Dow to Settle $1B Urethanes Case
The Dow Chemical Company plans to settle a $1.06 billion urethanes price-fixing lawsuit which dates back to 2005, according to company officials.
The American multinational corporation announced the proposed settlement Friday (Feb. 26), after three years of contesting a federal jury award entered against it February 2013.
Sources are indicating that the death of Justice Antonin Scalia figured heavily in the company’s decision, a factor alluded to in the statement Dow released.
“Growing political uncertainties due to recent events within the Supreme Court and increased likelihood for unfavorable outcomes for business involved in class action suits have changed Dow’s risk assessment of the situation,” the company wrote.
“Dow believes this settlement is the right decision for the company and our shareholders.”
The State of the Suit
According to its announcement, Dow Chemical, headquartered in Midland, MI, has entered into a settlement agreement to resolve the In re: Urethanes Class Action litigation.
In the settlement agreement, Dow has agreed to pay the plaintiff class $835 million to resolve the $1.06 billion judgment against Dow in 2013. This amount includes post-judgment interest and an anticipated award of attorney’s fees.
This settlement agreement is conditioned on the United States Supreme Court agreeing to suspend Dow’s petition for a Writ of Certiorari (i.e., its request that the lower court deliver its record in a case for the higher court’s review), as well as the subsequent approval of the class settlement by the United States District Court of Kansas, where the original case was heard.
The company had petitioned for the Writ of Certiorari as a means to dismiss the $1.06 billion judgment. Dow’s petition has been on hold with the Supreme Court as the Court considers a decision in a Tyson Foods case with a common class action issue.
Dow still stands behind the legal position expressed in its petition, the company noted, adding that it “continues to strongly believe” it was not part of any conspiracy and the judgment was fundamentally flawed as a matter of class action law.
Dow explains that its position is that the judgment violates class action law in multiple ways, notably with respect to the Supreme Court’s Walmart decision of 2011 and the Comcast decision of 2013, both authored by Justice Scalia.
According to a Reuters report, in each of those cases Scalia wrote the majority opinion for the court. The Comcast ruling was 5-4, and the Wal-Mart decision was 5-4 on one aspect and unanimous on another.
Dow states that it cooperated in the extensive investigation by the U.S. Department of Justice, which was closed in 2007 without any action taken or proposed against the company.
Dow did not wish to provide any additional information Monday (Feb. 29).
The loss of Scalia’s presence on the Supreme Court is characterized by Reuters as a “blow” to businesses that have recently seen successes in challenging class action cases at that level of the system.
Scalia and the four other conservative justices held the majority, and, as a result, in recent years the Court issued a series of rulings curbing class-action litigation against businesses.
|By Collection of the Supreme Court of the United States / Public domain, via Wikimedia Commons|
Dow appears to have chosen to settle the case “rather than risk its fate being decided by a shorthanded, eight-justice court missing, in Scalia, a reliable vote in support of companies in class action cases,” according to Reuters.
The news agency suggests that Dow chose to settle the case “rather than risk its fate being decided by a shorthanded, eight-justice court missing, in Scalia, a reliable vote in support of companies in class action cases.”
With Scalia's Feb. 13 death, Paul Bland, executive director of consumer advocacy group Public Justice says the conservative wing now lacks the five votes it would need "to make dramatic new rules that curtail class actions."
“Class-actions is one of the areas where Justice Scalia’s absence is likely to have an impact,” Gregory Garre told Bloomberg Business. Garre, an appellate lawyer at Latham & Watkins in Washington, was previously President George W. Bush’s top Supreme Court lawyer.
“Companies will have to be careful what they ask for in seeking review, or at least face an added burden in prevailing at the court on class-action issues,” he added.
Jonathan Hacker, who runs the Supreme Court practice at O’Melveny & Myers in Washington, told the business news sight he thought the impact of Scalia’s absence would be “marginal” at best.
“Overall I think most justices want to ensure that class-action procedures permit defendants to litigate their defenses fairly and don’t subject absent class members to unfair outcomes they can’t control or even influence,” Hacker said.
As reported earlier, the federal lawsuit, which dates back to 2005, alleged that Dow and its competitors—BASF SE, Bayer AG, Huntsman International LLC and Lyondell Chemical Company—began fixing prices for urethane by 1999, in violation of federal law. The conspiracy was said to have lasted into 2003.
Dow was the only remaining defendant; all of the other companies had settled out of court long ago, in agreements that topped $100 million in all.
|The Dow Chemical Company|
The federal lawsuit alleged Dow and its competitors—BASF SE, Bayer AG, Huntsman International LLC and Lyondell Chemical Company—began fixing prices for urethane by 1999, in violation of federal law. Dow continues to deny playing a part of any conspiracy.
The plaintiffs—buyers of urethane-based products for the construction, automotive, appliance and furniture industries—were seeking $1.125 billion in damages from Dow, according to court documents. The amount represented a 13 percent increase from what the prices would have been without the conspiracy, reports note.
At trial, plaintiffs argued that Dow executives fixed prices with leaders of the other companies during phone calls, meetings at hotels, and on golf courses, reports said.
In February 2013, after a four-week trial, a federal court jury in Kansas City, KS, returned its verdict against Dow, awarding $400 million in damages to buyers affected by a urethane price-fixing conspiracy.
U.S. District Judge John W. Lungstrum tripled the damages to $1.2 billion as required under federal antitrust law. The final judgment of $1.06 billion reflects the $139 million in settlements with the other defendants before trial, Bloomberg reported.