In re Linerboard Antitrust Litigation, MDL No. 1261, United States District Court for the Eastern District of Pennsylvania
In the early 1990s, domestic manufacturers of corrugated sheets and containers faced declining prices and revenues. The price decline was particularly troubling to Roger Stone of Stone Container, then the nation’s largest manufacturer of corrugated containers. In the years leading up to 1993, Stone had gone on a buying binge, financing the acquisition of rival manufacturers by issuing new debt. But declining revenue made it difficult for Stone to service its debt obligations. According to court documents, during the spring and summer of 1993, Roger Stone figured a way out of his and the industry’s predicament.
Evidently, the raison d'être of the industry’s woes was an excess supply of linerboard inventory, an “inventory overhang” in the market. Linerboard is the smooth outer layer of a corrugated sheet or box, and accounts for a significant portion of the cost of producing corrugated products. Stone reasoned that the excess inventory was hampering the industry’s ability to raise prices. So, according to court documents, Stone enlisted the help of other manufacturers to rid the industry of the unwanted inventory.
In 1999, Stone Container et al. were named as defendants in two separate class action lawsuits, one filed in the Northern District of Illinois, the other in the Eastern District of Pennsylvania. The complaints alleged, among other things, that defendants had conspired to fix and raise the price of linerboard (and hence corrugated sheets and containers) in violation of Section 1 of the Sherman Act (15 U.S.C. § 1). The two lawsuits were consolidated in the Eastern District of Pennsylvania.
Counsel for the plaintiffs hired Dr. John Beyer, president of Nathan Associates, to analyze the market for corrugated containers and prepare an affidavit regarding class certification. In September 2001, U.S. District Judge Jan E. DuBois certified two classes of purchasers, those who purchased corrugated sheets and those who purchased corrugated boxes. Defendants appealed to the Third Circuit.
On appeal the Third Circuit affirmed the lower court’s ruling. The court praised the work of Dr. Beyer, noting his “extensive empirical investigation into the behavior of linerboard and corrugated box prices over time, which proved a basis for his opinion of common impact.” (2002 U.S. App. LEXIS 18296). The court also noted that Dr. Beyer had offered feasible approaches to estimating class-wide impact, including the use of a multiple regression model to isolate the effects of the impact.
Defendants ultimately settled the litigation for an estimated $202 million, which, according to Judge DuBois, was the sixth largest antitrust settlement of all class actions between 1972 and 2003.