Leggett & Platt Inc., a furniture components producer, will pay about $40 million to settle with a class of direct purchasers who accused the company of conspiring to fix prices on flexible polyurethane foam. The tentative settlement, which requires court approval, was revealed last month in a stay order by U.S. District Judge Jack Zouhary. The direct purchasers, which include a variety of foam, packaging and carpet companies, have accused L&P and a number of foam producers of conspiring since at least 1999 to fix the price of the polyurethane foam.
This foam is widely used as cushioning and insulation in products such as bedding, packaging, flooring and cars. Numerous proposed class actions alleging a price-fixing conspiracy in the foam industry were filed in courts around the country throughout 2010. This came after the FBI and European Commission raided the offices of several foam makers in July 2010. It should be noted that a company called Vitafoam Inc. blew the whistle on the price-fixing conspiracy in February 2010, and sought acceptance into the U.S. Department of Justice’s corporate leniency program.
According to a consolidated complaint filed by the direct purchaser class in 2011, the Defendants engaged in phone conversations, letters and in-person meetings in order to coordinate the timing and amount of the foam price increases. Pointing to interviews provided by Vitafoam employees in connection with government inquiries into potential foam price-fixing, the direct purchasers alleged that the mechanisms and participants of the purported conspiracy had been revealed, and lodged violations of the Sherman and Clayton Acts.
In April Judge Zouhary certified the direct- and indirect-purchaser classes and designated seven named direct purchaser Plaintiffs, including Ace Foam Inc., Adams Foam Rubber Co., Cambridge of California Inc., Foam Factory Inc. and others, as the direct purchaser class representatives. A few months later defendant Mohawk Industries Inc., on Aug. 12, won a bid to compel arbitration and stay the claims of absent members of the direct purchaser class. Judge Zouhary granted the motion said he said, “reluctantly,” conceding that he was bound by case law’s “pro arbitration bent.”
The settlement between L&P, a Missouri-based company that produces a variety of industrial materials and residential furnishing components, comes about two years after Vitafoam Inc. and Vitafoam Products Canada Ltd. agreed to pay between $9 million and $15 million to the direct purchaser Plaintiffs. Judge Zouhary noted in his recent order that, although proceedings between L&P and the direct purchasers were halted, the stay did not apply to other lawsuits filed against the furniture component producer in the multidistrict litigation.
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