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Judge Denies $3M in Costs in Drywall Antitrust Case

April 15, 2016 | Posted in : Billing Practices, Billing Record / Entries, Expenses / Costs, Fee Reduction, Fee Request

A recent Legal Intelligencer story, “Judge Denies $3.18M in Costs in Drywall Antitrust Case” reports that the federal judge presiding over the domestic drywall antitrust litigation has denied plaintiffs' attorneys' request to use more than $3 million in ­settlement funds to pay litigation expenses.

U.S. District Senior Judge Michael M. Baylson of the Eastern District of Pennsylvania denied the request made by lawyers for the direct and indirect purchaser classes to use portions of the settlement for ongoing litigation expenses.

Drywall antitrust litigation is continuing against defendants National Gypsum, CertainTeed, American Gypsum, Lafarge and PABCO.  In March 2015, two former defendants, USG Corp. and TIN Inc., settled with the direct and indirect purchaser plaintiffs for a total of $55 million.

TIN agreed to pay $5.25 million to settle claims from direct purchasers of drywall and $1.75 million to settle with indirect purchasers.  USG agreed to pay $39.25 million to settle with the direct purchasers and $8.75 million to settle with indirect purchasers.

According to Baylson's memorandum, the direct and indirect purchasers had ­originally requested $2.5 million each from their respective settlement funds to pay for litigation expenses.  The direct purchasers said they paid $1.4 million in litigation expenses already and had racked up $1.8 million that had yet to be paid.  The indirect purchasers told the court that they would need $750,000 to cover expenses.  The court granted to direct purchasers the use of the $1.8 million for the unpaid expenses and $417,000 for the indirect purchasers.

However, Baylson denied the direct purchasers' request for the $688,000 balance of their original request and the indirect purchasers' subsequent request for the full $2.5 million on the grounds that the plaintiffs did not provide enough specificity about what the money would be used to pay.  They will be able to refile motions with more well-defined expenses.

"Additionally, plaintiffs must demonstrate that direct and indirect purchaser plaintiffs have cooperated with each other as much as possible to economize on the use of experts and avoid duplicative, ­overlapping, or unduly expensive expert reports," Baylson said.  "The court recognizes there may be conflicts between direct and indirect purchasers on some issues, separate experts are appropriate, and to some extent, cooperation may not be possible."

H. Laddie Montague of Berger & Montague, liaison counsel for the plaintiffs, said he was unsure as to when another ­motion for expenses would be filed.

In February, Baylson, who has handled the case since it was consolidated nearly three years ago, declined to toss claims against most of the remaining defendants.  Only defendant CertainTeed was let out of the case.

According to Baylson's 161-page February opinion, both proposed classes claimed harm from violations of antitrust law when defendants allegedly conspired to hike prices, restrict supply, and eliminate the traditional pricing practice of providing customers with job quotes.

The remaining defendants claimed they "were merely 'following the leader,' which they argue is an expected and legal business practice in an oligopoly," Baylson wrote, noting that American was the first company to send a letter in 2011 notifying customers of a 35 percent price increase.

The defendants claimed American Gypsum's action surprised industry players, Baylson said.  But, they argued, according to the opinion, each company ascertained an ­opportunity to improve their bottom line.  Accordingly, defendants said, each ­mimicked American Gypsum's strategy based on their independent conclusions that the changes would be in their best interests.  Those decisions were made by each company individually, not as part of a conspiracy, the defense said, ­according to the opinion.