In Re Linerboard

Opinions of the United

2002 Decisions States Court of Appeals

for the Third Circuit

9-5-2002

In Re Linerboard

Precedential or Non-Precedential: Precedential

Docket No. 01-4535

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PRECEDENTIAL

Filed September 5, 2002

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 01-4535

IN RE: LINERBOARD ANTITRUST LITIGATION

(MDL No. 1261)

WINOFF INDUSTRIES, INC.

v.

STONE CONTAINER CORPORATION; JEFFERSON

SMURFIT CORP.; SMURFIT-STONE CONTAINER CORP.;

INTERNATIONAL PAPER CO.; GEORGIA PACIFIC CORP.;

WEYERHAEUSER PAPER CO.; TEMPLE-INLAND INC.*;

GAYLORD CONTAINER CORP.*; UNION CAMP CORP.;

SIMPSON TACOMA KRAFT CO.; TENNECO, INC.;

TENNECO PACKAGING; PACKAGING CORPORATION

OF AMERICA

(D.C. Civil No. 98-cv-05055)

GENERAL REFRACTORIES COMPANY, ON BEHALF OF

ITSELF AND ALL OTHERS SIMILARLY SITUATED

v.

STONE CONTAINER CORPORATION

(D.C. Civil No. 99-cv-01341)

Stone Container Corporation, Jefferson Smurfit Corp.,

Smurfit-Stone Container Corp., International Paper Co.,

Georgia Pacific Corp., Weyerhaeuser Paper Co., Temple-

Inland, Inc.*, Gaylord Container Corp.*, Union Camp

Corp., Tenneco, Inc., Tenneco Packaging and Packaging

Corporation of America,

Appellants

(*Amended per Clerk’s Order dated 2/5/02)

Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. Nos. MDL No. 1261, 98-cv-05055 & 99-cv-01341)

District Judge: Honorable Jan E. DuBois

Argued: July 19, 2002

Before: McKEE, FUENTES and ALDISERT, Circuit Judges.

(Filed: September 5, 2002)

Kenneth W. Starr (argued)

Christopher Landau

Kannon K. Shanmugam

Grant M. Dixton

Kirkland & Ellis

655 Fifteenth St., N.W.

Washington, D.C. 20005

Attorneys for Appellants

International Paper Company, Union

Camp Corporation, Weyerhaeuser

Company, Gaylord Container

Corporation, Tenneco, Inc., Tenneco

Packaging and Packing Corporation

of America

Barbara W. Mather (argued)

Pepper, Hamilton LLP

18th and Arch Streets

3000 Two Logan Square

Philadelphia, PA 19103-2799

Attorneys for Appellants

Jefferson-Smurfit Corp., Stone

Container Corp. and Smurfit-Stone

Container Corp.

2

Steven J. Harper

Steven C. Seeger

Kirkland & Ellis

200 East Randolph Drive

Chicago, IL 60601

Daniel B. Huyett

Matthew W. Rappleye

Stevens & Lee

111 North Sixth Street

Reading PA, 19603

Attorneys for Appellants

International Paper Company and

Union Camp Corporation

Douglas J. Kurtenbach

James H. Schink

Timothy A. Duffy

Barak S. Echols

Kirkland & Ellis

200 East Randolph Drive

Chicago, IL 60601

Ralph G. Wellington

Sherry Swirsky

Schnader, Harrison, Segal &

Lewis LLP

1600 Market Street

Suite 3600

Philadelphia, PA 19103

Attorneys for Appellants

Weyerhaeuser Company, Gaylord

Container Corporation, Tenneco,

Inc., Tenneco Packaging and

Packaging Corporation of America

3

Edward M. Posner

Paul H. Saint-Antoine

Isabel C. Duffy

Drinker Biddle & Reath LLP

One Logan Square

18th and Cherry Streets

Philadelphia, PA 19103-6996

Attorneys for Appellant

Georgia Pacific Corporation

R. Mark McCareins

Dane A. Drobny

Michael J. Mayer

Andrew D. Shapiro

Winston & Strawn

35 West Wacker Drive

Suite 4200

Chicago, IL 60601

Attorneys for Appellants

Jefferson-Smurfit Corp., Stone

Container Corp. and Smurfit-Stone

Container Corp.

Richard C. Rizzo

Jennifer R. Clarke

Will W. Sachse

Donald C. Le Gower

Dechert Price & Rhoads

4000 Bell Atlantic Tower

1717 Arch Street

Philadelphia, PA 19103-2793

Attorneys for Appellant

Temple-Inland, Inc.

ATTORNEYS FOR APPELLANTS

4

Howard I. Langer (argued)

Sandals & Langer, LLP

One South Broad Street

Suite 1850

Philadelphia, PA 19107

Lead Counsel for All Appellees

Eugene A. Spector (argued)

Jeffrey J. Corrigan

William G. Caldes

Spector Roseman & Kodroff, P.C.

1818 Market St.

Suite 2500

Philadelphia, PA 19103

Michael J. Freed

Steven A. Kanner

William London

Much Shelist Freed Denenberg

Ament & Rubenstein, P.C.

200 North LaSalle Street

Suite 2100

Chicago, IL 60601-1095

Attorneys for Appellees

General Refractories Company and

Co-Lead Counsel for Corrugated

Sheet Plaintiffs

Robert J. LaRocca

Kohn, Swift & Graf, P.C.

One South Broad Street,

Suite 2100

Philadelphia, PA 19107

Attorney for Appellees

Oak Valley Farms, Inc., Garrett

Paper, Inc. and Local Baking

Products, Inc.

5

H. Laddie Montague

Martin Twersky

Berger & Montague, P.C.

1622 Locus Street

Philadelphia, PA 19103

Attorneys for Appellee

Garrett Paper, Inc.

Roberta D. Liebenberg

Donald L. Perelman

Fine Kaplan & Black

1845 Walnut Street, 23rd Floor

Philadelphia, PA 19103

Attorneys for Appellee

Local Baking Products, Inc.

W. Joseph Bruckner

Janelle K. Beitz

Lockridge Grindal Nauen PLLP

100 Washington Ave. South

Suite 2200

Minneapolis, MN 55401

Attorneys for Appellees

Oak Valley Farms, Inc., Garrett

Paper, Inc. and Local Baking

Products, Inc.

Mark Reinhardt

Mark Wendorf

Reinhardt & Anderson

First National Bank Building

Suite E-1000

332 Minnesota St.

St. Paul, MN 55101

Attorneys for Appellee

Albert I. Halper Corrugated Box

Company

ATTORNEYS FOR APPELLEES

6

OPINION OF THE COURT

ALDISERT, Circuit Judge:

This appeal by manufacturers of linerboard1 requires us

to decide if the district court erred in granting two motions

for class certification by groups of plaintiffs who brought

antitrust law suits alleging that the linerboard

manufacturers engaged in a continuing combination and

conspiracy in unreasonable restraint of trade and

commerce in violation of Section 1 of the Sherman Act, 15

U.S.C. S 1. Appellants contend that plaintiffs failed to

establish that the putative class met the requirements of

Rule 23(b)(3), Federal Rules of Civil Procedure, which

compel the court to:

find[ ] that the questions of law or fact common to the

members of the class predominate over any questions

affecting only individual members, and that a class

action is superior to other available methods for the

fair and efficient adjudication of the controversy. 2

Appellants are represented through briefs and oral

argument by two groups of manufacturers, the

"International Paper Appellants"3 and the "Georgia Pacific

Appellants."4

_________________________________________________________________

1. Linerboard includes any grade of paperboard suitable for use in the

production of corrugated sheets, which are in turn used in the

manufacture of corrugated boxes and for a variety of industrial and

commercial applications. Corrugated sheets are made by gluing a fluted

sheet which is not made of linerboard, known as the corrugating

medium, between facing sheets of linerboard; corrugated sheets are also

referred to as containerboard. Appellants are major integrated

manufacturers and sellers of linerboard, corrugated sheets and

corrugated boxes.

2. In the posture of the case presented to us, Appellants are not ipsis

verbis challenging the district court’s determination that the putative

classes met the requirements of Rule 23(a).

3. International Paper Co., Weyerhaeuser Paper Co., Gaylord Container

Corp., Union Camp Corp., Tenneco Inc., Tenneco Packaging Corp. of

America.

4. Georgia-Pacific Corp., Temple-Inland Inc., Jefferson-Smurfit Corp.,

Stone Container Corp. and Smurfit-Stone Container Corp.

7

After individual law suits were filed in the Northern

District of Illinois and the Eastern District of Pennsylvania,5

the cases were transferred by the Judicial Panel on

Multidistrict Litigation to the Eastern District of

Pennsylvania for coordinated and consolidated pretrial

proceedings.

The district court established two classes:

All persons in the United States who purchased

corrugated containers directly from any Defendant at

any time during the period October 1, 1993 through

November 30, 1995, but excluding Defendants, their

respective parents, subsidiaries and affiliates and

federal, state and local governmental entities and

political subdivisions.

* * * * *

All individuals and entities who purchased corrugated

sheets in the United States directly from any of the

defendants during the class period from October 1,

1993 through November 30, 1995, excluding the

defendants, their co-conspirators, and their respective

parents, subsidiaries and affiliates, as well as any

government entities.

In re Linerboard Antitrust Litig., 203 F.R.D. 197, 203 (E.D.

Pa. 2001) (emphasis added). These classes are presented

before us as the "Box Appellees" and the "Sheet Appellees."

The district court concluded that the putative classes met

the requirements of Rule 23(a) and noted that:

there is an overlap between the predominance

requirement of Rule 23(b)(3) and the prerequisite of

Rule 23(a)(2) that common questions exist. "The courts

have repeatedly focused on the liability issues, in

contrast to damage questions, and, if they found issues

were common to the class, have held that Rule 23(b)(3)

was satisfied." 4 NEWBERG ON CLASS ACTIONS, S 18-26.

_________________________________________________________________

5. A detailed history of the litigation, and action of the Judicial Panel on

Multi-District Litigation for coordinating and consolidating pre-trial

proceedings, is set forth in In re Linerboard Antitrust Litig., 203 F.R.D.

197 (E.D. Pa. 2001).

8

Id. at 214.

The court then decided that the putative classes had met

the requirements of Rule 23(b). The court determined first,

that plaintiffs presented sufficient evidence to support

claims that the conspiracy to raise the price of linerboard

correspondingly raised the price of corrugated products. It

went on to "conclude[ ] that plaintiffs’ allegations regarding

impact, like their allegations regarding conspiracy, will

focus the inquiry on defendants’ actions, not on individual

questions relating to particular class members." Id. at 220.

I.

The International Paper Appellants argue that the district

court erred in holding that Appellees have sufficiently

demonstrated that they will be able to prove common

impact at trial. In support of this major premise, they

contend that the court erred in applying a legal

presumption of impact and failing to apply rigorous

scrutiny to plaintiffs’ proffered impact evidence. They

contend also that the court erred in ignoring the individual

issues raised by plaintiffs’ claim of fraudulent concealment.

For their part, the Georgia Pacific Appellants argue that

the district court erred because here the existence of injury,

and hence potential liability, requires an inherently

individualized inquiry. Similarly, they argue that the court

erred in certifying classes because the existence of

fraudulent concealment also requires an inherently

individualized inquiry.

We review a district court’s grant of class certification

under an abuse of discretion standard. Newton v. Merrill

Lynch, Pierce, Fenner & Smith, 259 F.3d 154, 165-166 (3d

Cir. 2001).

In Katz v. Carte Blanche Corp., 496 F.2d 747, 756-757

(3d Cir. 1974) (in banc), we articulated the standard of

review applicable to class action decisions. We must

decide whether the 23(a) prerequisites have been met,

whether the district court correctly identified the issues

involved and which are common, and whether it

properly identified the comparative fairness and

9

efficiency criteria. If the court’s analysis on these

points is correct, then, "it is fair to say that we will

ordinarily defer to its exercise of discretion" embodied

in the findings on predominance and superiority. Id.

Bogosian v. Gulf Oil Corp., 561 F.2d 434, 448 (3d Cir.

1977).

The district court had jurisdiction pursuant to 28 U.S.C.

SS 1331 and 1337(a). Pursuant to Rule 23(f), Federal Rules

of Civil Procedure, Appellants timely petitioned this court

for permission to appeal the district court’s September 4,

2001, Order. We granted the petition and allowed the

appeal by an order dated December 18, 2001, and now

affirm.

II.

In presenting their theory of antitrust liability, Appellees

averred that even though demand for linerboard was strong

and rising between 1989 and 1992, the manufacturers’

prices for linerboard had fallen; that the manufacturers

attempted to increase prices during 1991, 1992 and the

first half of 1993, but the price increase announcement did

not "stick" and, therefore, the manufacturers had to rescind

them. It was at this point in September 1993, plaintiffs

allege, that Roger Stone, president of Stone Container

Corporation, the largest corrugated paper manufacturer,

reported that "the past five years have been the only five-

year period (going back as far as the 1920’s) when the

containerboard industry has had consistently declining

prices. It’s never happened before, never happened in the

depression, but it’s happened these last five years." App. at

710.

According to plaintiffs, declining prices were attributed to

excess inventory or inventory overhang. They also

maintained that Stone Container masterminded a two-fold

plan among the manufacturers to lower the industry

inventory to a five-week supply for a 2.5 million ton

threshold, in order to implement price increases. The

Packaging Corporation of America stated in the fall of 1993:

Weakness in containerboard pricing during the first

half of 1993 was more supply-related than demand-

10

related. Earlier this year, industry inventories of

containerboard hovered above 2.9 [million] tons and

nearly [six] weeks of supply, above the 2.5-2.6 [million]

tons and 5.0-5.2 week range usually required to

sustain a price increase.

App. at 1553.

The plan was two-fold. First, the manufacturers would

close their mills for "market downtime," thereby reducing

industry inventory at mills and box plants. Second, Stone

would purchase inventory from other manufactures while

idling its own mills. In implementing this conspiracy,

during late June and early July 1993, Roger Stone

conducted a telephone survey of his competitors. He

coordinated the industry-wide downtime and agreed to have

his company purchase a significant volume of linerboard

from its competitors rather than meet the requirements

from its own production. Stone took downtime of

approximately 180,000 tons of containerboard by shutting

six of its mills during the following weeks and months.

The manufacturers closed their mills between July and

December. By October 1993, they had concerted their

actions and had lowered total inventories to the desired

level of less than a five-week supply. A total of 435,000 tons

had been withdrawn from the market. Inventory reached "a

twenty-year low in terms of weeks of supply . . . ." App. at

733. In October 1993, Appellants successfully increased

their prices for containerboard and boxes for the first time

in more than two years. Each raised its container prices by

an identical amount. Subsequently, the major

manufacturers continued their pattern of taking substantial

downtime and implementing price increases. In late

November, less than two months after the successful

October 1 price increase, Stone announced another $30 per

ton increase to be effective on January 1, 1994, even

though analysts were not expecting another attempt to

raise containerboard prices until February or March of that

year. Other manufacturers joined, and the price increase

became effective in March 1994.

In April 1994, Appellants justified another

containerboard price increase citing low inventory. Between

11

the summer of 1993 and March 1995, seven

containerboard price increases were implemented in the

industry. Linerboard prices in the eastern United States

rose in six consecutive escalations from a low of around

$270 to $290 per ton in the third quarter of 1993 to $530

per ton by April 1995. Plaintiffs allege that the roughly 90%

recovery in prices resulted in a sharp resurgence in

industry profitability as the containerboard increases were

passed through in the form of finished box prices. Even the

most debt-laden industry players had returned to

profitability by the fourth quarter of 1994. App. at 1265.

Thus, plaintiffs’ theory of antitrust liability is based on

poly-syllogisms: (1) Prices in the marketplace are controlled

by the economic laws of supply and demand, to wit, if a

product is in short supply, the price will increase. During

the period in question, linerboard was in short supply.

Therefore, during this period, the price of linerboard

increased. (2) Closing down production will create a

shortage in supply and a corresponding price increase. The

linerboard manufacturers closed down production.

Therefore, the linerboard manufacturers created a shortage

in supply and a price increase.

III.

We address first, the contention that the court erred in

applying a presumption of impact, in order to demonstrate

that questions of law and fact common to the members of

the class predominate over any questions affecting only

individual members. The district court did apply such a

presumption, relying on the oft-quoted statement in

Bogosian, familiarly described as the "Bogosian short-cut":6

If, in this case, a nationwide conspiracy is proven, the

result of which was to increase prices to a class of

plaintiffs beyond the prices which would obtain in a

competitive regime, an individual plaintiff could prove

fact of damage simply by proving that the free market

prices would be lower than the prices paid and that he

made some purchases at the higher price. If the price

_________________________________________________________________

6. See Affidavit of Dr. Robin Cantor, App. at 608-629.

12

structure in the industry is such that nationwide the

conspiratorially affected prices at the wholesale level

fluctuated within a range which, though different in

different regions, was higher in all regions than the

range which would have existed in all regions under

competitive conditions, it would be clear that all

members of the class suffered some damage,

notwithstanding that there would be variations among

all dealers as to the extent of their damage. "[The]

burden of proving the fact of damage under S 4 of the

Clayton Act is satisfied by . . . proof of some damage

flowing from the unlawful conspiracy . . . ." Zenith

Radio [Corp. v. Hazeltine Research, Inc.], 395 U.S. [100,

114 n.9 (1969)]. Under these circumstances, proof on

a common basis would be appropriate. Even if the

variation in price dynamics among regions or

marketing areas were such that in certain areas the

free market price would be no lower than the

conspiratorially affected price, it might be possible to

designate subclasses to conform with these variations.

See In re Antibiotic Antitrust Actions, 333 F. Supp. [278,

281 (S.D.N.Y. 1971)].

Bogosian, 561 F.2d 434, 455 (3d Cir. 1977) (emphasis

omitted).7

Appellants challenge the following determination of the

district court:

_________________________________________________________________

7. The panel was unanimous on this point. The dissent would have

affirmed the grant of summary judgment, contending that plaintiffs had

six years of discovery in order to decide on a theory of liability and

should not have been given additional time to do so.

This is not a pro se case. Plaintiffs’ counsel are competent,

experienced and, in fact, nationally renowned attorneys in the

antitrust field . . . In my view [after six years], this case has long

since passed the stage where anyone concerned--parties, lawyers, or

judges--should have to speculate as to the theory of the litigation

. . . Moreover, until the theory of the case is settled, it will not be

known which facts are "relevant" facts. Facts are only relevant

insofar as they support a valid legal theory.

Bogosian, 561 F.3d at 457 (Aldisert, J., dissenting).

13

Plaintiffs have shown that they plan to prove common

impact by introducing generalized evidence which will

not vary among individual class members. For

example, plaintiffs contend that even though prices

may have varied among regions, the alleged conspiracy

caused these prices to rise throughout the country.

Although the prices for corrugated sheets and boxes

may have increased due to demand, because

defendants allegedly conspired to reduce production of

linerboard, the price was higher than it would have

been under competitive conditions. Such allegations,

supported by the evidence presented, are of the kind

contemplated by the Third Circuit in Bogosian and

Newton. See also, Lumco Indus.,[Inc. v. Jeld-Wen, Inc.],

171 F.R.D. [168, 173 (E.D. Pa. 1997)].

The Court recognizes that defendants dispute plaintiffs’

allegations. However, at the class certification stage,

"the Court need not concern itself with whether

Plaintiffs can prove their allegations regarding common

impact; the Court need only assure itself that Plaintiffs’

attempt to prove their allegations will predominantly

involve common issues of fact and law." Lumco Indus.,

171 F.R.D. at 174. "Plaintiffs need only make a

threshold showing that the element of impact will

predominantly involve generalized issues of proof,

rather than questions which are particular to each

member of the plaintiff class." Id. (citing In re

Disposable Contact Lens Antitrust Litig., 170 F.R.D. 524

(M.D. Fla. 1996)). Therefore, the Court concludes that

plaintiffs’ allegations regarding impact, like their

allegations regarding conspiracy, will focus the inquiry

on defendants’ actions, not on individual questions

relating to particular plaintiff class members.

Linerboard, 203 F.R.D. at 220.

A strong argument can be made that the Bogosian

concept of presumed impact was properly applied here. The

economic laws of supply and demand run in tandem with

the tenets of logic. A reduction in supply will cause prices

to rise. A deliberate cut in supply, as alleged here, is a

deliberate interference with market forces. Coincident with

this interference with the normal market forces, linerboard

14

prices in the eastern United States rose in six consecutive

price increases, from a low of around $270 to $290 per ton

in third quarter 1993 to $530 per ton by April 1995.

Reduced to its essence, what Appellants say is that there is

no correlation between the reduction in supply of

linerboard and the subsequent price increases. What they

really contend is that plaintiffs’ argument is anchored on

the familiar fallacy of post hoc propter hoc, the fallacy of

inferring causation from temporal succession only, a

reasoning from what happens in sequence is merely an

assumption of a causal connection.

The post hoc accusation is trumped, however, by the laws

of economics. If the facts do, in fact, support plaintiffs’

theory that "an individual plaintiff could prove fact of

damage simply by proving that the free market prices would

be lower than the prices paid and that he made some

purchases at the higher price[,]" Bogosian, 561 F.2d at 455,

this would be a demonstration of the laws of supply and

demand at work.

IV.

But there is more to this case than exclusive reliance on

the presumed impact theory. The district court used a belt

and suspenders rationale to support its conclusion that the

putative class had met its burden of showing impact. In

addition to relying on the Bogosian short cut, it credited the

testimony of plaintiffs’ experts, opinions that were

supported by charts, studies and articles from leading trade

publications. These experts suggested that advanced

econometric models could be effectively prepared to

establish class-wide impact.

A.

In reaching its decision, the district court made note of

plaintiffs’ expert Dr. John Beyer, who presented two

possible means of assessing impact on a class-wide basis--

multiple regression analysis, and the benchmark or

yardstick approach, which he described as methods of

showing "an antitrust impact by generalized proof." Affidavit

of Dr. John C. Beyer, App. at 673-675. See also , In re

15

Plastic Cutlery Antitrust Litig., No. CIV. A. 96-CV-728, 1998

WL 135703, at *7 (E.D. Pa. Mar. 20, 1998); In re Flat Glass

Antitrust Litig., 191 F.R.D. 472, 485-486 (W.D. Pa. 1999)

(identifying multiple regression analysis as a method of

proving impact).

Dr. Beyer made an extensive empirical investigation into

the behavior of linerboard and corrugated box prices over

time, which proved a basis for his opinion of common

impact. He stated that he had studied the structure of the

industry, including Appellants’ market power, geographical

overlap, the fungible nature of the products, the inelastic

demand and lack of a substitute. He found that "corrugated

container prices are strongly influenced by linerboard

prices." Because of these industry characteristics "all class

members would be impacted by higher corrugated

container prices." App. at 672.

Significantly, Dr. Beyer stated that he found that

linerboard and corrugated box prices were closely

correlated. He concluded that linerboard transaction prices,

as well as corrugated containerboard prices, behaved

similarly over time across different regions of the country

and across different types of linerboard. These findings,

sometimes referred to as "structure in pricing,"

demonstrated to Dr. Beyer that "[d]espite any variations in

particular boxes or customers, prices for all corrugated

containers would have responded over time to linerboard

price increases in a similar manner . . . ." Id. Based on this

qualitative analysis, he concluded that the "alleged

conspiracy would have had a common, class-wide impact,

and that all purchasers of corrugated containers would

have paid a higher price as a result of the conspiracy." Id.

at 673. We deem his conclusion to be significant because it

was supported by charts and studies.

In discussing these feasible approaches, which could be

used to provide quantitative methods for corroborating his

opinion on impact and for estimating damages, he

suggested as a potential benchmark, the potential prices

charged for linerboard during a competitive period when

there would be no effects of the conspiracy. He explained

that the necessary data was available to do the analysis

and described the types of data he would use. He discussed

16

also a multiple regression model "to isolate the effects of

various influences on corrugated container prices, thereby

allowing a determination of the impact of any one of the

variables, including, in this case, the impact of the

conspiracy." Id. at 674.

B.

The plaintiffs also presented an affidavit of Dr. Robin C.

Cantor who stated that "[b]ased on my analysis of the

pricing data and company records, I conclude that the

alleged unlawful conduct to raise linerboard prices would

have impacted all members of the proposed class through

higher corrugated sheet prices." App. at 612. We deem this

conclusion to also be extremely significant.

Such a conclusion was supported by relevant data. For

example, she indicated that the containerboard industry is

relatively concentrated and that during the relevant period,

77 percent of linerboard and 71 percent of the "corrugated

medium" was produced by the top ten firms and that

overall, 73 percent of containerboard production was

concentrated in the top ten firms. Id. at 614. She also

indicated that benchmark prices are published weekly in a

number of sources including "The Yellow Sheet," "Pulp and

Paper Week" and "Pulp & Paper’s North American Fact

Book," and that "[a]ccording to a Weyerhaeuser document,

‘linerboard is the industry’s indicator price.’ " Id. at 619. Dr.

Cantor recognized that "[c]orrugated boxes are the most

popular shipping containers in the world. Over 90 percent

of all products in the United States are shipped in

corrugated cardboard boxes." Id. at 623 (quoting the

American Forest and Paper Association website).

Emphasizing this dominance over the shipping industry,

Dr. Cantor remarked that:

[t]he market began to turn in the third quarter of 1993

when containerboard producers announced an

estimated 400,000 tons of downtime to reduce

linerboard and medium inventories just as box

shipments began to pick up. [(quoting Linerboard:

Prices Soar to Record Levels as Shortage Condition

Prevail, PULP & PAPER WEEK, Vol. 69, No. 1 at 13).]

17

The industry is gradually responding to the soft

linerboard market by announcing significant downtime

to be taken in the third quarter. Announcements to

date of downtime by Stone, Temple-Inland, Union

Camp, IP and [Packaging Corporation of America]

amount to roughly 300,000-350,000 tons of production

or 5.4% of the industry’s capacity during the three

month period." [(quoting Linerboard Markets--Industry

Report, Donaldson, Lufkin & Jenrette Securities,

August 10, 1993).]

App. at 626.

She also indicated that there are several accepted

statistical or mathematical approaches that could be used

to determine the percentage or absolute overcharge due

because of the effect of a conspiracy to manipulate prices.

App. at 628. She suggested that "benchmarking," which

uses "competitive prices for other comparable products to

estimate the pattern of prices but-for the alleged

misconduct[,]" could be effectively employed in this

situation. Id. Another proffered model would"compare[ ]

prices during non-conspiratorial periods with product

prices during the alleged conspiracy," and yet a third

approach would use revenue, production and profit data to

derive prices that are consistent with "yardstick"

competitive performance levels.

Most significantly, she concluded:

In sum, containerboard and corrugated sheet products

exhibit sufficient characteristics and their sale and

production exhibit sufficient economic conditions to

control for product variations in a price analysis. In

combination, these characteristics and conditions

indicate that a price-fixing conspiracy would have a

common impact on all members of the proposed class

and that feasible methods can be used to estimate

damages reliably on a class-wide basis.

App. at 629.

C.

Based on the foregoing, we conclude that the district

court did not err in determining that plaintiffs showed that

18

they could establish injury on a class-wide basis. Plaintiffs

produced affidavits of expert witnesses, Dr. Beyer and Dr.

Cantor, who effectively utilized supporting data, including

charts and exhibits, to authenticate their professional

opinions that all class members would incur such damages.

We decide that this was not a case where plaintiffs relied

solely on presumed impact and damages.

In commenting on plaintiffs’ submissions, the district

court referred to the teachings of Newton for the proposition

that this court does not require plaintiffs to have selected a

particular econometric model for demonstrating impact (or

proving damages) at the class certification stage. In In re

Corrugated Container Antitrust Litig., 80 F.R.D. 244 (S.D.

Tex. 1978), the identical situation was presented to that

court where plaintiff had identified two generally accepted

methodologies, which he planned on using to determine

impact and damages. Relying heavily on Bogosian , the

court accepted that contention and certified the class. Id. at

251-252. Without explicitly so stating, the district court,

like the Corrugated Container court, did not require the

experts to pick one particular method over another at the

class certification stage, recognizing that the certification

stage is early in the overall litigation process. Linerboard,

203 F.R.D. at 219.

Accordingly, we reject the contention that plaintiffs did

not demonstrate that sufficient proof was available, for use

at trial, to prove antitrust impact common to all the

members of the class.

V.

A significant portion of Appellants’ briefing, and a major

emphasis at oral argument, was that the factual allegations

alleged here track precisely the factual scenario in Newton,

and therefore, the district court erred in not following the

holding of Newton and denying class certification. At oral

argument, counsel for Appellants referred to Newton as

"provid[ing] the guide for resolution in this case" and

referred to a single sentence contained therein that

constituted, in his formulation, a "teaching[that] holds with

respect to both of our submissions today."8 That passage

_________________________________________________________________

8. Counsel: Let me, if I may, begin with this Court’s decision in

Newton, which we believe provides the guide for

19

reads as follows: "If proof of the essential elements of the

cause of action requires individual treatment, the class

certification is unsuitable." Newton, 259 F.3d at 172 (citing

Binder v. Gillespie, 184 F.3d 1059, 1063-1066 (9th Cir.

1999) (upholding class decertification where presumption of

reliance and loss unavailable), cert. denied, 528 U.S. 1154

(2000)).

We have several problems with this argument. In and of

itself, the quotation can be interpreted as the obverse of

Rule 23(b)(3), Federal Rules of Civil Procedure, in the sense

that "if any questions affecting individual members"

predominate over "questions of law and fact," class

certification is unsuitable. Clearly, if proof of the essential

elements of the cause of action require individual

treatment, then there cannot be a predominance of

"questions of law and fact common to the members of the

class."

Equally important, the quotation at issue must be

considered in the precise context in which it was used in

Newton. It formed the final sentence of a paragraph in

which we discussed permissible presumptions proof of

reliance and injury in securities cases. Having cited a

number of cases upholding presumptions of reliance in

Rule 10b-5 claims, we stated that where a presumption of

_________________________________________________________________

resolution in this case.

* * * * *

And I would like to guide the Court . . . to the language

in Newton. And if you will indulge me, I’m going to quote

one sentence. . . . If proof, if proof of the essential

elements of the cause of action requires individual

treatment, then class certification is unsuitable.

Now, that teaching holds with respect to both our

submissions today. [Co-counsel] has been speaking

about causation or impact or injury. It also goes to proof

of the essential elements of fraudulent concealment, the

second part of our submission today.

Transcript of Oral Argument in In re Linerboard Antitrust Litig., No. 01-

4353 (before the Court of Appeals for the Third Circuit, recorded in

Philadelphia, Pennsylvania, July 19, 2002, at 16-17).

20

reliance and loss was not available, as in Binder, it would

be necessary for each plaintiff to prove the essential

elements of the cause of action, and, if so, class

certification would be unsuitable. Newton, 259 F.3d at 172.

In Binder, the court affirmed the denial of class

certification, stating that "[t]he district court reasoned that

the class would have to satisfy the reliance element through

a presumption; otherwise individual questions of reliance

would predominate over questions common to the class."

Binder, 184 F.3d at 1063.

A.

We consider it useful to identify the precise flashpoint of

controversy at stake in Newton. Roscoe Pound taught us

that the judicial process distinguishes discrete functions in

the appellate decisional process: (1) finding or choosing (or

creating) the law where the dispute is over the choice of the

controlling legal precept; (2) if there is no dispute as to its

selection, a disagreement over its interpretation; and (3)

where there is agreement on the precept and its

interpretation, the sole question is the application of the

law to the facts, which Pound described as "[a]pplication of

the abstract grounds of decision to the facts of the

particular case."9 The precise holding in Newton was that

the facts common to the members of the class did not

predominate. No new legal precept was created; no new

nuance of interpretation was forthcoming. It was merely the

application of ruling case law in this court to the facts of

that case.

The process of justifying a court’s decision always

requires application of a legal precept to a particular factual

situation. The application may be purely mechanical, as it

is in most cases. If the facts are similar to those in an

earlier case announcing a rule of law, the doctrine of

precedent becomes operative. Where there is no quarrel

over the choice and interpretation of the legal precept, here

Rule 23(b)(3), the root controversy usually is traced to a

value judgment of whether there is sufficient similarity

_________________________________________________________________

9. Roscoe Pound, The Theory of Judicial Decision, 36 HARV. L. REV. 940,

950-951 (1923).

21

between the fact situations under comparison. Edward R.

Levi amply described this kind of assessment when he

stated: "[t]he scope of a rule of law, and therefore its

meaning, depends upon a determination of what facts will

be considered similar. . . . The finding of similarity or

difference is the key step in the legal process."10 To predict

a court’s actions in a precept-application controversy,

therefore, requires a prediction of what facts in the

compared cases a given court, at a given time, will deem

either material or insignificant. The facts considered

material are "adjudicative facts," described by Hart and

Sacks as "facts relevant in deciding whether a given general

proposition is or is not applicable to a particular situation."11

B.

For Appellants’ argument to prevail, therefore, they must

demonstrate that the facts in Newton are substantially

similar to the facts in the case at bar, what logicians call

inductive reasoning by analogy, or reasoning from one

particular case to another. To draw an analogy between two

entities is to indicate one or more respects in which they

are similar and thus argue that the legal consequence

attached to one set of particular facts may apply to a

different set of particular facts because of the similarities in

the two sets. Because a successful analogy is drawn by

demonstrating the resemblances or similarities in the facts,

the degree of similarity is always the crucial element. You

may not conclude that only a partial resemblance between

two entities is equal to a substantial or exact

correspondence.

Logicians teach that one must always appraise an

analogical argument very carefully. Several criteria may be

used: (1) the acceptability of the analogy will vary

proportionally with the number of circumstances that have

been analyzed; (2) the acceptability will depend upon the

number of positive resemblances (similarities) and negative

_________________________________________________________________

10. Edward H. Levi, Introduction to Legal Reasoning, 15 U. Chi. L. Rev.

501, 501-504 (1948)

11. HENRY HART & ALBERT SACKS, THE LEGAL PROCESS 384 (tent. ed.

1958).

22

resemblances (dissimilarities); or (3) the acceptability will be

influenced by the relevance of the purported analogies.

IRVING M. COPI & KEITH BURGESS-JACKSON,INFORMAL LOGIC 166

(3d ed. 1996); Arthur L. Goodheart, Determining the Ratio

Decidendi of a Case, 40 YALE L.J. 161, 179 (1930); JOHN H.

WIGMORE, WIGMORE’S CODE OF THE RULES OFEVIDENCE IN TRIALS

AT LAW 118 (3d ed. 1942); JOHN STUART MILL, A SYSTEM OF

LOGIC RATIOCINATIVE AND I NDUCTIVE 98-142 (8th ed. 1916) ("Two

things resemble each other in one or more respects; a

certain proposition is true of one; therefore it is true of the

other.").

For Appellants to draw a proper analogy, they had the

burden in the district court, as they do here, of showing

that the similarities in the facts of the two cases outweigh

the differences. They cannot do so, for two significant

reasons. First, in Newton it was clear that not all members

of the putative class sustained injuries; here, all members

sustained injuries because of the artificially increased

prices. Secondly, in Newton there were hundreds of millions

of stock transactions involved, thus making the putative

class extremely unmanageable; here, an astronomical

number of transactions is not present. The classes are

manageable.

We reversed the district court’s determination of class

certification in Newton because it involved a putative

securities class action in which purchasers of stocks

charged that their broker-dealers breached their duty to

execute trades on the most favorable terms reasonably

available. Newton, 259 F.3d at 161-163. The gravamen of

the complaint was that their brokers could have received a

better price for securities had they used a computer system

other than the central National Best Bid and Offer system

("NBBO"). The evidence disclosed that on some occasions,

the NBBO price was better than on other computer

systems, at times, the prices were the same, and at other

times, the NBBO price was worse than on other systems.

Id. at 177-180. Under those circumstances, we concluded

that not every class member was injured by the failure of

the brokers to find the best possible price. Id. at 187-188.

Critical to our determination of whether class certification

was proper, we noted that in determining how to execute a

23

client’s order, a broker-dealer must take into account order

size, trading characteristics of the security, speed of

execution, clearing costs, and the cost and difficulty of

executing an order in a particular market. Id. We were very

specific in this respect:

These factors would appear to vary from class member

to class member and, for each class member, from

trade to trade. Whether a class member suffered

economic loss from a given securities transaction

would require proof of the circumstances surrounding

each trade, the available alternative prices, and the

state of mind of each investor at the time the trade was

requested. This Herculean task, involving hundreds of

millions of transactions, counsels against finding

predominance.

* * * * *

The alleged injuries in Newton arise out of the

execution of hundreds of millions of trades, not a

single act of fraudulent conduct. The distinct facts

among the hundreds of thousands of plaintiffs

involving hundreds of millions of trades will determine

whether securities violations occurred. Because

plaintiffs’ claims will require an economic injury

determination for each trade, we hold the putative

class fails to satisfy the predominance requirement.

Id. at 187, 190.

Contrasting the Newton facts with those in the case at

bar, here there was no evidence that the individuals and

entities who purchased corrugated containers or corrugated

sheets from Appellants during the relevant two-year period

had participated in hundreds of millions of commercial

transactions. More important, the Newton court was staring

a situation in the face where they would necessarily

examine every stock purchase or sale because not every

member of the putative class was injured. By direct

contrast, with certain limited exceptions relating to

purchasers whose contracts were tied to a factor

independent of the price of linerboard, all purchasers of

corrugated sheets and boxes were injured. They were all

24

affected by the increased price of linerboard that reflected

in the price paid by plaintiffs.

For the foregoing reasons, we conclude that we cannot

accept the analogue so vigorously urged by Appellants

because the negative resemblances (dissimilarities) between

Newton and the case at bar seriously outweigh the positive

resemblances (similarities).

VI.

The Court’s decision in Illinois Brick Co. v. Illinois, 431

U.S. 720 (1977), bans Clayton Act lawsuits by persons who

are not direct purchasers from the defendant antitrust

violator. Appellants argue that the district court should

have denied class certification, under the teachings of

Illinois Brick, because members of the proposed classes

purchased corrugated sheets or boxes, of which linerboard

was a mere ingredient, and did not purchase linerboard per

se. Appellees respond, as they did in the district court, that

the facts here come within the purview of our decision and

rationale in In re Sugar Indus. Antitrust Litig. , 579 F.3d 13

(3d Cir. 1978), in which we held that the purchasers of

candy made by the sugar manufacturers were not barred

from bringing suit under the S 1 of the Sherman Act, 15

U.S.C. S 1, and S 4 of the Clayton Act, 15 U.S.C. S 15.

We posed the question succinctly: Does Illinois Brick bar

suit by a plaintiff who purchases directly from the alleged

offender, but buys a product which incorporates the price-

fixed product as one of its ingredients? We held that there

was no bar.

Our reasoning began with an explication of the rationale

behind Illinois Brick:

The Court grounded its conclusion on several bases,

including the possibility of exposing the defendant to

multiple liability and the evidentiary complexities that

would arise in apportioning the overcharge among

those in the chain who had suffered injury. The Court

also expressed concern that if the direct purchaser

could not make a full recovery of the overcharge, the

wrongdoer would be able to keep some of the fruits of

25

its illegality. Based on this reasoning, the Court held

that the plaintiff, which purchased a completed

building, was not permitted to sue the manufacturer of

concrete block which had been incorporated into the

structure.

In re Sugar, 579 F.3d at 17.

We then explained why this rule would not apply to the

purchasers of candy made with the price-fixed sugar:

As the defendants here point out, the product which

plaintiff purchased competes not with sugar, but with

other candy, and more than one ingredient determines

the price. To this extent, there will be some additional

complications underlying the damage claims. However,

this must not be allowed to obscure the fact that the

plaintiff did purchase directly from the alleged violator.

True, the price-fixed commodity had been combined

with other ingredients to form a different product. But

just as the sugar sweetened the candy, the price-fixing

enhanced the profits of the candy manufacturers. The

situation is the same as if the general contractor which

sold the building to the plaintiff in Illinois Brick were

the manufacturer of the concrete block which went into

the structure. In that situation, the concern which the

Supreme Court expressed about the proration of

overcharge among a number of entities in the chain

would not have been present.

Nor is that problem of allocation among various

distributors present in the case sub judice. Plaintiff is

a direct purchaser and, therefore, entitled to recover

the full extent of the overcharge.

Id. at 17-18.

In the case at bar, the district court met this issue head-

on, and we agree completely with its analysis. It

emphasized that the putative class plaintiffs purchased

corrugated sheets or boxes directly from Appellants, and,

like the candy in In re Sugar, which contained allegedly

price-fixed sugar, the corrugated sheets and boxes contain

linerboard that was subject to an agreement on output,

which is equivalent to a price-fixing agreement. Accordingly,

26

the putative class members are direct purchasers and are

entitled to recover the full amount of any overcharge. See

Gen. Leaseways v. Nat’l Truck Leasing Ass’n, 744 F.2d 588,

594-595 (7th Cir. 1984) ("An agreement on output also

equates to a price-fixing agreement. . . . [If] firms restrict

output directly, price will . . . rise in order to limit demand

to the reduced supply. . . . [R]educing output, and dividing

markets have the same anticompetitive effects.").

VII.

This is not a securities case. It is an antitrust case

involving allegations that several United States

manufacturers of linerboard engaged in a continuing

combination and conspiracy in unreasonable restraint of

trade and commerce in violation of S 1 of the Sherman Act,

15 U.S.C. S 1. It is well settled that "[a]ny action to enforce

any cause of action under section 15, 15a, or 15c . . . shall

be forever barred unless commenced within four years after

the cause of action accrued." 15 U.S.C. S 15b.

Appellants contend that Appellees’ claims are timed-

barred because most of the class period--from October

1993 to November 1995--ended more than four years

before the filing of the sheet and box complaints in May

1999. Appellees agree on the time period, but respond that

the four-year statute of limitations should be tolled under

the doctrine of fraudulent concealment because they had

no knowledge of the alleged conspiracy or of any facts that

might have led to the discovery thereof in the exercise of

reasonable diligence. They contend that it was not until

approximately February 25, 1998, when the Federal Trade

Commission issued a press release, a complaint and a

proposed consent decree against Appellant Stone Container

Corporation, describing certain facets of anti-competitive

conduct, that they became aware of Appellants’

misadventures.

A.

Although S 15b mandates a four-year statute of

limitations for civil antitrust actions, it is well established

that the doctrine of fraudulent concealment tolls the

27

limitation period when a plaintiff ’s cause of action has been

obscured by the defendant’s conduct.

[I]n order to establish the applicability of the doctrine,

an antitrust plaintiff must show three things: (1)

fraudulent concealment; (2) failure on the part of the

plaintiff to discover his cause of action notwithstanding

such concealment; and (3) that such failure to discover

occurred [notwithstanding] the exercise of due care on

the part of the plaintiff.

70 A.L.R. FED. 498 (1984).

Where an action implicating fraudulent concealment is

sought to be brought in a class posture, we must decide

whether the required elements of proof are too

individualized to permit such treatment.

"It generally has been recognized that the question of

concealment by [an] antitrust defendant is a common

question, subject to being uniformly resolved on behalf of

all members of the class." In re Flat Glass , 191 F.R.D. at

487 (citing In re NASDAQ Market-Makers Antitrust Litig.,

169 F.R.D. 493, 519 (S.D.N.Y. 1996); In re Fine Paper

Antitrust Litig., 82 F.R.D. 143, 154-155 (E.D. Pa. 1979)).

"However, the question of discovery of the cause of action

by a plaintiff presents an individual question." Id.

"Similarly, the issue of due diligence seemingly raises an

individual question." Id. "Thus, the broad issue of

fraudulent concealment presents both common and

individual issues; therefore, the determination whether an

antitrust action involving fraudulent concealment may

proceed as a class action turns upon which aspect of the

issue may be considered to predominate." Id. (citing Hedges

Enters., Inc. v. Cont’l Group, Inc., 81 F.R.D. 461, 476 (E.D.

Pa. 1979)).

The cumulative experience of the judiciary has not been

uniform in this regard. Some courts have regarded the

issue of concealment to predominate, and have held that

class certification is permissible, even though some

individual questions are present. Other courts have

considered individual questions to be too pervasive to

permit it to be handled as a class matter. In this judicial

28

circuit, there has been a division of authority, with some

cases supporting each view.12

B.

Appellants argue that common issues of proof do not

predominate with respect to the fraudulent concealment

issue and that therefore a class action is not the

appropriate vehicle for deciding Appellees’ claims.

International Paper Appellant’s Brief at 38-43. They suggest

that fraudulent concealment involves a "two-pronged"

inquiry--a concealment by the defendant and plaintiff ’s

actual knowledge of it or failure to use due care to discover

it--and cannot be established unless both prongs are

satisfied. In asserting their position, they rely on the

language of the Court of Appeals for the Fourth Circuit:

"when the defendant’s affirmative defenses (such as . . . the

statute of limitations) may depend on facts peculiar to each

plaintiff ’s case, class certification is erroneous." Broussard

v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331, 342 (4th

Cir. 1998) (alteration in original) (internal quotation marks

omitted); see also, Chevalier v. Baird Sav. Ass’n, 72 F.R.D.

140 (E.D. Pa. 1976); In re Anthracite Coal Antitrust Litig., 78

F.R.D. 709 (M.D. Pa. 1978); Krehl v. Baskin-Robbins Ice

Cream Co., 78 F.R.D. 108 (C.D. Cal. 1978).

They argue that a number of Appellees are barred from

asserting a fraudulent concealment defense to the statute

of limitations because they either had prior knowledge of

_________________________________________________________________

12. In some cases, the courts held that common questions

predominated, and that class actions therefore were permissible. See In

re Flat Glass, 191 F.R.D. 472 (W.D. Pa. 1999); In re Sugar Indus.

Antitrust Litig., 73 F.R.D. 322 (E.D. Pa. 1976); Hedges Enters., Inc. v.

Cont’l Group, Inc., 81 F.R.D. 461 (E.D. Pa. 1979); In re Fine Paper

Antitrust Litig., 82 F.R.D. 143 (E.D. Pa. 1979); In re Glassine &

Greaseproof Paper Antitrust Litig., 88 F.R.D. 302 (E.D. Pa. 1980). On the

other hand, other Third Circuit District Court cases have expressed the

view that questions relating to fraudulent concealment in antitrust class

actions do not present sufficiently common issues as to permit class

action treatment. See Chevalier v. Baird Sav. Ass’n, 72 F.R.D. 140 (E.D.

Pa. 1976); In re Anthracite Coal Antitrust Litig., 78 F.R.D. 709 (M.D. Pa.

1978); Wolfson v. Artisans Sav. Bank, 83 F.R.D. 547 (D. Del. 1979);

Susquehanna v. H & M, Inc., 98 F.R.D. 658 (M.D. Pa. 1983).

29

the conspiracy, or did not act with the requisite due

diligence, emphasizing that this sort of inquiry is highly

personal and is susceptible only to individualized proof

and, therefore, inappropriate for class treatment. 13

_________________________________________________________________

13. Appellants introduced evidence that "each of the five named plaintiffs

stands in a unique position with respect to fraudulent concealment that

will have to be individually adjudicated if that plaintiff is to recover."

International Paper Appellant’s Brief at 46. They refer to Lisa Garrett,

president of Garrett Paper, who testified that she was "sure" that

something illegal was afoot when Garrett Paper’s prices for corrugated

boxes increased during the alleged class period, that she "plain as day

told [her] salesman that" Appellants were fixing prices, and that she

knew such activity was illegal. International Paper Appellant’s Brief at

46-47.

Similarly, Appellants contend that Appellee Oak Valley was also aware

of the price increases and allegedly told Stone Container that "you’d

better lower your box prices," though Oak Valley is uncertain whether

that conversation took place during the class period. International Paper

Appellant’s Brief at 47. They emphasize that Oak Valley testified that it

"accepted the increases in the matter of course and never really

questioned it." Id. They assert also that although Local Baking now says

it had no knowledge during the alleged class period of changes in the

average market price for corrugated products, or of any downtime taken

by linerboard manufacturers, Local Baking has testified that it was told

by Appellant Stone Container that prices were increasing because of a

decrease in linerboard. They refer to the testimony of David Halper,

president of Alfred I. Halper Corrugated Box Co., Inc., who testified that

he was aware of the increased prices that Appellants had charged Halper

during the class period, and that he had even complained to Appellants

about the increases. Appellants argue that Halper has no greater

knowledge today about the existence of a conspiracy than he did during

the alleged class period.

Finally, they note that General Refractories sold all of its operating

assets in 1994, in the middle of the class period and years before any

complaint was ever filed in this case. They state that there were no

communications, other than invoices, between Appellants and General

Refractories during the class period, and that General Refractories could

not identify any facts discovered after the class period that led to filing

its complaint, and in particular none that led to the naming of entities

other than Stone Container as defendants. International Paper

Appellant’s Brief at 48-49. And, in contrast to Garrett Paper and Halper,

Appellants contend that General Refractories does not appear to have

had any suspicion of wrongdoing during the alleged class period based

on price increases for corrugated sheets.

30

To be sure, certain determinations involving the

fraudulent concealment defense to the statute of limitations

will require individualized proof, which might vary among

the assorted Appellees. However, most courts have refused

to deny class certification simply because there will be

some individual questions raised during the proceedings. In

rejecting the rationale in Broussard, the Court of Appeals

for the First Circuit determined:

Although a necessity for individualized statute-of-

limitations determinations invariably weighs against

class certification under Rule 23(b)(3), we reject any

per se rule that treats the presence of such issues as

an automatic disqualifier. In other words, the mere fact

that such concerns may arise and may affect different

class members differently does not compel a finding

that individual issues predominate over common ones.

As long as a sufficient constellation of common issues

binds class members together, variations in the

_________________________________________________________________

It is Appellants’ case that the factual complexities relating to these five

named plaintiffs underscores the inherently individualized nature of a

fraudulent concealment analysis. Appellants insist that the named

Appellees would have to prove, among other things: (1) that Garrett

Paper’s conceded awareness of alleged illegality does not qualify as

actual "discovery;" (2) that Garrett Paper’s considered inaction in the face

of such awareness qualifies as "due diligence;" (3) that Garrett Paper’s

asserted small size excuses its inaction; (4) that none of the other named

Appellees knew or had reason to know about the alleged illegality in the

exercise of due diligence, even though some of them complained about

the price increases whereas others were not even aware of those

increases; (5) that something was "fraudulently concealed" from all

putative class members, even though some of them have conceded that

they are aware of no more incriminating facts now than they were during

the alleged conspiracy; (6) that unique relationships do not affect the

due-diligence inquiry; (7) that named Appellees who claimed not to have

known of Stone Container’s downtime exercised "due" diligence, when

such downtime was widely publicized in the industry at the time; (8) that

General Refractories, which went out of business in the middle of the

class period, is held to a due-diligence standard even after that point;

and (9) that alleged oral misrepresentations made to some named

Appellees but not others, regarding the reasons for the price increases

does not affect the due-diligence analysis. Id. at 49-50.

31

sources and application of statutes of limitations will

not automatically foreclose class certification under

Rule 23(b)(3). See 5 JAMES WM. MOORE ET AL., MOORE’S

FEDERAL PRACTICE P 23.46[3] (3d ed. 1999).

Predominance under Rule 23(b)(3) cannot be reduced

to a mechanical, single-issue test.

Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 296

(1st Cir. 2000). We accept this reasoning as more

persuasive than that espoused by the Court of Appeals for

the Fourth Circuit in Broussard.

Notwithstanding the individual determinations that will

undoubtedly arise at trial, common issues of concealment

predominate here because "the inquiry necessarily focuses

on defendants’ conduct, that is, what defendants did rather

than what plaintiffs did." In re Flat Glass , 191 F.R.D. at

488. Key questions will not revolve around whether

Appellees knew that the prices paid were higher than they

should have been or whether Appellees knew of the alleged

conspiracy among Appellants. Instead, the critical inquiry

will be whether "defendants successfully concealed the

existence of the alleged conspiracy, which proof will be

common among the class members in each class." Id.14 It is

the fact of concealment that is the polestar in an analysis of

fraudulent concealment. It is the camouflage that demands

attention, the cover up, the acts of obscuring or masking.

These allegations of proof are all common to the

defendants, not the plaintiffs. It is not the conspiracy of the

defendant that is relevant on the issue of tolling the statute

of limitations, it is the act of concealing the conspiracy.

_________________________________________________________________

14. See, e.g., Abramovitz v. Ahern , 96 F.R.D. 208, 218 (D. Conn. 1982)

(issue of whether fraudulent concealment would toll the statute of

limitations was common to all class members); In re Plywood Antitrust

Litig., 76 F.R.D. 570, 586 (E.D. La. 1976) ("fraudulent concealment

issues appear to be generally common to all members in each class"); In

re Sugar, 73 F.R.D. at 348; In re Fine Paper , 82 F.R.D. at 154-155 ("The

key question on the issue of fraudulent concealment will relate to

whether defendants successfully concealed the existence of the alleged

conspiracy, and the proof of this contention [what defendants did] will

necessarily be common among the class members.").

32

C.

Moreover, any individualized facts of fraudulent

concealment may be adjudicated in the same fashion and

at the same time as individual damages issues. As a

leading treatise on class actions explains: "Challenges

based on the statute of limitations, fraudulent concealment,

releases, causation, or reliance have usually been rejected

and will not bar predominance satisfaction because those

issues go to the right of a class member to recover, in

contrast to underlying common issues of the defendant’s

liability." NEWBERG & CONTI, NEWBERG ON CLASS ACTIONS S 4.26

(3d ed.)

Many courts faced with similar circumstances have

certified class status with the expectation that individual

questions concerning fraudulent concealment can be

resolved at a later damages phase. See In re Flat Glass, 191

F.R.D. at 488 (citing In re Fine Paper, 82 F.R.D. at 154-155)

("[B]ifurcation of this litigation into liability and damage

segments remains an option if the predominating elements

of the question of fraudulent concealment do not prove

susceptible to generalized proof."). See also , In re Indus.

Diamonds Antitrust Litig., 167 F.R.D. 374, 385 (S.D.N.Y.

1996) (Individualized issues raised in fraudulent

concealment should be considered when court addresses

each putative class member’s damage claim.); Town of New

Castle v. Yonkers Contracting Co., 131 F.R.D. 38, 43

(S.D.N.Y. 1990) (holding that individualized claims and

defenses on statute of limitations issue can be adjudicated

in separate determinations of damages).

Accordingly, we hold that common issues of fraudulent

concealment predominate.

* * * * *

We have considered all contentions presented by the

parties and conclude that no further discussion is

necessary.

The judgment of the district court will be affirmed.

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A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

34