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Private Settlements Could Gain Steam, Lawyers Say

Law360, New York (March 12, 2009) -- The privately brokered settlement between accused marine hose cartelist Parker ITR and global purchasers of marine hose could provide a basis for other settlements, but should not be seen as a cut-and-paste model, antitrust attorneys say.

The deal, announced by claimants' firm Hausfeld LLP on March 6, was touted as the “first ever private settlement of a global cartel.”

Under the settlement, non-U.S. claimants, including oil companies and other direct and indirect purchasers of marine hose, agree to release any claims against Italy-based Parker ITR in exchange for a slice of a “high, seven-figure euro” settlement fund, according to Hausfeld attorney Brian Ratner, who helped broker the deal.
For all claimants who sign onto the deal, Parker ITR also agreed to guarantee against the payment of adverse costs associated with non-U.S. litigation against any other alleged co-conspirators and to provide evidence against other co-conspirators.

Since the deal was negotiated outside of any court system, claims will not be subjected to the lengthy court approval procedure, Ratner said, adding that funds could be distributed by the end of the year.

“We think it's a very efficient way of doing things, because you don't have to deal with the approval process and you can get payments to claimants more quickly,” Ratner said. “In this economic climate, that's important.”

John Majoras of Jones Day, who represented Parker ITR in the Hausfeld settlement, said he hoped potential claimants would see the deal as a fair basis to be compensated for their claims.

"In terms of my client in this case, the particular facts and circumstances made this settlement process make sense to us,” Majoras said. “We think this will be an effective way that potential claimants can look at what's available and say that this is a good way to get this resolved."

While attorneys for both sides heralded the preemptive deal as an efficient and economically sound alternative to litigation or traditional alternative dispute resolution measures, some lawyers cautioned that the unique facts of the long-running marine hose cartel might make the model difficult to replicate in other circumstances.

Purchasers of marine hose, an industrial product used to transfer oil between tankers and oil facilities, tend to be large oil and energy companies, not individuals, so the claims against Parker ITR are likely to be relatively few and fairly uniform, according to Clay Everett of Morgan Lewis & Bockius LLP.

“It was probably different for Parker ITR than it would be for a different antitrust defendant facing similar allegations,” Everett said, explaining that “the litigation risk in other countries could be significantly higher” because of Parker ITR's limited number of customers.

Parker ITR's previous payouts in the case, which include €25.6 million ($33.5 million) to the European Union's antitrust watchdog and $2.9 million to settle claims in the multidistrict litigation against cartelists in the U.S., have also been highly publicized, perhaps prompting Parker ITR to agree to the private settlement “as a show of goodwill” to customers, Everett said.

Pat Lane of Dinsmore & Shohl LLP agreed that the merits of this particular case made a privately-negotiated settlement possible.

“Where you have fewer purchasers who would be claimants, and purchasers who have ongoing needs for the products that were the subject of the alleged cartel, it does make it easier to find a business resolution of this type,” Lane said.

Majoras said that while the model worked well for his client, it might not necessarily translate to much broader liability claims or a massive class of claimants.

"The individual facts and circumstances of a case dictate any settlement, and as you face a case that has a lot of variables, it strikes me that it would be difficult to use this process," Majoras said.

Fred Houwen of Reed Smith LLP said that Parker ITR's actions echoed a “leniency” policy whereby one co-conspirator turns itself over to authorities in exchange for reduced charges.

“It's the same principle as one entity seeking an advantage by providing evidence on the behavior of other implicated entities,” Houwen said.

Parker ITR's settlement is unique in that the company is the only alleged marine hose co-conspirator to agree to a global settlement so far, and that the company offered to provide evidence against other potential defendants to entice potential plaintiffs, Houwen said.

But much of that information would have eventually become available to potential claimants anyway, if the parties had ended up in traditional litigation, according to Dinsmore & Shohl's Lane.

The deal may also provide a better alternative for some potential claimants who might not have otherwise brought claims at all, said Marjorie Holmes of Reed Smith.

“The biggest deterrent from bringing actions is the cost exposure,” Holmes said. “What this scheme is trying to do is try to avoid cost exposure altogether and, more unusually, guaranteeing payment of the adverse costs of claimants by the settled defendant.”

While the deal's unique features and private nature set it apart, Ratner, who would not comment last week on whether Hausfeld had engaged in discussions with any other alleged cartel members, said he believed the private settlement model could be applied to other, similar situations.

“Here, you had a company that looked at a legal problem and worked to find a creative solution to that problem,” Ratner said. “We believe there are many other companies out there in analogous cases that would also be open to considering a settlement model like this.”

Lane, who has a background in dispute resolution, said the settlement amounted to a creative resolution, especially given the complexities of crafting a settlement stretching across multiple jurisdictions.

“Each case and each resolution stands on its own merits,” Lane said, cautioning that disputes are unique and resolutions cannot necessarily be replicated. “But broadly, the reapplication of successful techniques is something that everybody should be interested in.”

--Additional reporting by Christine Caulfield
 

More information on this case: Marine Hose

Practice Areas: Antitrust / Competition