Case 2:13-md MMB Document Filed 05/20/15 Page 1 of 39 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

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1 Case 2:13-md MMB Document Filed 05/20/15 Page 1 of 39 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA IN RE: DOMESTIC DRYWALL ANTITRUST LITIGATION MDL No MD-2437 THIS DOCUMENT RELATES TO: ALL DIRECT PURCHASER ACTIONS MEMORANDUM OF LAW IN SUPPORT OF DIRECT PURCHASER PLAINTIFFS MOTION FOR FINAL APPROVAL OF SETTLEMENTS WITH TIN, INC. AND USG CORPORATION, UNITED STATES GYPSUM COMPANY, AND L&W SUPPLY CORPORATION, AND REQUEST FOR AUTHORIZATION TO UTILIZE UP TO $2,500,000 OF THE SETTLEMENT FUNDS FOR ONGOING LITIGATION EXPENSES

2 Case 2:13-md MMB Document Filed 05/20/15 Page 2 of 39 TABLE OF CONTENTS I. Introduction... 1 II. Background of the Litigation... 1 III. Background of the Settlements and Notice Program... 2 IV. Summary of the Terms of the TIN and USG Settlements... 3 A. The TIN Settlement The TIN Settlement Amount Cooperation Releases, Discharge, and Covenant Not to Sue Request to Use a Portion of the TIN Settlement Fund for Ongoing Litigation Expenses Option to Rescind... 5 B. The USG Settlement The USG Settlement Amount Cooperation Releases, Discharge, and Covenant Not To Sue Most Favored Nation Request to Use a Portion of the USG Settlement Fund for Ongoing Litigation Expenses Option to Rescind... 7 C. TIN s and USG s Sales Will Remain in the Litigation for Purposes of Calculating Damages and Joint and Several Liability... 8 V. The Settlement Classes Meet the Requirements of Rule 23 and Should be Certified for Settlement Purposes... 8 A. The Settlement Classes Satisfy the Requirements of Rule 23(a)... 9 i

3 Case 2:13-md MMB Document Filed 05/20/15 Page 3 of The TIN and USG Settlement Classes Are So Numerous That Joinder Is Impracticable There Are Common Questions of Law and Fact Plaintiffs Claims Are Typical of the TIN and USG Settlement Classes Claims Plaintiffs Will Fairly and Adequately Protect the Interests of the Settlement Classes. 12 B. The Settlement Classes Satisfy the Requirements of Rule 23(b)(3) Common Issues of Law and Fact Predominate Over Individual Issues A Class Action Is Superior to Other Available Methods of Adjudication VI. The Proposed Settlements Are Fair, REasonable, and Adequate and Should Be Approved by the Court A. Public Policy Favors Settlement of Class Actions B. The Settlements Are Entitled to a Presumption of Fairness C. The Girsh Factors Strongly Support Approval Of The Settlements Complexity, Expense and Likely Duration of the Litigation Reaction of the Class to the Settlements Stage of the Proceedings and Amount of Discovery Completed Risks of Establishing Liability Risks of Establishing Damages Risks of Maintaining the Class Action Through Trial Ability of the Defendants to Withstand a Greater Judgment Range of Reasonableness of the Settlement Funds in Light of the Best Possible Recovery and in Light of All the Attendant Risks of Litigation D. Notice Was Proper Under Rule 23 and Constitutional Due Process VII. Settlement Class Counsel s Request to UTILIZE a Portion of the Settlement Funds for Ongoing Litigation Expenses Is Reasonable and Should Be Granted VIII. Conclusion ii

4 Case 2:13-md MMB Document Filed 05/20/15 Page 4 of 39 TABLE OF AUTHORITIES In re Aetna Inc. Sec. Litig., MDL No. 1219, 2001 WL (E.D. Pa. Jan. 4, 2001)...23, 26 Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997)...9, 13, 15 Austin v. Pa. Dep t of Corr., 876 F. Supp (E.D. Pa. 1995)...16 In re Auto. Refinishing Paint Antitrust Litig., MDL No. 1426, 2003 WL (E.D. Pa. Sept. 5, 2003)...17, 22, 25, 29 Baby Neal v. Casey, 43 F.3d 48 (3d Cir. 1994)...11 In re Baby Products Antitrust Litigation, 708 F. 3d 163 (3d Cir. 2013)...18 Beck v. Maximus, Inc., 457 F.3d 291 (3d Cir. 2006)...11 Bell Atl. Corp. v. Bolger, 2 F.3d 1304 (3d Cir. 1993)...20 In re Bulk (Extruded) Graphite Antitrust Litig., No. Civ , 2006 WL (D. N.J. April 4, 2006)...9 Carroll v. Stettler, Civil Action No , 2011 WL (E.D. Pa. Oct. 19, 2011)...17, 27 Carson v. American Brands, Inc., 450 U.S. 79 (1981)...16 In re Cendant Corp. Litig., 264 F.3d 201 (3d Cir. 2001)... passim In re CertainTeed Corp. Roofing Shingle Prods. Liab. Litig., 269 F.R.D. 468 (E.D. Pa. 2010)...11, 17 In re Chambers Dev. Sec. Litig., 912 F. Supp. 823 (W.D. Pa. 1995)...26 In re Corrugated Container Antitrust Litig., MDL No. 310, 1981 WL 2093 (S.D. Tex. June 4, 1981), aff d, 659 F.2d 1322 (5th Cir. 1981)...20 iii

5 Case 2:13-md MMB Document Filed 05/20/15 Page 5 of 39 In re Diet (Phentermine, Fenfluramine, Dexfenfluramine) Drugs Prods. Liab. Litig., MDL No. 1203, 2000 U.S. Dist. LEXIS (E.D. Pa. Aug. 28, 2000)...26 In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297 (N.D. Ga. 1993)...21 In re: Dynamic Random Access Memory (DRAM) Antitrust Litig., No. M , 2006 WL (N.D. Cal. June 5, 2006)...11 In re Flat Glass Antirust Litig., 191 F.R.D 472 (W.D. Pa. 1999)...10, 11, 13 In re Flonase Antitrust Litig., 284 F.R.D. 207 (E.D. Pa. 2012)...15 In re General Motors Corp. Pick-Up Truck Fuel Tank Prod. Liab. Litig., 55 F.3d 768 (3d Cir. 1995), cert. denied, 516 U.S. 824 (1995)...16, 26 Girsh v. Jepsen, 521 F.2d 153 (3d Cir. 1975)... passim In re Gulf Oil/Cities Service Tender Offer Litig., 142 F.R.D. 588 (S.D.N.Y. 1992)...19 Hawaii v. Standard Oil Co., 405 U.S. 251 (1972)...24 Hedges Enters., Inc. v. Continental Group, Inc., 81 F.R.D. 461 (E.D. Pa. 1979)...13 In re Ins. Brokerage Antitrust Litig., 579 F.3d 241 (3d Cir. 2009)...13 Int l Union, UAW v. Ford Motor Co., No , No , 2006 WL (E.D. Mich. July 13, 2006)...23 Lake v. First Nationwide Bank, 156 F.R.D. 615 (E.D. Pa. 1994)...17 Lazy Oil v. Witco Corp., 95 F. Supp. 2d 290 (W.D. Pa. 1997)...23, 24, 25, 26 In re Linerboard Antitrust Litig, 203 F.R.D. 197 (E.D. Pa. 2001)...10, 11, 12 In re Linerboard Antitrust Litig., 292 F. Supp. 2d 631 (E.D. Pa. 2003)...17, 20, 29 iv

6 Case 2:13-md MMB Document Filed 05/20/15 Page 6 of 39 In re Linerboard Antitrust Litig., 292 F. Supp. 2d 644 (E.D. Pa. 2003)...3 In re Linerboard Antitrust Litig., 296 F. Supp. 2d 568 (E.D. Pa. 2003)...19, 20 In re Lucent Technologies Inc. Sec. Litig., 307 F. Supp. 2d 633 (D. N.J. 2004)...22, 24 Marsden v. Select Medical Corp., 246 F.R.D. 480 (E.D. Pa. 2007)...9 McDonough v. Toys R Us, Inc., Nos. 2:06-cv-0242, 2:09-cv-06151, 2015 WL (E.D. Pa. Jan. 21, 2015), appeal docketed, No (3d Cir. March 3, 2015)...19, 24, 25, 26 In re Mercedes-Benz Antitrust Litig., 213 F.R.D. 180 (D. N.J. 2003)...14 In re Microcrystalline Cellulose Antitrust Litig., No , Final Judgment Order at 7 (E.D. Pa. June 15, 2005) (O Neill, J.)...29 In re Mid-Atlantic Toyota Antitrust Litig., 564 F. Supp (D. Md. 1983)...20 In re NASDAQ Market-Makers Antitrust Litig., 169 F.R.D. 493 (S.D.N.Y. 1996)...15 In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 465 (S.D.N.Y. 1998)...24 Newby v. Enron Corp., 394 F.3d 296 (5th Cir. 2004)...30 In re OSB Antitrust Litig., No , 2007 WL (E.D. Pa. Aug. 3, 2007)...10 In re Packaged Ice Antitrust Litig., No. 08-MD-01952, 2011 WL (E.D. Mich. Feb. 22, 2011)...30 Perry v. FleetBoston Fin. Corp., 229 F.R.D. 105 (E.D. Pa. 2005)...23, 25 Petruzzi s v. Darling-Delaware Co., Inc., 880 F. Supp. 292 (M.D. Pa. 1995)...17 v

7 Case 2:13-md MMB Document Filed 05/20/15 Page 7 of 39 In re Plastic Cutlery Antitrust Litig., No Civ. 96-cv-728, 1998 WL (E.D. Pa. March 20, 1998)...9, 12 In re Processed Egg Products Antitrust Litig., 302 F.R.D. 339 (E.D. Pa. 2014)... passim In re Prudential Ins. Co., 148 F.3d 283 (3d Cir. 1998)... passim In re Prudential Ins. Co. of America Sales Practices Litig., 177 F.R.D. 216 (D. N.J. 1997)...27, 28 In re: Rent-Way Sec. Litig., 305 F. Supp. 2d 491 (W.D. Pa. 2003)...24, 25 Sherin v. Gould, 679 F. Supp. 473 (E.D. Pa. 1987)...16 In re Shopping Carts Antitrust Litig., MDL No. 451-CLB, M-21-29, 1983 WL 1950 (S.D.N.Y. Nov. 18, 1983)...19 Stewart v. Abraham, 275 F.3d 220 (3d Cir. 2001)...9 Stoetzner v. U.S. Steel Corp., 897 F.2d 115 (3d Cir. 1990)...15 Sullivan v. DB Investments, Inc., 667 F.3d 274 (3d Cir. 2011)...14, 15 In re Vitamins Antitrust Litig., 209 F.R.D. 251 (D. D.C. 2002)...14 Walsh v. Great Atlantic & Pacific Tea Co., Inc., 726 F.2d 956 (3d Cir. 1983)...15 In re Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004)...10, 11, 16, 17 William v. First Nat l Bank, 216 U.S. 582 (1910)...16 In re Wireless Telephone Federal Cost Recovery Fees Litig., No. MDL :03-MD-015, 2004 WL (W.D. Mo. April 20, 2004)...28 In re WorldCom, Inc., 347 B.R. 123 (S.D.N.Y. 2006)...28 vi

8 Case 2:13-md MMB Document Filed 05/20/15 Page 8 of 39 In re WorldCom, Inc. Sec. Litig., No , 2004 WL (S.D.N.Y. Nov. 12, 2004)...29 Statutes California Civil Code , 5 Preliminary Approval Orders and the Class Action Fairness Act of 2005, 28 U.S.C. 1711, et seq...3 Other Authorities RULE passim Rule 23(a)...9 Rule 23(a)(1)...9 Rule 23(a)(2)...10 Rule 23(a)(3)...10 Rule 23(a)(4)...12 Rule 23(b)...9 Rule 23(b)(3)...9, 13, 14 Rule 23(b)(3)(D)...9 Rule 23(e)...1, 15, 27, 28 Rule 23(f)...25 Fed. R. Evid. 902(11)...4, 6 Manual for Complex Litigation, Fourth (2004)...29 Manual for Complex Litigation, Fourth (2004)...5 Manual for Complex Litigation, Fourth (2004)...23 The Sherman Act...2, 12, 14 TIN and USG Settlement Class Members ( 21 vii

9 Case 2:13-md MMB Document Filed 05/20/15 Page 9 of 39 USG Corp. Form 10-K for the year ended December 31, 2012, at pp. 1, 4, x10k.htm...1 viii

10 Case 2:13-md MMB Document Filed 05/20/15 Page 10 of 39 I. INTRODUCTION Pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, Plaintiffs Sierra Drywall Systems, Inc., Janicki Drywall, Inc., New Deal Lumber & Millwork Co., and Grubb Lumber Co., Inc. (collectively, Plaintiffs ) submit this Memorandum in support of their motion for final approval of the Settlements reached with TIN, Inc. ( TIN ) and USG Corporation ( USG Corp. ), United States Gypsum Company, and L&W Supply Corporation 1 (collectively, USG ) and for an order authorizing the use of a portion of the Settlement Funds 2 to pay ongoing litigation expenses. The TIN and USG Settlements total $44.5 million and ensure a substantial financial recovery for the Plaintiffs as they continue to prosecute their antitrust claims against the nonsettling Defendants. 3 For the reasons set forth herein, Plaintiffs respectfully urge that the proposed Settlements with TIN and USG are fair, reasonable and adequate and should receive final approval. Further, in light of the significant expenses incurred in the litigation of this action to date as well as likely future expenses, Plaintiffs respectfully submit that Settlement Class Counsel s request to use up to $2.5 million of the Settlement Funds for ongoing litigation expenses should also be approved. II. BACKGROUND OF THE LITIGATION This litigation began in December 2012, with the filing of class action lawsuits against Defendants by direct purchasers of Wallboard. On June 24, 2013, Plaintiffs filed their 1 L&W Supply Corporation ( L&W ) is a wholly-owned subsidiary of USG Corp. and is engaged in Wallboard distribution. See USG Corp. Form 10-K for the year ended December 31, 2012, at pp. 1, 4, available at Persons or entities that purchased Wallboard directly from L&W are included in the Settlement Classes. 2 All capitalized terms in this Memorandum will have the same meaning as set forth in the TIN and USG Settlement Agreements. Copies of the TIN and USG Settlement Agreements are attached to this Memorandum as Exhibits 1 and 2, respectively, and are collectively referred to herein as Settlement Agreements. 3 TIN and USG reached separate settlements with the Indirect Purchaser Plaintiffs. 1

11 Case 2:13-md MMB Document Filed 05/20/15 Page 11 of 39 Consolidated Amended Class Action Complaint and Demand for Jury Trial (the Complaint ), alleging that Defendants violated Section 1 of the Sherman Act by conspiring to raise and maintain the price of Wallboard purchased in the United States and to cease the long-standing industry practice of providing job quotes. Defendants answered the Complaint, denying that they violated the Sherman Act. Plaintiffs reviewed millions of pages of documents produced during discovery and conducted numerous depositions of Defendants current and former officers and employees, as well as of third parties. Plaintiffs served their initial expert report on January 23, 2015, Defendants served their experts reports on March 13, 2015, and Plaintiffs served their expert reply report on April 23, Defendants moved for summary judgment on May 12, 2015, and Plaintiffs opposition is due June 24, III. BACKGROUND OF THE SETTLEMENTS AND NOTICE PROGRAM The TIN and USG Settlements were the result of separate, extensive, arm s-length negotiations between experienced counsel that took place over several months, during which the strengths and weaknesses of the respective parties positions were thoroughly discussed, evaluated, and negotiated. Plaintiffs reached an agreement in principle with TIN first. USG did not know the terms of Plaintiffs agreement with TIN when USG reached an agreement in principle with Plaintiffs. As part of the settlement negotiations, the parties met in person, had numerous telephone conferences and contacts, and thoroughly analyzed the relevant industry data and pertinent facts. Settlement Class Counsel also conferred with experts during the negotiations. The Court preliminarily approved the TIN and USG Settlements on March 16, On April 13, 2015, Notices of Proposed Settlements ( Notice ) were disseminated to 22,155 potential members of the Settlement Classes identified from Defendants transactional records. See Declaration of Markham Sherwood ( Sherwood Decl. ) at 2, attached as Exhibit 3. A 2

12 Case 2:13-md MMB Document Filed 05/20/15 Page 12 of 39 Summary Notice was published in the May edition of LBM Journal, a trade publication for the building products industry. See Sherwood Decl. at 4. Also, a website was established, which contains copies of the Complaint, Settlement Agreements, Notice, and Preliminary Approval Orders. 4 See Sherwood Decl. at 6. The postmark deadline for all exclusions from the Settlements and all objections to the Settlements is June 4, As of May 19, 2015, Settlement Class Counsel have received 5 requests for exclusion from the TIN Settlement and 4 requests for exclusion from the USG Settlement. See Sherwood Decl. at 7. To date, one objection to the Settlements has been received. See Sherwood Decl. at 8. Settlement Class Counsel will respond to any objections and report on exclusions by June 19, A fairness hearing is scheduled on July 15, IV. SUMMARY OF THE TERMS OF THE TIN AND USG SETTLEMENTS A. The TIN Settlement 1. The TIN Settlement Amount TIN has agreed, as part of the consideration for the release and discharge provided by Plaintiffs, to pay $5.25 million to the TIN Settlement Class. See TIN Settlement Agreement at 6, This amount will be reduced in proportion to the percentage of all relevant Wallboard sales represented by any class members that opt out of the TIN Settlement Class. See TIN Settlement Agreement at In addition, $50,000 of the $5.25 million may be used to 4 In accordance with the Preliminary Approval Orders and the Class Action Fairness Act of 2005, 28 U.S.C. 1711, et seq., TIN and USG notified the appropriate state and federal officials of the proposed Settlements. 5 Both Settlement Agreements provide that, to the extent that either the TIN Settlement Amount or the USG Settlement Amount is reduced due to opt-outs, 25% of the reduction will be placed in an Opt-Out Fee and Expense Account, which, subject to approval by the Court, will be paid to Settlement Class Counsel in consideration of their efforts on behalf of the opt-outs. See TIN Settlement Agreement at 23; USG Settlement Agreement at 34. Such payment is appropriate in light of the benefit received by the opt-outs from the significant efforts expended by Settlement Class Counsel in litigating the action and obtaining settlements with TIN and USG and is in lieu of Settlement Class Counsel pursuing such compensation from any opt-outs on an ad-hoc basis. See In re Linerboard Antitrust Litig., 292 F. Supp. 2d 644, 657 (E.D. Pa. 2003) (establishing an account to compensate class counsel using funds from settlements between defendants and plaintiffs in tag along actions, and noting that In carrying out 3

13 Case 2:13-md MMB Document Filed 05/20/15 Page 13 of 39 pay costs associated with notice and notice administration, and if any portion of that $50,000 remains after all such costs are paid, that amount will become part of the TIN Settlement Fund. See TIN Settlement Agreement at Cooperation TIN has agreed, as part of the consideration for the release and discharge provided by Plaintiffs, to provide cooperation to Plaintiffs in their prosecution of the lawsuit against the nonsettling Defendants. The cooperation includes: (a) interviews with three people currently or formerly under TIN s control; (b) trial depositions of three witnesses; and (c) a written declaration under Fed. R. Evid. 902(11), or testimony if necessary, regarding the authenticity and business records qualifications of TIN documents. See TIN Settlement Agreement at Releases, Discharge, and Covenant Not to Sue In consideration of payment of the Settlement Amount and the cooperation provided by TIN, Plaintiffs, TIN Settlement Class Members, and other Releasors (as defined in the TIN Settlement Agreement at 5) have agreed to release TIN and all Releasees (as defined in the TIN Settlement Agreement at 4) from any claims which were alleged or could have been alleged arising out of conduct prior to and including November 30, 2014 that relate to the facts, agreements, or other matters alleged in the Complaint. The release specifically does not include claims based upon indirect purchases of Wallboard (which are part of a separate settlement) and claims for any product defect, breach of contract, product performance, or warranty relating to Wallboard. See TIN Settlement Agreement at the duties of lead and liaison counsel, designated counsel have done much to craft the case against defendants. That work has benefitted all litigants in the class action and the tag-along actions. ). 6 Under the terms of the Settlement Agreements, Plaintiffs also expressly waived and released, upon the effective date of the Settlement Agreements, California Civil Code Section 1542 and similar provisions in other states. See TIN Settlement Agreement at 19; USG Settlement Agreement at 30. California Civil Code Section 1542 states: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the 4

14 Case 2:13-md MMB Document Filed 05/20/15 Page 14 of Request to Use a Portion of the TIN Settlement Fund for Ongoing Litigation Expenses Settlement Class Counsel request Court approval to use up to $500,000 of the TIN Settlement Amount, subject to accounting to the Court, to pay ongoing litigation expenses that have been incurred or that are incurred in the future, including expenses related to economic experts, depositions, and document review and production. See TIN Settlement Agreement at 28; Notice at 5, 11; Summary Notice. 5. Option to Rescind TIN and Plaintiffs are permitted to rescind the TIN Settlement Agreement if the Court refuses to approve the TIN Settlement Agreement, or if such approval is modified or set aside on appeal. See TIN Settlement Agreement at 32. The amount spent on notice and notice administration costs is not refundable to TIN in the event of rescission. See TIN Settlement Agreement at 25, 32. TIN also has the option to rescind the Settlement Agreement under certain circumstances set forth in a confidential side letter agreement entered into by TIN and Settlement Class Counsel. 7 See TIN Settlement Agreement at 33. B. The USG Settlement 1. The USG Settlement Amount USG has agreed, as part of the consideration for the release and discharge provided by Plaintiffs, to pay $39.25 million to the USG Settlement Class. See USG Settlement Agreement time of executing the release, which if known by him must have materially affected his settlement with the debtor. Id. 7 The TIN Settlement and the USG Settlement are both accompanied by separate, confidential side-letter agreements. These side-letter agreements contain terms giving TIN and USG the opportunity to withdraw from the proposed Settlements in the event that a certain percentage of class members opt out of either the TIN or USG Settlement Class, respectively. Such provisions may warrant confidential treatment and be submitted to the Court in camera. See Manual for Complex Litigation, Fourth (2004). Plaintiffs will provide the side-letter agreements for in camera inspection upon request of the Court. 5

15 Case 2:13-md MMB Document Filed 05/20/15 Page 15 of 39 at 16, 29. This amount may be reduced under certain circumstances depending on opt-outs from the USG Settlement Class. See USG Settlement Agreement at Further, a portion of the costs of notice and notice administration will be paid from the USG Settlement Fund. USG Settlement Agreement at Cooperation USG has agreed, as part of the consideration for the release and discharge provided by Plaintiffs, to provide cooperation to Plaintiffs in their prosecution of the lawsuit against the nonsettling Defendants. The cooperation includes: (a) depositions of two current or former USG employees; (b) interviews with and declarations or affidavits from four current or former USG employees; (c) trial testimony or trial depositions of two current or former USG employees; and (d) a written declaration under Fed. R. Evid. 902(11), or testimony if necessary, regarding the authenticity and business records qualifications of USG documents. See USG Settlement Agreement at Releases, Discharge, and Covenant Not To Sue In consideration of the payment and cooperation provided by USG, Plaintiffs, USG Settlement Class Members, and other Releasors (as defined in the USG Settlement Agreement at 14) have agreed to release USG from any claims which were alleged or could have been alleged arising out of conduct prior to and including November 30, 2014, that relate to the facts, agreements, or other matters alleged in the Complaint. The release specifically does not include claims based upon indirect purchases of Wallboard (which are part of a separate settlement) and claims for any product defect, breach of contract, product performance, or warranty relating to Wallboard. See USG Settlement Agreement at

16 Case 2:13-md MMB Document Filed 05/20/15 Page 16 of Most Favored Nation Plaintiffs agree to refund a certain portion of the USG Settlement Amount to USG if Plaintiffs enter into settlements with Defendants New NGC, Inc., American Gypsum Company LLC, or Eagle Materials, Inc. that are more favorable (as that term is defined in the USG Settlement Agreement at 63(d)) to those Defendants than the USG Settlement is to USG. This provision does not apply in certain situations, such as after trial or a material change in the governing law. See USG Settlement Agreement at 65. This provision also has a sunset provision that takes effect twenty-four (24) months from the Execution Date of the USG Settlement Agreement. See USG Settlement Agreement at Request to Use a Portion of the USG Settlement Fund for Ongoing Litigation Expenses Settlement Class Counsel request Court approval to use up to $2 million of the USG Settlement Amount to pay ongoing litigation expenses that have been incurred or that are incurred in the future, including expenses related to economic experts, depositions, and document review and production. See USG Settlement Agreement at 43; Notice at 5, 11; Summary Notice. 6. Option to Rescind USG and Plaintiffs are permitted to rescind the USG Settlement Agreement if the Court refuses to approve the USG Settlement Agreement, or if such approval is modified or set aside on appeal. USG Settlement Agreement at 44. The amount of the USG Settlement Fund spent on settlement notice and notice administration is not refundable to USG in the event of rescission. See USG Settlement at 37, 45. 7

17 Case 2:13-md MMB Document Filed 05/20/15 Page 17 of 39 USG also has the option to rescind the Settlement under certain circumstances set forth in a confidential side-letter agreement entered into by USG and Settlement Class Counsel. See USG Settlement Agreement at 47. C. TIN s and USG s Sales Will Remain in the Litigation for Purposes of Calculating Damages and Joint and Several Liability The Settlement Agreements reflect that neither TIN nor USG has entered into any judgment sharing or similar agreement with the non-settling Defendants, and that, accordingly, Plaintiffs may assert that the monetary amount of TIN s and USG s sales of Wallboard in the United States will remain in the litigation as a basis for calculating damages against the nonsettling Defendants and will be part of any joint and several liability imposed against those Defendants, minus the amounts of the Settlements themselves. See TIN Settlement Agreement at 49; USG Settlement Agreement at 69. V. THE SETTLEMENT CLASSES MEET THE REQUIREMENTS OF RULE 23 AND SHOULD BE CERTIFIED FOR SETTLEMENT PURPOSES Plaintiffs seek to certify the TIN Settlement Class and the USG Settlement Class for settlement purposes only. The TIN Settlement Class and the USG Settlement Class are defined identically as: All persons or entities that purchased Wallboard in the United States directly from any of the Defendants or their subsidiaries from January 1, 2012 through November 30, Excluded from the Settlement Classes are Defendants, officers, directors and employees of any Defendant, the parent companies, subsidiaries, and affiliates of any Defendant, the legal representatives and heirs or assigns of any Defendant, any federal governmental entities and instrumentalities of the federal government, any judicial officer presiding over the Action, and any member of his or her immediate family and judicial staff. The Settlement Classes also exclude those persons or entities that timely request exclusion. 8 8 After the June 4, 2015 deadline for exclusions, Plaintiffs will provide a list of all exclusions to the Court. 8

18 Case 2:13-md MMB Document Filed 05/20/15 Page 18 of 39 In certifying a settlement class, the court must conclude that the requirements for class certification under Rule 23(a) and at least one of the separate provisions of Rule 23(b) are met. See, e.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591, (1997). However, the court is not required to determine whether the action, if tried, would present intractable management problems, for the proposal is that there be no trial. Id. at 620; see also Fed. R. Civ. P. 23(b)(3)(D). The proposed TIN and USG Settlement Classes meet all of the requirements of Rule 23(a), as well as the requirements of Rule 23(b)(3), for settlement purposes. A. The Settlement Classes Satisfy the Requirements of Rule 23(a) 1. The TIN and USG Settlement Classes Are So Numerous That Joinder Is Impracticable The numerosity requirement of Rule 23(a)(1) is satisfied where the traditional joinder of parties would be unworkable. In re Bulk (Extruded) Graphite Antitrust Litig. ( Graphite ), No. Civ , 2006 WL , at *5 (D. N.J. April 4, 2006). There is no magic number which satisfies [Rule 23(a)(1) s] numerosity requirement, and plaintiffs do not have to allege the precise number or identity of the class members. In re Plastic Cutlery Antitrust Litig., No Civ. 96-cv-728, 1998 WL , at *2 (E.D. Pa. March 20, 1998). The most important factor is whether joinder of all the parties would be impracticable for any reason. See Stewart v. Abraham, 275 F.3d 220, (3d Cir. 2001). Generally, if the potential number of plaintiffs exceeds 40, the [numerosity] prong of Rule 23(a) has been met. Id. at ; see also In re Processed Egg Products Antitrust Litig., 302 F.R.D. 339, 348 (E.D. Pa. 2014). Moreover, numerosity is not determined solely by the size of the class, but also by the geographic location of class members. See Marsden v. Select Medical Corp., 246 F.R.D. 480, 484 (E.D. Pa. 2007). 9

19 Case 2:13-md MMB Document Filed 05/20/15 Page 19 of 39 Notice has been disseminated to 22,155 direct purchasers of Wallboard identified by the Defendants and their subsidiaries who are geographically dispersed throughout the United States. See Sherwood Decl. at 2. Accordingly, the numerosity requirement is met. 2. There Are Common Questions of Law and Fact Rule 23(a)(2) requires that there be questions of law or fact common to the members of the class. The commonality requirement is easily met because it may be fulfilled by a single common issue. In re Linerboard Antitrust Litig, 203 F.R.D. 197, 205 (E.D. Pa. 2001). [A]llegations concerning the existence, scope and efficacy of an alleged conspiracy present questions adequately common to class members to satisfy the commonality requirement. In re Flat Glass Antirust Litig., 191 F.R.D 472, 478 (W.D. Pa. 1999) (citing 4 Herbert Newberg & Alba Conte, NEWBERG ON CLASS ACTIONS, 18.05, at (3d ed. 1992)); see also, e.g., In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, (3d Cir. 2004) (where defendant engaged in a broad-based campaign, in violation of federal and state consumer fraud and antitrust laws... allegations naturally raise several questions of law and fact common to the entire class ); In re OSB Antitrust Litig., No , 2007 WL , at *4 (E.D. Pa. Aug. 3, 2007) (identifying the following common issues: whether Defendants engaged in a conspiracy; the conspiracy s duration and extent; and whether Plaintiffs and class members were injured by Defendants conduct and, if so, the appropriate classwide measure of damages). Here, the commonality requirement of Rule 23(a)(2) is similarly satisfied because the existence of the alleged antitrust conspiracy is an issue that is common to all members of the Settlement Classes. 3. Plaintiffs Claims Are Typical of the TIN and USG Settlement Classes Claims Rule 23(a)(3) requires that the claims... of the representative parties are typical of the claims... of the class. The typicality factor examines whether the named plaintiffs claims are 10

20 Case 2:13-md MMB Document Filed 05/20/15 Page 20 of 39 typical, in common-sense terms, of the class, thus suggesting that the incentives of the plaintiffs are aligned with those of the class. Beck v. Maximus, Inc., 457 F.3d 291, (3d Cir. 2006). A named plaintiff s claim is typical if it arises from the same alleged wrongful conduct by the defendants that gives rise to the claims of the putative class. See Baby Neal v. Casey, 43 F.3d 48, (3d Cir. 1994); accord Warfarin, 391 F.3d at (a plaintiff s claim is typical if it arises from the defendants alleged wrongful conduct); see also Egg Products, 302 F.R.D. at 349 ( If the claims of the named plaintiffs and putative class members involved the same conduct by the defendant, typicality is established regardless of factual differences. ); In re CertainTeed Corp. Roofing Shingle Prods. Liab. Litig., 269 F.R.D. 468, 478 (E.D. Pa. 2010) (same); Flat Glass, 191 F.R.D. at 479 (plaintiff s claim is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of other class members and, her or his claims are based on the same legal theory. ). In examining typicality, the court must ensure that the named plaintiffs do not have interests antagonistic to those of the class. See, e.g., Flat Glass, 191 F.R.D. at 481. Courts routinely find the typicality requirement to be satisfied in cases alleging horizontal price-fixing conspiracies. See Linerboard, 203 F.R.D. at 207 ( [I]n instances wherein it is alleged that the defendants engaged in a common scheme relative to all members of the class, there is a strong assumption that the claims of the representative parties will be typical of the absent class members. (citation omitted)). Typicality is satisfied in a price-fixing class action, even if the plaintiff followed different purchasing procedures, purchased in different quantities or at different prices, or purchased a different mix of products than did the members of the class. In re: Dynamic Random Access Memory (DRAM) Antitrust Litig., No. M , 2006 WL at *4 (N.D. Cal. June 5, 2006) (citing Flat Glass, 191 F.R.D. at 479; In re Indus. Diamonds Antitrust Litig., 167 F.R.D. 374, (S.D.N.Y. 1996)). 11

21 Case 2:13-md MMB Document Filed 05/20/15 Page 21 of 39 Here, Plaintiffs and the other members of the Settlement Classes are proceeding on the same legal claim, an alleged violation of Section 1 of the Sherman Act. Each class member may prove its claims in a similar manner by relying upon the same evidence to prove the violation and by demonstrating that it purchased Wallboard at prices artificially inflated as a result of Defendants anticompetitive conduct. These are the same elements the other class members would have to prove if they brought individual actions. In re Plastic Cutlery, 1998 WL , at *4. 4. Plaintiffs Will Fairly and Adequately Protect the Interests of the Settlement Classes The adequacy requirement of Rule 23(a)(4) seeks first to test[] the qualifications of the counsel to represent the class, and second, to uncover conflicts of interest between named parties and the class they seek to represent. In re Prudential Ins. Co., 148 F.3d 283, 312 (3d Cir. 1998) (quoting Amchem, 521 U.S. at 625); see also Linerboard, 203 F.R.D. at 207. As to the first requirement, Plaintiffs are represented by experienced counsel thoroughly familiar with class actions and antitrust litigation. Settlement Class Counsel Berger & Montague, P.C., Cohen Milstein Sellers & Toll PLLC, and Spector Roseman Kodroff & Willis, P.C. have extensive experience and expertise in antitrust disputes, complex litigation, and class action proceedings and are qualified and able to conduct this litigation. Further, Settlement Class Counsel have already demonstrated their full commitment to the continued prosecution of this litigation, and they possess the experience, skill and resources to continue to do so. As to the second requirement, the Plaintiffs are a diverse group, unhindered by conflicts with each other or members of the Settlement Classes. Plaintiffs and the Settlement Class Members have a common interest in TIN s and USG s cooperation in assisting with the prosecution of the class claims against the non-settling Defendants. Egg Products, 302 F.R.D. at 350. Thus, their interests are aligned. See id. Indeed, there are no conflicts of interest among 12

22 Case 2:13-md MMB Document Filed 05/20/15 Page 22 of 39 the Plaintiffs, let alone the kind of conflict that conceivably might be an obstacle to class certification. See Flat Glass, 191 F.R.D. at 482 (a conflict is only disabling for Rule 23 purposes if it is apparent, imminent, and on an issue at the very heart of the suit (citation omitted)); see also Hedges Enters., Inc. v. Continental Group, Inc., 81 F.R.D. 461, 466 (E.D. Pa. 1979) ( [T]he atypicality or conflict must be clear and must be such that the interests of the class are placed in significant jeopardy. (citation omitted)). B. The Settlement Classes Satisfy the Requirements of Rule 23(b)(3) The Settlement Classes satisfy Rule 23(b)(3), which authorizes class certification if the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. Rule 23(b)(3) is designed to secure judgments binding all class members save those who affirmatively elect[] to be excluded where a class action will achieve economies of time, effort, and expense, and promote... uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results. Amchem, 521 U.S. at Common Issues of Law and Fact Predominate Over Individual Issues Courts have repeatedly affirmed the principle that common questions predominate in a federal antitrust claim [b]ecause each of the elements of a Sherman Act violation involves common questions of law and fact. In re Ins. Brokerage Antitrust Litig., 579 F.3d 241, 269 (3d Cir. 2009); see also Amchem, 521 U.S. at 625 ( Predominance is a test readily met in certain cases alleging... violations of the antitrust laws. ); Egg Products, 302 F.R.D. at 351 (same). This case is no exception. Where many significant questions are common to the class, predominance is satisfied. Flat Glass, 191 F.R.D. at 484. That common issues must be shown to predominate does not 13

23 Case 2:13-md MMB Document Filed 05/20/15 Page 23 of 39 mean that individual issues do not exist, however. See, e.g., In re Mercedes-Benz Antitrust Litig., 213 F.R.D. 180, 186 (D. N.J. 2003) ( mere existence of individual issues will not of itself defeat class certification ); In re Vitamins Antitrust Litig., 209 F.R.D. 251, 269 (D. D.C. 2002) ( Rule 23(b)(3) requires that common issues predominate; it does not require that common issues be dispositive. ). Indeed, requiring a class to assert uniform or identical questions of law or fact and to preemptively demonstrate their legal viability would seriously undermine the possibility for settling any large, multi district class action. Sullivan v. DB Investments, Inc., 667 F.3d 274, (3d Cir. 2011) (citation omitted). Here, the asserted price-fixing conduct lies at the core of plaintiffs claims, as do the common injuries which all class members suffered as a result. Sullivan, 667 F.3d at 300 (evidence to show whether De Beers engaged in a broad conspiracy that was aimed to and did affect diamond prices in the United States would entail generalized common proof as to the implementation of De Beers [s] conspiracy, the form of the conspiracy, and the duration and extent of the conspiracy. (citation omitted)). A common legal question is whether [defendants] engaged in a broad conspiracy that was intended to and did affect Wallboard prices. Id. Indeed, whether Defendants engaged in anticompetitive conduct to artificially raise prices of Wallboard is a common question to all class members because it is an essential element of proving a Section 1 Sherman Act violation. Therefore, if Plaintiffs or the other members of the Settlement Classes were to bring individual actions, they would be required to prove the same wrongdoing by Defendants in order to establish liability. 2. A Class Action Is Superior to Other Available Methods of Adjudication Rule 23(b)(3) further conditions class certification on the class action [being] superior to other available methods for the fair and efficient adjudication of the controversy. [This] superiority requirement asks the court to balance, in terms of fairness and efficiency, the merits 14

24 Case 2:13-md MMB Document Filed 05/20/15 Page 24 of 39 of a class action against those of alternative available methods of adjudication. Prudential, 148 F.3d at 316 (internal quotations and citation omitted). A class action is superior to other available methods for the fair and efficient adjudication of the claims here because, absent class action certification, the Court would be faced with individual lawsuits, each of which would arise out of the same set of operative facts and require the same demonstration of proof. By proceeding as a class action, judicial resources will be more efficiently utilized to resolve common issues one single time, which will bring about a single outcome that is binding on all class members. The alternatives to a class action are either no recourse for thousands of class members for whom the cost of pursuing individual litigation would be prohibitive, In re NASDAQ Market-Makers Antitrust Litig., 169 F.R.D. 493, 527 (S.D.N.Y. 1996), or a multiplicity of lawsuits resulting in possible contradictory results for some plaintiffs, In re Flonase Antitrust Litig., 284 F.R.D. 207, 234 (E.D. Pa. 2012). Further, a critical difference between certification of a settlement class and certification of a litigation class is that, in the settlement class context, a court need not consider any possible difficulties in managing a trial of the case, because the settlement will obviate the need for a trial. See Amchem, 521 U.S. at 620; Sullivan, 667 F.3d at VI. THE PROPOSED SETTLEMENTS ARE FAIR, REASONABLE, AND ADEQUATE AND SHOULD BE APPROVED BY THE COURT Under Rule 23(e) of the Federal Rules of Civil Procedure, a proposed settlement of a class action should be approved if it is fair, adequate and reasonable. See also Prudential, 148 F.3d at 316; Stoetzner v. U.S. Steel Corp., 897 F.2d 115, 118 (3d Cir. 1990); Walsh v. Great Atlantic & Pacific Tea Co., Inc., 726 F.2d 956, 965 (3d Cir. 1983). The TIN and USG Settlements satisfy that standard and should be approved. 15

25 Case 2:13-md MMB Document Filed 05/20/15 Page 25 of 39 A. Public Policy Favors Settlement of Class Actions Federal courts have consistently recognized the long-standing public policy favoring the settlement of civil actions. See, e.g., Carson v. American Brands, Inc., 450 U.S. 79, 88, n.14 (1981); William v. First Nat l Bank, 216 U.S. 582, 595 (1910) ( compromises of disputed claims are favored by the courts ); Sherin v. Gould, 679 F. Supp. 473, 474 (E.D. Pa. 1987). Settlements are particularly favored in complex class actions such as this one. See, e.g., Warfarin, 391 F.3d at 535 ( there is an overriding public interest in settling class action litigation, and it should therefore be encouraged ); In re General Motors Corp. Pick-Up Truck Fuel Tank Prod. Liab. Litig., 55 F.3d 768, 784 (3d Cir. 1995), cert. denied, 516 U.S. 824 (1995) (holding that the law favors settlement, particularly in class actions and other complex cases where substantial judicial resources can be conserved by avoiding formal litigation ); Austin v. Pa. Dep t of Corr., 876 F. Supp. 1437, 1455 (E.D. Pa. 1995) (explaining that the extraordinary amount of judicial and private resources consumed by massive class action litigation elevates the general policy encouraging settlements to an overriding public interest ). Each of these Settlements was an ice-breaker: the TIN Settlement was the first settlement overall and also among the small market-share Defendants, and the USG Settlement was the first settlement with a large market-share Defendant. B. The Settlements Are Entitled to a Presumption of Fairness Recognizing that a settlement represents an exercise of judgment by the negotiating parties, courts should apply an initial presumption of fairness when reviewing a proposed settlement where: (1) the settlement negotiations occurred at arm s length; (2) there was sufficient discovery; (3) the proponents of the settlement are experienced in similar litigation; and (4) only a small fraction of the class objected. Warfarin, 391 F.3d at 535 (quoting In re Cendant Corp. Litig., 264 F.3d 201, 232, n.18 (3d Cir. 2001)). Courts have noted that it is 16

26 Case 2:13-md MMB Document Filed 05/20/15 Page 26 of 39 appropriate to give substantial weight to the recommendations of experienced attorneys, who have engaged in arms-length settlement negotiations, in making this determination. In re Auto. Refinishing Paint Antitrust Litig., MDL No. 1426, 2003 WL , at *2 (E.D. Pa. Sept. 5, 2003); see also Petruzzi s v. Darling-Delaware Co., Inc., 880 F. Supp. 292, 301 (M.D. Pa. 1995) (noting that the opinions and recommendation of such experienced counsel are indeed entitled to considerable weight ). 9 The elements giving rise to the presumption are present here: The Settlement Agreements were consummated only after extensive, arm s-length negotiations over the course of several months, during which the strengths and weaknesses of the respective parties positions were thoroughly considered; Prior to entering into the Settlement Agreements, Settlement Class Counsel reviewed and analyzed millions of pages of documents produced by Defendants and third parties, including transactional data regarding Defendants Wallboard sales. Additionally, Settlement Class Counsel conferred with experts in evaluating whether the Settlements were in the best interest of the classes; Settlement Class Counsel have significant antitrust and class action experience, and TIN and USG s counsel are likewise experienced at complex litigation; and At most, only one objection to the proposed Settlements has been received to date. Therefore, the proposed Settlements are entitled to a presumption of fairness. See Warfarin, 391 F.3d at 535; Linerboard, 292 F. Supp. 2d at 640; Lake, 156 F.R.D. at See also Carroll v. Stettler, Civil Action No , 2011 WL , at *4 (E.D. Pa. Oct. 19, 2011); CertainTeed Corp. Roofing, 269 F.R.D. at 484 ( There is a strong presumption in favor of voluntary settlement, particularly in class actions and other complex cases where substantial judicial resources can be conserved by avoiding formal litigation. ) (citations omitted)); In re Linerboard Antitrust Litig., 292 F. Supp. 2d 631, 640 (E.D. Pa. 2003) (holding that [a] presumption of correctness is said to attach to a class settlement reached in arms-length negotiations between experienced, capable counsel after meaningful discovery ) (citing Hanrahan v. Britt, 174 F.R.D. 356, 366 (E.D. Pa. 1997)); Lake v. First Nationwide Bank, 156 F.R.D. 615, 628 (E.D. Pa. 1994) (giving due regard to the recommendations of the experienced counsel in this case, who have negotiated this settlement at armslength and in good faith ). 17

27 Case 2:13-md MMB Document Filed 05/20/15 Page 27 of 39 C. The Girsh Factors Strongly Support Approval Of The Settlements The Third Circuit has established a nine-factor test for determining whether a proposed settlement is fair, adequate and reasonable. See Girsh v. Jepsen, 521 F.2d 153, 157 (3d Cir. 1975); In re Baby Products Antitrust Litigation, 708 F. 3d 163, 174 (3d Cir. 2013). These factors, referred to as the Girsh factors, are: (1) the complexity, expense and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the trial; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; and (9) the range of reasonableness of the settlement fund in light of all the attendant risks of litigation. Cendant, 264 F.3d at 232 (citing Girsh, 521 F.2d at 157). These factors are satisfied here and demonstrate that the Settlements are fair, reasonable, and adequate, and that final approval should be granted. 1. Complexity, Expense and Likely Duration of the Litigation The first Girsh factor is the amount of recovery obtained through the settlement compared to the complexity, expense, and likely duration of the litigation. See Girsh, 521 F.2d at 157. This factor captures the probable costs, in both time and money, of continued 18

28 Case 2:13-md MMB Document Filed 05/20/15 Page 28 of 39 litigation. Cendant, 264 F.3d at 233 (quoting GM Corp., 55 F.3d at 812). This factor weighs heavily in favor of approval of the Settlements here. As an initial matter, [a]n antitrust class action is arguably the most complex action to prosecute. The legal and factual issues involved are always numerous and uncertain in outcome. In re Linerboard Antitrust Litig., 296 F. Supp. 2d 568, 577 (E.D. Pa. 2003) (quoting In re Motorsports Merchandise Antitrust Litig., 112 F. Supp. 2d 1329, 1337 (N.D. Ga. 2000)) (internal citations and quotations omitted); see also McDonough v. Toys R Us, Inc., Nos. 2:06- cv-0242, 2:09-cv-06151, 2015 WL at *6 (E.D. Pa. Jan. 21, 2015) ( Antitrust class actions are particularly complex to litigate and therefore quite expensive. ), appeal docketed, No (3d Cir. March 3, 2015); In re Shopping Carts Antitrust Litig., MDL No. 451-CLB, M , 1983 WL 1950, at *7 (S.D.N.Y. Nov. 18, 1983) (observing that antitrust price fixing actions are generally complex, expensive and lengthy ). This action involves complex legal and factual issues relating to the pricing of Wallboard over a span of approximately three years. The parties engaged in lengthy discovery consisting of the review and analysis of millions of pages of documents produced by Defendants and third parties, retained economic experts, deposed Defendants former and current officers and employees, and prepared an extensive pretrial statement and supplemental pretrial statement. These Settlements will help streamline proceedings going forward. Both TIN and USG are represented by able counsel who have mounted a vigorous defense. Continuing to litigate against TIN and USG would complicate summary judgment and trial against the other Defendants. See In re Gulf Oil/Cities Service Tender Offer Litig., 142 F.R.D. 588, 591 (S.D.N.Y. 1992) (granting final approval of a settlement where continuing the litigation against 19