In re: Urethane AntiTrust Liti

• Court: Court of Appeals for the Tenth Circuit
• Decided: September 29, 2014
• Docket: 13-3215
• Status: Published

Opinion

FILED United States Court of Appeals PUBLISH Tenth Circuit

UNITED STATES COURT OF APPEALS September 29, 2014

Elisabeth A. Shumaker TENTH CIRCUIT Clerk of Court

IN RE: URETHANE ANTITRUST LITIGATION. ____________________________

DOW CHEMICAL COMPANY, No. 13-3215

Appellant,

v.

SEEGOTT HOLDINGS, INC.; INDUSTRIAL POLYMERS, INC.; QUABAUG CORPORATION, (Class Plaintiffs),

Appellees,

and

CHAMBER OF COMMERCE OF THE UNITED STATES and AMERICAN INDEPENDENT BUSINESS ALLIANCE,

Amici Curiae.

Appeal from the United States District Court for the District of Kansas (D.C. No. 04-MD-01616-JWL-JPO) Carter G. Phillips, Sidley Austin LLP, Washington, D.C. (Joseph R. Guerra, C. Frederick Beckner III, Kathleen Moriarty Mueller, Jeffrey S. Beelaert, Sidley Austin LLP, Washington, D.C.; and Charles J. Kalil, General Counsel, the Dow Chemical Company, Duncan A. Stuart, Associate General Counsel, the Dow Chemical Company, Midland, MI, on the briefs) for Defendant-Appellant.

Paul D. Clement, Bancroft PLLC, Washington, D.C. (Zachary D. Tripp, Candice Chiu, William R. Levi, Bancroft PLLC, Washington, D.C.; Roberta D. Liebenberg, Donald L. Perelman, Gerard A. Dever, Matthew Duncan, Fine, Kaplan, & Black, RPC, Philadelphia, PA; Richard A. Koffman, Kit A. Pierson, Christopher J. Cormier, Sharon K. Robertson, Laura A. Alexander, Cohen Milstein Sellers & Toll, PLLC, Washington, D.C.; Joseph Goldberg, Freedman Boyd Hollander Goldberg Urias & Ward, P.A., Albuquerque, N.M.; Michael J. Guzman, Rebecca A. Beynon, Michael N. Nemelka, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, D.C.; and Robert W. Coykendall, Roger N. Walter, Morris, Laing, Evans, Brock & Kennedy, Chartered, Wichita, KS, on the briefs) for Plaintiffs-Appellees.

Kathryn Comerford Todd, Tyler R. Green, National Chamber Litigation Center, Inc., Washington, D.C.; Jeffrey L. Kessler, George E. Mastoris, Winston & Strawn LLP, New York, NY; and Gene C. Schaerr, Robert F. Ruyak, William A. Roach, Jr., Winston & Strawn LLP, Washington, D.C., filed an Amicus Curiae brief for the Chamber of Commerce of the United States.

Jonathan D. Selbin, Jason L. Lichtman, Lief Cabraser Heimann & Bernstein, LLP, New York, NY; Jordan Elias, Lief Cabraser Heimann & Bernstein, LLP, San Francisco, CA; and Ian J. McLoughlin, Rachel M. Brown, Shapiro Haber & Urmy, LLP, Boston, MA, filed an Amicus Curiae brief for the American Independent Business Alliance.

Before LUCERO, MURPHY, and BACHARACH, Circuit Judges.

BACHARACH, Circuit Judge.

This antitrust class action stems from an allegation that Dow Chemical Company

conspired with competitors to fix prices for polyurethane chemical products. Over

2 Dow’s objection, the district court certified a plaintiff class including all industrial

purchasers of polyurethane products during the alleged conspiracy period. The action

went to trial, and the jury returned a verdict against Dow. The district court entered

judgment for the plaintiffs, denying Dow’s motions for decertification of the class and

judgment as a matter of law.

Dow appeals, raising four arguments:

 First, Dow contends that class certification was improper because common questions did not predominate over individualized questions. We reject this contention. The district court decided that common questions predominated because: (1) the existence of a conspiracy and impact raised common questions, and (2) these common liability-related questions predominated over individualized questions regarding the extent of each class member’s damages. This decision fell within the district court’s discretion. Thus, we reject Dow’s challenge to class certification.

 Second, Dow argues that the district court should have excluded the testimony of the plaintiffs’ expert witness on statistics. According to Dow, the impact and damages models were unreliable because the expert witness inappropriately selected variables and benchmark years based on what would yield the greatest damages. We disagree. The district court acted within its discretion in allowing the testimony, and Dow’s arguments relate to the weight of the expert’s testimony, not admissibility.

 Third, Dow challenges the sufficiency of the evidence regarding liability. Viewing the evidence in the light most favorable to the plaintiffs, as we must, we conclude that the evidence sufficed on liability.

 Fourth, Dow asserts that the damages award lacked an evidentiary basis and that the resulting judgment violated the Seventh Amendment. These arguments are invalid.

The award of $400,049,039 was supported by the evidence. Dr. McClave calculated even greater damages ($496,680,486), and the jury had an evidentiary basis for reducing this figure to $400,049,039.

3 In allocating this award, the court did not violate the Seventh Amendment; and Dow has no interest in the method of distributing the aggregate damages award among the class members.

I. The Polyurethane Market

This appeal involves four categories of urethane chemical products: (1) polyether

polyols; (2) toluene diisocyanate (TDI); (3) methylene diphenyl diisocyanate (MDI); and

(4) polyurethane systems.1 These products—collectively, “polyurethanes”—are used in

various consumer and industrial components such as mattress foams, insulation, sealants,

and footwear.

The polyurethane market comprises a “myriad of products, pricing structures,

individualized negotiations, and contracts.” AA 413. Buyers negotiate individually with

manufacturers regarding price and other terms, sometimes entering into long-term

contracts and other times purchasing on a “spot” basis. The price depends on multiple

factors, including supply and demand, the balance of bargaining power between the buyer

and manufacturer, and the availability of a substitute product to meet the buyer’s needs.

Apart from price, buyers can negotiate on other terms, such as rebates, most-favored-

nation clauses, early payment discounts, and protection from future price hikes.

Prices are set in some of the contracts, but not in others. When there is no set

price, a contract typically requires the manufacturer to give the buyer advance notice of

price increases. Accordingly, price increases are announced by letter 30 to 45 days in

1 The litigation initially involved another category of urethane products—polyester polyols—but those defendants settled. 4 advance. But these announcements did not always result in actual price increases. For

example, buyers sometimes avoided price hikes by negotiating with the supplier.

II. The Price-Fixing Claim

The plaintiffs are industrial purchasers of polyurethane products who sued under

the Sherman Antitrust Act, 15 U.S.C. § 1, and the Clayton Antitrust Act, 15 U.S.C.

§ 15(a), alleging that a group of polyurethane manufacturers—Bayer AG, Bayer

Corporation, Bayer Material Science, BASF Corporation, Huntsman International LLC,

Lyondell Chemical Company, and Dow Chemical Company—conspired to fix prices and

allocate customers and markets from January 1, 1999, to December 31, 2004. AA 369.

As the case progressed, it underwent three significant changes. First, the plaintiffs settled

with all defendants except for Dow. Second, the plaintiffs dropped their allocation

theory, leaving the price-fixing theory as the sole basis of the lawsuit. Third, the

plaintiffs chose to pursue a shorter conspiracy—one lasting from January 1, 1999, to

December 31, 2003—than was initially alleged.

The price-fixing claim arises under § 1 of the Sherman Act, which “prohibits

contracts and conspiracies that restrain trade.” Smalley & Co. v. Emerson & Cuming,

Inc., 13 F.3d 366, 367 (10th Cir. 1993). For a § 1 violation, the class had to prove:

● the existence of an agreement or conspiracy

● among actual competitors

● that had the purpose or effect of raising, depressing, fixing, pegging, or stabilizing prices

5 ● in interstate commerce.2

Cayman Exploration Corp. v. United Gas Pipe Line Co., 873 F.2d 1357, 1360 (10th Cir.

1989). Because the plaintiffs sought damages under § 4 of the Clayton Act, 15 U.S.C.

§ 15(a), they also had to prove antitrust injury, or “impact,” which is “‘an injury of the

type the antitrust laws were intended to prevent and that flows from that which makes

defendant’s acts unlawful.’” Elliott Indus. Ltd. v. BP Am. Prod. Co., 407 F.3d 1091,

1124 (10th Cir. 2005) (quoting Reazin v. Blue Cross & Blue Shield of Kan., Inc., 899

F.2d 951, 962 n.15 (10th Cir. 1990)).

III. Certification of the Class

The plaintiffs moved for class certification under Rule 23(b)(3) of the Federal

Rules of Civil Procedure. Dow opposed the motion, arguing that certification was

improper because common questions did not predominate over individualized questions.

The district court disagreed, holding that common questions predominated because the

key elements of the price-fixing claim—the existence of a conspiracy and impact—

involved common questions that were capable of class-wide proof.

The court rejected Dow’s argument that the impact element caused individualized

questions to predominate, relying in part on a report prepared by the plaintiffs’ expert,

Dr. John Beyer. Dr. Beyer examined the polyurethane industry and concluded that a

price-fixing conspiracy for polyurethane products would affect all buyers. Crediting Dr.

2 Dow stipulated to the interstate commerce element; accordingly, that issue was not submitted to the jury. 6 Beyer’s report and his supporting models, the court determined that impact involved a

common question susceptible to class-wide proof.

This determination was unaffected by the fact that prices were individually

negotiated. The court reasoned that the industry’s standardized pricing structure—

reflected in product price lists and parallel price-increase announcements—“presumably

establishe[d] an artificially inflated baseline” for negotiations. AA 410. Consequently,

any impact resulting from a price-fixing conspiracy would have permeated all

polyurethane transactions, causing market-wide impact despite individualized

negotiations.

The court acknowledged that the determination of damages might be

individualized. But the court concluded that:

● class certification was appropriate for resolution of “the more difficult, threshold liability issues,” and

● if individualized questions were to overwhelm the damages issue, “‘the more appropriate course of action would be to bifurcate a damages phase and/or decertify the class as to individualized damages determinations.’”

Id. at 413-14 (quoting In re Urethane Antitrust Litig., 237 F.R.D. 440, 452 (D. Kan.

2006)).

IV. Dow’s Motion to Exclude Expert Testimony

Before trial, Dow moved to exclude the testimony of Dr. James McClave, the

plaintiffs’ statistical expert. Dr. McClave used a multiple-regression analysis to develop

models predicting prices that would have existed in a competitive market. He then

7 compared these prices to the actual prices during the conspiracy period, estimating

overcharges of 15.6% for MDI, 14% for TDI, and 14.9% for polyether polyols. SA 6297.

Using these overcharge estimates and sample data from roughly 50% of class sales, Dr.

McClave extrapolated damages for the entire class and distilled the calculations into a

damages model.3

Dr. McClave proposed to testify about these models, and Dow objected on

grounds that he picked variables and the time period to get the result that he wanted.

First, Dow accused Dr. McClave of selecting variables based on whether they

would produce supra-competitive prices for the conspiracy period. The district court

rejected this argument, holding that Dr. McClave had “a basis, beyond statistical fit,

rooted in general economic theory and particular documents” for selecting the variables

that he did. AA 504. Thus, the court concluded that Dow’s argument affected the weight

of the testimony rather than its admissibility. Id.

Dow’s second challenge involved Dr. McClave’s decision to move 2004 from the

conspiracy period to the competitive/benchmark period. According to Dow, Dr.

McClave manipulated the benchmark to generate supra-competitive prices for the

conspiracy period. The district court was unpersuaded, reasoning that: (1) Dr. McClave

3 Dr. McClave did not create a regression model for systems. Instead, he assumed that prices for systems increased proportionately with increases in the price of MDI, the basic chemical comprising the system. AA 1036, 2087-88. Estimating that MDI constituted approximately 74% of a system, Dr. McClave assumed that all systems were subject to an overcharge equal to 74% of the average overcharge for MDI, resulting in a 7.2% average overcharge for systems. Id. at 1036-40. 8 could have had legitimate reasons to modify the benchmark, and (2) Dow’s argument was

untimely.

V. The Trial, the Verdict, & the Post-Trial Rulings

At trial, the plaintiffs attempted to prove that Dow had conspired with competitors

to fix prices for polyurethane products. The plaintiffs’ theory was that the conspiracy had

begun in January 1999, when the polyurethane market was depressed. In an effort to turn

the industry around, executives allegedly coordinated “lockstep” price-increase

announcements and agreed to try to make the price increases stick in individual contract

The plaintiffs supported their theory with testimony from industry insiders,

evidence that the defendants behaved collusively, evidence that the industry was

susceptible to collusion, and evidence that prices exceeded a competitive level.

On the day before the trial was to begin, Dow moved to decertify the class.4

Nonetheless, the trial proceeded, and the jury ultimately found that: (1) Dow had

participated in a price-fixing conspiracy, (2) the conspiracy caused the plaintiffs to pay

more for polyurethane products than they would have paid in a competitive market, (3)

the injury did not precede November 24, 2000, and (4) the plaintiffs suffered damages of

4 Dow did not include its motion in the appendix. Because the appeal involves the denial of the motion to decertify the class, Dow had an obligation to include the motion in the appendix. See 10th Cir. R. 10.3(D)(2), 30.1(A)(1). But we exercise our discretion to take judicial notice of the motion. See Guttman v. Khalsa, 669 F.3d 1101, 1127 n.5 (10th Cir. 2012). 9 $400,049,039. After trebling the damages and deducting the amounts paid by the settling

defendants, the court entered judgment against Dow for $1,060,847,117.

The court then granted the plaintiffs’ request to permit allocation of the award

according to Dr. McClave’s damages model, with a pro rata reduction to reflect the jury’s

award of a lesser amount. With this ruling, the court rejected the Seventh Amendment

challenge, adding that Dow had no interest in the way damages were distributed among

the class members.

Over a month after the trial ended, Dow renewed its motion to decertify the class.

In its reply brief, Dow relied for the first time on the Supreme Court’s then-recent

opinion in Comcast Corp. v. Behrend, __ U.S. __, 133 S. Ct. 1426 (2013). Invoking

Comcast, Dow argued that Dr. McClave’s models had failed to supply a nexus between:

● the liability theory and

● the impact on class members.5

The court held that Comcast did not apply and declined to decertify the class.

VI. Dow’s Arguments

Dow raises four challenges on appeal, which involve: (1) the certification of a

class and refusal to order decertification, (2) the admission of Dr. McClave’s testimony,

(3) the sufficiency of the evidence, and (4) the damages award.

5 Dow raised this argument for the first time in a post-trial brief. The court characterized the argument as “arguably untimely,” but addressed the merits “in light of the intervening Supreme Court decision and the fact that plaintiffs were given an opportunity to file a sur-reply addressing the Comcast opinion.” AA 528. 10 VII. Certification & the Motion for Decertification

Dow challenges the orders certifying a class and declining to decertify the class.

In evaluating these challenges, we review de novo whether the district court applied the

correct legal standard. Carpenter v. Boeing Co., 456 F.3d 1183, 1187 (10th Cir. 2006).

If the proper standard was applied, we will reverse only for abuse of discretion. Id. An

abuse of discretion occurs “when the district court bases its decision on either a clearly

erroneous finding of fact or conclusion of law or by manifesting a clear error of

judgment.” DG ex rel. Stricklin v. Devaughn, 594 F.3d 1188, 1194 (10th Cir. 2010).

The class was certified under Rule 23(b)(3) of the Federal Rules of Civil

Procedure, which requires “that the questions of law or fact common to class members

predominate over any questions affecting only individual members.” Fed. R. Civ. P.

23(b)(3). Dow maintains that common questions did not predominate and that the district

court’s contrary rulings run afoul of Wal-Mart Stores, Inc. v. Dukes, __ U.S. __, 131 S.

Ct. 2541 (2011), and Comcast Corp. v. Behrend, __ U.S. __, 133 S. Ct. 1426 (2013).

A. Dow’s Wal-Mart Arguments

Wal-Mart involved a gender-discrimination claim under Title VII. The plaintiffs,

who were female employees, alleged that their supervisors had discriminated in decisions

on pay and promotions. For the gender-discrimination claims, the district court certified

a class of female employees. See Wal-Mart, 131 S. Ct. at 2549. The Ninth Circuit Court

of Appeals upheld certification, reasoning that the evidence had raised a common

question involving the reason for gender-based disparities on pay and promotion. See id. 11 The Supreme Court disagreed, concluding that the evidence did not show a

company-wide policy of discrimination or “a common mode of exercising discretion that

pervade[d] the entire company.” Id. at 2553-55. Thus, there was no “glue” holding

together the reasons for the alleged injury, and the district court could not resolve the

individual claims “in one stroke.” Id. at 2551-52. The Court emphasized that “[w]hat

matters to class certification . . . is not the raising of common ‘questions’—even in

droves—but, rather the capacity of a classwide proceeding to generate common answers

apt to drive the resolution of the litigation.” Id. at 2551 (quoting Nagareda, Class

Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97, 132 (2009)). The

problem for the plaintiffs was that the common question (the reason for the pay and

promotion disparities) was incapable of yielding a common answer. Therefore,

individual trials were needed to resolve the claims.

The district court held that class-wide liability could be decided based on a sample

of class members. See id. at 2560-61. This procedure was invalidated by the Supreme

Court. Id. at 2561. Calling the procedure a “trial by formula,” the Supreme Court

reasoned that the determination of liability would violate Wal-Mart’s right “to litigate its

statutory defenses to individual claims.” Id.

Dow contends that the certification here violated Wal-Mart in two ways: (1) by

denying Dow the right to show in individualized proceedings that certain class members

suffered no injury, and (2) by allowing the class to proceed on the basis of extrapolated

impact and damages. We reject both contentions. 12 1. The Need for Individualized Proceedings

Dow argues that it was entitled to show in individualized proceedings that certain

class members could not have been injured by the alleged conspiracy. To support this

argument, Dow points to ways that the plaintiffs could have avoided the announced price

increases, such as negotiating for a lower price or switching to a substitute product.

It is true that some of the plaintiffs may have successfully avoided damages. But

Dow has not shown that the district court abused its discretion in finding that class-wide

issues predominated over individualized issues.

The district court determined that common questions predominated because the

key elements of the price-fixing claim—the existence of a conspiracy and impact—raised

common questions that were capable of class-wide proof. Dow disagrees, contending

that impact involved individualized questions because the class members experienced

varying degrees of injury, with some avoiding injury altogether.

The district court did not abuse its discretion in determining that impact involved a

common question that would override other individualized issues. Under the prevailing

view, price-fixing affects all market participants, creating an inference of class-wide

impact even when prices are individually negotiated. E.g., In re Linerboard Antitrust

Litig., 305 F.3d 145, 151-52 (3d Cir. 2002);6 In re Foundry Resins Antitrust Litig., 242

6 In In re Linerboard Antitrust Litigation, the Third Circuit Court of Appeals upheld class certification based in part on expert testimony by John Beyer, Ph.D. 305 F.3d at 153-54. There, Dr. Beyer testified that antitrust impact could be proven on a class-wide basis despite variations for particular products or customers. See id. This testimony was 13 F.R.D. 393, 409-10 (S.D. Ohio 2007).7 The inference of class-wide impact is especially

strong where, as here, there is evidence that the conspiracy artificially inflated the

baseline for price negotiations. See In re Rail Freight Fuel Surcharge Antitrust Litig.,

287 F.R.D. 1, 61 (D.D.C. 2012) (holding that common proof could be used to prove

injury by raising the starting point for negotiations), vacated in part on other grounds,

725 F.3d 244 (D.C. Cir. 2013); In re Cardizem CD Antitrust Litig., 200 F.R.D. 326, 345-

47 (E.D. Mich. 2001) (holding that injury was provable through class-wide evidence

involving inflation of the baseline for individual negotiations); In re Commercial Tissue

Prods., 183 F.R.D. 589, 595 (N.D. Fla. 1998) (holding that impact of price-fixing was

provable through class-wide evidence notwithstanding individualized negotiations for

every distributor); see also In re Scrap Metal Antitrust Litig., 527 F.3d 517, 535 (6th Cir.

2008) (“[E]ven where there are individual variations in damages, the requirements of

Rule 23(b)(3) are satisfied if the plaintiffs can establish that the defendants conspired to

interfere with the free-market pricing structure.”).

The district judge certified a class based on the plaintiffs’ evidence of an

artificially inflated baseline, including parallel issuance of similar product price lists and

among the evidence relied on by the district court and the appeals court. Id. Here, the district court relied on similar testimony by Dr. Beyer. 7 In In re Foundry Resins Antitrust Litigation, the district court relied on Dr. Beyer’s testimony in holding that impact could be proven through class-wide evidence notwithstanding the defendants’ reliance on “individualized pricing negotiations” and “market competition between the [d]efendants themselves.” 242 F.R.D. at 409-10. 14 price-increase announcements.8 When the district judge denied the motion for

decertification, he had the benefit of the trial testimony. At trial, some of Dow’s

witnesses acknowledged that price-increase announcements had affected the starting

point for price negotiations. See SA 4095-4103, 4156-57 (testimony of Richard Beitel);

id. at 3885-86 (testimony of Robert Wood).

The district judge could reasonably weigh the evidence and conclude that price-

fixing would have affected the entire market, raising the baseline prices for all buyers.

Based on the reasonableness of this finding, the judge had the discretion to treat impact as

a common question that was capable of class-wide proof. See Blades v. Monsanto Co.,

400 F.3d 562, 566 (8th Cir. 2005) (“If the same evidence will suffice for each [class]

member to make a prima facie showing, then it becomes a common question.”).

The presence of individualized damages issues would not change this result.

Class-wide proof is not required for all issues. Instead, Rule 23(b)(3) simply requires a

showing that the questions common to the class predominate over individualized

questions. Amgen v. Conn. Ret. Plans & Trust Funds, __ U.S. __, 133 S. Ct. 1184, 1196

(2013).

In price-fixing cases, courts have regarded the existence of a conspiracy as the

overriding issue even when the market involves diversity in products, marketing, and

8 The appendices do not include the evidence submitted to the district court for or against class certification. But we exercise our discretion to take judicial notice of the evidence presented on the motion for certification. See Guttman v. Khalsa, 669 F.3d 1101, 1127 n.5 (10th Cir. 2012). 15 prices. In re Flat Glass Antitrust Litig., 191 F.R.D. 472, 484-85 (W.D. Penn. 1999); In re

Alcoholic Beverages Litig., 95 F.R.D. 321, 327 (E.D.N.Y. 1982); In re Fine Paper

Antitrust Litig., 82 F.R.D. 143, 151-53 (E.D. Penn. 1979); In re Folding Carton Antitrust

Litig., 75 F.R.D. 727, 734 (N.D. Ill. 1977); see also In re Scrap Metal Antitrust Litig.,

527 F.3d 517, 535 (6th Cir. 2008) (stating that “‘[p]redominance is a test readily met in

certain cases alleging . . . violations of the antitrust laws,’ because proof of the

conspiracy is a common question that is thought to predominate over the other issues of

the case” (citation omitted) (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625

(1997))). Therefore, the district court acted within its discretion by treating common

issues (involving the existence of a conspiracy) as predominant over individualized issues

(involving negotiated prices). See Gold Strike Stamp Co. v. Christensen, 436 F.2d 791,

796 (10th Cir. 1970) (“[W]here the question of basic liability [in antitrust cases] can be

established readily by common issues, then it is apparent that the case is appropriate for

class action [under Rule 23(b)(3)].”).

With this determination, the district court acted within its discretion in certifying

the class under Rule 23(b)(3), and nothing in Wal-Mart suggests an abuse of that

discretion. In Wal-Mart, individualized proceedings were necessary because the common

questions—the reasons for the pay and promotion disparities—could not yield a common

answer “in one stroke.” Wal-Mart, 131 S. Ct. at 2551-52.

Here, however, there were two common questions that could yield common

answers at trial: the existence of a conspiracy and the existence of impact. The district 16 court reasonably concluded that these questions drove the litigation and generated

common answers that determined liability in a single “stroke.” Id.

2. The Use of Extrapolation Techniques

Dow contends that the district court violated Wal-Mart by allowing the plaintiffs

to use extrapolations to prove class-wide impact and damages. This contention is based

on the plaintiffs’ reliance on Dr. McClave’s regression models (used to show impact) and

his extrapolation models (used to estimate damages). Dow complains that: (1) the use of

these models violated Wal-Mart’s prohibition against “trial by formula,” and (2) the

models were defective because Dr. McClave did not use representative sampling. We

reject both complaints.

When certifying the class, the district court relied on:

● the report and supporting models of Dr. Beyer, which Dow has not challenged on appeal, and

● the evidence of a standardized pricing structure, including price lists and parallel announcements of price increases.

The court did not even have Dr. McClave’s models or any other sort of extrapolation

evidence. Thus, the court could not have erred by relying on Dr. McClave’s models

when the class was initially certified.

But the plaintiffs did present Dr. McClave’s models before the district court ruled

on Dow’s motion to decertify the class. For two reasons, we conclude that the court

acted within its discretion when it denied the motion to decertify: (1) the motion was

filed late, and (2) liability was not proven through a sampling of class members. 17 First, the court acted reasonably in determining that the motion was late. Dow

waited until the day before trial to seek decertification even though it had received Dr.

McClave’s report 21 months earlier. The court reasonably held that decertification at that

juncture would have prejudiced the plaintiffs, who had “prepared for a long and complex

trial at great expense” and who would have found it “much more difficult to assert

individual claims at [that] time.” AA 523-24; see Davis v. Avco Fin. Servs., Inc., 739

F.2d 1057, 1062 (6th Cir. 1984) (“Despite the fact that as the case developed individual

questions became more prominent vis a vis common questions of law and fact, there still

were and are significant common questions such that we would not be justified in

decertifying the class at this late date.”), overruled on other grounds by Pinter v. Dahl,

486 U.S. 622, 649-50 & n.25 (1988).

Second, reliance on Dr. McClave’s models did not result in a “trial by formula.”

The Wal-Mart Court used this term to describe a novel method of calculating damages,

where the district court determined the merits of individual claims by extrapolating from

a sample set of class members. Wal-Mart, 131 S. Ct. at 2561. This method proved

problematic because it displaced the “established . . . procedure for trying pattern-or-

practice cases” under Title VII and, in doing so, deprived Wal-Mart of the right “to

litigate its statutory defenses to individual claims.” Id.

Our circumstances are different. The plaintiffs did not seek to prove Dow’s

liability through extrapolation. Rather, Dow’s liability as to each class member was

proven through common evidence; extrapolation was used only to approximate damages. 18 Wal-Mart does not prohibit certification based on the use of extrapolation to calculate

damages. See Leyva v. Medline Indus., Inc., 716 F.3d 510, 514 (9th Cir. 2013).

Dow also complains that the models were defective because Dr. McClave did not

use representative sampling. But Dow makes no attempt to:

● explain how the allegedly unrepresentative samples caused individualized questions to predominate, or

● tie its unrepresentative-sampling argument to an abuse of discretion by the district court.

We need not consider these issues, however, because Dow did not raise its present

argument in the district court.9 See, e.g., Walker v. Mather (In re Walker), 959 F.2d 894,

896 (10th Cir. 1992).

B. Dow’s Comcast Argument

Comcast involved a class action based on the antitrust laws. The proposed class

had alleged four theories of antitrust impact, three of which were rejected by the district

court as incapable of class-wide proof. See Comcast Corp. v. Behrend, __ U.S. __, 133

S. Ct. 1426, 1430-31 (2013). The Supreme Court held that the class had not satisfied its

burden of proving damages on a class-wide basis. Id. at 1434-35.

Class-wide damages were to be proven in Comcast solely through the testimony of

Dr. McClave. The Court regarded Dr. McClave’s model as defective because it had

“assumed the validity of all four theories of antitrust impact initially advanced,”

9 In its brief opposing class certification, Dow argued that systems purchases should be excluded from the class definition. But that argument differs fundamentally from the one Dow is now asserting. 19 including the three that had been rejected by the district court. Id. at 1434. Because the

model measured aggregate damages for all of the initial theories, the plaintiffs had no

way to prove class-wide damages. And without such proof, the Court concluded,

individualized questions would “inevitably overwhelm questions common to the class.”

Id. at 1433.

Dow argues that Dr. McClave’s model here suffers from the “precise flaw” that

precluded certification in Comcast: a “failure to distinguish between the impact and

damages attributable to the liability theory [that was] pursued at trial and another liability

theory” that was not. Appellant’s Opening Br. at 42 (emphasis removed). For the sake

of argument, we can assume that Dow is correct.10 But Comcast did not rest on the

10 This assumption is generous because Dr. McClave used different types of benchmarks in Comcast and the present action.

In Comcast, Dr. McClave created a benchmark by constructing a hypothetical market that would have existed in eighteen counties if the defendant had not engaged in four separate types of anticompetitive conduct. See Comcast, 133 S. Ct. at 1429 & n.1, 1431, 1434-35; Behrend v. Comcast Corp., 655 F.3d 182, 205 (3d Cir. 2011), rev’d, __ U.S. __, 133 S. Ct. 1426 (2013); Behrend, 655 F.3d at 217-18 (Jordan, J., dissenting); see infra pp. 21-22. But before trial, the district court rejected the claims on three of the four types of anticompetitive conduct. Comcast, 133 S. Ct. at 1431; see infra p. 22. Though the plaintiffs’ claims changed, Dr. McClave’s model did not. Comcast, 133 S. Ct. at 1431. Thus, Dr. McClave’s benchmark in Comcast included thirteen counties no longer encompassed in the allegations of anticompetitive conduct. Id. at 1433-35; Behrend, 655 F.3d at 217-18 (Jordan, J., dissenting).

This defect does not exist in the benchmark that Dr. McClave used here because it was not based on any subsets of the market (such as counties where the alleged misconduct took place). Instead, the benchmark was based on the entire market, with Dr. McClave comparing actual prices to the prices that would have prevailed in a competitive market. Though one theory (customer allocation) dropped from the case, the market 20 ability to measure damages on a class-wide basis. Instead, the decision was premised on

the majority’s conclusion that without a way to measure damages on a class-wide basis,

individualized questions would “inevitably overwhelm questions common to the class.”

Comcast, 133 S. Ct. at 1433. Comcast does not control because: (1) the decision turned

on a concession that is absent here, and (2) we know from the actual trial that

individualized issues did not predominate.

First, unlike the claimants in Comcast, our plaintiffs did not concede that class

certification required a method to prove class-wide damages through a common

methodology. This distinction was highlighted in the Comcast dissent, which explained

that the plaintiffs’ concession on this point—an “oddity” specific to that case—was

outcome determinative. Id. at 1436-37 (Ginsburg & Breyer, JJ., dissenting).

Second, the procedural setting in Comcast was different. There, the issue was

whether the district court could determine before trial that the plaintiffs could prove

damages on a class-wide basis. In making that determination, the district court had only

Dr. McClave’s expert report, which based damages on a comparison between actual

prices and a model addressing theories already rejected by the district court. These

circumstances are absent here.

Comcast involved a class action against providers of cable television service. See

id. at 1430. According to the suit, the cable television providers violated the antitrust

examined by Dr. McClave did not change. Thus, there was no need to adjust the benchmark (as there had been in Comcast). 21 laws by clustering services in a 16-county region. The class proposed 4 theories of

damages from the clustering:

1. The clustering created an incentive for the cable operators to withhold sports programming from competitors.

2. The clustering reduced the level of competition from companies building cable networks in areas already being serviced.

3. The clustering reduced the “benchmark” competition that cable customers used to compare prices.

4. The clustering strengthened the cable operators’ power to bargain with companies providing content.

See id. at 1430-31. Before trial, the district court rejected three of these theories, holding

that the plaintiffs could prove class-wide damage through only a single theory: reduction

of competition from companies building cable networks in areas already being serviced.

See id.

This ruling created a problem of proof for the class. It relied on a pretrial model

by Dr. McClave that compared actual prices in the 16-county region to the prices that

would have existed if the cable operators had not gained an incentive to withhold sports

programming from competitors, reduced competition from companies building rival

networks in areas already serviced, reduced price competition from rival cable

companies, and strengthened the defendants’ bargaining power with companies providing

content. See id. And the district court had already held that many of these alleged

problems could not be used to prove class-wide damage. See id. With this ruling, Dr.

McClave’s benchmarks became useless. Id. at 1433-35. And without another way to 22 prove class-wide damage, all class members would need to prove their own damages. Id.

at 1433. The necessity of individual determinations on damages proved fatal to

certification because the plaintiffs had not questioned the necessity of a methodology

capable of measuring damages on a class-wide basis. Id. at 1430, 1434-35.

These problems do not exist here because Dow waited until after trial to raise the

issue. Thus, by the time Dow presented its argument, Dr. McClave had already testified

at trial.

In the trial, Dr. McClave testified “that nearly all class members had been

impacted or overcharged” during the pertinent period. AA 940. In light of this

testimony, the district court had the discretion to find a “fit” between the plaintiffs’

theory of liability (a nationwide conspiracy to fix prices) and the theory of class-wide

damages.

This “fit” had been missing in Comcast. Without any other evidence of class-wide

damages, the Supreme Court predicted that “[q]uestions of individual damage

calculations [would] inevitably overwhelm questions common to the class.” Comcast,

133 S. Ct. at 1433.

This problem was absent here. The district court did not need to predict what

would predominate at trial because by the time Dow raised this issue, the trial had already

taken place. And because Dow did not request individualized determinations on

23 damages,11 the plaintiffs presented only class-wide evidence of damages. As a result, the

district court knew from the actual trial that common issues of damages had

predominated.

Dow complains that this approach masks a “disconnect” between Dr. McClave’s

expert report and his theory of damages. But the expert report was never introduced in

evidence. In Comcast, the district court had to rely on Dr. McClave’s expert report

because the trial had not taken place. Here, the district court had the benefit of seeing

what ultimately took place at trial. The court had no need to make a prediction based on

11 At oral argument, counsel for Dow argued that it had sufficiently requested individualized damages calculations in its objection to class certification. Oral Arg. 15:34. But this objection did not constitute a request for individualized findings.

In the objection, Dow argued that the plaintiffs had failed to show that common evidence could be used to measure damages “for each putative class member.” ASA 126. The district court overruled the objection, but suggested a willingness to bifurcate the trial and decertify the class to obtain individualized findings on damages. AA 413-14.

Even with this suggestion by the district court, Dow never asked for individualized findings on damages. Instead, Dow asked for a single finding on class-wide damages. See, e.g., Dow’s Proposed Verdict Form & Written Questions at 2 (Jan. 17, 2013) (Doc. 2696-1) (“The total damages sustained by the members of the Class caused by that conspiracy were $________.” (emphasis added)); Dow’s Proposed Jury Instructions at 50- 51 (Jan. 14, 2013) (Doc. 2690-2) (“Dow does not object to the proposed [damages] jury instruction with the proposed modifications.”); Dow’s Memorandum in Support of Dow’s Proposed Verdict Form at 6-7 (Jan. 17, 2013) (Doc. 2696) (“If the jury answers “YES,” then in response to Question 2(d) the jury must specify the total damages Class members sustained as a result of that conspiracy.”).

When questioned about the failure to seek individualized findings on damages, Dow’s counsel asserted that the district court had limited discovery to the named plaintiffs. Oral Arg. 16:00-16:08. We are not persuaded. Dow did not raise this excuse in its appellate briefs, and it has not pointed us to any such order limiting discovery. 24 the expert report. Instead, the district court could see that common issues of liability had

predominated over individualized issues. In these circumstances, the court did not abuse

its discretion by declining to decertify the class.

VIII. The Admissibility of Dr. McClave’s Testimony

Dow also argues that the district court erroneously allowed Dr. McClave’s expert

testimony. We disagree.

A. Standard of Review

“We review de novo whether the district court applied the proper standard in

determining whether to admit or exclude expert testimony.” Norris v. Baxter Healthcare

Corp., 397 F.3d 878, 883 (10th Cir. 2005). If the proper standard was applied, we will

reverse only for abuse of discretion. Id. An abuse of discretion occurs when a ruling is

“‘arbitrary, capricious, whimsical or manifestly unreasonable or when we are convinced

that the district court made a clear error of judgment or exceeded the bounds of

permissible choice in the circumstances.’” Id. (quoting Dodge v. Cotter Corp., 328 F.3d

1212, 1223 (10th Cir. 2003)).

B. Admissibility Requirements

Expert testimony is admissible only if it is relevant and reliable. Kumho Tire Co.

v. Carmichael, 526 U.S. 137, 152 (1999). To ensure reliability, district courts play an

essential “gatekeeping” role. Id. at 141. This role requires assessment of the expert

witness’s qualifications and the reliability of the opinions. Ralston v. Smith & Nephew

Richards, Inc., 275 F.3d 965, 969 (10th Cir. 2001). 25 C. Dow’s Arguments

Dow argues that Dr. McClave’s testimony was unreliable because of flaws in his

multiple-regression analysis. Multiple-regression analysis is a statistical tool used to

determine the relationship between an unknown variable (the “dependent” variable) and

one or more “independent” variables that are thought to impact the dependent variable.

Saks, Michael J., et al., Reference Manual on Scientific Evidence 179, 181 (2d ed. 2000).

The dependent variable in Dr. McClave’s models was market price. To identify

the independent variables driving prices in a competitive market, Dr. McClave chose a

benchmark period and tested various independent variables to find the combination that

would accurately predict prices during the benchmark period. That combination of

variables was then applied to the conspiracy period to calculate the prices that would

have existed but for the conspiracy. Dr. McClave testified that when he compared the

prices expected in a competitive market and the actual prices, he detected overcharges for

the relevant products and attributed the overcharges to “something other than

competition.” AA 1072-73, 1119.

Dow argues that the testimony was inadmissible because Dr. McClave

manufactured supra-competitive prices through “variable shopping” and “benchmark

shopping.” We disagree.

26 1. “Variable Shopping”

In Dow’s view, Dr. McClave engaged in “variable shopping” by choosing

variables based on whether they would generate supra-competitive prices. This argument

bore on the weight of Dr. McClave’s opinions, not their admissibility.

a. The Need to Include the Major Factors

The validity of a regression analysis depends on selection of the appropriate

independent variables. E.g., Segar v. Smith, 738 F.2d 1249, 1261 (D.C. Cir. 1984).

Consequently, the exclusion of major variables or the inclusion of improper variables

may diminish the probative value of a regression model. Bazemore v. Friday, 478 U.S.

385, 400 (1986). But such defects do not generally preclude admissibility, and courts

allow use of a regression model as long as it includes the variables accounting for the

major factors. See id. (“Normally, failure to include variables will affect the [regression]

analysis’ probativeness, not its admissibility.”); see also Koger v. Reno, 98 F.3d 631, 637

(D.C. Cir. 1996) (“Following Bazemore, courts have taken the view that a defendant

cannot undermine a regression analysis simply by pointing to variables not taken into

account that might conceivably have pulled the analysis’s sting.”).

Dow challenges Dr. McClave’s exclusion of: (1) domestic demand variables for

TDI, and (2) various demand variables for MDI and polyether polyols.

b. TDI

The district court reasonably concluded that Dr. McClave had a reliable

evidentiary foundation to tie TDI exports to price. Dow challenges the exclusion of 27 domestic demand variables, but does not question the relevance of TDI exports. The

exclusion of domestic demand variables was not fatal because Dr. McClave had no need

to consider every measurable factor―just the “major” ones. Bazemore, 478 U.S. at 400.

The district court reasonably found that Dr. McClave had accounted for the major factors

affecting demand, and Dow’s arguments bore on the weight of Dr. McClave’s opinions,

not their admissibility.

Dow argues that Dr. McClave mistakenly selected variables based on the data

instead of picking variables that “made economic sense.” Appellant’s Opening Br. at 46.

This argument does not invalidate the district court’s contrary finding.

For this argument, Dow relies on a law review article by Franklin Fisher. Franklin

M. Fisher, Multiple Regression in Legal Proceedings, 80 Colum. L. Rev. 702 (1980).

There, Dr. Fisher states that in multiple regression, the analyst “specifies the major

variables that are believed to influence the dependent variable,” then tests the accuracy of

the chosen variables. Id. at 705-06, 715. According to Dow, Dr. McClave did the

opposite, picking variables based on his own data rather than picking variables based on

what he would have expected.

But the district court could reasonably infer that Dr. McClave followed the

protocol urged by Dow. Dr. McClave stated under oath that for TDI, he tested variables

that best explained the changes in price, then tested how well these variables served to

predict price changes. AA 2081, 2085. With this explanation, the district court

concluded that TDI exports could reliably be used as a proxy for demand. Id. at 503. In 28 drawing this conclusion, the court pointed out that none of Dow’s experts had questioned

the sufficiency of a relationship between TDI exports and demand. Id. Even now, Dow

does not refer to any such evidence.12

Instead, Dow argues that Dr. McClave should have considered other independent

variables addressing domestic demand. But Dr. McClave tested domestic demand

variables and concluded they did not bear a statistically significant relationship to price.

Id. at 2221. He explains that when he tested domestic demand variables, price decreased

as demand increased. Id. at 2161. Dr. McClave regarded this finding as a “nonsensical

negative sign[],” which made domestic demand unusable as an independent variable

affecting TDI prices. Id.

Dr. McClave pointed to other evidence substantiating his statistical conclusions

that domestic demand proved less significant than exports. For example, a 2004 Bayer

document identified exports as a driver of TDI prices. And the plaintiffs’ economic

expert (John Solow, Ph.D.) opined that “the marginal demand driver for TDI was not

12 In district court, Dow appeared to criticize Dr. McClave’s inclusion of TDI exports as a variable. Dow’s Mot. to Exclude Dr. McClave’s Test. at 20 (Aug. 17, 2012) (Doc. 2391) (stating that it was improper for Dr. McClave to use TDI exports rather than measures of U.S. demand). But on appeal, Dow appears to retract its criticism of Dr. McClave’s decision to include TDI exports as a demand variable. Dow’s Reply Br. at 15-16 (“The problem . . . is not the inclusion of TDI exports as a demand variable . . . .”).

29 domestic demand . . . but rather expert demand”). Corrected Solow Report at 22 n.71

(June 16, 2011).13

Dr. McClave’s treatment of domestic demand is open to debate. But the district

court had the discretion to accept Dr. McClave’s explanation for omitting variables

addressing domestic demand. Thus, the district court did not abuse its discretion in

concluding that Dow’s complaints bore on the weight of Dr. McClave’s testimony rather

than its admissibility.

c. MDI and Polyols

In its opening brief, Dow devotes two sentences to the choice of variables for MDI

and polyether polyols: “In specifying his MDI and polyols models, in contrast, Dr.

McClave used only domestic demand variables and did not include a variable for exports.

He continued his results-oriented approach in the MDI and polyols models by selectively

picking and choosing among the variables used as a proxy for domestic demand.”

Appellant’s Opening Br. at 46-47 (citations omitted). Dow followed the two sentences

with a chart comparing Dr. McClave’s proxies for domestic demand with a report of the

top uses in 2002. Id. at 47.

We question whether the two sentences and the chart fairly develop a claim

challenging the use of variables for MDI and polyols. See Thompson R2-J Sch. Dist. v.

Luke P., ex rel. Jeff P., 540 F.3d 1143, 1148 n.3 (10th Cir. 2008). But even if we were to

13 Dr. Solow’s report was omitted from the appendices. But the report was filed in district court as an attachment and is subject to judicial notice. See Guttman v. Khalsa, 669 F.3d 1101, 1127 n.5 (10th Cir. 2012). 30 construe these sentences and the chart as a separate appeal point, it was not raised in

Dow’s motion to exclude Dr. McClave’s testimony. See Dow’s Mot. to Exclude Dr.

McClave’s Test., passim (Aug. 17, 2012) (Doc. 2391). Thus, if Dow has presented an

appeal point for MDI and polyols, we would confine our review to the plain-error

standard. See McKenzie v. Benton, 388 F.3d 1342, 1350-51 (10th Cir. 2004).

Dow’s brief assertions do not show an obvious error in Dr. McClave’s choice of

variables for MDI or polyols. As a result, even if we were to construe Dow’s brief

references to MDI and polyols as a separate argument, it would not warrant reversal

under the plain-error standard. See, e.g., Royal Maccabees Life Ins. Co. v. Choren, 393

F.3d 1175, 1181-82 (10th Cir. 2005) (stating that the plain-error standard requires

demonstration of an error “that is plain or obvious under existing law”).

2. “Benchmark Shopping”

Dow also argues that Dr. McClave engaged in “benchmark shopping,” arguing

that he moved 2004 from the conspiracy period to the competitive/benchmark period in

order to manufacture supra-competitive prices during the conspiracy period. The

plaintiffs maintain that this decision was made for legitimate reasons. But even if Dow

could prove otherwise, its benchmark-shopping argument does not implicate the

reliability of Dr. McClave’s methodology.

Reliability “is primarily a question of the validity of the methodology employed

by an expert, not the quality of the data used in applying the methodology or the

conclusions produced.” Manpower, Inc. v. Ins. Co. of Penn., 732 F.3d 796, 806 (7th Cir. 31 2013). Accordingly, a district court must admit expert testimony as long as it is based on

a reliable methodology. It is then for the jury to evaluate the reliability of the underlying

data, assumptions, and conclusions. Id. at 806-08.

Dow argues that Dr. McClave skewed the results by including 2004 data in the

prices for the benchmark period. This argument involves a swearing match. Dow

asserted to the district court that Dr. McClave had moved 2004 to the “benchmark”

period in order to maximize damages. The plaintiffs disagreed, presenting Dr.

McClave’s explanation that he had included 2004 as part of the benchmark period based

on test results reflecting that 2004 prices “were more consistent with competition than

collusion.” AA 2081, 2215. The district court resolved this swearing match in favor of

the plaintiffs. SA 498. We have no basis to regard this resolution as an abuse of

discretion. See Hollander v. Sandoz Pharm. Corp., 289 F.3d 1193, 1204 (10th Cir.

2002).

IX. Sufficiency of the Evidence

Dow also challenges the sufficiency of the evidence regarding liability, arguing

that the district court erred in denying the motion for judgment as a matter of law. We

reject this challenge.

32 We engage in de novo review of the district court’s denial of judgment as a matter

of law, applying the same standard as the district court. Myklatun v. Flotek Indus., Inc.,

734 F.3d 1230, 1233-34 (10th Cir. 2013). This standard requires us to determine whether

the evidence allowed a verdict for the plaintiffs. See Wolfgang v. Mid-Am. Motorsports,

Inc., 111 F.3d 1515, 1522 (10th Cir. 1997). In applying this standard, we view the

evidence and related inferences in the light most favorable to the plaintiffs. See

Myklatun, 734 F.3d at 1234. Judgment as a matter of law should not be granted “[u]nless

the proof is all one way or so overwhelmingly preponderant in favor of the movant as to

permit no other rational conclusion.” Greene v. Safeway Stores, Inc., 98 F.3d 554, 557

(10th Cir. 1996).

This evidence, viewed in the light most favorable to the plaintiffs, was sufficient

for a finding of liability.

B. Dow’s Arguments

Dow argues that: (1) there was insufficient evidence that the alleged price-fixing

agreement was effectively implemented, (2) there was insufficient evidence of a

conspiracy involving Lyondell, and (3) the jury necessarily rejected Dr. McClave’s

models, leaving insufficient evidence of impact and damages. We reject each argument.

1. Implementation of the Conspiracy

Dow does not dispute:

● the existence of an agreement to coordinate price-increase announcements and try to make them stick, or

33 ● the existence of evidence involving coordination in announcing price increases.

Rather, Dow questions the existence of evidence that the conspirators followed through

with the agreement by requiring suppliers to make the price increases stick. Without

evidence of follow-through, Dow argues, the price-fixing claim fails as a matter of law.

We reject Dow’s argument.

a. Parallel Announcements of Price Increases

The argument rests on a purported distinction between two categories of price-

fixing conspiracies: (1) those involving an agreement to set prices directly, and (2) those

involving an agreement to announce price increases and try to make them stick.

Conspiracies falling into the second category, Dow submits, require an evidentiary link

between the price-increase announcements and subsequent prices. According to Dow,

this evidentiary link is necessary because parallel price-increase announcements do not

prove a conspiracy.

For the sake of argument, we can assume that evidence of parallel price-increase

announcements would not establish a price-fixing conspiracy. But the plaintiffs did more

than show parallel announcements. The evidence included admissions by industry

insiders, collusive behavior, susceptibility of the industry to collusion, and setting of

prices at a supra-competitive level.

For example, the plaintiffs presented testimony by Ms. Stephanie Barbour (Dow),

who admitted that Dow had participated in a price-fixing conspiracy. Ms. Barbour

34 directly implicated at least three Dow executives in the conspiracy: Mr. Marco Levi, Mr.

David Fischer, and Mr. Peter Davies.

Another key witness for the plaintiffs was Mr. Lawrence Stern (Bayer), who

recounted numerous conversations he had had with his counterparts at Dow, BASF, and

Huntsman. Mr. Stern described these conversations as “inappropriate,” for they pertained

to future pricing and “the possibility of raising prices.” SA 912-14. Mr. Stern added that

he had:

● discussed prices with David Fisher (Dow) on eight to fifteen occasions, and

● exchanged confidential pricing information with competitors to spur industry-wide price increases.

Id. at 896-97, 905.

Mr. Stern also testified that he had taken “unusual steps” to conceal his

conversations with Bayer’s competitors. Id. at 881. For instance, he would use pay

telephones instead of calling from his office and would use a prepaid phone card. Id.

Other times, Mr. Stern met with competitors at off-site locations, such as coffee shops or

hotels. Commenting on these secretive communications, the plaintiffs’ expert

econometrician told the jury that “economists associate secrecy with collusion.” Id. at

2688.

Testimony about a conspiracy also came from others, such as:

● Mr. Edward Dineen (Lyondell), who implicated Mr. Jean Pierre Dhanis (BASF) and Mr. Robert Wood (Dow) in the conspiracy,

35 ● Mr. Robert Kirk (Bayer), who confirmed Mr. David Fischer’s (Dow) involvement, and

● two Bayer executives (Ms. Michelle Blumberg and Mr. Gerald Phelan) who had grounds to suspect their colleague, Mr. Wolfgang Friedrich, of price- fixing.

The jury also heard from the plaintiffs’ expert, Dr. John Solow, who testified

about: (1) collusive conduct he had observed in the polyurethane industry, and (2) the

industry’s susceptibility to collusion.

Dr. Solow had observed four types of collusive conduct.

First, the defendant companies had issued “a series of . . . lockstep price increase

announcements,” which came within weeks of each other, communicated the same or

similar price increases, and were to take effect at about the same time. Id. at 2678-79,

2682.

Second, Dr. Solow noticed “a widespread pattern of communication” among the

top executives of the defendant companies. Id. at 2679. Dr. Solow was struck not only

by the frequency and secrecy of these communications but also by their timing, for the

contacts frequently occurred within days of a lockstep price-increase announcement. Id.

at 2706-09. This proximity suggested that the price-increase announcements had been

coordinated. Id.

Third, Dr. Solow detected a “price over volume strategy,” where the companies

would stick to their list prices even if it meant walking away from opportunities to earn

business or make sales at lower, but still profitable, prices. Id. at 2679. In Dr. Solow’s

36 view, these actions would not take place in a competitive market and the companies were

acting contrary to their interests. Id. at 2711-12.

Fourth, the defendant companies monitored one another to prevent cheating and to

discipline any supplier that was found cheating. Id. at 2723.

Dr. Solow also testified that the polyurethane industry was “ripe for collusion”

based on six features:14

1. Sales of polyurethane products were “concentrated in the hands of only a handful of firms” during the conspiracy period;15

2. the market had high barriers to entry;16

3. polyurethane products are homogenous;17

4. there were no close product substitutes available to customers;18

5. there was excess capacity for MDI, TDI, and polyether polyols during the conspiracy period, meaning that the companies could “produce more output than the customers actually want[ed] to buy,” putting a “strong downward pressure on prices;”19 and

14 SA 2675. 15 Id. at 2644. 16 Id. at 2645. 17 Id. at 2646. 18 Id. at 2649. 19 Id. at 2651-52.

37 6. the industry has several trade associations, which provided “an opportunity to engage in price fixing behavior.”20

The evidence also included testimony by Dr. McClave. He testified that class

members had been overcharged for polyurethane products because of “something other

than competition.” AA 1072-73, 1119; SA 6297.

The evidence, viewed favorably to the plaintiffs, goes beyond parallel

announcements of price increases.

b. Announcements of Price Increases v. Actual Price Increases

Dow argues that even if a conspiracy existed, it did not work because the plaintiffs

could not tie the announcements to actual price hikes. But the plaintiffs had no reason to

connect the two, for they were not trying to prove that the price-increase announcements

caused supra-competitive prices. Instead, the plaintiffs were trying to prove that the

supra-competitive prices were caused by the conspiratorial agreement; the price-increase

announcements were merely an instrument used to effectuate that agreement.

The jury could have inferred that the announcements proved successful, for the

trial included testimony that: (1) manufacturers sometimes used the announcements to

avoid price decreases,21 and (2) some of the announcements were partially or fully

20 Id. at 2660-61. 21 SA 1964 (testimony of Mr. Jean-Pierre Dhanis).

38 accepted.22 From this testimony, the jury could have inferred that a conspiracy existed

and that it caused prices to be higher than they would have been in a marketplace free of

collusion.

2. Involvement of Lyondell

Dow argues the evidence was insufficient regarding Lyondell’s involvement in the

conspiracy. This argument fails legally and factually.

The argument fails legally because even if the evidence had not shown Lyondell’s

involvement, Dow would not have been exonerated. A defendant can incur liability for a

conspiracy under § 1 of the Sherman Act so long as the defendant did not act unilaterally.

See Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768 (1984). And, for

the reasons discussed above, there is sufficient evidence of a conspiracy between Dow

and the other defendant companies, regardless of Lyondell’s involvement.

Dow’s argument also fails factually because the evidence allowed a reasonable

fact-finder to infer Lyondell’s participation in the conspiracy. The inference was possible

based on evidence that: (1) Lyondell and Dow communicated before three price hikes,

22 SA 892-93 (testimony of Mr. Larry Stern); id. at 4156 (testimony of Mr. Richard Beitel that price increases were fully paid for 40-50% of the announcements); id. at 299- 300 (Bayer memorandum stating that “the price increases [are] becoming effective and being paid”); id. at 304 (Bayer memorandum stating that announcements of price increases allowed Bayer to benefit from the full impact); id. at 341-42 (Dow e-mails acknowledging that Dow had obtained “the full increases”); id. at 482 (Dow announcement in connection with pricing, stating “Its [sic] Working!!!!!!!”); id. at 3438, 3502-03 (testimony of Dr. McClave that prices exceeded competitive levels from 1999 to 2003); id. at 2732 (testimony of Dr. Solow that the alleged conspiracy succeeded because nearly all class members had to pay the higher prices). 39 (2) other conspirators discussed collusion in front of Lyondell’s representative, and (3)

other manufacturers colluded.

First, the plaintiffs presented evidence that Mr. Mario Portela (Lyondell) had

communicated with Mr. Marco Levi (Dow) immediately before at least three lockstep

price-increase announcements. See SA 3147-51, 3224-30; AA 1772-92.

Second, the evidence included testimony by Mr. Edward Dineen (Lyondell), who

told the jury that: (1) he had attended a dinner with Mr. Jean-Pierre Dhanis (BASF) and

Mr. Robert Wood (Dow), and (2) during the dinner, Mr. Dhanis made “comments

regarding pricing and market conditions for urethanes” that made Mr. Dineen feel

“uncomfortable from an antitrust perspective.” SA 1984-85. The fact that Mr. Dhanis

felt comfortable discussing prices in front of Mr. Dineen suggests the involvement of one

or more Lyondell executives.

Finally, the evidence suggested participation by virtually every large

manufacturer. This evidence could have led the jury to infer participation by Lyondell.

See In re Flat Glass Antitrust Litig., 385 F.3d 350, 363 (3d Cir. 2004) (“If six firms act in

parallel fashion and there is evidence that five of the firms entered into an agreement, . . .

it is reasonable to infer that the sixth firm acted consistent with the other five firms’

actions because it was also a party to the agreement.”).

3. Effect of the Jury Verdict on Dr. McClave’s Models

The jury found no injury for the 23-month period preceding November 24, 2000.

AA 513-14. From this finding, Dow infers that the jury partially rejected Dr. McClave’s 40 models. With this inference, Dow argues that Dr. McClave’s models are invalid; and

without valid models, Dow continues, the plaintiffs lack sufficient evidence of impact

and damages. This series of inferences does not allow us to disturb the jury’s

unequivocal findings on impact and damages.

We conclude that:

● the plaintiffs’ failure to prove a conspiracy for part of the alleged conspiracy period does not invalidate the finding of liability for part of this period, and

● we have no reason to believe that the jury rejected Dr. McClave’s models in their entirety.

As the district court recognized, the jury may have fully credited Dr. McClave’s models,

but found the evidence insufficient to find an injury before November 24, 2000.

Citing In re Rail Freight Fuel Surcharge Antitrust Litigation, Dow contends that

the models are invalid because they “detect[] injury where none could exist.” Appellant’s

Opening Br. at 51 (quoting In re Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d

244, 252 (D.C. Cir. 2013)). This case does not apply.

In In re Rail Freight, an expert witness found damages for plaintiffs who were

bound by rates agreed to before the alleged conspiracy. 725 F.3d at 252. Thus, the

plaintiffs could not have been harmed by the conspiracy. Id. And, under Comcast, the

D.C. Circuit Court of Appeals regarded certification as questionable because damages

might not be provable through class-wide evidence. Id. at 252-53. This analysis does not

apply here for two reasons.

41 First, In re Rail Freight involved a certification challenge decided on interlocutory

review; at that stage, the Court of Appeals could only predict whether common issues

would predominate for purposes of class certification. Here, we have the benefit of

knowing what happened at the trial: Common issues predominated over individualized

issues. Thus, the D.C. Circuit’s concern lacks any bearing on whether common issues

predominated here.

Second, Dr. McClave’s model does not suffer from the same flaw identified in In

re Rail Freight. There, the appeals court could not credit the expert’s opinion because his

methodology yielded damages for a time period in which prices had been freely set.

Thus, the expert found damages for plaintiffs who could not possibly have suffered

injury. Here, by contrast, Dow has not identified a single class member for whom injury

was impossible.

Rather, Dow asks us to infer a flaw based on the jury’s finding of no damages for

a specific time period. We cannot draw that inference, for the jury could have limited the

time period for the conspiracy based on Dow’s explanation for prices before November

24, 2000. Thus, the jury might have limited the conspiracy period while agreeing with

Dr. McClave’s analysis of pricing after November 24, 2000.

For both reasons, the flaw in In re Rail Freight does not exist here, and the jury’s

finding does not imply a failure to prove impact or damages after November 24, 2000.

X. The Damages Award

42 Dow’s final challenge involves the award of damages. Dow argues that: (1) the

damages award had no evidentiary basis, and (2) the resulting judgment violated the

Seventh Amendment.

A. Evidentiary Support for the Award

The jury assessed damages of $400,049,039 even though Dr. McClave had

calculated damages of $496,680,486. AA 514. Dow contends that the jury’s assessment

was speculative because it deviated from Dr. McClave’s figure and lacked any other

evidentiary support. We reject this contention.

In evaluating this argument, we must view the evidence in the light most favorable

to the plaintiffs,23 upholding the jury’s damages award unless it is “clearly, decidedly or

overwhelmingly against the weight of the evidence.”24

In entering judgment based on the damages award, the district court reasoned that

the jury might have discounted Dr. McClave’s figure based on:

● Dow’s arguments regarding systems,

● skepticism about Lyondell’s involvement in the conspiracy, or

● a belief that the conspiracy had a shorter duration than Dr. McClave assumed.

23 Snyder v. Moab, 354 F.3d 1179, 1187-88 (10th Cir. 2003). 24 Black v. Hieb’s Enters., 805 F.2d 360, 363 (10th Cir. 1986).

43 Id. at 537. Dow does not question these possibilities. Instead, Dow insists that the jury

had no evidentiary basis for a smaller amount because the plaintiffs had not “introduce[d]

the underlying calculations or provide[d] the jury with the information necessary to adjust

[Dr.] McClave’s . . . damages figures if they disagreed with any of his assumptions.”

Appellant’s Opening Br. at 63. We reject Dow’s argument.

Dow assumes that the jury could not adjust Dr. McClave’s damages figure without

his “underlying calculations” or some other “tool.” Id. at 63-64. This assumption is

incorrect, for a jury can reduce an expert’s calculations on damages even when unable to

“run the exact numbers and calculations of [a damages] model with ‘mathematical

certainty.’” MedCom Holding v. Baxter Travenol Labs., Inc., 106 F.3d 1388, 1400-01

(7th Cir. 1997); see Russo v. Ballard Med. Prods., 550 F.3d 1004, 1018 (10th Cir. 2008)

(rejecting the defendant’s argument that the jury’s award “exceeded what the record

evidence could support” when the jury awarded an amount lying “somewhere in between

the extremes suggested by the evidence received at trial”); see also In re Scrap Metal

Antitrust Litig., 527 F.3d 517, 533-34 (6th Cir. 2008) (rejecting the defendant’s argument

that “the jury must have resorted to speculation” to arrive at a damages award of $11.5

million, when the expert calculated damages of $20.9 million); Tuf Racing Prods., Inc. v.

Am. Suzuki Motor Corp., 223 F.3d 585, 591 (7th Cir. 2000) (rejecting the defendant’s

argument that the jury’s award should be set aside as “‘speculative’” when the plaintiff’s

expert calculated damages of $1.2 million, but “the jury awarded only a bit more than 10

percent of that”). 44 B. The Seventh Amendment

Dow also challenges the district court’s decision to permit allocation of the

damages award according to Dr. McClave’s damages model. According to Dow, this

method of distribution violates the Seventh Amendment by taking from the jury “the

question of liability and the extent of the injury by an assessment of damages.” Dimick v.

Schiedt, 293 U.S. 474, 486 (1935). We disagree.

Because this argument implicates a constitutional question, our review is de novo.

J.R. Simplot v. Chevron Pipeline Co., 563 F.3d 1102, 1115 (10th Cir. 2009).

According to Dow, the Seventh Amendment problem arises not from the use of

Dr. McClave’s model to distribute damages, but from the application of a pro rata

reduction to reflect the jury’s award of a lesser amount. The court’s across-the-board

reduction is problematic, Dow says, because the reason for the jury’s reduction is

unknown. Dow argues that: (1) the reduction was based on a finding that certain class

members suffered no injury, and (2) as a result, Dow was unable to have a jury determine

which class members had suffered less damage than Dr. McClave had figured.

Appellant’s Opening Br. at 65.

We reject this argument because Dow has no interest in the method of distributing

the aggregate damages award among the class members. See Allapattah Servs., Inc. v.

Exxon Corp., 333 F.3d 1248, 1258 (11th Cir. 2003) (“[A] defendant has no interest in

how the class members apportion and distribute a[n] [aggregate] damage [award] among

themselves.”); Six (6) Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1307 45 (9th Cir. 1990) (“Where the only question is how to distribute the damages, the interests

affected are not the defendant’s but rather those of the silent class members.”). And Dow

cannot complain about the uncertainties inherent in an aggregate damages award because

Dow never requested individualized findings on damages. See supra pp. 23-24 & note

11.

Dow claims an interest in the allocation of damages to ensure that all class

members are bound by the judgment. But Dow fails to identify any threat to the binding

effect of the judgment. The three cases that it cites are inapplicable.

In Phillips Petroleum Co. v. Shutts, the defendant challenged the trial court’s

jurisdiction over the class plaintiffs, raising a legitimate concern that the judgment would

not bind all class members. 472 U.S. 797, 805 (1985).

Carrera v. Bayer Corp. likewise involved a class-wide judgment with an uncertain

binding effect. 727 F.3d 300, 310 (3d Cir. 2013). The class there had been decertified

because there was insufficient evidence of an ascertainable class. As a result, the class

members could argue that they were not bound by the judgment. Id.

Dimick v. Schiedt was a case about additur. 293 U.S. 474 (1935). There, the

Supreme Court held that the Seventh Amendment is violated when a court “assess[es] an

additional amount of damages” beyond that found by the jury. Id. at 486-87.

Unlike the defendants in Phillips and Carrera, Dow has not identified any reason

to believe that the judgment here would fail to bind all class members. And the district

46 court reduced the jury’s damages award, rather than add to it as in Dimick. Accordingly,

these cases do not apply.

We conclude that Dow has not established a Seventh Amendment violation.

XI. Conclusion

We affirm, rejecting Dow’s challenges to the order for class certification, the

refusal to decertify the class, the admission of Dr. McClave’s testimony, the sufficiency

of the evidence, and the award of damages.