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In re Pool Products Distribution Market Antitrust Litigation

United States District Court, E.D. Louisiana

July 27, 2015



SARAH S. VANCE, Chief District Judge.

Indirect-Purchaser Plaintiffs (IPPs), together with Hayward Industries, Inc. (Hayward) and Zodiac Pool Systems, Inc. (Zodiac), move the Court to grant final approval of a class action settlement between IPPs and Hayward and a class action settlement between IPPs and Zodiac.[1] In addition, Class Counsel for IPPs move the Court to approve the deduction of common benefit litigation expenses and class administration expenses from the fund, and to approve their request for attorneys' fees.[2] The Court has considered all of the evidence submitted at the fairness hearing held on May 14, 2015, as well as the parties' legal memoranda and supplemental submissions. For the reasons stated more fully below, the Court finds the settlement of this class action to be fair, reasonable, and adequate, and the Court awards attorneys' fees and expenses as provided in this order.

I. Background

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).[3] Manufacturer Defendants are the three largest manufacturers of Pool Products in the United States: Hayward, Zodiac, and Pentair Water Pool and Spa, Inc. (Pentair).[4] 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).[5] IPPs are pool owners 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 Pool conspired with each of the Manufacturer Defendants 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 Pool charged 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 History

On November 21, 2011, the Federal Trade Commission (FTC) announced that it conducted an investigation into unfair methods of competition by Pool and 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 several others. On April 17, 2012, the Judicial Panel on Multidistrict Litigation consolidated the suits for pretrial purposes in this Court.[6] 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.[7] That Complaint alleged that Pool's 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, Cal. Bus. & Prof. Code §§ 17200, et seq.; 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. [8] IPPs based their claims on allegations of the same underlying conduct that DPPs alleged 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 acquiring competitors and foreclosing actual and potential competition by conditioning access to its distribution network on manufacturers' promises 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 dismissed IPPs' illegal group boycott claim under the Cartwright Act because IPPs failed to allege a horizontal agreement.[9] The Court also dismissed IPPs' claim that defendants fraudulently concealed their illegal conduct.[10]

The Court allowed IPPs 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.[11] The Court also allowed IPPs 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.[12] 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.[13] 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.[14] IPPs then filed their Third Amended Class Action Complaint, which omitted the claims the Court dismissed.

C. Settlement Agreement Background

1. 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. 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.

2. 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 mediated this action before Judge Phillips. Settlement negotiations for the Zodiac settlement included three full-day, in-person mediation sessions. 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.

After the parties finalized both settlements, IPPs suggested combining the Hayward settlement with the Zodiac settlement for purposes of administration and providing notice to the class.

3. Preliminary Fairness Determination

The Court held a preliminary fairness and settlement class certification hearing on August 14, 2014. On August 22, 2014, the Court appointed Richard C. Stanley as Special Master, in accordance with Rule 53 of the Federal Rules of Civil Procedure, to assist in implementing any subsequent settlements.[15] The Court preliminarily approved the IPP-Hayward settlement and the IPP-Zodiac settlement on December 31, 2014.[16] The terms of the two settlement agreements, with the exception of the settlement amounts, are substantively the same. In addition, the Court certified identical settlement classes for both settlements.[17]

Consistent with the agreements, the Court appointed plaintiffs Kevin Kistler, Jean Bove, Peter Mougey, and Ryan Williams (collectively "Named Plaintiffs") as Class Representatives of the Settlement Class. The Court appointed Thomas J.H. Brill (Law Office of Thomas H. Brill) as Lead Counsel for the Class, and Gainsburgh, Benjamin, David, Meunier & Warshauer, L.L.C.; Edgar Law Firm LLC, Sharp McQueen PA; and Brady & Associates as Co-Counsel for the Settlement Class, finding that the appointments satisfied the prerequisites of Rule 23(g).[18] The Court also approved Angeion Group as the Claims Administrator for the settlement and First NBC Bank as escrow agent.[19] The Court further approved the proposed notice and claim forms, as well as deadlines for submitting claims forms, opting out, and filing objections.

The Court held a fairness hearing on May 14, 2015, to determine whether the settlement is fair and to determine an award of attorneys' fees and expenses. Following the fairness hearing, the parties filed a supplemental joint memorandum alerting the Court to the potential for a cy pres distribution of any unclaimed settlement funds. On July 10, 2015, the Court informed the parties that the proposed recipients of cy pres funds failed to meet applicable criteria for cy pres awards.[20] On July 16, 2015, the parties identified new proposed beneficiaries for any potential cy pres distribution.[21]

D. The Settlement Class

The Court certified the following settlement class for both settlements:

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.[22]

Also excluded from the class are any putative class members who excluded themselves by filing a timely, valid request for exclusion. The parties stipulated 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.

E. The Settlement Agreements

Hayward has paid $1.5 million and Zodiac has paid $500, 000 into an Escrow Account pending the Court's final approval of the settlements. Interest from the account accrues to the benefit of the settlement class.

The Agreements provide 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.[23] 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.[24]

Hayward and Zodiac also agreed 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.[25]

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 statutory or common law, or consumer protection law.[26]

Releasors waive any rights or benefits conferred by Section 1542 of the Ca1ifornia 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."[27] Releasors also waive 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 Section 1542 of the California Civil Code, including but not limited to Section 20-7-11 of the South Dakota Codified Laws.

F. Notice

Federal Rule of Civil Procedure 23(c)(3) governs the notice requirements for class certification. Specifically, the notice must state:

(i) the nature of the action;
(ii) the definition of the class certified;
(iii) the class claims, issues, or defenses;
(iv) that a class member may enter an appearance through an attorney if the member so desires;
(v) that the court will exclude from the class any member who requests exclusion;
(vi) the time and manner for requesting exclusion; and
(vii) the binding effect of a class judgment on members under Rule 23(c)(3).

Fed. R. Civ. P. 23(c)(3)(B). The notice here gave the class information about the terms of the settlements, the date of the final fairness hearing and deadlines for opting out of or objecting to the settlement, and methods for contacting Class Counsel and Angeion. The notice also informed the class that Class Counsel intended to seek up to one-third of the settlement in attorneys' fees and/or for reimbursement of expenses. The Court found in its preliminary approval order that the proposed notice met the requirements of Rule 23(c)(3). The Court also found that the proposed plan for disseminating the notice was the best notice practicable in accordance with Rule 23(c)(2)(B) and that it met the requirements of Due Process.

Class Counsel has provided evidence that the notice was disseminated as planned. Angeion sent email notice to 214, 263 individuals and entities, using email addresses gleaned from Hayward's and Zodiac's warranty and rebate databases.[28] The email lists did not include all class members, because many affected class members may have never registered their warranties or submitted a rebate request. Thus, to reach unknown class members, Angeion implemented a three-part, paid notice campaign.

First, Angeion published short-form notice of the settlement in major newspapers in the four states included in the class. The affidavit from Angeion's Executive Vice President includes a chart documenting the particular newspapers and dates of publication. Second, Angeion executed an internet banner advertisement campaign and a Facebook and Google advertisement campaign. Third, Angeion issued a national press release about the settlement.

In addition to the notice campaign, Angeion has established an information website about the settlement. As of March 2015, the website had received approximately 28, 000 views. Angeion also established a toll-free number to permit class members to listen to FAQs and request long-form notice.

Hayward and Zodiac have notified the appropriate state and federal officials as required by the Class Action Fairness Act. See 28 U.S.C. § 1715. The Act requires notice to be given no later than ten days after a proposed settlement of a class action is filed in court. Id. § 1715(b). And, under section 1715(d), a court may not grant final approval of a settlement until ninety days after the appropriate officials have been served with notice.

Here, Zodiac served notice on the necessary State and Federal officials on November 26, 2014, two days after filing its proposed settlement in court.[29] Hayward, however, did not serve notice until February 6, 2015-months after filing its proposed settlement.[30] Thus, it did not comply with the Act's requirement of prompt notice. Nonetheless, more than ninety days have passed since both Hayward and Zodiac served notice on the appropriate officials, and no officials have raised complaints or concerns. Therefore, the Court finds that the notice satisfies the Act, because the appropriate state and federal officials have had "sufficient notice and opportunity to be heard" about the settlements. In re Processed Egg Prods. Antitrust Litig., 284 F.R.D. 249, 258 n.12 (E.D. Pa. 2012) (collecting cases).

In sum, after reviewing evidence of the Claims Administrator's actual dissemination of the notice, and the notice provided to state and federal officials under the Class Action Fairness Act, the Court confirms that the notice complies with the requirements of Rule 23 and Due Process, and with the Act.

G. 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. Plaintiffs combined notice and administration for the Hayward and Zodiac settlements to save on costs. IPPs project that after deducting estimated settlement administration expenses ($210, 000), and their ...

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