United States District Court, E.D. Louisiana
IN RE: POOL PRODUCTS DISTRIBUTION MARKET ANTITRUST LITIGATION, SECTION: R(2)
ORDER AND REASONS
SARAH S. VANCE, District Judge.
Before the Court is Direct Purchaser Plaintiffs' Motion for Preliminary Approval of Settlement Between Direct Purchaser Plaintiffs and Zodiac Pool Systems, Inc. and Certification of a Settlement Class. For the following reasons, the Court GRANTS the motion and CERTIFIES the proposed settlement class.
A. Factual Background
This is an antitrust case that direct-purchaser plaintiffs (DPPs) and indirect-purchaser plaintiffs (IPPs) filed against Pool and Manufacturer Defendants. Pool is the country's largest distributor of products used for the construction and maintenance of swimming pools (Pool Products). Manufacturer Defendants are the three largest manufacturers of Pool Products in the United States: Hayward Industries, Inc. (Hayward), Pentair Water Pool and Spa, Inc. (Pentair), and Zodiac Pool Systems, Inc. (Zodiac). As defined in DPPs' Second Consolidated Amended Class Action Complaint (SCAC), Pool Products are the equipment, products, parts and materials used for the construction, renovation, maintenance, repair, and service of residential and commercial swimming pools. Pool Products include pumps, filters, covers, drains, fittings, rails, diving boards, and chemicals, among other goods. Pool buys Pool Products from manufacturers, including the three Manufacturer Defendants, and in turn sells them to DPPs, which include pool builders, pool retail stores, and pool service and repair companies (collectively referred to as "Dealers" in the SCAC).
On November 21, 2011, the Federal Trade Commission (FTC) announced that it had conducted an investigation into unfair methods of competition by Pool and had entered a consent decree with Pool resolving the matter. Shortly after the FTC's announcement, several plaintiffs filed suit in this district and in several other districts. On April 17, 2012, the panel on multidistrict litigation consolidated the suits for pretrial purposes in this court. Plaintiffs later added their claims against the Manufacturer Defendants.
DPPs filed their first Consolidated Amended Complaint (CAC) on June 29, 2012. DPPs initially alleged (1) that Pool monopolized and attempted to monopolize the Pool Products distribution market in the United States in violation of Section 2 of the Sherman Act by acquiring rival distributors and by entering into agreements with manufacturers to exclude Pool's rivals; (2) that Pool and the Manufacturer Defendants violated Section 1 of the Sherman Act by engaging in an unlawful conspiracy to exclude Pool's competitors; and (3) that defendants fraudulently concealed their illegal conduct and thus are liable for damages outside of the statutory limitations period. Plaintiffs claimed that the defendants' allegedly illegal conduct caused plaintiffs to pay more for Pool Products than they would have absent the unlawful activity.
On April 11, 2013, the Court issued an order dismissing certain of DPPs' claims from the CAC. First, the Court dismissed the DPPs' monopolization claim because they did not allege that Pool possesses monopoly power in the relevant market. Second, the Court dismissed DPPs' claim that defendants engaged in a per se illegal boycott because only horizontal conspiracies among competitors can give rise to per se liability under Supreme Court precedent, and "the complaint lack[ed] any allegations that manufacturers colluded with each other." Finally, the Court dismissed DPPs' allegation of fraudulent concealment because plaintiffs failed to assert that defendants concealed the allegedly unlawful agreements, or that defendants engaged in a "self-concealing" antitrust violation. The Court allowed the CAC's claim of attempted monopolization under Section 2 of the Sherman Act and the CAC's Section 1 claims under the rule of reason to go forward.
DPPs thereafter sought leave to file an amended complaint. In support of that motion, DPPs asserted that "[a]fter filing the CAC, DPPs discovered new information demonstrating communications between Defendants-including communications among the Manufacturer Defendants themselves-that persuasively support a per se Section 1 claim and Defendants' fraudulent concealment of their misconduct." Following the Court's grant of DPPs' motion,  DPPs filed the SCAC, which contained more extensive allegations of horizontal agreements among the Manufacturer Defendants and of "secret" agreements among all defendants. DPPs did did not reassert the Section 2 monopolization claim in the SCAC.
On December 18, 2013, the Court issued an order dismissing certain of DPPs' claims from the SCAC. First, the Court dismissed the SCAC's claim of a per se illegal conspiracy among the Manufacturer Defendants to disadvantage buying groups, on the ground that Manufacturer Defendants' parallel actions regarding the buying groups did not give rise to an inference of conspiracy because it was not plausible that their treatment of the buying groups stemmed from anything other than their independent perception of their own best interests. Second, the Court dismissed the SCAC's claim of fraudulent concealment because the DPPs again failed to assert that defendants concealed their alleged offenses or that defendants engaged in a "self-concealing" antitrust violation. The Court allowed the SCAC's claim of a per se illegal conspiracy among the Manufacturer Defendants and Pool to fix freight minimums to go forward.
In July 2014, DPPs reached a settlement with Hayward Industries, Inc. The Court held a preliminary fairness hearing and settlement class certification hearing for the DPP-Hayward Settlement on August 14, 2014. The proposed settlement class for the settlement between DPPs and Zodiac is identical to that in the proposed settlement between DPPs and Hayward. The terms of the two settlements are also similar. The Court preliminarily approved the DPP-Hayward settlement and certified its settlement class on September 26, 2014.
B. Settlement Agreement Background
Negotiations leading to this settlement agreement took place over the course of a year and a half. Class Counsel for DPPs and counsel for Zodiac mediated this action before the Honorable Layn Phillips, a former federal district judge and a respected mediator of antitrust disputes. The first mediation session, held on July 22, 2013, was unsuccessful. On March 20, 2014, the parties held a second mediation session at which they again did not reach a settlement. Counsel continued to engage in sporadic settlement discussions, including an in-person session on July 23, 2014. Following the third unsuccessful mediation session, Class Counsel and Zodiac's counsel continued to engage in settlement discussions, with Judge Phillips's assistance. On October 2, 2014, Judge Phillips issued a mediator's proposal using a "double blind" procedure in which neither side would know if the other had accepted the proposal unless both sides accepted. The mediator's proposal also included a term that, if both sides accepted, any disputes regarding the scope of the proposal would be submitted to Judge Phillips for binding determination. DPPs and Zodiac accepted Judge Phillip's proposal on October 6, 2014. Over the next few weeks, the parties negotiated the settlement agreement. The parties submitted a dispute concerning the settlement's terms to Judge Phillips, and Judge Phillip quickly resolved the dispute. The parties signed the settlement agreement on November 4, 2014. The parties represent that they have not entered into any side agreements.
DPPs filed the present Motion for Preliminary Approval of Settlement on November 24, 2014. DPPs request that the Court: (1) preliminarily approve the proposed settlement agreement; (2) authorize the proposed named Settlement Class representatives to represent the class; (3) appoint Class Counsel for purposes of Settlement; (4) certify the Settlement Class; (5) approve the proposed Plan of Allocation; (6) approve the proposed form and method of class notice; and (7) approve Garden City as Claims Administrator and Citibank as Escrow Agent.
C. The Proposed Settlement Class
The Settlement Agreement defines the Settlement Class as:
All persons and entities located in the United States that purchased Pool Products in the United States directly from PoolCorp, during the Class Period from November 22, 2007 to November 21, 2011. Excluded from the Settlement Class are Defendants and their subsidiaries, parents, or affiliates, whether or not named as a Defendant in the Second Consolidated Amended Class Action Complaint, and government entities.
Class Members will be each member of the Settlement Class who does not timely elect to be excluded from the Settlement class. The parties stipulate that certification of the Settlement Class is for settlement purposes only, and they retain all of their respective objections, arguments, and defenses regarding class certification in the event that settlement is not finalized.
D. The Settlement Agreement
Under the terms of the proposed Agreement, Zodiac would pay a settlement amount of $3.45 million into an Escrow Account controlled by the parties pending final approval by the Court. The Agreement requires that the settlement amount be wire transferred by Zodiac into the Escrow Account within 10 days of when the Court enters an order preliminarily approving the settlement. Interest from the account will accrue to the benefit of the settlement class.
The Agreement provides that the $3.45 million settlement amount is an "all-in" figure, meaning that it is the total amount Zodiac will pay under the Agreement in exchange for the released claims. Accordingly, the settlement amount shall be used to pay: (1) the notice and administration costs; (2) attorneys' fees and litigation expenses; (3) incentive awards; (4) class member benefits; and (5) any remaining administration expenses and any other costs of any kind associated with the resolution of the action.
Zodiac also agrees to assist plaintiffs' counsel with document authentication and to continue to answer plaintiffs' questions about transactional data previously produced by Hayward during discovery.
The Agreement identifies seven proposed named Class Settlement Representatives: Aqua Clear Pools & Decks; A Plus Pools Corp.; Liquid Art Enterprises d/b/a Carl Boucher; Oasis Pool Service, Inc.; Pro Pool Services; SPS Services, LLC d/b/a Premier Pools & Spas; and Thatcher Pools, Inc.
The Agreement provides that it is intended to forever and completely release Zodiac from all "Released Claims, " which are defined as:
any and all claims, demands, actions, suits, proceedings, causes of action, damages, liabilities, costs, expenses, penalties and attorneys' fees, of any nature whatsoever, whether class, individual, or otherwise in nature, whether directly, representatively, derivatively or in any other capacity, that Releasors, or each of them, ever had, now has, or hereafter can, shall, or may have on account of, related to, or in any way arising out of, any and all known and unknown, foreseen and unforeseen, suspected or unsuspected injuries, damages, and the consequences thereof in any way arising out of or relating in any way to the Action, which were asserted or that could have been asserted.
Released Claims do not include claims against any Non-Settling Defendant. The Agreement further specifies that these releases constitute
a waiver of Section 1542 of the California Civil Code and Section 20-7-11 of the South Dakota Codified Laws, each of which provides that a general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor, and a waiver of any similar, comparable, or equivalent provisions, statute, regulation, rule, or principle of law or equity of any other state or applicable jurisdiction.
In DPPs' Memorandum of Law in support of their motion for preliminary approval of the settlement, DPPs nominate Garden City as the Claims Administrator for the settlement and Citibank as escrow agent.
E. Notice Plan
PoolCorp's transaction data will be used to determine addresses to mail hard-copy notices to Class Members. Summary Notice would also be published in Pool & Spa News and Aqua , which DPPs represent are leading sources for industry information. DPPs plan to combine notice for the Zodiac settlement with notice for the Hayward settlement. The claims administrator, Garden City, will also establish a website for the case with information on the proposed settlements and their status, as well as links to settlement papers and court filings. In addition, Garden City will establish a toll-free settlement "hotline" to respond to Settlement Class Member questions.
F. Plan of Allocation and Claims Process
Under the proposed plan of allocation, the $3.45 million settlement fund will first be used to pay attorneys' fees and expenses approved by the Court. In addition, as specified in the Agreement, all settlement administration expenses will also come out of the $3.45 million settlement. Garden City estimated that administering Hayward Settlement alone would cost roughly $195, 000, and plaintiffs represent that administering the Zodiac Settlement separately would cost about the same amount. Costs for notice will also come out of the fund. Nevertheless, plaintiffs intend to combine notice and administration for both settlements with the intention of saving on costs. Citibank's administration fee for the Escrow Account is three basis points (.03%) per annum.
The Notice explains that class counsel will ask the Court to approve fees and expenses incurred in the prosecution of the lawsuit in an amount not to exceed $1, 150, 000 from the Zodiac Settlement, which is one-third of the settlement fund.
The amount that remains of the $3.45 million settlement fund after all of these costs and expenses are paid is to be distributed on a pro rata basis to class members who submit valid and timely claims. Specifically, when a class member makes a claim, the claims administrator will review the claim for timeliness, completion, and accuracy, and then "approve" an amount for the claim. Once all timely and valid claims have been reviewed and any issues with the claims have been resolved, the total amount of all recognized claims will form the basis for determining each class member's pro rata share of the fund. The proportion that a settlement class member's recognized claim bears to the total amount of all recognized claims will determine the proportion of the settlement fund that the class member will receive.
II. Class Certification
A. Legal Standard
The certification requirements of Federal Rule of Civil Procedure 23 generally apply when certification is for settlement purposes. See Amchem Prods. Inc. v. Windsor , 521 U.S. 591, 620 (1997). A district court need not consider "whether the case, if tried, would present intractable management problems, for the proposal is that there be no trial." Id. at 620 (citing Fed.R.Civ.P. 23(b)(3)(D)). But the Court's consideration of the other factors in Rule 23 is of "vital importance" since the court will lack a later opportunity to make adjustments to the class. Id. The existence of a settlement class may even "warrant more, not less, caution on the question of certification." Id.
To be certified under Rule 23, the class must first satisfy four threshold requirements. A court ...