Miami Products & Chemical Co. v. Olin Corporation

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF NEW YORK

_____________________________________

MIAMI PRODUCTS & CHEMICAL CO.,

On Behalf of Itself and All Others Similarly

Situated, et al.,

DECISION AND ORDER

Plaintiffs,

1:19-CV-00385 EAW

v.

OLIN CORPORATION, et al.,

Defendants.

_____________________________________

THE TRIPP PLATING WORKS, INC., On

Behalf of Itself and All Others Similarly

Situated, et al.,

Plaintiffs,

1:19-CV-00975 EAW

v.

OLIN CORPORATION, et al.,

Defendants.

_____________________________________

INTRODUCTION

Plaintiffs The Tripp Plating Works, Inc. (“Tripp”) and Finch Paper, LLC (“Finch”)

(collectively “Indirect Purchaser Plaintiffs” or “IPPs”) allege that defendants Olin

Corporation (“Olin”), K.A. Steel Chemicals, Inc. (“K.A. Steel”), Occidental Chemical

Corporation (“OxyChem”), Westlake Chemical Corporation (“Westlake”), Shintech

Incorporated (“Shintech”), and Formosa Plastics Corporation, U.S.A. (“Formosa USA”)

(collectively, “Defendants”) entered into a combination or conspiracy to artificially reduce

or eliminate competition for the pricing of caustic soda sold to purchasers in the United

States. (Dkt. 335 at ¶ 129). In IPPs’ words, they “allege that Defendants conspired to fix

the price of caustic soda in the United States, forcing them to pay supracompetitive prices.”

(Dkt. 623 at 7).1

IPPs ask the Court to certify two classes pursuant to Federal Rule of Civil Procedure

23. (Id.; see Dkt. 514; Dkt. 644 at 24 n.26). They have also moved to strike and exclude

certain opinions offered by Defendants’ expert witness, John H. Johnson IV, Ph.D. (Dkt.

592). Defendants argue that this matter is not suitable for class certification (Dkt. 532), and

have jointly moved to exclude certain opinions offered by IPPs’ expert witness, Gareth

Macartney, Ph.D. (Dkt. 590). Shintech and Formosa USA have also separately moved to

strike portions of Dr. Macartney’s testimony. (Dkt. 588; Dkt. 594).

For the reasons below, the Court denies IPPs’ motion for class certification. The

Court resolves the parties’ motions to strike expert testimony and opinions as needed to

enable it to resolve the class certification motion, as described below, and otherwise denies

those motions as moot.

1 When referencing the page number(s) of docket citations in this Decision and Order,

the Court cites the CM/ECF-generated page numbers that appear in the upper righthand

corner of each document and not to the original pagination. Unless otherwise noted, all

docket references herein refer to Civil Action No. 1:19-cv-00385.

BACKGROUND

On December 28, 2023, the Court issued a Decision and Order denying a motion for

class certification filed by plaintiffs Miami Products & Chemical Co., Amrex Chemical Co.,

Inc., Main Pool and Chemical Co., Inc., Midwest Renewable Energy, LLC, Perry’s Ice

Cream Company, Inc., and VanDeMark Chemical, Inc. (collectively “Direct Purchaser

Plaintiffs” or “DPPs”). (Dkt. 724 (the “DPP Class Certification D&O”); see also Dkt. 729

(unredacted version)). Familiarity with the DPP Class Certification D&O and with the prior

proceedings in this matter is assumed for purposes of this Decision and Order. The Court

has summarized the most relevant information below.

I. Factual Background

A. The Caustic Soda Market and Defendants’ Alleged Anticompetitive

Behavior

In seeking class certification, IPPs “incorporate[d] the factual background set forth

by the . . . [DPPs] in their motion for class certification.” (Dkt. 623 at 9). That factual

background is recounted at length in the DPP Class Certification D&O. (See Dkt. 729 at 4-

8). The Court does not repeat it here, but incorporates by reference its prior discussion of

the facts underlying both IPPs’ and DPPs’ theories of how Defendants allegedly

manipulated the caustic soda market and caused their customers to pay supracompetitive

prices.

B. Defendants

Olin is a vertically integrated global manufacturer and distributor of chemical

products and a leading U.S. manufacturer of ammunition. (Id. at 8). Olin acquired K.A.

Steel, a privately held distributor of caustic soda and other chemicals, in August 2012. (Id.).

OxyChem is a wholly owned subsidiary of Occidental Petroleum Company, and

produces and markets basic chemicals and vinyls. (Id.).

Westlake is an international manufacturer and supplier of basic chemicals, vinyls,

polymers, and building products. (Id.).

Formosa USA is a vertically integrated supplier of plastic resins and petrochemicals.

(Id.).

Shintech is a wholly owned subsidiary of Shin-Etsu Chemical Co., Ltd., the largest

manufacturer of polyvinyl chloride in the world. (Id.).

C. The Indirect Purchaser Plaintiffs

Tripp is “a family-owned business that provides electroplating services, which is a

process used to deposit finished coats on certain metal products such as valves, bonnets, and

other parts.” (Dkt. 623 at 16). Finch is “a company that produces paper products and uses

membrane grade caustic soda for its manufacture of those paper products.” (Id.). Both

claim to have indirectly purchased caustic soda manufactured by one or more of Defendants.

(Dkt. 335 at ¶ 12).

D. Dr. Macartney

IPPs have engaged Dr. Macartney to provide expert testimony in this matter. Dr.

Macartney is a Senior Economist, the Director of Competition, and Chief Executive Officer

at OnPoint Analytics, Inc., an economic and statistical consulting firm. (Dkt. 629-7 at ¶ 1).

Dr. Macartney holds a Ph.D. in economics from University College London. (Id.).

Dr. Macartney has opined, among other things, that: (1) common evidence

demonstrates that the structure of the caustic soda industry is conducive to anticompetitive

behavior; (2) common evidence and methods demonstrate that Defendants engaged in

collusive behavior that artificially increased the price of caustic soda; and (3) there is a

common, reliable standard economic methodology that may be used to calculate damages

on a classwide basis, and by applying that methodology, he has estimated “Class-wide

damages of $155 million for the State Antitrust Class. . . .” (See id. at ¶¶ 12-22).2 Dr.

Macartney has further opined that “Class-wide damages for the Unjust Enrichment Class

can also be calculated using common evidence . . . in the amount of $712 million in revenue

terms, $355 million in gross profit terms, and $348 million in net profit terms[.]” (Id. at

¶ 23).

A key part of Dr. Macartney’s opinion is his performance of a “reduced-form pricing

regression” analysis3 to purportedly demonstrate that caustic soda prices were artificially

inflated during the alleged class period. (See id. at ¶ 117). To perform this analysis, Dr.

Macartney used a “standardized database of Defendants’ transaction data” he received from

2 The definitions of the proposed classes are set forth later in this Decision and Order.

3 “Multiple regression analysis is a statistical tool used to understand the relationship

between or among two or more variables. Multiple regression involves a variable to be

explained—called the dependent variable—and additional explanatory variables that are

thought to produce or be associated with changes in the dependent variable.” (Dkt. 729 at

11 (citation omitted); see also Dkt. 629-7 at ¶ 117 (“The reduced-form pricing regression is

the most common statistical method employed in antitrust litigation. It enables an economist

to simultaneously calculate the relationship between changes in a dependent variable (e.g.,

Caustic Soda prices) and change in multiple independent variables (e.g., supply and demand

factors).” (quotation and alteration omitted))).

Dr. Russell Lamb, DPPs’ expert economist. (Id. at ¶ 118 n.232). Dr. Macartney’s model

purports to show an overcharge of 11.61% for all of Defendants’ customers and a 16.37%

overcharge for distributor customers. (Id. at ¶ 128). Dr. Macartney then used a regression

model “to estimate the proportion of Defendants’ price increases that were passed through

into the distributors’ prices to members of each [proposed] Class.” (Id. at ¶ 133). This

model “provides an estimate of passthrough at a rate of 81%[.]” (Id. at ¶134).

E. Dr. Johnson

Defendants have engaged Dr. Johnson to provide expert testimony in this matter. Dr.

Johnson is the Chief Executive Office of Edgeworth Economics, LLC, a “consulting firm

that provides clients with objective expert economic and financial analysis for complex

litigation and public policy debates.” (Dkt. 630-5 at ¶ 22). Dr. Johnson holds a B.A. in

economics from the University of Rochester and a Ph.D. in economics from the

Massachusetts Institute of Technology (“MIT”). (Id. at ¶ 23). Dr. Johnson’s areas of

specialization at MIT were labor economics and econometrics (the application of statistics

to economics). (Id.).

Dr. Johnson has provided an expert report in which he responds to and critiques Dr.

Macartney’s opinions. (Dkt. 633-5). Dr. Johnson has argued, among other things, that: (1)

Dr. Macartney’s assessment of the impact of Defendants’ price increase announcements is

divorced from economic evidence, in part because “[p]ricing for caustic soda is individually

negotiated between each supplier and distributor, and the pricing mechanisms and terms

vary substantially across distributors, across Defendants, and over time”; (2) Dr.

Macartney’s overcharge regression fails to account for global supply and demand conditions

that impact the domestic price of caustic soda; (3) Dr. Macartney’s overcharge regression

improperly calculates an average overcharge for distributor and non-distributor purchasers,

instead of customer-specific overcharges; (4) Dr. Macartney’s pass-through model relies on

data from only three distributors to estimate pass-through rates for 155 distributors, but he

has provided no statistical tests to support the conclusion that “the purchases and sales

associated with his three distributors are representative of the distributors excluded from his

analysis”; and (5) Dr. Macartney’s pass-through model otherwise oversimplifies the caustic

soda supply chain. (Id. at ¶¶ 7-21).

As part of his critique of Dr. Macartney’s regression model, Dr. Johnson ran his own

multiple regression analysis in which he added “various export price measures.” (Id. at

¶ 168). Dr. Johnson ran six additional regressions, in each of which he added one measure

of export prices (contemporaneous and three-month lagged). (Id. at ¶ 169). These additional

tests “yield[ed] an estimate of the purported ‘overcharge’ that is negative or statistically

insignificant.” (Id. at ¶ 170).

II. Procedural Background

The instant actions were referred for the handling of non-dispositive pretrial matters

to United States Magistrate Judge Michael J. Roemer. (See Dkt. 42; Civil Action No. 1:19-

cv-00975, Dkt. 8). Judge Roemer ordered consolidation of the two cases filed by IPPs and

further ordered that IPPs’ cases be coordinated with the consolidated DPP action and that

all filings be made in Civil Action No. 1:19-cv-00385. (Civil Action No. 1:19-cv-00975,

Dkt. 11). Judge Roemer further appointed Barbara J. Hart of Loewey Dannenberg, P.C. and

Kenneth A. Wexler of Wexler Wallace LLP to serve as interim Co-Lead Class Counsel for

all IPPs in the consolidated action. (Id.). Ms. Hart later moved to the firm Grant &

Eisenhofer P.A. (Dkt. 623 at 16 n.10).

The operative pleading is the amended consolidated complaint filed on August 23,

2021. (Dkt. 335). IPPs have moved for class certification under Federal Rule of Civil

Procedure 23(a) and (b)(3). (Dkt. 514; Dkt. 623). IPPs seek to certify two classes with the

following definitions:

State Antitrust Class: All persons and entities who indirectly purchased from a

distributor, and did not resell, liquid forms of membrane or diaphragm grade caustic

soda in Arizona, California, Connecticut, Florida, Illinois, Iowa, Kansas, Maine,

Maryland, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Hampshire,

New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island,

South Dakota, Tennessee, Vermont, West Virginia, Wisconsin, and the District of

Columbia manufactured by one or more of the Defendants or their co-conspirators

(or any of Defendants’ or their co-conspirators’ parents, predecessors, subsidiaries or

affiliates) at any time between October 1, 2015 and December 31, 2019.

Unjust Enrichment Class: All persons and entities who indirectly purchased from a

distributor, and did not resell, liquid forms of membrane or diaphragm grade caustic

soda in Arizona, Hawaii, Illinois, Iowa, Maine, Michigan, Minnesota, Mississippi,

Nebraska, Nevada, New Mexico, New York, Oregon, Rhode Island, South Dakota,

Utah, Vermont, West Virginia, and Wisconsin manufactured by one or more of the

Defendants or their co-conspirators (or any of Defendants’ or their co-conspirators’

parents, predecessors, subsidiaries or affiliates) at any time between October 1, 2015

and December 31, 2019.

(Dkt. 623 at 8-9).4 Excluded from the proposed classes are “Defendants, their

coconspirators, parents, predecessors, subsidiaries, and affiliates, and all federal government

4 IPPs originally also sought certification of a third proposed class, which they referred

to as the Colorado Consumer Protection Class. (Dkt. 623 at 8-9). However, IPPs

entities and instrumentalities of the federal government.” (Id. at 9). IPPs also ask the Court

to appoint them as class representatives and to appoint Barbara J. Hart of Grant & Eisenhofer

P.A. and Kenneth A. Wexler of Wexler Boley & Elgersma LLP to serve as Co-Lead Class

Counsel, and Colucci & Gallaher to serve as Liaison Counsel. (Dkt. 623 at 30). Defendants

oppose class certification. (Dkt. 532; Dkt. 633).

Defendants and IPPs have also moved to strike and/or exclude certain opinions

offered by Drs. Macartney and Johnson, respectively. (Dkt. 590; Dkt. 592). These motions

are opposed. (Dkt. 610; Dkt. 611). In addition to Defendants’ joint motion, Shintech and

Formosa USA have each filed individual motions to strike and/or exclude certain of Dr.

Macartney’s opinions. (Dkt. 588; Dkt. 594). IPPs also oppose these individual motions.

(Dkt. 612; Dkt. 613).

On October 31, 2023, IPPs and Shintech entered into a settlement agreement. (See

Dkt. 714-3) (the “Shintech Settlement Agreement”). The Shintech Settlement Agreement

is between IPPs and two proposed classes: (1) the State Antitrust Class; and (2) the Unjust

Enrichment Class. (Id. at 5). These proposed classes have the same definitions as in IPPs’

class certification motion. (Id.). IPPs have moved for preliminary approval of the Shintech

Settlement Agreement pursuant to Federal Rule of Civil Procedure 23(e). (Dkt. 714).

After the Court issued the DPP Class Certification D&O, it ordered the parties to file

additional briefing addressing the effect of that decision on IPPs’ class certification motion

subsequently withdrew their request for certification of this class. (See Dkt. 644 at 24 and

n. 26 (stating that IPPs “seek certification of two classes” and “IPPs are no longer pursuing

certification of the Colorado Class”)).

and the pending motions for preliminary settlement approval. (Dkt. 728).5 IPPs and

Defendants filed supplemental briefs on January 26, 2024. (Dkt. 731; Dkt. 732; Dkt. 733).

The Court entered an order (Dkt. 739) holding its consideration of IPPs’ motion for

class certification, the motions to strike Dr. Johnson’s and Dr. Macartney’s opinions, and

the motion for preliminary approval of the Shintech Settlement Agreement in abeyance

pending the Second Circuit’s resolution of the DPPs’ petition for permission to appeal the

DPP Class Certification D&O. The Second Circuit later denied DPPs’ petition. (Dkt. 746).

The Court afforded IPPs and Defendants two more opportunities to submit additional

filings regarding IPPs’ class certification motion and the parties’ motions seeking to strike

expert testimony and opinions. (See Dkt. 753; Dkt. 758; Dkt. 759; Dkt. 760; Dkt. 762; Dkt.

766; Dkt. 773; Dkt. 775; Dkt. 777; Dkt. 778).

DISCUSSION

I. Motions to Exclude Expert Testimony

A. Legal Standard

Pursuant to Federal Rule of Evidence 702, a proposed expert witness must possess

“scientific, technical, or other specialized knowledge [that] will help the trier of fact to

understand the evidence or to determine a fact in issue.” Fed. R. Evid. 702(a). In accordance

with this rule, a court considering the admissibility of expert testimony must consider

whether (1) “the testimony is based upon sufficient facts or data”; (2) “the testimony is the

5 DPPs had filed motions seeking preliminary approval of settlement agreements they

had entered into with Formosa USA, Westlake, and Shintech. The Court later denied those

motions. (Dkt. 752).

product of reliable principles and methods”; and (3) “the expert’s opinion reflects a reliable

application of the principles and methods to the facts of the case.” Fed. R. Evid. 702(b), (c),

(d).

In Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), the Supreme

Court explained that a trial court has a “gatekeeping” duty under Rule 702, and must ensure

that proposed expert testimony “both rests on a reliable foundation and is relevant to the

task at hand.” Id. at 597; see also Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147 (1999)

(“In Daubert, this Court held that Federal Rule of Evidence 702 imposes a special obligation

upon a trial judge to ensure that any and all scientific testimony is not only relevant, but

reliable.”) (quotation and alteration omitted).

“Per Daubert and its progeny, a court’s Rule 702 inquiry involves the assessment of

three issues: (1) the qualifications of the expert, (2) the reliability of the methodology and

underlying data employed by the expert, and (3) the relevance of that about which the expert

intends to testify.” Washington v. Kellwood Co., 105 F. Supp. 3d 293, 304 (S.D.N.Y. 2015).

“Ultimately, the party proffering the expert has the burden to demonstrate by a

preponderance of the evidence that its expert witness satisfies these criteria.” Id. (quotation

and alteration omitted). “As the courts and Advisory Committee have made clear, ‘the

rejection of expert testimony is the exception rather than the rule.’” M.B. ex rel. Scott v.

CSX Transp., Inc., 130 F. Supp. 3d 654, 665 (N.D.N.Y. 2015) (quoting Fed. R. Evid. 702,

Advisory Committee’s Note).

“The Supreme Court has not definitively ruled on the extent to which a district court

must undertake a Daubert analysis at the class certification stage,” but it has “offered limited

dicta suggesting that a Daubert analysis may be required at least in some circumstances.”

In re U.S. Foodservice Inc. Pricing Litig., 729 F.3d 108, 129 (2d Cir. 2013). “[C]ourts in

the Second Circuit regularly ‘subject expert testimony to Daubert’s rigorous standards

insofar as that testimony is relevant to the Rule 23 class certification analysis.’” Bowling v.

Johnson & Johnson, No. 17 Civ. 3982 (AJN), 2019 WL 1760162, at *7 (S.D.N.Y. Apr. 22,

2019) (quoting Scott v. Chipotle Mexican Grill, Inc., 315 F.R.D. 33, 55 (S.D.N.Y. 2016)).

In this case, the Court has relied in part on Dr. Johnson’s opinions to resolve IPPs’

class certification motion. It is therefore necessary for the Court to resolve IPPs’ challenges

to the admissibility of Dr. Johnson’s opinions. But the Court need not resolve Defendants’

challenges to the admissibility of Dr. Macartney’s opinions, because the Court finds class

certification unwarranted even assuming arguendo that all of his opinions are admissible

under Rule 702 and Daubert. The Court therefore declines to resolve these challenges at

this time, and instead denies Defendants’ motions to strike Dr. Macartney’s opinions and

testimony as moot. See, e.g., In re 5-Hour Energy Mktg. & Sales Pracs. Litig., No.

ML132438PSGPLAX, 2017 WL 2559615, at *5 (C.D. Cal. June 7, 2017) (“Because the

issue of whether [the plaintiffs’ expert] has put forward a workable model to assess damages

on a class-wide basis is closely intertwined with the Rule 23(b) predominance analysis, the

Court declines to address the reliability of [the expert’s] methodologies in a Daubert motion,

and instead accepts [the expert’s] expert report and testimony for the limited purpose of

deciding the predominance issue.”).

B. Admissibility of Dr. Johnson’s Opinions

IPPs argue that the Dr. Johnson’s “overcharge regression analyses, and his opinions

and testimony based on them,” are unreliable, because they “are prone to endogeneity” and

“unreliably control for global supply and demand for caustic soda.” (Dkt. 630 at 4). More

particularly, IPPs argue that Dr. Johnson has committed a “fundamental error” by using spot

export prices as a variable. (Id. (arguing that “Dr. Johnson’s use of spot export prices is true

error that requires his analyses to be excluded because the spot export prices are not

indicators of international prices or demand in their respective localities.”)). As IPPs

acknowledge, DPPs made a similar argument related to Dr. Johnson’s opinions in

connection with their class certification motion. (Id. at 5 (acknowledging that IPPs seek

exclusion “for similar reasons discussed in the Direct Purchaser Plaintiffs’ motion to

exclude Dr. Johnson’s spot export price analyses”); see also id. at 14 (“IPPs join with the

DPPs and move to exclude Dr. Johnson’s [specified opinions and testimony.]”)).

In the DPP Class Certification D&O, the Court considered and rejected the argument

that Dr. Johnson’s use of spot export prices rendered his analysis and testimony unreliable.

(See Dkt. 729 at 17-20). That analysis applies to and resolves IPPs’ motion to strike Dr.

Johnson’s testimony and opinions. As the Court explained in the DPP Class Certification

D&O, Dr. Johnson has explained his methodology in a way that the Court found both

reasonable and persuasive. (Id. at 19-20). Nothing in IPPs’ submissions causes the Court

to reconsider the correctness of its prior finding that “there is no basis for the Court to strike

or exclude Dr. Johnson’s opinions under Rule 702.” (Id. at 20). The Court denies IPPs’

motion to strike Dr. Johnson’s opinions and testimony.

II. Motion for Class Certification

A. Legal Standard

“In determining whether class certification is appropriate, a district court must first

ascertain whether the claims meet the preconditions of [Federal] Rule [of Civil Procedure]

23(a). . . .” Teamsters Loc. 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d

196, 201-02 (2d Cir. 2008). Specifically, the Court must determine whether the proposed

class meets the following requirements:

(1) the class is so numerous that joinder of all members is impracticable;

(2) there are questions of law or fact common to the class;

(3) the claims or defenses of the representative parties are typical of the

claims or defenses of the class; and

(4) the representative parties will fairly and adequately protect the

interests of the class.

Fed. R. Civ. P. 23(a). If all these requirements are met, the Court must then determine

whether one of the scenarios set forth under Rule 23(b)(1)-(3) is satisfied. IPPs seek

certification under Rule 23(b)(3) (see Dkt. 623 at 8), which provides that class certification

is appropriate if: (i) common questions of law or fact predominate over questions affecting

only individual class members; and (ii) class treatment is superior to other methods for

adjudicating the controversy.

The Second Circuit has also “recognized an implied requirement of ascertainability

in Rule 23, which demands that a class be sufficiently definite so that it is administratively

feasible for the court to determine whether a particular individual is a member.” In re

Petrobras Sec., 862 F.3d 250, 260 (2d Cir. 2017) (quotations omitted). “A class is

ascertainable when defined by objective criteria that are administratively feasible and when

identifying its members would not require a mini-hearing on the merits of each case.”

Brecher v. Republic of Argentina, 806 F.3d 22, 24-25 (2d Cir. 2015) (citation omitted).

Rule 23 “does not set forth a mere pleading standard. Rather, a party must not only

be prepared to prove that there are in fact sufficiently numerous parties, common questions

of law or fact, typicality of claims or defenses, and adequacy of representation, as required

by Rule 23(a). The party must also satisfy through evidentiary proof at least one of the

provisions of Rule 23(b).” Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013) (quotations

and citations omitted). “[T]he preponderance of the evidence standard applies to evidence

proffered to establish Rule 23’s requirements.” Teamsters Loc. 445, 546 F.3d at 202.

For the reasons below, the Court finds that IPPs have not satisfied their burden to

show that their proposed classes should be certified under Rule 23 and accordingly denies

IPPs’ motion for class certification.

B. IPPs Cannot Satisfy the Predominance Requirement

Predominance “tests whether proposed classes are sufficiently cohesive to warrant

adjudication by representation.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997).

“Determining whether common questions of law or fact predominate requires specifically

evaluating the elements of the underlying cause of action.” In re Namenda Indirect

Purchaser Antitrust Litig., 338 F.R.D. 527, 550 (S.D.N.Y. 2021) (quotation omitted). The

general elements of an antitrust claim are “(1) a violation of the antitrust laws; (2) injury

caused by that violation; and (3) measurable damages.” Id.6

In Comcast, the Supreme Court explained that:

[A]t the class-certification stage (as at trial), any model supporting a plaintiff’s

damages case must be consistent with its liability case, particularly with

respect to the alleged anticompetitive effect of the violation. And for purposes

of Rule 23, courts must conduct a rigorous analysis to determine whether that

is so.

569 U.S. at 35 (quotations and citations omitted); see also Passman v. Peloton Interactive,

Inc., 671 F. Supp. 3d 417, 432 (S.D.N.Y. 2023) (“The Supreme Court in Comcast . . . held

that Rule 23(b)(3) requires that the proposed methodology for calculating damages be

consistent with the class’s theory of liability and capable of measuring these damages on a

classwide basis.”).

6 As discussed above, IPPs seek to certify both a State Antitrust Class and an Unjust

Enrichment Class. As to the State Antitrust Class, IPPs concede that they must establish

these three elements. (See Dkt. 623 at 18). As to the Unjust Enrichment Class, in its

Decision and Order denying Defendants’ motion to dismiss IPPs’ unjust enrichment claims,

the Court explained that the unjust enrichment claims in this case were “correctly

categorized as parasitic of the state law statutory claims.” (Dkt. 501 at 9). Such “parasitic

unjust enrichment claims . . . merely provide a different form of remedy.” In re Digital

Music Antitrust Litig., 812 F. Supp. 2d 390, 413 (S.D.N.Y. 2011). In other words, IPPs’

unjust enrichment claims also necessarily require common proof of class-wide injury based

on Defendants’ alleged anticompetitive conduct. (See Dkt. 623 at 29 (“For states in both

the State Antitrust and Unjust Enrichment Classes, establishing an antitrust violation proves

an unjust enrichment claim, so the same common evidence—including Dr. Macartney’s

report, transactional data, and deposition testimony—will be used across the Classes.”)).

In the DPP Class Certification D&O, the Court concluded for several reasons that

DPPs had “failed to demonstrate by a preponderance of the evidence that common questions

will predominate over individual questions with respect to their proposed class,” and that

they had “not come forward with common proof sufficient to allow a trier of fact to conclude

that all or most members of the class suffered antitrust injury as a result of the alleged cartel.”

(Dkt. 729 at 46-47). For similar reasons, the Court reaches the same conclusion about IPPs’

proposed classes.

To understand the Court’s conclusion, it is helpful to recall certain facts about the

caustic soda market and both DPPs’ and IPPs’ theories of this case. As the Court explained

in the DPP Class Certification D&O:

Caustic soda is generally sold pursuant to contract, with limited amounts sold

under freely negotiated spot sales. Caustic soda contracts may employ

different pricing mechanisms—for example, the parties may agree upon a

fixed price and a volume target for a period of time, they may tie the price

formulaically to a pricing index or indices, or they may enter into long-term

contracts for fixed prices, linked to changes in underlying cost factors, priced

on an ECU [electrochemical unit] basis, or based on a market basket.

Contracts tied to a market basket are priced based on the average selling price

realized from some other set of agreed-upon contracts.

(Id. at 5 (alteration in original and quotations and citations omitted); see also Dkt. 633-5 at

¶ 50 (“Contracts between caustic soda producers and distributors often involve detailed and

complex terms.”)). The diversity and complexity of the contracts between Defendants and

their customers were primary drivers of the Court’s finding that the predominance

requirement had not been satisfied in connection with DPPs’ class certification motion.

As the Court further explained in the DPP Class Certification D&O, “[d]uring the

relevant time period, Defendants would periodically send out price increase

announcements—that is, letters notifying their customers that they desired to increase the

price of caustic soda.” (Dkt. 729 at 5). These letters would not automatically result in an

increase in the prices paid by customers, “but would instead trigger negotiations between

the seller and the buyer.” (Id.). In opposition to IPPs’ class certification motion, Defendants,

via Dr. Johnson, point out that certain of the relevant contracts were specifically “designed

to prevent unilateral price changes via price increase announcements,” including by using

specific pricing mechanisms. (Dkt. 633 at 56-57).

Because of these characteristics of the caustic soda market, to prove class-wide

injury, DPPs and IPPs both must present common proof of a plausible mechanism through

which Defendants’ alleged anticompetitive behavior—namely, agreeing to increase prices

by issuing parallel price increase announcements unsupported by market conditions—could

have caused customers with widely differing contract terms to pay inflated prices.7 (See id.

at 57 (Defendants arguing in opposition to IPPs’ class certification motion that “price

increase announcements cannot be used to raise prices on customers whose pricing is

determined by an index since price increase announcements do not directly affect prices

determined by index-based formulas in customer contracts”)). The Court concluded that

DPPs had not done so, and now reaches the same conclusion as to IPPs.

7 IPPs have the additional burden of demonstrating that Defendants’ distributor

customers then passed these artificially inflated prices onto IPPs.

The evidence proffered by IPPs in support of their class certification motion fails to

address the economic realities of the caustic soda market. For example, Dr. Johnson has

explained that Dr. Macartney offers no evidence of how Defendants allegedly manipulated

price indices, to increase prices for customers whose contracts were formulaically tied to

one or more of those indices. (See Dkt. 633-5 at ¶¶ 141-42). IPPs contend that “Defendants’

price increases would have easily moved the . . . indexes in a relatively straightforward

fashion.” (Dkt. 644 at 48). But, as the Court explained in the DPP Class Certification D&O,

the record is “devoid of any . . . evidence regarding the manner in which particular

negotiated prices from particular customers are incorporated into the variety of indices” at

issue here. (Dkt. 729 at 42). “There is no actual proof in the record—much less common

proof—that any allegedly artificially inflated negotiated price was actually incorporated into

an index, and that a . . . [caustic soda customer] then paid an artificially inflated price based

on that index.” (Id. at 43).

Like DPPs, IPPs have failed to present evidence from which a reasonable trier of fact

could conclude that price increase announcements resulted in artificially inflated negotiated

prices that were actually incorporated into an index. IPPs assert that Dr. Macartney has

“readily demonstrate[d]” that this is the case. (Dkt. 644 at 48). But in support of this

assertion, they cite to paragraph 57 of Dr. Macartney’s reply declaration, which says nothing

about price indices. (Id.; see Dkt. 644-2 at ¶ 57). Dr. Macartney does assert elsewhere in

his reply declaration that “Defendants’ price announcements would have been embedded in

the IHS price indices in a straightforward fashion.” (Dkt. 644-2 at ¶ 71). But Dr.

Macartney’s discussion in this paragraph is conclusory. Dr. Macartney does not purport to

have performed any analysis “to determine whether the prices published by IHS, Argus, or

ICIS accurately reflected actual negotiated prices for any month in the proposed class

period.” (Dkt. 729 at 42). To the contrary, he testified at his deposition that he had not

conducted an economic analysis assessing Defendants’ alleged manipulation of the IHS

price index. (See Dkt. 633-5 at ¶ 141 and n. 328). Dr. Johnson has confirmed that Dr.

Macartney performed no “analysis of the purported index manipulation by Defendants.”

(See id.).

IPPs also assert that “Defendants have already conceded that the IHS indexes are the

‘most representative of the month-to-month caustic soda price movement for contract

volumes of liquid’ caustic soda.” (Dkt. 644 at 48). But the quoted language in this sentence

does not come from Defendants. It comes from a declaration prepared by Dr. Macartney,

where he in turn is quoting from IHS’s own description of one of its price indices. (See Dkt.

623-3 at ¶ 61 (“IHS prepares a Caustic Soda price index which it claims is ‘most

representative of the month-to month caustic soda price movement for contract volumes of

liquid 50% caustic soda.’” (emphasis added and alteration omitted)). IHS’s description of

its price index is not a concession by Defendants.

In sum, IPPs’ “theory for how price increase announcements caused injury to . . .

[Defendants’ customers] with index-based pricing relies entirely on assumption and

conjecture.” (Dkt. 729 at 42-43). “[T]heory is not sufficient to satisfy Rule 23(b)(3)’s

requirements. [IPPs] must provide properly analyzed, reliable evidence that a common

method of proof exists to prove impact on a class-wide basis.” In re High-Tech Emp.

Antitrust Litig., 289 F.R.D. 555, 570 (N.D. Cal. 2013) (quotation and citation omitted and

emphasis in original); see also In re Flash Memory Antitrust Litig., No. C 07-0086 SBA,

2010 WL 2332081, at *8 (N.D. Cal. June 9, 2010) (“[A]ntitrust claims predicated on

negotiated transactions, as opposed to purchases based on list prices, often entail

consideration of individualized proof of impact.”). The Court agrees with Defendants that

“IPPs and their expert . . . have no common method to trace price increase announcements

to injury of index-based customers.” (Dkt. 633 at 58).

The wide-variety of contract pricing mechanisms used in the caustic soda industry

causes a second predominance problem for IPPs, as it also did for DPPs. Again, it is helpful

to recall some of the discussion from the DPP Class Certification D&O:

[A]s part of the discovery in this action, Defendants provided “transaction

data” containing “over 3.3 million observations containing information with

regard to quantity, form of caustic soda sold, price, and customer.” (Dkt. 624-

2 at ¶ 190). “In order to use Defendants’ transaction data in [his] analysis,”

Dr. Lamb and “staff working under [his] direction” had to “first process and

clean some of the fields included in the datasets produced.” (Id. at ¶ 192).

Part of this processing and cleaning consisted of “identification and

assignment of contract type to customers where data are available.” (Id.).

Specifically, Dr. Lamb and his staff assigned each transaction one of the

following contract types: “FORMULA”; “NEGOTIATED”; “OTHER”; and

“MARKET BASKET.” (Id. at ¶ 192 n. 554). Contracts designated “OTHER”

included “long-term contracts under fixed prices, cost-based contracts, [and]

ECU price contracts that do not have an index component to pricing.” (Id.)

Transactions that could not be assigned a contract type were designated as

“N/A.” “Contract types were able to be applied to approximately 65% of

observations.” (Id.).

Dr. Lamb and his staff did not review individual contracts in order to make

these designations—instead, Dr. Lamb’s reply report indicated that they relied

on the following: (1) for Olin, “Olin customer-contract databases that contain

contract and pricing detail”; (2) for OxyChem, “internal documents and

databases that identified ECU customers and pricing terms for contracts”; (3)

for Westlake, “internal documents and databases . . . that identified ECU

customers and pricing terms for contracts”; (4) for Shintech, “internal

databases that listed customers and pricing terms of contracts, as well as

Shintech’s interrogatory responses that identified contracted customers”; and

(5) for Formosa USA, “internal documents that identify customers that

purchase under contract and those that make spot purchases.” (Dkt. 624-3 at

¶ 73).

(Dkt. 729 at 25-26). For reasons detailed in the DPP Class Certification D&O, the Court

determined that this data processing was unreliable in accurately characterizing the relevant

transactions and that “[t]he complexity of the contractual pricing mechanisms used in the

caustic soda industry makes it infeasible to accurately categorize the transactional data

without reviewing the individual contracts.” (Dkt. 729 at 32).

This conclusion impacts the Court’s assessment of Dr. Macartney’s opinions, because

Dr. Macartney “received a standardized database of Defendants’ transaction data” from Dr.

Lamb and Dr. Macartney used that database to perform his own analysis. (Dkt. 623-3 at 78

n. 232; see also Dkt. 644-2 at ¶ 137 (Dr. Macartney stating in his reply declaration that he

and Dr. Lamb “use the same Defendant transaction dataset, processed in the same way”);

Dkt. 633-32 at 9 (Dr. Macartney testifying at deposition that he used Dr. Lamb’s transaction

dataset with “certain modest modifications”)).

IPPs have attempted to distinguish their class certification motion from DPPs’ class

certification motion on this issue by pointing out that their proposed class definitions—

unlike the class proposed by DPPs—do not exclude particular purchases based on contract

type. (See Dkt. 773 at 7-8). IPPs are correct that the nature of DPPs’ proposed class

definition made Dr. Lamb’s failure to accurately characterize the contract types particularly

problematic. But the Court disagrees that this failure, which has been incorporated into Dr.

Macartney’s analysis, is excusable in the context of IPPs’ class certification motion. Dr.

Macartney’s analysis begins by “estimat[ing] the direct overcharge paid by distributors to

the Defendants using the Defendants’ transaction data[.]” (Dkt. 623-3 at ¶ 22). One of the

“supply and demand factors” that Dr. Macartney acknowledges his model must control for

is “[c]ontract type, such as formula, negotiated, etc.” (Id. at 78-79). And Dr. Macartney’s

regression model—like Dr. Lamb’s model—has different coefficients for each category of

contracts. (See id. at 78). In other words, Dr. Macartney’s model operates in part on the

assumption that Dr. Lamb’s dataset accurately characterizes the contract types.

IPPs contend that “Dr. Macartney corrected Dr. Lamb’s contract misclassifications.”

(Dkt. 778 at 7). As evidence for this argument, they point to discrete examples of

misclassification cited by Dr. Johnson in his report served in connection with the DPPs’

class certification motion, and assert that Dr. Macartney’s backup materials show that he

corrected these errors. (Id.). IPPs also fault Defendants for not having “provide[d] any

actual examples where Dr. Macartney misclassified contracts or where any given

classification decision actually impacted Dr. Macartney’s ultimate conclusions.” (Id.).

Like DPPs, IPPs misunderstand the significance of the failure to adequately account

for and characterize the complex contracts at issue in this litigation by individually

reviewing the relevant contracts. As the Court explained in the DPP Class Certification

D&O, the databases that Dr. Lamb used to construct the dataset that he and Dr. Macartney

relied on in performing their analyses did not accurately record the relevant contract terms—

indeed, “the record before the Court contains specific examples of cases in which the terms

of contracts changed from what was recorded in the databases relied upon by Dr. Lamb and

his staff.” (Dkt. 729 at 30-31). A dataset compiled from inaccurate, incomplete databases

is by definition also incomplete and inaccurate. The fact that Dr. Macartney may have

incidentally identified and corrected a few errors does not change the fact that he, like Dr.

Lamb, built his model on a dataset that does not reflect the actual facts of this case. And a

regression model built on an incomplete, inaccurate dataset cannot demonstrate anything by

a preponderance of the evidence.

IPPs also argue that “at class certification, [they] do not have to prove on the merits

that the class is in fact injured.” (Dkt. 778 at 8). This is correct. But what they do have to

show at the class certification stage is “that they can prove, through common evidence, that

all class members were injured by the alleged conspiracy.” Sykes v. Mel S. Harris & Assocs.

LLC, 780 F.3d 70, 82 (2d Cir. 2015) (citation and alteration omitted). “Without such

common evidence, the need to present evidence that varies from member to member to

establish antitrust injury will almost inevitably make individual questions more prevalent or

important than common ones.” In re Aluminum Warehousing Antitrust Litig., 336 F.R.D. 5,

45 (S.D.N.Y. 2020) (quotation omitted).

And post-Comcast, the Court’s assessment of whether the predominance requirement

has been satisfied must involve a careful examination of “the soundness of an expert’s model

relied upon to establish classwide impact.” Id. at 47; see also In re Rail Freight Fuel

Surcharge Antitrust Litig.-MDL No. 1869, 725 F.3d 244, 255 (D.C. Cir. 2013) (“Rule 23 not

only authorizes a hard look at the soundness of statistical models that purport to show

predominance—the rule commands it.”). “In sum: No damages model, no predominance,

no class certification.” In re Aluminum Warehousing, 336 F.R.D. at 48 (quotation omitted).

The reliability of the model “may not be deferred or deflected to a trial on the merits” where

it serves as the “central basis for establishing classwide injury and causation[.]” Id. at 49.

Dr. Macartney’s model, like Dr. Lamb’s model, is fundamentally unsound because it

does not accurately reflect the complex and varied contracts that existed between

Defendants and their customers during the relevant time period. It therefore cannot suffice

to support a showing of predominance. And the Court has already determined, for reasons

detailed in the DPP Class Certification D&O, that the other evidence of record about the

characteristics of the domestic caustic soda market is not independently sufficient to prove

classwide impact. (See Dkt. 729 at 39-47).

For these reasons, IPPs have failed to demonstrate by a preponderance of the

evidence that common questions will predominate over individual questions with respect to

their proposed class. The Court notes that Defendants have made several other arguments

regarding predominance, including numerous additional attacks on the reliability of Dr.

Macartney’s overcharge model and Dr. Macartney’s pass-through model. (See Dkt. 633 at

41-67). The Court need not and does not reach these arguments, on which it has not held an

evidentiary hearing. But the Court does observe that some of these arguments appear to

have merit.

In particular, Defendants are correct that courts have “consistently rejected” pass-

through methodologies that use “averaging and sampling . . . without underlying evidentiary

support,” and thus “mask individualized questions that otherwise predominate.” In re Pre-

Filled Propane Tank Antitrust Litig., No. 14-02567-MD-W-GAF, 2021 WL 5632089, at *12

(W.D. Mo. Nov. 9, 2021) (finding pass-through model fatally flawed where the defendants’

direct customers “paid individually negotiated wholesale prices” and then “resold . . .

propane exchange tanks at individually-set retail prices”). In this case, Dr. Macartney’s

pass-through model is based on data from only three distributors out of more than 155, and

Dr. Johnson has offered persuasive evidence that the model ignores the complexity of the

supply chain. (See Dkt. 633-5 at ¶¶ 191-98). Dr. Johnson also persuasively argues that the

three distributors in question are not regionally representative of the full pool of distributors.

(See id. at ¶¶ 199-204). While the Court would need to conduct an evidentiary hearing to

finally resolve those issues, on the papers Defendants appear to have identified additional

significant barriers to a finding of predominance with respect to IPPs’ proposed classes.

C. Typicality

Defendants also argue that the Court’s ruling on typicality in the DPP Class

Certification D&O is fatal to IPPs’ class certification motion. (See Dkt. 777 at 14-15). The

Court disagrees with this argument.

In the DPP Class Certification D&O, the Court concluded that the named DPP

plaintiffs were not typical of the proposed class, because the three largest members of the

proposed class had testified that they used a different price negotiation strategy than the

named DPP plaintiffs, and specifically that price increase announcements played no role in

their individual negotiations with Defendants. (See Dkt. 729 at 47-48). Because DPPs

“failed to meaningfully address this argument,” the Court found that they had not met their

burden of showing typicality by a preponderance of the evidence. (Id. at 48).

Defendants argue that a similar analysis applies here, because IPPs made “unique,

non-price-related decisions in selecting their caustic soda suppliers.” (Dkt. 777 at 15). But

the evidence that Defendants cite with respect to IPPs is different in kind from the evidence

the Court found dispositive in connection with DPPs’ class certification motion. The

evidence about IPPs is that they “consider a number of factors—such as customer service

and supplier convenience—in addition to price in making their purchase decisions.” (Dkt.

773 at 11 (citing relevant evidence)). This evidence is not comparable to testimony from

the three largest members of the proposed DPP class establishing that they did not fit within

DPPs’ theory of injury. (See Dkt. 729 at 48). Indeed, in the DPP Class Certification D&O,

the Court made clear that the argument it found persuasive was not that “typicality is

defeated . . . because some large class members may have factored into their purchasing

decisions their need to preserve relations with their suppliers.” (Id. (citation omitted)).

Similarly, typicality is not defeated here because IPPs did not make their purchasing

decisions based solely on price.

Defendants also argued in their opening opposition papers that IPPs’ claims are not

typical of the members of the proposed class whose claims arise under Connecticut antitrust

law, because Connecticut antitrust law allows recovery for only one year of the proposed

class period. (See Dkt. 633 at 36). The Court is not persuaded by this argument, and agrees

with IPPs that “[t]he fact that Connecticut purchasers can only recover for purchases made

after 2018 has absolutely no effect on the evidence that plaintiffs will submit to prove their

claims.” (Dkt. 644 at 30). “Typicality . . . is satisfied when each class member’s claim

arises from the same course of events, and each class member makes similar legal arguments

to prove the defendant’s liability.” Marisol A. v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997)

(quotation omitted). Connecticut’s unique limitation on the timeframe for recovery does

not impact the Court’s typicality analysis, and the Court does not deny class certification

based on a failure to demonstrate typicality.

D. Ascertainability

In the DPP Class Certification D&O, the Court found that the class proposed by DPPs

was not ascertainable, because it provided “no objective criteria for determining what

constitutes a long-term, fixed-price contract that predates October 1, 2015.” (Dkt. 729 at

49-50). Because that phrase was used but not defined in DPPs’ proposed class definition,

the Court determined that the proposed class was insufficiently ascertainable. (Id.).

Defendants have made an ascertainability argument here, contending that mini-trials

would be required to determine whether a member of the proposed class purchased caustic

soda manufactured by one of Defendants and did not resell it. (See Dkt. 633 at 40, 75; Dkt.

777 at 23). The Court does not find this argument persuasive. Unlike the term at issue in

the DPP matter, none of the terms used in IPPs’ proposed class definitions lack objective

criteria. And ascertainability asks “whether the class [is] defined by objective criteria that

[makes] the class’s membership sufficiently definite, not whether the class [is]

administratively feasible.” In re Petrobras Sec., 862 F.3d at 266. The Court does not deny

class certification on the basis of ascertainability.

E. Defendants’ Other Arguments

Defendants made other arguments in opposition to IPPs’ request for class

certification, including that IPPs impermissibly expanded their proposed class definitions

from those in the amended consolidated complaint, that (for reasons much like their

ascertainability argument) the named IPP plaintiffs have not established their class

membership, that the named plaintiffs are not adequate to serve the interests of the proposed

classes, and that IPPs cannot establish superiority. (See Dkt. 633). These arguments are

unrelated to the arguments the Court considered in the DPP Class Certification D&O, and

the Court need not and does not resolve them to decide IPPs’ motion for class certification.

The Court’s conclusion that IPPs have not shown predominance dictates that the class

certification motion must be denied. See Comcast, 569 U.S. at 33-34.

CONCLUSION

For the reasons set forth above, the Court denies IPPs’ motion for class certification

(Dkt. 514); denies as moot Shintech’s motion to exclude certain of Dr. Macartney’s opinions

and proposed testimony (Dkt. 588); denies as moot Defendants’ joint motion to exclude

certain of Dr. Macartney’s opinions and proposed testimony (Dkt. 590); denies IPPs’ motion

to strike and exclude certain of Dr. Johnson’s opinions and proposed testimony (Dkt. 592);

and denies as moot Formosa’s motion to exclude certain of Dr. Macartney’s opinions (Dkt.

594). The Court’s denial of the parties’ motions to strike/exclude shall not preclude the

parties from raising any issues related to the admissibility of expert testimony in connection

with motions for summary judgment or at trial.

The Court will enter a separate Order setting a schedule for additional briefing on the

impact of this Decision and Order on IPPs’ motion for preliminary approval of the Shintech

Settlement Agreement. (See Dkt. 714). The Court will also enter a separate Order affording

IPPs and Defendants an opportunity to be heard on a summary judgment briefing schedule

and any further next steps they propose the Court take in connection with this litigation.

SO ORDERED.

hag GAL ple

RE ROL

Chi Judge ORD

United States District Court

Dated: December 16, 2024

Rochester, New York

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