Hayward Industries, one of four defendants in a national class action lawsuit, has reached a settlement with plaintiffs for $8 million, pending court approval.
“We’re pleased that one of the defendants decided they are better served by putting the case behind them,” said Jay L. Himes, one of the plaintiffs’ attorneys.
The suit named Covington, La.-based mega-distributor PoolCorp, as well as the “Big Three” manufacturers — Hayward Industries of Elizabeth, N.J.; Pentair Aquatic Systems of Sanford, N.C.; and Zodiac Pool Systems of Vista, Calif.
At least one of the remaining defendants plans to proceed with the case. “The settlement doesn’t change our view at all that the plaintiffs’ claims — both direct and indirect purchasers’ claims — have no merit, and we intend to defend against them vigorously,” said David Bamberger of DLA Piper’s Washington, D.C., office, representing PoolCorp.
All were accused of violating the Sherman Antitrust Act, which prohibits activities that restrain trade or commerce. PoolCorp also was accused of violating the section of the law prohibiting monopolies.
There are two groups of plaintiffs in this lawsuit. The first, called “direct purchasers,” is made up of pool and spa distributors claiming their ability to do business was hampered by the alleged anti-competitive behavior. This group accuses PoolCorp of pressuring manufacturers not to sell to other distributors, and says the Big Three cooperated. They also alleged that PoolCorp purchased competitors with the intention of shutting them down.
The other group, “indirect purchasers,” are consumers who claim they had to pay higher-than-necessary prices because of the alleged activity.
In June, Hayward settled with both groups. The direct purchasers are set to receive $6.5 million, and indirect purchasers $1.5 million, which will be used toward attorneys’ fees and other costs of litigation, as well as to award plaintiffs. If approved, the settlements could affect industry professionals who made Hayward purchases between Nov. 22, 2007, to the same date in 2011.
Up to 500,000 consumers could be affected, according to court documents. To qualify, they must have purchased Hayward products between Jan. 1, 2008, and the date the agreement goes into effect.
Under the terms of both agreements, Hayward denies all accusations.
As the court approves the settlement, it ultimately will decide how the funds will be distributed, said Himes, one of the plaintiffs’ attorneys. He added that agreements such as these generally take four months or longer to receive approval.
Though oral arguments for some of the preliminary stages were expected to take place in the fall, it now appears that won’t occur until next year.
The fact that Hayward settled cannot be used in court to imply guilt by any of the parties. However, the settlement can make the remaining defendants vulnerable in other, less tangible ways, said an attorney unrelated to the case. “Whatever money is paid … is adding to a war chest for the plaintiffs’ lawyers and the plaintiffs to hire experts, pay to take depositions, and basically make things easier for the prosecution of the case,” said Mark Stapke, a partner in New York-based Peckar & Abramson.
Much of the money gained in class action lawsuits goes to the attorneys, and this is particularly true of early-stage settlements if other defendants continue, he added. It also further benefits the plaintiffs that they have one fewer defendant to contend with.
“If I’m a plaintiff and I sue a distributor and name three manufacturers as co-conspirators in my case, I now have four opponents,” Stapke said. “My client gets cross-examined four different times by four different lawyers, there are four closing arguments by four defendants, and there’s only one from me as the plaintiff. If I have one defendant, or two or three, it’s better for me than four or more.”
The suit, filed in 2011, originally named only PoolCorp and came after the Federal Trade Commission accused the distributor of anti-competitive activity. PoolCorp said it was innocent, but entered into a settlement with the FTC in which it agreed to certain conditions.
The manufacturers were added to the class action case the following year.
Last year, certain accusations were removed by the court. The judge decided neither plaintiff group had sufficiently established the possibility that PoolCorp has achieved monopoly status. She said the accusations of attempted monopolization, however, had been adequately pleaded. This was not an agreement that PoolCorp committed the infraction, but rather that the plaintiffs established the possibility so that it was worth proceeding in the case. She also dropped fraud allegations from the Florida and Missouri consumers, which would have allowed the lawsuit to cover behavior past the statute of limitations.