cases, In Re Chocolate Confectionary Antitrust Litig., 801 F. 3d 383 (3d Cir. 2015), In re Flat Glass Antitrust Litig., 383 F. 3d 350 (3d Cir. 2004), and In re Baby Food Antitrust Litig., 166 F. 3d 112 (3d Cir. 1999). The cases stand for the unremarkable proposition that conscious parallelism alone, absent any “plus” factors, is insufficient to survive a motion for summary judgment in a price fixing case. The cases are important, however, for the factual analysis of what does, and what does not, constitute a plus factor. What is noteworthy about the wallboard case is that Judge Baylson applied this test to the facts in homebuilders’ case and found that summary judgment was properly denied, even post-Valspar, because there was evidence of a plus factor—“traditional” conspiratorial evidence. 2018 U.S. Dist. Lexis at *5-6. (“What distinguishes this case from Valspar is that in considering the plus factors in this case, there was evidence of “traditional” conspiratorial evidence, specifically as to PABCO.”) In Judge Baylson’s extensive prior opinion, he noted that traditional conspiracy evidence may be shown by proof that the defendants got together and exchanged assurances of common action or otherwise adopted a common plan even though no meetings, conversations, or exchanged documents are shown. 163 F. Supp. 3d at 195. Judge Baylson found these internal PABCO’s emails permitted an inference that PABCO participated in an agreement to eliminate job quotes and raise prices:

• Email from PABCO’s Director of Sales, South in September 2011 (“It will take strong united effort by all manufacture [sic] to manage current job pricing and improve forward pricing for this increase attempt to yield any price improvement.”);
• PABCO email after American announcement (indicating that Mr. Powers (President, American) and Mr. Duvall (Sales Manager, PABCO) had a conversation about lack of industry leadership the day before the American announcement and that “[e]liminating job quotes would be a great start for the price improvement”);
• Email from PABCO’s Director of Sales, North on 9/27/2011 (“I am suggesting, wherever and to whoever will listen, that the manufacturers have to police. . . . [G]etting something done by seven manufacturers for the good of the industry is like being in the house of reps in DC.”); (indicating that PABCO gave advanced notice of its price increase to Longbow and that within minutes of receiving that notice, Longbow forwarded the information to Craig Weisbruch at National);
• Email from PABCO’s Director of Sales, North on 8/6/2012 (“Other manufacturers are doing the same planning [for allocation prior to the 2013 increase]. This will be an annual event to support price increases.”);
• 10/9/2012 email from PABCO’s VP of Sales and Marketing (“[A]ny perceived weakness or attempt to grab additional share with reduced pricing by any of the players could throw the price back into a destructive downward spiral.”).

See 163 F. Supp. 3d at 255-57 (discussing emails from PABCO’s Director of Sales and VP of Sales and Marketing).

Conclusion

Judge Baylson’s analysis and characterization of certain evidence as “traditional” conspiracy evidence is worth a read in any conscious parallelism case where the search for “plus factors” makes or breaks a case. The judge cautioned, however, that the homebuilders must still prove at trial that PABCO was part of a price-fixing conspiracy.