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TABLE OF CONTENTS
I. SUMMARY OF ARGUMENT.......................................................................1
II. INTRODUCTION AND BACKGROUND....................................................4
III. ARGUMENT...................................................................................................8
A. MOVANTS HAVE NOT MET THEIR HEAVY BURDEN
OF DEMONSTRATING ENTITLEMENT TO A STAY....................8
B. A STAY OF DISCOVERY IS UNNECESSARY AND
UNJUSTIFIED BECAUSE THIS LITIGATION WILL
CONTINUE REGARDLESS OF HOW THIS COURT RULESON MOVANTS CLASS CERTIFICATION APPEAL....................11
C. THE DISTRICT COURT PROPERLY EXERCISED ITS
DISCRETION IN DENYING MOVANTS MOTION TO
STAY MERITS DISCOVERY IN THIS CASE ................................12
1. There is No Irreparable Injury to Movants ...........................14
2. A Stay Would Cause Substantial Injury to Respondents ........17
3. The Public Interest Lies Heavily in Respondents Favor .........19
4. Movants Face Imposing Obstacles On Appeal.........................21
IV. CONCLUSION..............................................................................................29
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TABLE OF CITATIONS
Cases
Beattie v. CenturyTel Inc.,No. 02-10277, 2006 WL 1722207 (E.D. Mich. June 20, 2006)......................... 13, 16
Beck v. Maximus, Inc.,
457 F.3d 291 (3d Cir. 2006) .............................................................................................. 29
Blades v. MonsantoCo.,
400 F.3d 562 (8th
Cir. 2005) .............................................................................................. 25
Blair v. Equifax Check Servs., Inc.,
181 F.3d 832 (7th Cir. 1999)...................................................................................... passim
Bogosian v. Gulf Oil Corp.,
561 F.2d 434 (3d Cir. 1977) .............................................................................. 21, 22, 28, 2
Castano v. American Tobacco Co.,
84 F.3d 734 (5th Cir. 1996) ............................................................................................... 20
Cumberland Farms, Inc. v. Browning-Ferris Industries, Inc.,
120 F.R.D. 642 (E.D. Pa. 1988) ................................................................................... 19, 2
Daniels v. City of New York,138 F.Supp.2d 562 (S.D.N.Y. 2001)......................................................................... 13, 17
De Asencio v. Tyson Foods, Inc.,
342 F.3d 301 (3d Cir. 2003) .............................................................................................. 22
Family Trust Foundation of Kentucky, Inc. v.
Kentucky Judicial Conduct Commn,
388 F.3d 224 (6thCir. 2004) .............................................................................................. 16
Gold v. Johns-Manville Corp.,
723 F.2d 1068 (3d Cir. 1983).................................................................................... 3, 8, 10
Golden Quality Ice Cream Co. v. Deerfield Specialty,87 F.R.D. 53 (E.D. Pa. 1980)............................................................................................ 20
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Interwave Technology, Inc. v. Rockwell Automation, Inc.,
No. Civ. A. 05-0398, 2005 WL 1667591 (E.D.Pa. Jul. 14, 2005)......................... 3, 9
Jayaraj v. Scappini,
66 F.3d 36 (2d Cir.1995) .................................................................................................... 17
Johnston v. HBO Film Mgmt. Inc.,
265 F.3d 178 (3d Cir. 2001) .............................................................................................. 21
Landis v. North American Co.,
299 U.S. 248 (1936) ........................................................................................................ 8, 10
Lightfoot v. Walker,
797 F.2d. 505 (7th
Cir. 1986) ............................................................................................... 9
Long v. Robinson,
432 F.2d 977 (4th
Cir.1970) ............................................................................................... 10
Monahan v. City of Wilmington,
49 Fed. Appx. 383 (3d Cir. 2003) .................................................................................... 22
Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
259 F.3d 154 (3d Cir. 2001) ........................................................................................ 21, 24
Nutraquest, Inc. v. All American Phamaceutical & Natural Foods Corp.,
Civ. No. 06-186 (DRD), 2007 WL 121448 (D.N.J. Jan. 11, 2007) ...................... 3, 9
Phamaceutical & Natural Foods Corp.,
Civ. No. 06-186 (DRD), 2007 WL 121448 (D.N.J. Jan. 11, 2007) ...................... 3, 9
Pillsbury Co. v. Conboy,
459 U.S. 242 (1983) ............................................................................................................ 19
Republic of Philippines v. Westinghouse Elec. Corp.,949 F. 2d 653 (3d Cir. 1991)......................................................................................... 6, 13
Samuel-Bassett v. KIA Motors Am., Inc.,
357 F.3d 392 (3d Cir. 2004) .............................................................................................. 22
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United States v. Breyer,
41 F.3d 884 (3d Cir. 1994) ........................................................................................ 3, 9, 10
United States v. Carlin,
No. 06-1906, 2006 WL 3208675 (E.D. Pa. Nov. 2, 2006) ........................................ 14
Wachtel v. Guardian Life Ins. Co. of America,
453 F.3d 179 (3d Cir. 2006) .............................................................................................. 29
Weisfeld v. Sun Chem. Corp.,
84 Fed. Appx. 257 (3d Cir. 2004) .................................................................................... 22
West Tenn. Assoc. Builders v. City of Memphis,
138 F.Supp.2d 1015 (W.D. Tenn. 2000) ........................................................................ 13
Will v. Calvert Fire Ins. Co.,
437 U.S. 655, 98 S.Ct. 2552, 57 L.Ed.2d 504 (1978) ............................................. 9, 10
Wisconsin Gas Co. v. FERC,
758 F.2d 669 (D.C.Cir.1985) ............................................................................................ 17
Other Authorities
Carey M. Erhard, Note,A Discussion of Interlocutory Review of ClassCertification Orders Under Federal Rule of Civil Procedure 23(f),
51 Drake L. Rev. 151, 178 (2002) ................................................................................... 13
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Respondents, Direct Purchaser Plaintiffs below, by the undersigned
counsel, respectfully submit this opposition to Defendants Motion to Stay
Merits Discovery Pending Appeal of Class Certification Order (Motion).1
I. SUMMARY OF ARGUMENT
Rule 23(f) provides that [a]n appeal does not stay proceedings in the
district court unless the district judge or the court of appeals so orders. The
Advisory Committee Notes to Rule 23(f) elaborate that:
Permission to appeal does not stay trial court proceedings. Ifthe trial court refuses a stay, its actions and any explanation
of its views should weigh heavily with the court of appeals.
Here, Movants have presented no appropriate basis for delaying merits
discovery, as the District Court explicitly recognized and explained.
This case involves serious allegations of price-fixing carried out on a
global scale for over a decade, allegations that are supported by guilty pleas
to felony price-fixing charges in the United States, admissions of criminal
misconduct by a defendant/leniency applicant in corporate leniency
programs operated by both the United States Department of Justice (DOJ)
and the European Commission (EC), and an adjudication of liability
1 In this appellate proceeding, movants inappropriately designate
themselves as defendants. They are referred to here as Movants.
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suffer no prejudice if merits discovery goes forward, and there is a strong
and compelling public interest in having this case proceed expeditiously.
Movants have not identified a single case where this Court or any
federal Court of Appeals has stayed discovery under Rule 23(f) after the
district court considered and refused the same request, particularly under
the circumstances presented in this case. Instead, to support their argument
here, Movants rely upona litany of inapposite district court cases. However,
as Rule 23(f) and the Advisory Committee notes recognize, it is the district
court, not the Court of Appeals, that is by far in the better position to decide
whether a stay is warranted pending appeal. SeeUnited States v. Breyer, 41
F.3d 884, 893 (3d Cir. 1994); Gold v. Johns-Manville Corp., 723 F.2d 1068,
1075-76 (3d Cir. 1983); Nutraquest, Inc. v. All American Phamaceutical &
Natural Foods Corp., Civ. No. 06-186 (DRD), 2007 WL 121448, at *1
(D.N.J. Jan. 11, 2007); Interwave Technology, Inc. v. Rockwell Automation,
Inc., No. Civ. A. 05-0398, 2005 WL 1667591, at *2 (E.D.Pa. Jul. 14, 2005);
Grider v. Keystone Health Plan Cent., Inc., No. Civ. A. 2001-CV-05641,
2004 WL 1047840, at *1 (E.D.Pa. May 4, 2004) (same). As a practical
matter, the district courts exercise of discretion in denying (or granting) a
stay pending interlocutory appeal is to be overturned only on the rarest and
most extreme of occasions. This is not one of those occasions.
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Feb. 28, 2007).4 Respondents allege that during the Class Period, Movants
conspired to fix the price of hydrogen peroxide and two downstream
products, sodium perborate and sodium percarbonate sold in the United
Statesin violation of Section 1 of the Sherman Act, 15 U.S.C. 1.
By Order dated February 20, 2007, following a pretrial conference,
the District Court entered a Scheduling Order Regarding Merits and Expert
Discovery (Scheduling Order). SeeDeclaration of Alan J. Davis (Davis
Decl.), filed together with Movants Motion, at Ex. D. Thereafter, on
February 28, 2007, a three-judge panel of this Court granted Movants
petition for review of the Class Certification Order under Fed. R. Civ. P.
23(f), issuing a three-sentence Order that did not reveal the panels rationale
for permitting a review of the Class Certification Order. SeeDavis Decl., at
Ex. A. Movants subsequently filed a motion to stay discovery pending this
4 The District Court certified the following class under Fed. R. Civ. P.
23(b)(3):
All persons or entities, including state, local and municipal
government entities (but excluding defendants, their parents,
predecessors, successors, subsidiaries, and affiliates as well as
federal government entities) who purchased hydrogen peroxide,
sodium perborate, or sodium percarbonate in the United States,its territories, or possessions, or from a facility located in the
United States, its territories, or possessions, directly from any
of the defendants, or from any of their parents, predecessors,
successors, subsidiaries, or affiliates, at any time during the
period from September 14, 1994 to January 5, 2005 (Class
Period).
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Courts adjudication of their Rule 23(f) appeal. The District Court denied
that motion in an Order dated March 16, 2007 (Stay Denial Order), a copy
of which is attached here as Exhibit B. In its Stay Denial Order, the District
Court articulated in detail the specific reasons supporting its determination
that the most efficient and just way to resolve this case is to allow
discovery to proceed during the pendency of the appeal. Stay Denial Order,
(r).
Analyzing the relevant factors identified by this Court in Republic of
Philippines v. Westinghouse Elec. Corp., 949 F. 2d 653, 658 (3d Cir. 1991),
the District Court denied Movants motion.
First, the District Court held that Movants will not be irreparably
injured absent a stay because (1) there is a separate but substantively related
case that has been brought independently on behalf of direct purchasers that
have opted out of the class action (the Conopco plaintiffs); (2) this
Courts adjudication of the Class Certification Order appeal will not affect
the related legal claims in the Conopco plaintiffs action; (3) there is no
possible justification for staying progress of a pending opt-out action while
disputes over class certification are being resolved; (5) the vast majority
of discoverable material in the class action will be relevant to the Conopco
plaintiffs action; (6) even if this Court did reverse or modify the Class
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Certification Order, this case would continue to go forward as to a
significant number of [other] plaintiffs, who as buyers of tank-sized
quantities of the chemicals at issue, have ample economic incentives to
prosecute these treble damage claims on their own to the bitter end"; and (7)
a stay of discovery at this point would merely delay the inevitable. Stay
Denial Order, (c), (d), (e), (f), (k), (l), (m) and (n).
Second, the Court ruled that the Direct Purchasers will likely suffer
material harm if discovery in this action is delayed for any significant period
of time because [t]he earliest price-fixing allegations in this case are
already more than twelve years old and [t]he risk that documents and
deponents necessary to [the Direct Purchasers] case will become
unavailable or that memories fade (or no longer exist) is palpable and
increases the longer [the Direct Purchasers] must wait. Stay Denial Order,
(o), (p), (q)
Finally, because this is a horizontal price fixing case, a type of suit
that constitutes a paradigmatic use of the class action device, and because
of the similarity of this litigation to In re Linerboard Antitrust Litig., 305
F.3d 145, 152 (3d Cir. 2002) (an action where the economic analysis of John
C. Beyer, Ph.D. was likewise important to the courts finding of common
impact), the District Court found that Movants had not make a strong
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showing that they are likely to succeed on the merits of their appeal. Stay
Denial Order, (h), (i), (j).
A month after the District Courts denial of a stay, on April 16, 2007,
Movants filed the instant motion for a stay of discovery in this Court.
III. ARGUMENT
A. MOVANTS HAVE NOT MET THEIR HEAVY BURDEN
OF DEMONSTRATING ENTITLEMENT TO A STAY
The recommendation in the Advisory Committee Note to Rule 23(f)
that the views of a trial court denying a stay motion should be heavily
weighed by a court of appeals codifies what has long been the law in the
Third Circuit governing stays generally.
As this Court held in Gold v. Johns-Manville Corp., 723 F.2d 1068,
1075-76 (3d Cir. 1983), citing,Landis v. North American Co.,299 U.S. 248,
255 (1936), It is well settled that before a stay may be issued, the petitioner
must demonstrate a clear case of hardship or inequity, if there is even a
fair possibility that the stay would work damage on another party. The
Court inJohns-Manvillewent on to explain:
The power to stay proceedings is incidental to the powerinherent in every court to schedule disposition of thecases onits docket so as to promote fair and efficient adjudication. How
this can best be done is a decision properly vested in the trial
courts. Landis v. North American Co., supra,299 U.S. at 254-
55, 57 S.Ct. at 165-66. District courts have wide discretion in
setting their own calendars, and when a matter is committed to
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In issuing the Stay Denial Order, the District Court exercised its
inherent power to dispose of cases so as to promote their fair and efficient
adjudication in a prudent manner, and used its best judgment to weigh
competing interests and maintain an even balance. Breyer, 41 F.3d at 893;
Landis v. North American Co., 299 U.S. at 254-55. The District Court
identified the specific factors that it considered in evaluating and denying
Movants motion to stay discovery.
There is no basis to conclude that the District Court committed a
patent abuse of its discretion in determining that Movants failed to
establish a clear case of hardship or inequity or in refusing to conclude
that Movants had a clear and indisputable legal right to a stay, no matter
how much Movants may wish that the District Court had exercised its
judgment differently. Gold v. Johns-Manville Corp., 723 F.2d at 1075-77
(citing Landis v. North American Co.,299 U.S. at 255 and Will v. Calvert
shall treat it as such and give the district courts action the appropriate
deferenceWe shall not use Rule 8 [of the Federal Rules of Appellate
Procedure] to undermine the district courts discretion. See also Long v.Robinson, 432 F.2d 977, 979 (4
th Cir.1970) (internal citations omitted)
(Ordinarily, when a party seeking a stay makes application to an appellate
judge following the denial of a similar motion by a trial judge, the burden of
persuasion is substantially greater than it was before the trial judge; the
premise of this rule is that the motion for a stay has received full
consideration by the trial judge).
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Fire Ins. Co., 437 U.S. at 665-66). Such a showing was and still is
entirely absent from the arguments that Movants offer in support of a stay.
As demonstrated below, the District Courts denial of Movants
motion to stay was not only well within its wide discretion, it was an
eminently sensible exercise of that discretion.
B. A STAY OF DISCOVERY IS UNNECESSARY AND
UNJUSTIFIED BECAUSE THIS LITIGATION WILL
CONTINUE REGARDLESS OF HOW THIS COURT RULES
ON MOVANTS CLASS CERTIFICATION APPEAL
As the District Court correctly found, there are no case dispositive
issues pending or to be decided by this Court on Movants Rule 23(f) appeal.
Regardless of how this Court rules on the 23(f) appeal, this lawsuit will be
still be adjudicated on the merits of the claims asserted by proposed class
representatives that sustained substantial damages as a result of Movants
unlawful conspiracy to fix prices in the hydrogen peroxide industry. Stay
Denial Order, (m), (n).
Likewise, any ruling by this Court on class certification issues will
have no effect on the opt-out action filed by the Conopco plaintiffs. Stay
Denial Order, (c), (d), (e), (f). With or without class certification,
discovery by the Direct Purchasers and Conopco plaintiffs will cover
essentially the same time period and will focus on the same conspiracy, the
same witnesses, the same products, the same documents and the same
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depositions. Stay Denial Order, (l), (m), (n) and n. 3 and 4.6 A stay of
merits discovery would serve no purpose under these circumstances other
than to delay the inevitable. Stay Denial Order, (n). Moreover, a stay
would defeat the efficiency and economy of litigation that the District
Court attempted to achieve through its Scheduling Order. Stay Denial
Order, (r).
C. THE DISTRICT COURT PROPERLY EXERCISED
ITS DISCRETION IN DENYING MOVANTS
MOTION TO STAY MERITS DISCOVERY IN THIS CASE
Rule 23(f) was not intended as means to delay the progression of
litigation. See, e.g., In re Sumitomo Copper Litig., 262 F.3d 134, 140 (2d
Cir. 2001) (cautioning that litigants should not view Rule 23(f) as a vehicle
to delay proceedings in the district court); Blair v. Equifax Check Servs.,
Inc., 181 F.3d 832, 835 (7th Cir. 1999) (Because stays will be infrequent,
interlocutory appeals under Rule 23(f) should not unduly retard the pace of
6 WhileMovants do not address the fact that class representatives with
substantial individual claims will aggressively pursue their claims through
trial whatever the outcome of Movants Rule 23(f) appeal, Movants do
attempt to belittle the opt-out action filed by theConopco plaintiffs as too
small and insignificant to make a difference in the District Courtscalculus concerning how best to manage its docket. See Defendants
Motion to Stay Merits Discovery Pending 23(f) Appeal of Class
Certification Order (Motion) at 5; 15-16. However, that presumptuous
argument was rejected by the District Court, which was well within its
discretionary case management authority in assessing the practical
significance of the non-class action litigation pending before it.
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litigation.). See alsoCarey M. Erhard, Note,A Discussion of Interlocutory
Review of Class Certification Orders Under Federal Rule of Civil Procedure
23(f), 51 Drake L. Rev. 151, 178 (2002) (The drafters intention that Rule
23(f) avoid the delay of other avenues of appeal is evidenced by the no-
automatic-stay language in Rule 23(f)).
While no clear method of analysis has been established for motions
seeking stays under Rule 23(f), [m]ost courts employ an analysis similar to
that used in motions for preliminary injunction or stays pending appeals of
final judgments. Beattie v. CenturyTel Inc., No. 02-10277, 2006 WL
1722207, at *2 (E.D. Mich. June 20, 2006); see alsoIn re Sumitomo Copper
Litig ,262 F.3d at 140;Blair v. Equifax Check Servs., Inc., 181 F.3d at 835;
Daniels v. City of New York,138 F.Supp.2d 562, 564 (S.D.N.Y. 2001); West
Tenn. Assoc. Builders v. City of Memphis,138 F.Supp.2d 1015, 1027 (W.D.
Tenn.2000). As the District Court did below, this Court may apply its own
general standards for assessing motions to stay pending appeal. They are:
(1) whether the stay applicant has made a strong showing that
he is likely to succeed on the merits; (2) whether the applicant
will be irreparably injured absent a stay; (3) whether issuance of
the stay will substantially injure the other parties interested inthe proceeding; and (4) where the public interest lies.
Republic of Philippines v. Westinghouse Elec. Corp., 949 F. 2d 653, (3d Cir.
1991) (quotation marks omitted, quotingHilton v. Braunskill, 481 U.S. 770,
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777 (1987)); see also United States v. Carlin, No. 06-1906, 2006 WL
3208675, at *1 (E.D. Pa. Nov. 2, 2006) (same).
Here, each of the relevant factors weighs decidedly against the broad
stay of discovery sought by Movants.
1. There is No Irreparable Injury to Movants
Should discovery proceed in the manner set forth in the Scheduling
Order, there is no possibility that Movants would be irreparably injured if
they ultimately prevailed on their Rule 23(f) appeal. As set forth above,
both the named direct purchaser plaintiffs and the opt-out action plaintiffs,
Conopco, Inc. and Reckitt Bensicker, Inc., will continue to litigate their
substantial individual claims regardless of how this Court ultimately rules on
Movants appeal. This is not a case where denial of class status sounds the
death knell of the litigation, because the representative plaintiffs claim is
too small to justify the expense of litigation. SeeBlair v. Equifax Check
Servs., Inc., 181 F.3d at 834
Given this practical reality, there is no conceivable injury to
Movants if they are required to provide merits discovery in an uninterrupted
fashion within the timeframe established in the Scheduling Order. Indeed,
discovery on class certification issues ended long ago, and Movants offer
only the most unenlightening speculation of how the scope of merits
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discovery might differ if this Court were to ultimately reverse or narrow the
District Courts Class Certification Order. SeeMotion at 10-12.
By contrast, the District Court carefully considered Movants
arguments but, after analyzing the particular facts and circumstances of this
litigation, it drew a different conclusion as to how to avoid any purported
inefficiency identified by Movants. Stay Denial Order, (d) and n.1.
Among other things, the District Court found that (a) the period covered by
the Conopco plaintiffs action was already shorter than the certified Class
Period; (b) defendants marginal cost of producing any limited discovery
that would not need to be produced in the absence of a class action was
but a drop in the bucket that will be defendants costs to defend this case
in its entirety; and (c) continued discovery during the Rule 23(f) period was
particularly efficient because it would aid an expedient resolution of the
case for all concerned. Stay Denial Order, (l) and n.3; (n) and n.4; and
(r) and n.5. Movants have not shown that the District Court in any way
abused its discretion in denying the stay of discovery that they have
requested. Instead, what Movants present on appeal are subjective
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(emphasis in original).
While Movants and Respondents alike will incur costs during merits
discovery in this case, it is well settled that such litigation costs do not rise
to the level of irreparable injury so as to justify a stay. Daniels v. City of
New York, 138 F.Supp.2d at 564 (quoting Hammerman v. Peacock, 623
F.Supp. 719, 721 (D.D.C. 1985)); Jayaraj v. Scappini,66 F.3d 36, 39 (2d
Cir.1995) (Mere injuries, however substantial, in terms of money, time and
energy necessarily expended in the absence of a stay, are not enough). See
alsoIn re Lorazepam & Clorazepate Antitrust Litig.,208 F.R.D. at 6, citing,
Wisconsin Gas Co. v. FERC,758 F.2d 669, 674 (D.C.Cir.1985) (litigation
expenses alone do not necessarily qualify as irreparable harm).
2. A Stay Would Cause Substantial Injury to Respondents
As the court observed in In re Lorazepam & Clorazepate Antitrust
Litigation,208 F.R.D. at 6, it may be true as a general matter that a delay
in discovery itself constitutes substantial harm. Here, the District Court
specifically held that the Respondents would suffer material harm if
discovery in this action is delayed for any significant period of time because
the allegations of price-fixing in this litigation are already more than twelve
years old and there is a palpable risk that additional delay would cause
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evidence to become unavailable and that memories would fade.8 Stay
Denial Order, (o), (p), (q). At the same time, the District Court
recognized that denial of the motion to stay discovery would have no
meaningful effect on Movants one way or the other. Stay Denial Order,
(k), (n).
Merits discovery was previously stayed in this litigation for
approximately sixteen months pending the District Courts adjudication of
Respondents motion for class certification. Such discovery commenced
only recently by virtue of the District Courts February 20, 2007 Scheduling
Order. As the District Court recognized in the Stay Denial Order, any further
delay would substantially prejudice Respondents. Merits discovery should
therefore commence and move forward in accordance with the Scheduling
Order.
8 As Respondents noted in opposing Movants motion to stay in the
District Court, this is not merely an academic concern. Although Movants
blithely discount this important issue (see Motion at 13), one of the
participants in the price-fixing conspiracy has already passed away, and the
passage of additional time will no doubt see the departure or unavailability
of additional witnesses, through death, retirement, termination, or relocation.The risk of delay to the orderly prosecution of this litigation and
corresponding prejudice to Respondents is particularly acute here, where
many of the key participants in Movants price-fixing conspiracy are based
in Europe, so that the retirement or relocation of these conspirators beyond
Movants control will make them difficult for Respondents to reach for
discovery purposes.
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4. Movants Face Imposing Obstacles On Appeal
The factors identified above constitute sufficient, independent grounds
to deny Movants' motion for a stay. An added reason is Movants' failure to
acknowledge the substantial obstacles they face on appeal.
Third Circuit law relating to class certification standards in antitrust
price-fixing cases is well established. The two landmark cases In re
Linerboard Antitrust Litig., 305 F.3d 145, 152 (3d Cir. 2002) andBogosian
v. Gulf Oil Corp., 561 F.2d 434 (3d Cir. 1977) were relied upon and
applied by the District Court in issuing its Class Certification Order. As in
Linerboard itself, the economic analysis of John C. Beyer, Ph.D. was
important to the District Courts finding of common impact. The District
Court thus had ample support for its conclusion that Movants failed to make
a strong showing of likely success on the merits of their Rule 23(f) appeal.11
11 In the District Court, Movants relied upon a purported statistical
analysis of Rule 23(f) petitions rather than on the facts of their own case, an
argument that the District Court found unconvincing. Stay Denial Order,
(i), (j). While Movants retreat somewhat from that labored analysis in the
instant motion, they continue to cite cases where denials of class
certification were affirmed on appeal (under the deferential abuse ofdiscretion standard) or where class certification rulings were only partially
vacated or modified. See, e.g.,Newton v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 259 F.3d 154 (3d Cir. 2001) (denial of a class motion affirmed in
securities action). In addition, this Court has expressly distinguished
Newton and other substantively dissimilar actions from traditional price-
fixing cases such as this. See Linerboard, 305 F.3d at 158); Johnston v.
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This Court reviews a grant of class certification under an abuse of
discretion standard and must decide whether the 23(a) prerequisites have
been met, whether the district court correctly identified the issues involved
and which are common, and whether it properly identified the comparative
fairness and efficiency criteria. If the court's analysis on these points is
correct, then, it is fair to say that we will ordinarily defer to its exercise of
discretion embodied in the findings on predominance and superiority
HBO Film Mgmt. Inc., 265 F.3d 178 (3d Cir. 2001) (denial of class motion
in securities fraud and RICO case affirmed).
Two such decisions relied on by Movants were sui generis to the
extent that they were clearly labeled by this Court as non-precedential (and
therefore not appropriately cited as precedent). See Weisfeld v. Sun Chem.
Corp., 84 Fed. Appx. 257 (3d Cir. 2004) (non-precedential) (affirmingdenial of class certification in case alleging companies conspired to not hire
each others employees);Monahan v. City of Wilmington, 49 Fed. Appx. 383
(3d Cir. 2003) (non-precedential) (affirming denial of class motion in race
discrimination case).
Movants also cite cases that involved denials of class certification
based on a lack of federal jurisdiction over the claims at issue. SeeSamuel-
Bassett v. KIA Motors Am., Inc., 357 F.3d 392 (3d Cir. 2004) (consumer
state law class action for damages based on allegedly defective automobilebrake system; vacated and remanded for fact-finding on amount in
controversy);De Asencio v. Tyson Foods, Inc., 342 F.3d 301 (3d Cir. 2003)
(district court certified class wage and hour claims under federal and state
law; Third Circuit held that supplemental jurisdiction over state lawclaimdid not exist). By contrast, there is no question as to federal jurisdiction in
this case.
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Linerboard, 305 F.3d at 149-51 (citingBogosian v. Gulf Oil Corp., 561 F.2d
434, 448 (3d Cir. 1977)).
While it will certainly be for this Court to decide whether to affirm the
District Court's class certification ruling, Movants have offered no
convincing reason to believe that this Court should or would necessarily find
that the District Court had abused its discretion in certifying a class of direct
purchasers. They concede as much by inappropriately seeking a more
expansive de novoreview of the Class Certification Order (See Motion at 8-
9) based on the questionable ground that the "District Court both
misapprehended the proper legal standard for adjudicating class
certification motions and then misapplied it. (See Motion 7-8). In
meticulously applyingLinerboardandBegosianto the facts of this case, the
District Court conformed to the law rather than departed from it.
Outside of this baseless contention, Movants premise their argument
relating to the likely success of their 23(f) appeal on the hope that this
Court will abandon the principle of stare decisis in favor of what Movants
contend to be different (and, by implication, better) approaches to class
certification followed in other Circuits. However, there is nothing in the one-
line Order granting an appeal of the Class Certification Order (Davis Decl.,
Ex. A) to suggest that this Court, influenced by other Circuits to change
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longstanding Third Circuit law, has agreed to clarify the proper standard for
class certification in the Third Circuit for horizontal price-fixing cases. See
Motion at 7-8. Movants do not address the other possibility that this Court
will use the occasion of its Rule 23(f) review to reinforce the class action
standards set forth in Linerboard and Bogosian, and to show how
approaches taken recently by other circuits are in harmony with traditional
Third Circuit jurisprudence.12
12
Movants rely upon an analytically confused and hostile reading of two
cases that they claim foreshadow a new, restrictive legal standard for class
certification motions in the Third Circuit under Rule 23 of the Federal Rules
of Civil Procedure.
The first of these cases, In re Initial Public Offering Sec. Litig.
(IPO), 471 F.3d 24 (2d Cir. 2006), merely brought the Second Circuit into
line with established practice in this Circuit, see id. at 38 (citing Newton v.
Merrill Lynch, Pierce, Fenner & Smith, 259 F.3d 154, 166 (3d Cir. 2001)),after the Second Circuits previous case law had created a misleading
appearance of unduly relaxed class action standards,see id.at 35-37. As the
Second Circuit stressed, however, the judge resolves factual disputes
relevant to each Rule 23 requirement. [I]n making that determination, a
district judge should not assess any aspect of the merits unrelated to a Rule
23 requirement. Id. (emphasis supplied). Interpreting IPO, the Southern
District of New York in Hnot v. Willis Group Holdings Ltd., -- F.R.D. --,
2007 WL 749675, at *5-*6 (S.D.N.Y. Mar. 8, 2007), did weigh expert
evidence to the limited degree necessary to decide class certification issues,
but it explicitly refused to referee a statistical dueling of experts or todecide which expert report is most credible, which would have required an
adjudication on the merits, a practice In re IPO specifically cautions
against.
While Movants in this litigation claim erroneously that the District
Court altogether ignore[d] defendants expert evidence because it was in
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As the District Court properly held, the possibility that Movants hope
for is not so substantial to warrant a stay of merits discovery under the facts
of this case, particularly given the highly deferential abuse of discretion
standard that Movants must meet as they proceed with prosecution of their
appeal.
With similar implausibility, Movants also contend that this Courts
grant of defendants Petition, standing alone, demonstrates that there is a
substantial likelihood that defendants will obtain at least some relief in this
conflict with plaintiffs evidence (seeMotion at 8), the class certification
analysis undertaken by the District Court was consistent with and satisfied
the IPO standards as interpreted in Hnot. SeeHydrogen Peroxide, 240
F.R.D. at 170 (weighing expert testimony as part of limited inquiry into
merits at class certification stage of litigation).
Movants also cite the Eighth Circuits decision inBlades v. MonsantoCo., 400 F.3d 562, 575 (8
thCir. 2005) as an example of a case post-dating
the 2003 amendments to Rule 23 that they believe might convince this Court
to deviate from its established standards for class certification in price-fixing
cases. Notably, under an abuse of discretion standard, the court in Blades
affirmed the denial of class certification in a readily distinguishable case
alleging price-fixing of a non-homogeneous product with significant
regional pricing dynamics and variations. See id. at 400 F.3d at 572-74.
Such circumstances are not present in this case. Far from presaging any
repudiation of this CourtsLinerboarddecision, the Eighth Circuit inBlades
reaffirmed the vitality ofLinerboard, and it relied onLinerboard extensively(and in some instances exclusively) in its decision. Bladesstands merely for
the proposition that the district court in that case did not abuse its discretion
in holding that highly unique facts and market conditions (not present here)
failed to satisfy the Linerboard standard, which the Eighth Circuit
recognized as the prevailing class certification analysis. See Blades, 400
F.3d at 573-75.
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Court that will significantly alter the scope of merits discovery in this case.
Motion at 9 (emphasis supplied). TheLinerboardexperience demonstrates
the spuriousness of this argument. There, the district court certified a
plaintiff class in a price-fixing case, carefully applying (as the District Court
did here) the traditional standards set by the Third Circuit for class
certification in cases of this type. SeeIn re Linerboard Antitrust Litig., 203
F.R.D. 197 (E.D. Pa. 2001). The defendants inLinerboardproceeded to file
a Rule 23(f) petition, urging this Court to abandon the Bogosianstandards,
which defendants derided as outmoded and in need of contemporary
revision. This Court granted the petition, but it ultimately affirmed the
district courts class certification decision and reaffirmed the Courts
seminal Bogosiandecision. SeeIn re Linerboard Antitrust Litig., 305 F.3d
145 (3d Cir. 2002).
One of the factors that may have influenced this Court to grant
Movants Rule 23(f) petition is facilitation of the orderly development of
the law. Given the frequency of arguments made by obdurate antitrust
defendants who fail to acknowledge the clear import of controlling
precedent, it would be beneficial for the parties and district court judges if
this Court explicitly and unambiguously reaffirmed its fundamentally sound
rulings inLinerboard andBogosian. SeeBlair v. Equifax Check Servs., Inc.,
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181 F.3d at 835 (When the justification for interlocutory review is
contributing to development of the law, it is less important to show that the
district judges decision is shaky. Law may develop through affirmances as
well as through reversals).
While Movants entire 23(f) appeal is based on the premise that the
District Courts Class Certification Order was shaky, in moving to stay
merits discovery, Movants rely on cases that, at best, have only a tottering
application to this litigation.
As perhaps the most egregious example, in In re Lorazepam &
Clorazepate Antitrust Litig.,208 F.R.D. 1 (D.D.C. 2002), the court stayed
discovery for the following reasons: (1) the appeal involved a dispositive
issue of standing, thereby implicating federal antitrust policies that the
Supreme Court articulated inIllinois Brick Co. v. Illinois,431 U.S. 720, 97
S.Ct. 2061, 52 L.Ed.2d 707 (1977) and raising the possibility that a
reversal by the D.C. Circuit would moot every deposition taken, motion
argued, document produced, and interrogatory answered during the
appellate period. Id. at 4 (emphasis added); (2) the matters under appeal
were comprised of issues of first impressionId; and (3) because the parties
had previously stipulated to a stay of discovery pending the outcome of
settlement discussions and because the Court of Appeals was expected to
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rule on the appeal within approximately two months, any potential harm
created by a short stay was de minimis. Id. at *6. Here, by contrast, the
class certification issues raised by Movants on appeal are not new or unique,
no ruling that comes from this appeal will be dispositive of this litigation
and moot all discovery undertaken, and the stay requested by Movants is
indefinite, not limited in duration. TheLorazepam & Clorazepate decision is
strikingly inapposite.
Numerous other cases cited by Movants are equally inapplicable or
non-supportive of the propositions for which they are cited. This is a
traditional Sherman Act price-fixing action for whichLinerboard,Bogosian
and numerous district court decisions have created a rock-solid foundation
of legal jurisprudence in the Third Circuit. See Exhibit C, Decisions
Granting Class Certification in Price Fixing and Market Allocation Actions
in District Courts Within Third Circuit. In this context, cases involving
other laws (particularly proposed class actions asserting claims under the
sometimes divergent state laws), different and varying legal theories
(primarily arising under the intricacies of state law) and divergent public
policy considerations are not nearly so well suited for class action treatment.
Yet Movants cite such cases indiscriminately to support misdirected claims
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about the frequency with which cases under Rule 23(f) review have resulted
in rulings favorable to the party opposing class certification.13
IV. CONCLUSION
For the reasons set forth above, this Court should defer to the District
Courts sound exercise of its discretion in denying Movants motion to stay
merits discovery in this action. Even in the absence of such deference,
Movants have not satisfied this Courts standards for stays of litigation, and
this case does not justify a discretionary stay of discovery under Rule 23(f)
of the Federal Rules of Civil Procedure. For all the reasons expressed above,
Respondents request this Court to deny Movants motion to stay merits
discovery.
13 As set forth above, cases cited by Movants involve situations where the
denial of class certification was affirmed in the context of a Rule 23(f)appeal, which is unremarkable in view of the highly deferential abuse of
discretion standard applicable to such appeals. The cases do not support
the premise they are cited for, i.e., that the Courts of Appeals routinely
reverse class certification rulings.
Other decisions cited by Movants involved remands of class
certification orders directing the respective district court to more fully
explain the rationale for their decisions. See, e.g.,Beck v. Maximus, Inc., 457
F.3d 291 (3d Cir. 2006) (consumer class action alleging violations of FairDebt Collection Practices Act, remanded because district court did not
adequately explain why the plaintiff satisfied the typicality requirement of
Rule 23(a)(2)); Wachtel v. Guardian Life Ins. Co. of America, 453 F.3d 179
(3d Cir. 2006) (ERISA class action vacated and remanded for district court
to more clearly define claims, issues or defenses to be treated on class basis).
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Respectfully submitted,
Dated: April 26, 2007 BOLOGNESE & ASSOCIATES LLC
By:
Anthony J. Bolognese
Joshua H. Grabar
John G. Narkin
One Penn Center
1617 JFK Blvd., Suite 650
Philadelphia, PA 19103
Telephone: (215) 814-6750
Facsimile: (215) 814-6764
Robert N. Kaplan
Gregory Arenson
Jason Zweig
KAPLAN FOX & KILSHEIMER LLP
805 Third Avenue, 22nd
Floor
New York, NY 10022
(212) 687-1980
(212) 687-7114 (fax)
Steven A. Kanner
William H. London
Douglas A. Millen
Robert J. Wozniak
FREED KANNER
LONDON & MILLEN, LLC
2201 Waukegan Road, Suite 130
Bannockburn, IL 60015
Telephone: (224) 632-4500
Facsimile: (224) 632-4519
30
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Michael D. Hausfeld
William P. Butterfield
Reena Gambhir
COHEN MILSTEIN HAUSFELD
& TOLL, PLLC
1100 New York Avenue, N.W.
West Tower, Suite 500
Washington, DC 20005
Telephone: (202) 408-4600
Facsimile: (202) 408-4699
Respondents Co-Lead Counsel
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DECISIONS GRANTING CLASS CERTIFICATION
IN PRICE-FIXING AND MARKET-ALLOCATION ACTIONS IN
DISTRICT COURTS WITHIN THE THIRD CIRCUIT
1. In re Hydrogen Peroxide Antitrust Litig, 240 F.R.D. 163 (E.D. Pa.
2007) (Dalzell, J.)
2. In re Bulk Extruded Graphite Prods. Antitrust Litig., 2006 WL
891362 (D.N.J. Apr. 4, 2006) (Walls, J.)
3. In re Microcrystalline Cellulose Antitrust Litig.,218 F.R.D. 79 (E.D.
Pa. 2003) (ONeill, J.)
4. In re Graphite Electrodes Antitrust Litigation,File No. 97-4182 (E.D.
Pa. Feb. 26, 2003)
5. In re Mercedes-Benz Antitrust Litig., 213 F.R.D. 180 (D.N.J. 2003)
(Wolin, J.)
6. In re Linerboard Antitrust Litig., 203 F.R.D. 197 (E.D. Pa. 2001)
(Dubois, J.), affd 305 F.2d 145 (3d Cir. 2002)
7. In re Flat Glass Antitrust Litig., 191 F.R.D. 472 (W.D.Pa. 1999)
(Ziegler, C.J.)
8. In re Plastic Cutlery Antitrust Litig., 1998 WL 135703 (E.D. Pa. Mar.
20, 1998) (McGlynn, J.)
9. Jerry Enterprises of Gloucester County, Inc. v. Allied Beverage
Group, LLC,178 F.R.D. 437 (D.N.J. 1998) (Orlosfky, J.)
10. Lumco Indus. Inc. v. Jeld-Wen, Inc., 171 F.R.D. 168 (E.D. Pa. 1997)
(Broderick, J.)
11. In re Residential Doors Antitrust Litigation,171 F.R.D. 168 (E.D.Pa.
1997)
12. In re Industrial Silicon Antitrust Litig.,1996 WL 812935 (W.D.Pa.
Dec. 18, 1996) (Lancaster, J.)
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2
13. Petruzzis IGA Supermarkets v. Darling-Delaware Co., Inc.,1992
WL 212226 (M.D. Pa. 1992) and 1992 U.S. Dist. LEXIS 13050 (M.D.
Pa. 1992)
14. Cumberland Farms, Inc. v. Browning-Ferris Indus., Inc.,120 F.R.D.
642 (E.D. Pa. 1988) (Bechtle, C.J.)
15. In re Chlorine & Caustic Soda Antitrust Litig., 116 F.R.D. 622 (E.D.
Pa. 1987) (Bechtle, C.J.)
16. Fisher Bros. v. Mueller Brass Co., 102 F.R.D. 570 (E.D. Pa. 1984)
(Shapiro, J.)
17. In re Glassine and Greaseproof Paper Antitrust Litig., 88 F.R.D. 302
(E.D. Pa. 1980) (Pollak, J.)
18. In re Fine Paper Antitrust Litig., 82 F.R.D. 143 (E.D. Pa. 1979), affd,
685 F.2d 810 (3d Cir. 1982) (McGlynn, J.)
19. Hedges Enters., Inc. v. Continental Group, Inc.,81 F.R.D. 461 (E.D.
Pa. 1979) (Bechtle, J.)
20. Axelrod v. Saks and Co.,77 F.R.D. 441 (E.D. Pa. 1978) (Loungo, J.)
21. Bogosian v. Gulf Oil Corp. 561 F.2d 434 (3rd Cir. 1977)
22. Chevalier v. Baird Savings Assn,72 F.R.D. 140 (E.D. Pa. 1976)
23. In re Sugar Indus. Antitrust Litig., 73 F.R.D. 322 (E.D. Pa. 1976)
(Cahn, J.)
24. Sommers v. Abraham Lincoln Fed. Sav. & Loan Assn, 66 F.R.D. 581
(E.D. Pa. 1975) (Newcomer, J.)
25. Sol S. Turnoff Drug Distribs., Inc. v. N.V. Nederlandsche Combinatie
Voor Chemische Industries,51 F.R.D. 227 (E.D. Pa. 1970) (Wood, J.)
26. City of Philadelphia v. Emhart Corp., 50 F.R.D. 232 (E.D. Pa. 1970)
(Wood, J).
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