Transamerican Refining Corp. v. Dravo Corp.

130 F.R.D. 70, 16 Fed. R. Serv. 3d 1517, 1990 U.S. Dist. LEXIS 4977, 1990 WL 19070
CourtDistrict Court, S.D. Texas
DecidedJanuary 16, 1990
DocketCiv. A. No. H-88-789
StatusPublished
Cited by17 cases

This text of 130 F.R.D. 70 (Transamerican Refining Corp. v. Dravo Corp.) is published on Counsel Stack Legal Research, covering District Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Transamerican Refining Corp. v. Dravo Corp., 130 F.R.D. 70, 16 Fed. R. Serv. 3d 1517, 1990 U.S. Dist. LEXIS 4977, 1990 WL 19070 (S.D. Tex. 1990).

Opinion

ORDER

NORMAN W. BLACK, District Judge.

Pending before the Court is Plaintiffs’ motion for class certification. Defendants have filed a joint response and three Defendants have filed supplements to the response. After careful consideration of the motion, responses and relevant case law [72]*72the Court is of the opinion that class certification is appropriate in this matter.

This suit arises out of an alleged conspiracy to illegally and secretly manipulate the price of specialty steel piping materials sold under cost-plus arrangements throughout the United States between 1966 and 1985. The manufacturers or distributors, as suppliers of specialty steel piping, allegedly made arrangements with pipe fabricators to quote an inflated price on steel which was to be resold by the pipe fabricators on a cost-plus basis. It is alleged that the supplier and fabricator later divided the price differential through payments or credits. Plaintiffs have asserted two legal theories; one based on the Sherman Act and the other on common law fraud.

Plaintiffs’ proposed class consists of the end-users of specialty steel piping who made purchases on a cost-plus basis. The various class members constructed nuclear power plants, conventionally-fueled power plants, refineries, coal gasification plants, and other projects using specialty steel piping material during this twenty year period. Plaintiffs contend that from 1966-1985 practically the entire specialty steel piping industry engaged in this conspiracy to raise prices by practices which destroyed the competitive price-setting mechanism for cost-plus contracts. The conspiracy was not revealed until prosecutors convened several grand juries to investigate the activity. As a result numerous participants have been indicted and several individuals and companies have pled or been found guilty.

The class proposed by the Plaintiffs is defined as follows:

All purchasers of specialty steel piping material in the United States who purchased specialty steel from any of the defendants or their co-conspirators pursuant to cost-plus contracts or arrangements (including cost-plus provisions or elements in contracts or arrangements) during the period January 1, 1966 through December 31, 1985, but excluding from the class the named defendants and their co-conspirators. Specialty steel piping materials includes alloy steel, stainless steel and certain limited types of carbon steel products (including piping, fittings, hangers, supports, flanges and valves) sold on a cost-plus basis.

The Court must decide whether to certify the class as urged by the Plaintiffs or allow each litigant to pursue its claims on an individual basis. Not only must the requirements of Rule 23, Fed.R.Civ.P. be considered but also which alternative will best serve the ends of justice, fairness, and Court efficiency.

In making a determination the Court must examine the specialty steel piping industry and attempt to understand the product, the sellers and the buyers. Specialty steel piping includes two varieties of piping: stainless steel and other “alloy” steel. This piping is used in industrial plants where products are transported at high temperatures or pressures, are highly corrosive, or where it is required for sanitary purposes.

Specialty piping is made by pipe manufacturers who then sell to distributors. Transactions between these two groups are not part of this litigation. Manufacturers and distributors, referred to as suppliers, sell the specialty steel piping to fabricators who construct the customized configurations required by a particular plant. These configurations are then sold to the end-user, generally on a cost-plus basis.

The proposed class consists only of purchasers of specialty steel piping sold on a cost-plus basis. Projects and contracts or parts thereof involving sales on any other basis are irrelevant. Plaintiffs’ contend that the cost-plus transactions of the fabricators were affected by the industry-wide anti-competitive practices alleged in their complaint. They allege that when a fabricator called a supplier for specialty steel piping he was asked if this was to be on a cost-plus basis. If the fabricator responded in the affirmative he would then give the supplier a code which indicated the percentage of increase that was to be added to the quote. This price boosting scheme was successful because it was industry-wide. Since the practice was so pervasive there was a break down in the com[73]*73petitive process which was sacrificed in favor of unlawful price-fixing and profits.

Plaintiffs believe there was a single common, industry-wide conspiracy which involved all the major participants. However, Defendants complain of the Plaintiffs’ lack of specificity at this point in time. It is important to keep in mind that discovery in this matter has been stayed except on the issue of class certification. As a result, Plaintiffs have had little opportunity to explore the intricacies of the merits of the case. Plaintiffs are not required to prove their case in order to be entitled to class certification and have presented the Court with sufficient evidence to support its claim for class certification.

The Court must determine whether Plaintiffs have satisfied the requirements of Rule 23(a), and if so, whether the proposed class properly falls within a subsection of Rule 23(b). Section (a) lists four requirements for class certification. First, the class must be so numerous that joinder of all members is impracticable. Plaintiffs contend that the class numbers in the hundreds or thousands, which is more than enough to satisfy the numerousity requirement. Class members consist of oil refineries, nuclear and conventional power plants plus other companies that purchased specialty steel piping on a cost-plus basis. If a customer made cost-plus purchases, it is a member of the class. It is not necessary to determine the identity of the class members at the time of class certification. Carpenter v. Davis, 424 F.2d 257, 260 (5th Cir.1970). Plaintiffs have compiled a preliminary list of several hundred victims which more that satisfies the numerosity requirement of the Rule.

Second, according to Rule 23(a)(2) there must be some questions of law or fact common to the class. This is different from Rule 23(b)(3) which requires that the common questions “predominate” over the questions affecting only individual class members. It is clear that, while questions not common to all may arise, there are common questions of law or fact, the most obvious being the very existence of a conspiracy among the Defendants. Therefore, the Court finds this requirement has been met.

Third, the claims or defenses of the representative parties must be typical of the claims or defenses of the class. The named Plaintiffs’ claim must stem from the same event, practice or course of conduct that forms the basis of the class claims and be based on the same remedial theory. 7A Wright, Miller & Kane, Federal Practice and Procedure, § 1764 at 228 (1986). Here the named Plaintiffs’ claims, as well as the class claims, are based on the alleged injury from a national industry-wide conspiracy to restrain trade. The named Plaintiffs built a representative sample of projects and purchased substantial quantities of specialty steel on a cost-plus basis for construction projects.

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Bluebook (online)
130 F.R.D. 70, 16 Fed. R. Serv. 3d 1517, 1990 U.S. Dist. LEXIS 4977, 1990 WL 19070, Counsel Stack Legal Research, https://law.counselstack.com/opinion/transamerican-refining-corp-v-dravo-corp-txsd-1990.