United States District Court, E.D. Louisiana
IN RE: POOL PRODUCTS DISTRIBUTION MARKET ANTITRUST LITIGATION, Section: R(2)
THIS DOCUMENT RELATES TO ALL INDIRECT-PURCHASER PLAINTIFF CASES ORDER AND REASONS
SARAH S. VANCE, District Judge.
Indirect-Purchaser Plaintiffs (IPPs), together with Hayward Industries, Inc. and Zodiac Pool Systems, Inc., move the Court to preliminarily approve a class action settlement between IPPs and Hayward and a class action settlement between IPPs and Zodiac. The parties also move the Court to certify a class for the purposes of the Hayward and Zodiac settlements. For the following reasons, the Court GRANTS the motion.
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., Pentair Water Pool and Spa, Inc., and Zodiac Pool Systems, Inc. As defined in IPPs' Third Amended Class Action Complaint (Complaint), Pool Products are the equipment, products, parts or materials and chemicals 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 Complaint). IPPs are owners of pools who indirectly purchased Pool Products manufactured by the Manufacturer Defendants and distributed by Pool. The IPPs named in the Complaint and their states of citizenship are: Jean Bove (CA), Kevin Kistler (AZ), Peter Mougey (FL), and Ryan Williams (MO).
IPPs allege violations of state laws on behalf of classes of individuals and entities who purchased Pool Products not for resale in California, Arizona, Florida, and Missouri. IPPs allege a nationwide conspiracy in which Pool conspired with the Manufacturer Defendants and other Pool Products manufacturers to restrict the supply of Pool Products to Pool's rival distributors. They allege that defendants' conduct resulted in higher prices, reduced output, and reduced customer choice for Pool Products sold indirectly to IPPs. They allege that the conduct of Pool and the Manufacturing Defendants violated various antitrust and consumer protection laws of California, Arizona, Florida, and Missouri. IPPs further allege that any price increases charged by Pool were passed on by Pool Dealers to indirect consumers who own residential or commercial swimming pools, such as IPPs. IPPs claim to have suffered damages from defendants' conduct in the form of passed-on overcharges they paid for Pool Products as a result of defendants' conduct and claim that the overcharges are "identifiable and traceable" through the manufacturer, distributor, dealer (retailer), or service company to the ultimate consumer, such as IPPs in Arizona, California, Florida, and Missouri.
B. Procedural Background
1. Claims and Motions to Dismiss
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 direct purchaser 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. On May 17, 2012, IPPs filed their initial consolidated class action complaint in the multidistrict litigation in this Court.
On September 5, 2012, IPPs filed their Second Amended Class Action Complaint. That Complaint alleged that Pool and the Manufacturer Defendants' conduct violated various antitrust and deceptive trade practices laws of California, Arizona, Florida, and Missouri. Specifically, IPPs alleged violations of California's antitrust law, the Cartwright Act, Cal Bus. & Prof. Code § 16720, et seq.; the Unfair Competition Law, §§ 17200, et seq., of the California Business & Professional Code; the state antitrust provisions of Ariz. Rev. Stat. §§ 44-1401, et seq.; the consumer protection provisions of the Florida Deceptive and Unfair Trade Practices Act, Fl. Stat. §§ 501.201, et seq., including § 501.204; and the consumer protection provisions of the Missouri Merchandising Practices Act, Mo. Rev. Stat. §§ 407.010, et seq.  The IPPs based their claims on allegations of the same underlying conduct alleged by DPPs in their Sherman Act claims. Specifically, IPPs alleged that Pool pursued a deliberate strategy to restrain trade and monopolize the Pool Product Distribution Market through the acquisition of competitors and through the foreclosure of actual and potential competition by conditioning access to its distribution network on promises by manufacturers not to supply Pool's rivals. IPPs also alleged that the Manufacturer Defendants agreed with Pool to eliminate existing distribution competitors and prevent new entrants from obtaining the products necessary to compete. IPPs alleged that they were injured because defendants' conduct caused them to pay higher prices for Pool Products than they would have otherwise paid absent defendants' illegal practices. Finally, IPPs alleged that defendants fraudulently concealed their illegal conduct until November 2011 when the Federal Trade Commission investigation and related consent decree made public the nature of Pool's anticompetitive conduct.
On May 24, 2013, the Court dismissed IPPs' claims under the California Unfair Competition Law, Florida Deceptive and Unfair Trade Practices Act, and Missouri Merchandising Practices Act that were based on the theory that defendants engaged in fraud or misrepresentation. The Court also dismissed IPPs' claim that defendants fraudulently concealed their illegal conduct.
The IPPs were allowed to go forward with their California Unfair Competition Law and rule of reason Cartwright Act claims involving three vertical conspiracies (one between Pool and each Manufacturer Defendant), to the extent that the claims were predicated on a national market. The IPPs were also allowed to go forward with their Arizona Antitrust Act claims of three vertical conspiracies, to the extent that the claims were predicated on a national market, and their Arizona Antitrust Act claim of attempted monopolization against Pool. The Court also found that IPPs stated a claim under the Florida Deceptive and Unfair Trade Practices Act based on their allegations of attempted monopolization (by Pool) and three vertical conspiracies (one between Pool and each Manufacturer Defendant), to the extent that the claims were predicated on a national market. In addition, the Court found that IPPs stated a claim under the Missouri Merchandising Practices Act (MMPA) based on their allegations of defendants' alleged anticompetitive agreements to exclude Pool's rivals and Pool's alleged attempted monopolization, to the extent that the claims were predicated on a national market. IPPs then filed their Third Amended Class Action Complaint, which omitted the claims dismissed by the Court.
The parties have participated in extensive fact discovery, including the deposition of over eighty fact witnesses. Fact and expert discovery is complete.
2. Hayward Settlement Negotiations
Negotiations leading to the Hayward settlement agreement took place over the course of a year. Class Counsel for IPPs and counsel for Hayward mediated this action before the Honorable Layn Phillips, a former federal district judge and a respected mediator of antitrust disputes. Settlement negotiations included two full-day, in-person mediation sessions with Judge Phillips. The first took place July 22, 2013, and the second occurred nine months later on March 20, 2014. After these sessions, counsel continued to engage in settlement discussions in teleconference calls facilitated by Judge Phillips. The parties came to an agreement on March 31, 2014, and finalized the terms and signed the agreement on May 16, 2014. IPPs and Hayward filed a Joint Motion for Preliminary Approval of Settlement on June 6, 2014. The Court held a preliminary fairness and settlement class certification hearing for the Hayward settlement on August 14, 2014.
3. Zodiac Settlement Negotiations
Negotiations leading to the Zodiac settlement agreement also took place over the course of a year. Class Counsel for IPPs and counsel for Zodiac also mediated this action before Judge Phillips. Settlement negotiations for the Zodiac settlement included three full-day, in-person mediation sessions with Judge Phillips. These sessions occurred on July 22, 2013; March 20, 2014; and October 1, 2014. After these sessions, counsel continued with extensive telephone settlement discussions, including discussions mediated by Judge Phillips. The parties finalized and executed the agreement on November 4, 2014.
IPPs suggest combining the Hayward settlement with the Zodiac settlement for purposes of administration and providing notice to the class. Counsel for IPPs, Hayward, and Zodiac have submitted a joint motion that asks the Court to: (1) grant preliminary approval of the Hayward and Zodiac settlements; (2) certify a settlement class; (3) appoint class counsel; (4) authorize the parties to notify the proposed class of the proposed settlements; (5) schedule a final fairness hearing; (6) stay all claims against Hayward and Zodiac in the MDL; and (7) establish a schedule for hearing motions for attorneys' fees, litigation expenses, and incentive awards for the named plaintiffs.
C. The Proposed Settlement Class
Both settlement agreements define the Settlement Class as:
all individuals residing or entities operating in Arizona, California, Florida or Missouri, who or which, between January 1, 2008 and July 16, 2013, purchased indirectly from PoolCorp (and not for resale) Pool Products in Arizona, California, Florida or Missouri manufactured by Hayward, Pentair, or Zodiac. Excluded from the Settlement Class are (1) individuals residing or entities operating in Missouri, who or which did not purchase Pool Products primarily for personal, family, or household purposes, and (2) Defendants and their subsidiaries, or affiliates, whether or not named as a Defendant in this Action, and governmental entities or agencies.
"PoolCorp" is defined to include Pool Corporation and its subsidiaries, SCP Distributors LLC, and Superior Pool Products LLC. "Pool Products" are defined as "the equipment, products, chemicals, parts or materials for the construction, maintenance, repair, renovation or service of residential and (except in the State of Missouri) commercial swimming pools, including, among other goods, chemicals, pumps, filters, heaters, covers, cleaners, steps, rails, diving boards, pool liners, pool walls, and white goods (the parts necessary to maintain pool equipment) manufactured by Defendants and sold directly or indirectly to Pool Corporation, or any subsidiaries, including, but not limited to, SCP Distributors LLC ('SCP') and Superior Pool Products LLC ('Superior') (collectively, Pool Corporation')."
D. The Settlement Agreements
Under the terms of the proposed Agreements, Hayward would pay a settlement amount of $1.5 million and Zodiac would pay a settlement amount of $500, 000 into an Escrow Account pending final approval by the Court. The Agreements require that the settlement amounts be wire transferred by Hayward and Zodiac into the Escrow Account within 10 days of when the Court enters a Preliminary Order approving the settlements. Interest from the account will accrue to the benefit of the settlement class.
The Agreements provides that the settlement amounts are "all-in" figures, meaning that $1.5 million is the total amount Hayward will pay and $500, 000 is the total amount Zodiac will pay in exchange for the released claims. Accordingly, the settlement amounts 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.
Hayward and Zodiac also agree to assist plaintiffs' counsel with document authentication and to continue to answer plaintiffs' questions about transactional data previously produced by Hayward and Zodiac during discovery.
The Agreements provide that they are intended to forever and completely release Hayward and Zodiac from all "Released Claims, " which are defined as:
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 or not any person or entity has objected to the settlement or makes a claim upon or participates in the Settlement Fund), 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 and unsuspected injuries, damages, and the consequences thereof in any way arising out of or relating to the Action, which were asserted or that could have been asserted, in complaints filed in the Action by the Settling Plaintiffs, including, without limitation, any claims arising under any federal or state antitrust, unjust enrichment, unfair competition, or trade practice st atutory or common law, or consumer protection law. Releasors waive any rights or benefits conferred by § 1542 of the California Civil Code, which states: "A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor." Releasors also wave rights or benefits available under any law of any state or territory of the United States or District of Columbia, or by principle of common law, which is similar, comparable, or equivalent to § 1542 of the California Civil Code, including but not limited to Section 20-7-11 of the South Dakota Codified Laws.
E. Plan of Notice
The Notice Plan provides that long form notice and a Proof of Claim form will be transmitted in writing, by emailing the last known email address of all persons identified through evaluation of warranty registration and rebate request databases maintained by third party contractors of Hayward and Zodiac. Short form notice would also be published in "major newspapers serving Arizona, California, Florida, and Missouri." Both Long and Short Notice and the Claim Form will be available on a case-specific website. In addition, display ads will be posted to Google and Facebook users in Arizona, California, Florida, and Missouri. The Notice Plan also calls for the issuance of a press release through major press outlets throughout the United States, which would direct potential class members to the case website.
F. Plan of Allocation and Claims Process
The Agreements provide that settlement funds will be used to pay attorneys' fees and expenses approved by the Court, all settlement administration expenses, costs for notice, and any other costs associated with the settlement. The proposed Notice explains that class counsel will ask the Court to approve an award of attorneys' fees, costs, and expenses, not to exceed one-third of the $2 million combined settlement fund.
The Court also appointed a Special Master for the IPP settlement,  and tasked the Special Master with formulating and recommending an allocation protocol that would apportion the proceeds of the settlement fund-net of claims administration expenses, attorneys' fees and costs-to Class Members who submit valid claims from each of the four states involved (CA, AZ, MO, and FL). The Special Master recommends a claims procedure in accordance with which claimants could elect to recover under a "Standardized Recovery Model" or an "Itemized Recovery Model, " depending on the types of documentation they have available. Consumers without extensive documentation would recover standard amounts for items purchased in particular categories of pool products. Consumers with extensive records could submit itemized claims based on their actual purchase prices. In any event, consumers would be able to recover only up to the alleged 4.97% overcharge on their eligible Pool Products purchases. After all claims were processed, if the aggregate eligible recovery should exceed the net settlement amount, then eligible claims would be reduced pro rata. If the aggregate eligible recovery is less than the net settlement amount, the special master recommends that the remaining funds be allocated to a cy pres fund, to be distributed at the Court's discretion. The special master also recommends awarding an incentive payment of $1500 to each of the named class representatives, who have each served the class by reviewing the complaints, submitting to a multi-hour deposition, preparing for the deposition, and gathering and submitting documents to Class Counsel.
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 ...