Drywall Makers Settle Price Fixing Suit for $191M

Originally published by: ProSales MagazineJanuary 2, 2018

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Four of the nation’s principal drywall manufacturers have agreed to pay an additional $125 million to settle a class action case involving allegations of price manipulation, boosting the total payout to nearly $191 million, according to an SEC filing and an announcement by the plaintiffs’ attorneys.

Eagle Materials, American Gypsum Co., New NGC Inc. (parent of National Gypsum), and PABCO Building Products entered into an agreement on Dec. 29 settling claims that wallboard manufacturers broke antitrust laws by conspiring in 2011 and 2013 to raise prices.

“Settling defendants believe that they are not liable for the claims asserted and have good defenses to plaintiffs’ claims,” according to the settlement agreement, included as part of Eagle Materials’ Dec. 29 SEC filing. “but nevertheless have decided to enter into this settlement agreement in order to avoid further expense, inconvenience, and the distraction of burdensome and protracted litigation. ….”

Cohen Milstein Sellers & Toll, one of the law firms for the plaintiffs said wallboard makers now have committed $190.7 million to settle the case. The most recent settlement is subject to final approval by a federal judge.

According to Cohen Millstein, the case began in the fall of 2011 when American Gypsum announced a 35% price increase for drywall for the following year. The other defendants then announced comparable increases.

“Over the course of the litigation, the plaintiffs alleged that American Gypsum would not have raised prices so significantly without the agreement of its competitors to follow suit,” Cohen Millstein’s press release said. “All the defendant drywall manufacturers also instituted significant price increases for 2013. The lawsuit alleged that as a result of collusion, direct purchasers of drywall products, including distributors, buying cooperatives and contractors, paid artificially inflated prices.”

In March 2015, U.S. District Judge Michael Baylson of Pennsylvania’s Eastern District gave preliminary approval to four settlements totaling $55 million. Paying then were USG Corp. and TIN Inc, (aka Temple Inland), the Top Class Actions website reported. CertainTeed also had been accused of price fixing but was cleared of wrongdoing.

The class action covers persons or businesses that bought wallboard between Jan. 1, 2012, and Dec. 31, 2013, from any of the companies named above plus L&W Supply Corp. (at that time a unit of USG), and Georgia-Pacific. Compensation will be doled out based on the total dollar amount of wallboard bought in the U.S. by entities in the class.

“Price-fixing scandals in fact are standard fare for drywall manufacturers,” The Atlantic reported in July 2016. It cited “a 1996 Department of Justice memo that ordered Georgia-Pacific to divest two gypsum plants in order to restore viable competition.” The publication added that “major producers of gypsum wallboard have been caught up in civil and criminal price-fixing litigations in the 1920s, 1940s, and the 1970s.”