Settle Suits

Scalia's Death Prompts Dow to Settle Suits for $835 Million 

by Jef Feeley  and Greg Stohr

Dow Chemical Co. said it agreed to pay $835 million to settle an antitrust case pending before the U.S. Supreme Court after Justice Antonin Scalia’s death reduced its chances of overturning a jury award.

Dow, the largest U.S. chemical maker by sales, said Friday the accord will resolve its challenges to a $1.06 billion award to purchasers of compounds for urethanes, chemicals used to make foam upholstery for furniture and plastic walls in refrigerators.

The Midland, Michigan-based company disputed a jury’s finding it had conspired with four other chemical makers to fix urethane prices and asked the Supreme Court to take the class-action case on appeal. Scalia, one of the court’s most conservative members, had voted to scale back the reach of such group suits.

“Growing political uncertainties due to recent events with the Supreme Court and increased likelihood for unfavorable outcomes for business involved in class-action suits have changed Dow’s risk assessment of the situation,” the company said in an e-mailed statement.

Scalia’s Absence

Scalia’s death is likely to make it harder for companies to get the five votes they need to overturn awards or get new restrictions on class actions. He had been a key voice for companies in challenging group suits at the Supreme Court.

Scalia wrote the 5-4 ruling in 2011 that said Wal-Mart Stores Inc. couldn’t be sued by potentially a million female workers. Two years later, Scalia was the author of a 5-4 ruling that freed Comcast Corp. from having to defend against an $875 million antitrust lawsuit on behalf of Philadelphia-area customers.

“Class-actions is one of the areas where Justice Scalia’s absence is likely to have an impact,” said Gregory Garre, an appellate lawyer at Latham & Watkins in Washington and previously President George W. Bush’s top Supreme Court lawyer. “Companies will have to be careful what they ask for in seeking review, or at least face an added burden in prevailing at the court on class-action issues.”

‘Political Philosophy’

“Companies whose positions are based more on political philosophy than on interpretation of the law worry when the majority philosophy in sway at the court changes,” said Erik Gordon, a professor at the University of Michigan’s business and law schools who teaches classes on mass torts and class-action cases.

“It is unlikely that any nominee will be as favorable to business as Justice Scalia was,” Gordon said in an e-mail. “The anti-business wing will carry more decisions.”

Nevada Governor Brian Sandoval, a Republican, bowed out of consideration Thursday as Scalia’s replacement on the court. Senate Republican leader Mitch McConnell of Kentucky has vowed that any nominee pushed forward by President Barack Obama won’t get a confirmation vote this year. McConnell says the next president should make the appointment.

‘Marginal Difference’

Some appellate lawyers say the court won’t change much on class actions, regardless who makes the selection.

“I think it’s only a marginal difference,” said Jonathan Hacker, who runs the Supreme Court practice at O’Melveny & Myers in Washington. “Overall I think most justices want to ensure that class-action procedures permit defendants to litigate their defenses fairly and don’t subject absent class members to unfair outcomes they can’t control or even influence.”

The settlement in the Dow case resolves the largest U.S. court award for 2013, according to data compiled by Bloomberg. That year, a federal-court jury in Kansas City, Kansas, awarded urethane purchasers $400 million in damages over claims that Dow engaged in price fixing. The judge in the case tripled the award to $1.2 billion as required by antitrust law.

The case started in 2005 with allegations that Dow plotted with BASF SE, Huntsman International LLC and Lyondell Chemical Co. in violation of federal law. Dow was the only company that refused to settle. The final judgment in the case was reduced to reflect $139 million in settlements with the other defendants before trial.

Dow’s Defense

Dow appealed the liability finding and award to a federal appeals court in Denver, which rejected its challenges to the class-action claims in September 2014. The company asked the U.S. Supreme Court to review the lower court’s ruling.

Dow disputes that it was part of a price-fixing conspiracy even though it agreed to resolve the case. The jury award “was fundamentally flawed as a matter of class-action law,” the company said in its statement.

The Supreme Court has been holding Dow’s appeal while it considers similar issues in a Tyson Foods Inc. case. Tyson is seeking to overturn a $5.8 million wage award to workers at an Iowa pork-processing plant. The company argues that it was subjected to an improper “trial by formula” and that the class of workers included some who were fully compensated.

Tyson got a skeptical audience from the justices during arguments in November. The justices suggested they might issue a narrow ruling, potentially upholding the award while limiting its reasoning to the wage-and-hour hour context. The Dow appeal raised broader questions about group lawsuits, arguing the award violated both the Constitution and the federal courtroom rules that govern class actions.

In December, Dow and DuPont Co. agreed to a merger of equals, the largest combination ever in the chemical industry. The companies have a combined market value exceeding $106 billion, based on current trading.

The deal is scheduled to close by the end of this year, after which three separate companies focused on plastics, agricultural products and specialty materials will be spun off to shareholders.

The antitrust case is In re Urethane Antitrust Litigation, 04-md-01616, U.S. District Court, District of Kansas (Kansas City).