DRI ANTITRUST & CONSUMER PROTECTION SLG 06.19.13 Glenn E. Davis 314.480.4154

1. In Re URETHANE ANTITRUST LITIGATION Case No. 04-MD-1616 JWLTHE DOW VERDICT—LESSONS ON CONSPIRACY, CLASS CERT., AND COMCAST DRI ANTITRUST & CONSUMER PROTECTION SLG 06.19.13 Glenn E. Davis 314.480.4154 glenn.davis@heplerbroom.com One Metropolitan Square-2700 St. Louis, MO 63102-2740

2. Background on the URETHANE ANTITRUST MDL • MDL consolidation of multiple class actions and two direct actions (56 opt-out plaintiffs) against manufacturers of two types of urethane products. • Polyester Polyol • Polyether Polyol (“PPP’s”) • Chemicals used individually and systems for production of foam used in automotive, furniture, and other applications • Prior closed Antitrust Division Investigation 2007 • Cases filed in November 2004 and thereafter • Defendants: Bayer AG, Huntsman International LLC, BASF SE, Lyondell Chemical Co., and Dow Chemical Co.

3. BACKGROUND cont’d • Plaintiffs claimed defendants engaged in price fixing and market allocation scheme • July 29, 2008 Court certified a class of purchasers of PPP urethane products & systems from defendants from January 1, 1999 to December 31, 2004 • All defendants except Dow (on polyether cases) settled • Bayer-$55 m (2006) • Huntsman- $33 m (2011) • BASF- $51 m (2011) • Court denied Dow’s summary judgment motion on the class claims. In re Urethane Antitrust Litig., 2012 WL 6610878 (D. Kan. Dec. 18, 2012)

4. Summary judgment issues • Initial summary judgment order found evidence sufficient to create fact issues for trial: • Existence of conspiracy involving Dow 1999-2003 • Affirmative acts of concealment to toll SOL’s (pretextual & false reasons for price increases) • Fraudulent concealment requirement of due diligence • Second summary judgment motion denied • Pre-class period conspiracy evidence 1994-1998 • Individual plaintiff Lubrizol (contract price increase limitations) and Vitafoam Canada (5th Amendment invocation) issues

5. ON TO TRIAL AND JURY VERDICT • Four week jury trial • Jury returned verdict for plaintiffs on 2/20/13: • Dow participated in PPP price fixing conspiracy • Caused plaintiffs to pay more for chemicals than they would absent conspiracy • No overpayments prior to 11/24/00 (4 year SOL period prior to filing) • Damages: $400,049,039.00 • Trebled: $1,200.147.117.00 (Yikes. $1.2 Billion)

6. POST TRIAL MOTIONS • Motion to De-Certify the Class • Invoking post-certification developments • Comcast v. Behrend; expert failed to address other causes • Variation between jury findings and expert theory/time period of class claim • Too late • Motion for Judgment as a Matter of Law or New Trial • No class-wide impact or damages • No direct evidence/insufficient circumstantial or indirect conspiracy evidence • Verdict form did not require jury finding on conspiracy time period • Instructional error—length and definition of conspiracy/evidence of competition among defendants • Jury required to find evidence that excludes the possibility of independent action • Failure to give instruction of document retention program • Failure to give bias instruction on witness with DOJ grant of immunity • Imposition of joint and several liability violates Due Process/Fifth Amendment • District Court denies all post-trial motions on May 15, 2013 • The Appellate teams are now hard at work ( Plaintiffs engage Paul Clement)

7. CONSPIRACY EVIDENCE AND ISSUES • Incongruence of 5 year price fixing conspiracy Plaintiffs alleged with jury award for 4 years; no conspiracy matching allegations • Court: “The absurdity of its premise—that Dow could escape liability…because plaintiffs alleged a longer conspiracy than found by the jury—convinces the Court that it should not create new law….” • Dow disputes sufficiency of conspiracy evidence: • No direct evidence of conspiracy • Parallel conduct expected in oligopoly • Pricing discussions “not extensive” • Market conditions drove price increases • Downstream pricing data and market information shows non-collusive explanations for independent price increases • No reasonable inference of collusion wrongdoing versus equally plausible inference of independent business reasons for price increases

8. PLAINTIFFS EVIDENCE • DIRECT • Direct testimony on agreements among subordinate executives • Price discussions among executives at functions • INDIRECT (Plus Factors) • Parallel, lockstep conduct in price announcements and increases • Communications at or near time of price increases and releases • Pricing control effective • Efforts to maintain secrecy of pricing communications • Acts contrary to self interest • Oligopoly structure • Expert opinion on supracompetitive prices and enforcement mechanisms “The totality of the evidence was sufficient to tip the scales beyond evidence that could reasonably be consistent with competitive behavior.” District Judge John W. Lungstrum Mem. & Order 5/15/13

9. THE INTERVENING COMCAST DECISION • Class of 2million Comcast cable subscribers alleged actual and attempted monopolization in regional concentration of operations (swap agreements) • Alleged 4 theories of harm • Supreme Court found certification improper under Fed. R. Civ. P. 23(b)(3) • Expert failed to isolate damages to sole theory of harm remaining in damages model offered in support of certification • Plaintiffs must establish damages can be proven with class-wide evidence for common issues to predominate

10. The Class Certification Issues • Dow’s Comcast argument • Plaintiffs expert could not does not directly link price increases to anticompetitive conduct • Jury rejected damage model from same expert (James McClave) in Comcast • McClave multiple regression model estimated damages: 1999 to 2003 • Jury found no injury prior to 2000 • Focus on Rule 23(b)(3) requirements for rigorous analysis versus relaxed burden on damages/injury once some fact of injury is shown at trial • McClave theory based on multiple theories (price fixing, market & customer allocation) while only one was tried • Comcast “offers powerful confirmation that the class in this case should be decertified.” (Dow brief). • Judge Lungstrum: “Dow had every opportunity to cross-examine him about whether the impact on plaintiffs could have resulted from soother wrongdoing.”

11. CLASS CERT ISSUES (Cont’d) • Dow had McClave’s report since 4/11 but did not raise decertification until the eve of trial • Prejudice to class members • No timely objection at trial; McClave theory defined by trial testimony; neither side introduced possibility of market allocation theory of harm • Court accepts plaintiffs argument that classwide measurement does not mean that some class members may have unquantifiable damages or mitigated damages • No authority that existence of some zero damages class members defeat certification • Contrary conclusion would bless an improper fail-safe class

12. TAKEAWAYS • Cautionary tale replete with outstanding real life fact patterns for compliance illustrations • Docket rich with issues and valuable pre-trial discovery and other pleadings, trial motions and post-trial briefs • Fundamental issues to watch • How will the 10th Circuit deal with the case? Cf. Abraham v. Intermountain Health Care Inc., 461 F. 3d 1249, 1257-60 (10th Cir. 2006)(plaintiff must present evidence that tends to exclude the possibility of independent action) • Will the Supreme Court be interested in revisiting the joint and several liability constitutional challenge? • In what circumstances can a defendant be confident in “legitimate business reasons” to counter conspiracy allegations at trial? Cf. Blomkest Fertilizer, Inc. v. Potash Corp. of Saskatchewn, Inc., 203 F. 3d 1028, 1033-38 (8th Cir. 2000)(parsing allegations counter-justifications individually to reject conspiracy) • Conspiracy evidence change? • Rejection of parsing evidence approach. • Distinction between pleading standard for conspiracy and sufficient proof at trial. • Plaintiffs burden does not require absolute exclusion or evidence that tends to exclude possible independent conduct

13. TAKEAWAYS • Class Certification and Comcast • Skepticism on injury and common impact arguments in overcharge price fixing cases • Raise and preserve every issue every step of the way • Comcast not a panacea; raise at class hearing stage if viable • Big win will embolden the network of plaintiffs antitrust counsel