Dow Chemical Damages Hit $1.2 Billion in Urethane Case

Dow Chemical Co. (DOW) was ordered by a federal judge to pay a $1.2 billion judgment in a urethane price-fixing case after losing its bid to undo a jury’s verdict that it colluded with competitors.

U.S. District Judge John W. Lungstrum in Kansas City, Kansas, yesterday rejected Dow’s request to overturn the $400 million February jury verdict. Lungstrum tripled the damages under U.S. antitrust law, making the award the biggest U.S. verdict this year, according to data compiled by Bloomberg News. Dow said in a statement it will appeal.

Lungstrum rejected the company’s challenge to the verdict on grounds the purchaser plaintiffs alleged a conspiracy spanning the years 1999 to 2003 and were unable to prove its existence before November 2000.

“The absurdity of its premise -- that Dow could escape liability for an illegal antitrust conspiracy because plaintiffs alleged a longer conspiracy than found by the jury -- convinces the court that it should not create new law by adopting Dow’s position,” the judge said in a 30-page ruling.

The case started in 2005 with allegations that Dow plotted with BASF SE (BAS), Huntsman International LLC and Lyondell Chemical Co. in violation of federal law. Only Dow didn’t settle.

At the heart of the suit were urethane-based products used in the automotive, construction, appliance and furniture industries.

Business Reasons

Dow denied the price-fixing allegations, maintaining there were legitimate business reasons for the evidence the plaintiffs cited as proof of their claims.

Dow fell 24 cents to close at $35.10 in New York Stock Exchange composite trading. The shares earlier dropped as much as 1.3 percent to $34.88.

“Dow will appeal the judgment entered against it,” Rebecca Bentley, a spokeswoman for the Midland, Michigan-based company, said yesterday in an e-mailed statement. “We believe that the jury’s findings required that judgment should have been entered in Dow’s favor.”

A U.S. Justice Department probe into the matter was closed in 2007 with no charges being filed, Bentley said.

The company also contended Lungstrum erred in not decertifiying the purchaser class based on a March U.S. Supreme Court ruling. In that case, involving cable-television service provider Comcast Corp., the high court rejected a damages theory propounded by the same expert used by the urethane buyers in Dow.

Expert’s Testimony

The chemical maker didn’t object to the expert’s testimony before or during the trial, Lungstrum said.

The expert, James McClave, testified to a causal link between the single price-fixing conspiracy alleged at trial and the impact on the plaintiffs, according to the judge.

“Dow had every opportunity to cross-examine him about whether the impact on plaintiffs could have resulted from some other wrongdoing,” Lungstrum said. The judge concluded there was no basis for finding that McClave’s methodology couldn’t provide an adequate link between the theory of liability and classwide impact.

Purchasers’ attorney Joseph Goldberg said in an e-mailed message that he was “pleased” the court upheld the jury’s verdict. He is a partner in the Albuquerque law firm Freedman Boyd Hollander Goldberg Urias & Ward PA.

In his ruling, Lungstrum also denied Dow’s requests for judgment in its favor as a matter of law or a new trial.

Closing Arguments

“What Dow did was wrong,” Goldberg told the jury Feb. 19 in his closing arguments. “It colluded with its competitors and entered into a price-fixing conspiracy.”

David Bernick, a lawyer for Dow, disputed that allegation in his own summation.

“What kind of cartel is it where everybody is doing exactly what they would be doing otherwise?” Bernick asked jurors.

The purchasers’ case was “empty of truth, empty of facts and empty of fairness,” said Bernick, a partner in New York-based Boies Schiller & Flexner LLP.

“An agreement can be just a wink and a nod,” Goldberg told the jury. He said such schemes aren’t agreed upon in corporate board rooms. They’re hatched in back rooms, on golf courses and over cocktails, he said.

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

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net Dan Margolies in Kansas City, Kansas, at margolies@hotmail.com

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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