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Wednesday, May 22, 2024 | Back issues
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Foam Insulation Firm Dodges Antitrust Claims

(CN) - Class action claims of a price-fixing conspiracy involving manufacturers of foam-insulation equipment came too late, a federal judge ruled.

The dispute stems from Graco Inc.'s $65 million purchase of Gusmer Corp., the world's largest manufacturer of fast-set equipment - i.e. spray guns, heated hoses, and other items used to install foam insulation - in February 2005.

"This forced buyers, many begrudgingly, to switch to the more expensive corresponding Graco models," Insulate SB Inc., a California-based fast-set contractor claimed in Minneapolis.

Two years later, Graco allegedly tried to block a re-entry into the market by former Gusmer owners - PMC Global Inc., Garraf Maquinaria S.A., and Gama Machinery USA Inc.

Insulate said Graco and its specialized distributors had agreed "to charge contractors anticompetitive prices" and keep out distributors willing to sell competing products.

The Minnesota-based firm allegedly wrote to its distributors in October 2007 to remind them that they had agreed to help Graco bar new companies from entering the fast-set market.

Months later, Graco bought the sole competing manufacturer for $35 million, according to the complaint.

Graco then filed theft of trade secrets and breach of contract claims against PMC, Garraf, and Gama in New Jersey, alleging they unfairly exploited Graco's intellectual property.

Though Gama countered with antitrust counterclaims against Graco in June 2008, they settled on April 17, 2013.

That same day, the Federal Trade Commission filed an antitrust suit against Graco ordering it to cease and desist from its distributor exclusivity policies for 10 years.

Insulate then filed its class action in June, naming as defendants Graco and 33 of its alleged distributors. It later voluntarily dismissed 12 from that list.

U.S. District Judge Ann Montgomery dismissed the action as time-barred Tuesday.

"After Graco acquired Gusmer in 2005, Gusmer products became obsolete, prices for fast-set equipment increased, and choices for fast-set equipment declined," Montgomery wrote. "These facts would have drawn Insulate's attention when it became forced to 'begrudgingly' switch to more expensive fast-set equipment models."

Gama's counterclaims in the New Jersey litigation also warned Insulate of Graco's alleged misconduct nearly six years ago, the ruling states.

Tossing aside the continuing violations claims, Montgomery found no issue with Graco's February 2012 letter to distributors "reminding them" not to carry the Gama product line.

"The February 2012 letter merely reflected and reaffirmed the alleged prior agreement to eliminate new entrants such as Gama from the fast-set equipment market, and therefore did not restart the limitations period," Montgomery wrote.

As for the price-fixing, market-allocation and exclusivity-conspiracy claims, the judge dismissed them on the basis of Insulate's failure to allege sufficient supportive facts.

"Although the complaint alleges that unidentified 'key dstributors, as well as other [fast-set equipment] FSE distributors, know and communicate with each other at industry conferences and otherwise,' no information is provided about the conferences, who attended them, or what was discussed," Montgomery wrote.

The court rejected the parties' motions to stay or expedite discovery as moot.

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