Class-Action Suit Against Makers Of Cardboard Gets Go-Ahead

A class-action lawsuit accusing paper-products makers of plotting for two years to manipulate production and raise prices of cardboard for boxes used to ship nearly all U.S.-made goods has received a go-ahead from a federal appeals court.

If the ruling stands, attorneys will mail notices and run ads alerting customers that bought boxes or corrugated cardboard from the manufacturers from Oct. 1, 1993, through Nov. 30, 1995, of their eligibility to join in the civil antitrust lawsuit, attorney Eugene A. Spector said.

Because cardboard containers are so widely used, Spector said the number of customers charged higher prices because of the alleged conspiracy would be "at least hundreds; I would guess in the thousands."

The ruling came in an appeal by the paper-products makers of a ruling by U.S. District Judge Jan E. DuBois certifying the lawsuit as a class action. A three-judge appellate panel Thursday rejected the manufacturers' arguments that DuBois had ignored individual issues that made a class action inappropriate.

The defendants could request a rehearing, seek a hearing by the full 3rd U.S. Circuit Court of Appeals, or petition for a direct review by the U.S. Supreme Court.

Calls yesterday to the office of Kenneth Starr, an attorney for the defendants, seeking comment on the ruling or the likelihood of an appeal weren't immediately returned. Starr, the former special prosecutor who returned to private practice with the Washington firm of Kirkland & Ellis after investigating former President Bill Clinton, argued the case before the appellate panel in July.

Spector said if there was no appeal, the plaintiffs would begin steps to notify potential class members and get the lawsuit under way in six to nine months.

While the dollar amount of damages to be sought hadn't been calculated, Spector said, "It's an industry that has a broad array of customers who have been harmed."

Plaintiffs led by Winoff Industries Inc. allege that as prices declined in the early 1990s due to excess inventory of the linerboard used to make corrugated sheets and boxes, the largest linerboard manufacturer, Stone Container Corp., led a twofold plan by manufacturers to reduce inventories.

Stone Container entered into a consent decree in 1998 to settle Federal Trade Commission charges that it tried to bring about price increases by temporarily shutting down some of its linerboard mills in 1993 and purchasing excess linerboard from competitors.

Stone Container denied any unlawful actions, but agreed not to urge competitors to raise or fix prices, in return for an agreement by the government to drop the case.

The current lawsuit alleges that through the alleged conspiracy by Stone Container and other manufacturers, 435,000 tons of linerboard were withdrawn from the market by late 1993 and inventories were cut to less than a five-week supply.