Ashley Furniture Industries, Inc. v. Packaging Corporation of America et al

Brief in Opposition

W.D. Wis.December 23, 2016

1 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN ASHLEY FURNITURE INDUSTRIES, INC., Plaintiff v. PACKAGING CORPORATION OF AMERICA, et al Defendants. ) ) ) ) ) ) ) ) ) ) ) Case No. 3:16-cv-00469-WMC PLAINTIFF ASHLEY FURNITURE INDUSTRIES, INC.’S MEMORANDUM OF LAW IN OPPOSITION TO GEORGIA PACIFIC’S MOTION TO DISMISS ASHLEY’S POST-2010 CLAIM OR, IN THE ALTERNATIVE, MOTION FOR JUDGMENT ON THE PLEADINGS In its Second Amended Complaint (“SAC”), Ashley alleges a single conspiracy among Defendants to fix, raise, maintain and stabilize the price of Containerboard Products between 2004 through 2013. Defendant Georgia Pacific, LLC’s (“Georgia Pacific”) Motion does not argue the SAC fails to plead the existence of a plausible conspiracy. Further, Georgia Pacific poses no challenge to Ashley’s claim that Georgia Pacific - with the other Defendants - participated in a conspiracy to fix the price of containerboard products during the years 2004- 2010. Nor does Georgia Pacific’s Motion or its Answer (Doc. 111) assert any defense that it withdrew from the conspiracy. Rather, Georgia Pacific argues the allegations regarding conspiratorial conduct after 2010 are insufficient and should be struck from this case. Georgia Pacific’s Motion invites this Court to “dismember” Ashley’s allegations and apply clearly distinguishable law from outside this District. Georgia Pacific also relies heavily on Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), but that case dealt with whether an Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 1 of 12 2 antitrust conspiracy is plausibly alleged - an issue Georgia Pacific does not contest - and does not support Georgia Pacific’s attempt to isolate and remove a particular time period from a plausibly alleged conspiracy. For the following reasons, the Motion should be denied. I. Allegations Of A Conspiracy Should Not Be Dismembered, Especially To Cut Off The Conspiracy’s End Date Where The Existence Of The Conspiracy Is Not Challenged Georgia Pacific, before producing any discovery, argues this Court should declare 2010 as the last year of Defendants’ price-fixing conspiracy despite the post-2010 allegations of conspiracy in the SAC. To get there, Georgia Pacific dismembers the post-2010 allegations from the rest of the SAC and urges the Court to view those allegations in isolation. But that is not the law, because the “character and effect of a conspiracy are not to be judged by dismembering it and viewing its separate parts.” Cont’l Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699 (1962). Twombly did not change this long established rule of evaluating a conspiracy. See Standard Iron Works v. ArcelorMittal, 639 F. Supp. 2d 877, 902 (N.D. Ill. 2009) (quoting Continental Ore Court’s “admonition that ‘[t]he character and effect of a conspiracy are not to be judged by dismembering it and viewing its separate parts’” and finding that plaintiffs pleaded “sufficient facts to comply with Federal Rule of Civil Procedure 8(a)(2) and Twombly”); In re Pressure Sensitive Labelstock Antitrust Litig., 566 F. Supp. 2d 363, 373-74 (M.D. Pa. 2008) (“Nothing in Twombly, however, contemplates this ‘dismemberment’ approach to assessing the sufficiency of a complaint. Rather, a district court must consider a complaint in its entirety without isolating each allegation for individualized review.”) (citing Twombly, 550 U.S. at 556). In In re Refrigerant Compressors Antitrust Litigation, the court was confronted with the same argument that Georgia Pacific makes here - indeed, the defendants relied on the same case law as Georgia Pacific. 795 F. Supp. 2d 647, 660-61 (E.D. Mich. 2011). There, the Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 2 of 12 3 defendants conceded a conspiracy had been sufficiently pleaded for the June 2004-December 2006 time period (just as Georgia Pacific does not challenge a 2004-2010 conspiracy here) but sought to dismiss any post-2006 conspiracy claim. Id. The defendants argued a post-2006 conspiracy failed because the complaint did not have “any allegations with respect to alleged conspiratorial conduct after December 2006.” Id. at 660. The court rejected the argument concluding “that Twombly does not support such a ‘dismemberment’ or ‘carve out’ approach to assessing the sufficiency of a complaint.” Id. at 661. Dismembering a complaint’s conspiracy allegations is especially improper to cut off the conspiracy end date - as opposed to trimming its start date - where the existence of the conspiracy is not challenged. This is because “[o]nce a conspiracy is established, ‘it is presumed to continue until there is an affirmative showing that it has been abandoned.’” In re Cast Iron Soil Pipe And Fittings Antitrust Litig., No. 14-MD-2508, 2015 WL 5166014, at *10 (E.D. Tenn. June 24, 2015) (quoting United States v. Hayter Oil Co. of Greeneville, Tenn., 51 F.3d 1265, 1270-71 (6th Cir. 1995)); In re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 616 (7th Cir. 1997) (“To terminate one’s liability for the continuing illegal acts of a conspiracy that one had joined, a withdrawing member must either report the conspiracy to the authorities or announce his withdrawal to his coconspirators.”). The point is illustrated by a case relied on by Georgia Pacific - In re Lithium Ion Batteries Antitrust Litigation, No. 13-MD-2420, 2014 WL 309192 (N.D. Cal. Jan. 21, 2014). In that case, the defendants did not dispute the existence of “some conspiracy” but argued the plaintiffs overreached in pleading its duration - specifically, the conspiracy start date by two years and the conspiracy end date by three years. The court agreed with respect to the start date because there was an utter lack of allegations that defendants reached any agreement prior to a Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 3 of 12 4 2002 meeting where the conspiracy was purportedly launched. Id. at *12. Importantly, however, the court denied defendants’ argument that the conspiracy’s end date should be shortened by three years. The court acknowledged “that the allegations [for these three years] grow sparse,” but pointed out “the relative paucity of allegations is plausibly explained by increased care and efficiency in the operation of the conspiracy.” Id. “Nothing in the pleadings requires the Court to conclude that the alleged conspiracy abruptly ceased to operate in this period.” Id. (denying motion to dismiss seeking to shorten conspiracy period by three years). As shown in In re Lithium Ion Batteries Antitrust Litigation, on a motion to dismiss a critical distinction exists in evaluating the sufficiency of allegations regarding the conspiracy’s start date versus its end date, where the existence of the conspiracy is uncontested, as is the case here. For this reason, two of Georgia Pacific’s cases are inapposite. In both In re Urethane Antitrust Litigation, 663 F. Supp. 2d 1067 (D. Kan. 2009), and In re Foreign Benchmark Rates Antitrust Litigation No. 13-CV-7789, 2016 WL 5108131 (S.D.N.Y. Sept. 9, 2016), the defendants argued the allegations regarding the start date of the conspiracy were insufficiently pleaded; the defendants did not challenge the end date pleaded. II. The SAC Sufficiently Pleads The Conspiracy Extended Until 2013 Applying these legal standards, the entirety of the conspiracy allegations must be considered, and the post-2010 allegations of conspiratorial conduct cannot be dismembered from the rest of the SAC. The SAC alleges that beginning “in or about 2004, the Containerboard Products industry was faced with decreasing profit margins, rising product demand, and a promising macroeconomic outlook.” SAC ¶ 6. Nonetheless, “Defendants began a coordinated across-the-board imposition of capacity constraints, leading to a subsequent restriction in the supply of Containerboard Products on the market.” Id. The conspiracy “included a scheme to Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 4 of 12 5 impose capacity and supply constraints which had the effect of creating an artificial shortage of Containerboard Products during a time of stable or increasing demand, thereby allowing Defendants to charge supra-competitive prices to Ashley.” Id. Key to the conspiracy to reduce capacity and increase prices was an unprecedented consolidation of the containerboard industry, which “created an environment conducive to collusion.” SAC ¶ 58; see also SAC ¶ 60 (“The period of 2004-2013 witnessed an exceptional number of containerboard plant closings, capacity reductions, and price increases that can only be explained by concerted effort by the Defendants and their co-conspirators.… Each of these price increases was implemented by Defendants nearly simultaneously and was facilitated by reductions in supply and production capacity. In the face of increasing demand, these reductions make no economic sense absent conspiracy and collusion.”) The SAC alleges a plausible vehicle through which the coordination and collusion occurred - industry and trade associations. SAC ¶¶ 47-50. Defendants, including Georgia Pacific, were members of the Fibre Box Association (“FBA”) (SAC ¶ 47), the American Forest & Paper Association (“AF&PA”) (SAC ¶ 48), and the International Corrugated Case Association (“ICCA”) (SAC ¶ 50), and certain Defendants, including Georgia Pacific, had representatives on these associations’ board of directors. SAC ¶¶ 47, 48, 50. The SAC alleges that representatives and executives of Defendants attended FBA and AF&PA “meetings each year where executives and other representatives of Defendants and their co-conspirators have an opportunity to meet and talk with one another, including communicating about supply and prices.” SAC ¶¶ 47, 48; see also SAC ¶ 77 (alleging “on July 17, 2004, representatives from Defendants Weyerhauser, WestRock, Smurfit-Stone, and Georgia-Pacific attended a Paperboard Packaging Alliance Board of Advisors meeting in Washington, D.C.… The same month, the AF&PA Statistics Committee Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 5 of 12 6 met to discuss, among other things, the ‘Long-Term Vision and Goals Plan for Domestic and International Statistics….’”). Following many of these meetings during the relevant time period, Defendants acted uniformly in increasing prices and/or reducing capacity. E.g., SAC ¶¶ 96, 98, 103, 106; see also SAC ¶¶ 111 and 136 (following industry meetings in 2006 and 2007, “Defendants and their co-conspirators raised prices on linerboard again, this time by nearly 10% [in 2006] [and] by over 7% [in 2007]…. At the same time, Defendants and their co-conspirators raised the price of corrugated medium by over 10% [in 2006] [and] by over 7% [in 2007]…. These price increases occurred across-the-board and were imposed by all Defendants and their co-conspirators at or about the same time.”) Additionally, the SAC alleges that “AF&PA forums have included instructions on steps to conceal anticompetitive communications between firms.” SAC ¶ 48. The allegations regarding post-2010 conspiratorial conduct fit squarely with the allegations of conspiratorial conduct during 2004-2010, a period that Georgia Pacific does not argue in this Motion is insufficiently pleaded. Consistent with the pre-2010 conduct, Defendants continued their consolidation of the industry. In 2011, WestRock RKT (then Rock-Tenn Company) acquired the large containerboard manufacturer Smurfit-Stone. SAC ¶ 185. Then, weeks after WestRock RKT’s acquisition of Smurfit-Stone, Defendant International Paper announced its intent to acquire Temple-Inland, which was accomplished in 2012. SAC ¶ 186. The net effect of these acquisitions was that by 2013 “the top four containerboard producers [accounted] for about 70% of North Amerian capacity compared with 47% in 2000.” SAC ¶ 187. According to a 2013 article referenced in the SAC and attached to Georgia Pacific’s Memorandum in Support, which was authored by a containerboard industry expert, this consolidation “indicat[ed] a very fertile period for price increases today.” Doc. 110, Ex. A at 1. Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 6 of 12 7 The expert was correct. Despite an 18-month price increase hiatus following the filing of the class action complaints in 2010, Defendants WestRock, International Paper, and PCA announced coordinated price increases in lockstep in the latter part of 2012. SAC ¶ 189. These price increases stuck because as a result of Defendants’ industry consolidation “there was relatively little pushback from customers as tight industry supply gave them little choice.” Id. Then, in February 2013, Georgia Pacific announced a $50/ton price increase, and other Defendants followed. SAC ¶ 190. The February 2013 price increase is notable, for among other reasons, because it was a “departure from historical trends in which the containerboard producers would generally lag input cost changes and inflation.” Doc. 110, Ex. A at 2. In other words, there was no input cost increase or inflation spike that led Defendants to increase containerboard prices in 2013. Rather, they did it because they could, and they could because of the coordinated consolidation and the substantial capacity reductions.1 Accordingly, the SAC pleads sufficient allegations regarding Defendants’ coordinated industry consolidation and price increases beyond the 2010 filing of the class actions. This is certainly true given courts’ high reluctance to announce an end date (rather than start date) of a conspiracy whose existence is not contested and is properly pleaded. See, e.g., In re Lithium Ion Batteries Antitrust Litigation, No. 13-MD-2420, 2014 WL 309192 (N.D. Cal. Jan. 21, 2014) (granting motion to dismiss allegations regarding conspiracy’s start date but denying motion as to alleged end date). 1 Georgia Pacific’s other case - Precision Associates, Inc. v. Panalpina World Transport (Holding) Ltd., No. 08-cv-00042, 2015 WL 4987751 (E.D.N.Y. Aug. 19, 2015) - is distinguishable because, unlike here, there was a total lack of allegations for the last four years of the alleged conspiracy and, even worse, factual allegations showing the conspiracy ended four years before. Specifically, four years before the conspiracy’s alleged end date, one defendant had entered the DOJ leniency program and other defendants had entered guilty pleas. Id. at *5. In the face of these allegations, the court ruled the complaint alleged a conspiracy that ended in 2007, rather than 2011 as alleged. Id. at *6. Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 7 of 12 8 Further, to the extent the post-2010 allegations are not as robust as the 2004-2010 allegations - and, in particular, the period between 2010 and the renewal of price increases in 2012 - “the relative paucity of allegations is plausibly explained by increased care and efficiency in the operation of the conspiracy.” In re Lithium Ion Batteries Antitrust Litigation, 2014 WL 309192, at *12 (a case relied on by Georgia Pacific). That Defendants exercised “increased care and efficiency” in carrying out their conspiracy after 2010 is certainly plausible given they were facing lawsuits. III. If The Post-2010 Allegations Are Found To Be Lacking, Ashley Should Be Given An Opportunity To Amend Its Complaint As explained above, the SAC sufficiently pleads a conspiracy that extends through 2013. Nonetheless, if this Court finds that the post-2010 allegations are lacking, Ashley respectfully requests that the Court permit Ashley to amend its complaint to add to its existing allegations. Georgia Pacific’s own cases support an opportunity to amend, rather than outright dismissal. For example, in In re Urethane Antitrust Litigation, after the court found the complaint’s allegations regarding the conspiracy start date were insufficient, the court gave the opt-out plaintiffs leave to amend to plead additional allegations that the conspiracy started in 1994, rather than 1999 as was alleged in the class’s complaint. 663 F. Supp. 2d at 1069-70, 1077. Following that decision, the opt-out plaintiffs filed a second amended complaint, defendants responded with another motion to dismiss the pre-1999 conspiracy claim, and the court denied defendants’ motion, ruling that the plaintiffs had fixed the pleading deficiencies of their earlier pleading. In re Urethane Antitrust Litigation, 683 F. Supp. 2d 1214, 1233 (D. Kan. 2010). Giving Ashley an opportunity to amend to plead additional allegations regarding post- 2010 conduct makes especially good sense here because Ashley did not have the benefit of any discovery when drafting the SAC. Shortly after the Rule 26(f) conference, Ashley on October Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 8 of 12 9 21, 2016 served its First Request for Production of Documents (“First RFPs”) on each Defendant requesting production of the documents, written discovery responses, and deposition transcripts from the Kleen Products class action. Thus, Ashley’s First RFPs simply ask Defendants to re- produce the materials they already produced in the class action. The task was Herculean, and Defendants were not required to reinvent the wheel. And yet, while Defendants’ document re- productions were due on November 23, 2016, and though each Defendant committed to reproduce its class action materials, only seven of the ten Defendant entities have even begun to produce documents. Georgia Pacific is not one of them.2 The fact that Ashley did not have access to document productions when drafting the SAC distinguishes this situation from two cases cited by Georgia Pacific. In In re Domestic Drywall Antitrust Litigation, MDL No. 13-2437, 2016 WL 3453147 (E.D. Pa. June 22, 2016), the court dismissed the opt-out plaintiffs’ claim that the conspiracy extended until 2014-2015 and did not allow leave to amend because the opt-out plaintiffs “had two opportunities to amend their complaint as well as access to discovery completed in the Class Action.” Id. at *4 (emphasis added). Similarly, in In re Lithium Ion Batteries Antitrust Litigation, No. 13-MD-2420, 2014 WL 309192 (N.D. Cal. Jan. 21, 2014), the court dismissed the allegations of the conspiracy’s start date - but did not trim the end date allegations, as discussed above in § I - noting that plaintiffs “drafted their consolidated amended complaints with the benefit of five Defendants’ grand jury productions[.]” Id. at *10.3 2 Georgia Pacific served objections and non-substantive responses to Ashley’s First RFPs but, to date, has not produced any documents. Georgia Pacific’s failure to do so is inexplicable, in particular because it said in its RFP responses that it would do so. Georgia Pacific’s failure to produce documents will likely (and unfortunately) be the subject of a soon-to-be-filed motion to compel discovery. 3 Georgia Pacific also cites to a legal malpractice case for the unremarkable proposition that a plaintiff “should not be given unlimited opportunities to move the goalposts in this litigation.” Doc. 110 at 4 & (Footnote continued) Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 9 of 12 10 If the Court finds the post-2010 allegations insufficient, given the imminent re-production of Defendants’ class materials, Ashley respectfully requests that the Court grant Ashley leave to amend within 30 days after Defendants complete their re-production of the materials produced in the class action. In the alternative, Ashley requests 30 days from the date of the Court’s ruling on Georgia Pacific’s Motion to amend the SAC to plead additional post-2010 allegations. IV. Response To Georgia Pacific’s Statement That Incorrect Georgia Pacific Entity Is Named As The Defendant In a footnote in its Memorandum in Opposition, Georgia Pacific states that the SAC names the wrong Georgia Pacific entity because Defendant Georgia Pacific LLC is a mere holding company.4 Doc. 110 at 2 & n. 1. Georgia Pacific then says it “has asked Ashley to name the proper party in this case, but Ashley has to this point declined to do so.” Id. That is not factually accurate. In a previous filing, Georgia Pacific stated that its counsel “has advised Plaintiff’s counsel that upon resolution of this motion [to sever/transfer], it is prepared to make appropriate arrangements with Plaintiff’s counsel for the substitution of the proper GP operating entities as defendants.” Doc. 73 at 1 & n.1. Georgia Pacific has not made those “appropriate arrangements” nor otherwise provided any information to Ashley or its counsel identifying the other Georgia Pacific entity or entities who should be named or why the substitution should occur. Further, it bears noting that the Georgia Pacific entity named in the Kleen Products class action is the same Georgia Pacific entity named in this case: Georgia Pacific LLC. That said, Ashley remains willing to substitute another Georgia Pacific entity or entities for Georgia Pacific LLC, if it would be appropriate to do so. n.2) (citing Multiut Corp. v. Greenberg Traurig, LLP, 2011 WL 4431021 (N.D. Ill. Sept. 22, 2011). A key fact in the Multiut case, which is not present here, is that the plaintiff had been told by the court that the last amendment would be the “final opportunity to amend.” Multiut, 2011 WL 4431021 at *5. 4 Georgia Pacific did not move for dismissal on this ground. Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 10 of 12 11 V. Conclusion For the foregoing reasons, Ashley respectfully requests that the Court deny Georgia Pacific’s Motion to Dismiss Ashley’s Post-2010 Claim or, in the alternative, Motion for Judgment on the Pleadings. Dated: December 23, 2016 Respectfully submitted, GERMAN MAY PC By /s/ Brandon J.B. Boulware William D. Beil Brandon J.B. Boulware 1201 Walnut Street, Suite 2000 Kansas City, MO 64106 Tele: (816) 471-7700 Fax: (816) 471-2221 Email: billb@germanmay.com Email: brandonb@germanmay.com GASS WEBER MULLINS LLC John Franke (1017283) Michael B. Brennan (1017064) 309 N. Water St., Suite 700 Milwaukee, WI 53202 Tele: (414) 223-3300 Fax: (414) 224-6116 Email: franke@gwmlaw.com Email: brennan@gwmlaw.com Attorneys for Plaintiff Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 11 of 12 12 CERTIFICATE OF SERVICE I hereby certify that on December 23, 2016, I electronically filed the foregoing document with the Clerk of the Court using the CM/ECF system, which will send a notice of electronic filing to counsel of record for this case. /s/ Brandon J.B. Boulware Attorney for Plaintiff Case: 3:16-cv-00469-wmc Document #: 128 Filed: 12/23/16 Page 12 of 12