Polyurethane Foam Antitrust Litigation

On November 12, 2015, the Center for Class Action Fairness (CCAF) at CEI filed an objection in the U.S. District Court for the Northern District of Ohio to class action settlements reached in a case alleging that polyurethane foam manufacturers and suppliers had violated antitrust laws.

The settlements were entered with nine defendants in the indirect purchaser class and created a settlement fund of $151,250,000. Upon entering the settlements, class counsel filed a fee request seeking 30% of the settlement fund, plus an additional $5.1 million in expenses. CCAF objected that the requested fee was excessive and would provide a windfall to the plaintiffs’ attorneys at the expense of class members. Due to economies of scale, “mega-fund” recoveries tend to be the result of class size rather than attorney skill and, thus, the percentage awarded should be in a lower range. CCAF further objected that the fee request overstated the value of the time that plaintiffs’ attorneys and their staff devoted to the case and should be reduced to reflect market rates. As a consequence, and to deter plaintiffs’ attorneys from submitting such overinflated fee requests in the future, CCAF argued that the fee award should be reduced further.

Under the settlement agreements, $10 million is not due for full payment until mid-2017, and another $9.25 million is contingent upon two of the defendants’ recovery in separate litigations against a third party. CCAF objected to any fee award that was based on those amounts before they were available for disbursement to the class. CCAF additionally objected to any allocation among the firms requesting fees that was not undertaken by the Court, in accordance with the federal rules, and, further, that the notice provided to class members was defective in that it failed to disclose information material to a class member’s decision to remain in the class or opt-out.

UPDATE: January 28, 2016:

The U.S. District Court for the Northern District of Ohio denied the indirect purchaser plaintiffs’ attorneys their full requested fees in the Polyurethane Foam Antitrust litigation, granting them twenty percent less than they were seeking. Competitive Enterprise Institute’s Center for Class Action Fairness (CCAF) had objected to the original fee request, arguing that class counsel’s excessive request would transfer to plaintiffs’ attorneys tens of millions of dollars that rightfully belong to class members. CCAF is encouraged by the court’s order that places more of the award in the hands of consumers rather than the class attorneys.

UPDATE: December 15

The Honorable Jack Zouhary held a fairness hearing Tuesday, December 15 in In re Polyurethane Foam Antitrust Litigation in Toledo, Ohio. During the two hour hearing, the judge actively questioned the parties and objectors about the proposed settlements and attorneys’ fee requests. He also spoke with the claims administrator by telephone to learn how and when the distribution to class members was likely to occur. He focused his questions on when and how class members would receive payment, the requested attorneys’ fees, and how to approach any potential cy pres. He took the matter under advisement and did not indicate when he would issue a ruling. 

CEI’s Center for Class Action Fairness represents two class members objecting to the excessive fee request by class counsel and the inadequate notice of the contingent and delayed nature of about $19 million of the settlement fund and the potential cy pres recipient. Class counsel seeks 30% in fees — over $45 million — from the $150 million mega-fund and justifies the request with a lodestar that is both inadequately supported and based on numerous forms of over-billing. The objectors argued that in mega-fund cases such as this one, attorneys’ fees of 10-16% of the fund are more appropriate, and further reduction is necessary to incentivize class counsel not to submit over-inflated lodestar calculations and fee requests in the future.”