Antitrust Law Daily Disputed jury instruction fails to upset judgment for grocery wholesaler in market allocation suit
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Monday, April 27, 2020

Disputed jury instruction fails to upset judgment for grocery wholesaler in market allocation suit

By Nicholas Kaster, J.D.

The jury instruction was sufficient to accommodate complaining retailer’s alternate theory that the defendants agreed to allocate a certain segment of the new customers in the two regions, even if they did not divide up all new customers in the two territories.

A Minnesota federal district court’s instructions to the jury in an antitrust action brought by D&G, Inc. against C&S Wholesale Grocers, Inc. were not in error, the U.S. Court of Appeals in St. Louis has ruled. In affirming the lower court, the Eight Circuit found that the reference in the instructions to the defendants dividing "territories and customers along geographic lines" did not mislead the jury. The jury’s instructions "fairly and adequately" submitted the issues, the appellate court held (In re Wholesale Grocery Products Antitrust Litigation, April 27, 2020, Colloton, S.).

C&S Wholesale Grocers, Inc. provides wholesale grocery services to grocery retail stores primarily in the northeastern United States. In 2003, C&S purchased substantially all the assets of Fleming, a nationwide grocery wholesaler, during Fleming’s bankruptcy. C&S later entered into an asset exchange agreement with SuperValu, a grocery wholesaler headquartered near Minneapolis. C&S transferred Fleming’s assets and customers located in the Midwest to SuperValu in exchange for SuperValu’s assets and customers located in New England. C&S and SuperValu agreed not to supply the exchanged customers for two years after the sale and not to solicit the exchanged customers for five years after the sale.

D&G, an independent grocery retailer, brought an antitrust suit against C&S on behalf of a class of grocery retailers. D&G and the class alleged that C&S violated the Sherman Act by agreeing with SuperValu to allocate customers and territories for full-line grocery wholesale goods and services and that this anti-competitive conduct caused retailers to pay supracompetitive prices for wholesale goods and services. D&G’s theory was that, in addition to the written agreement about exchanging assets and existing customers, C&S and SuperValu had an unwritten agreement that C&S would not compete for new customers in the Midwest and that SuperValu would not compete for new customers in the Northeast. Alternatively, D&G claimed that even if C&S did not agree to forego competition for all new customers in the Midwest, C&S at least agreed that it would not compete for new business from a subset of potential new customers—namely, independent grocery retailers—in that region.

After a two-week trial, a jury returned a verdict for the C&S. Following the verdict, the court entered cost judgments based on costs filed by the defendants in 2013 and 2018. The parties sought review and the district court rejected arguments by the plaintiffs that they should not be responsible for fees and also modified the cost judgment by allowing some costs for exemplification or copying for electronically stored information (ESI), as well as expert fees for depositions. The court denied expenses that would have led to a double recovery for a defendant who had settled earlier in the litigation with one plaintiff and also denied certain expenses for ESI and for expert preparation time. D&G appealed, arguing that the district court erred in its instructions to the jury. Specifically, D&G asserted that the district court erred in formulating one jury instruction and the verdict form.

The district court’s jury instruction provided as follows: "Plaintiffs claim that C&S violated Section 1 of the Sherman Act by entering into an Unwritten Agreement with SuperValu to allocate customers and territories along geographic lines. Allocate means to divide...To prevail on this claim against C&S, Plaintiffs must prove each of the following elements by a preponderance of the evidence: (1) C&S and SuperValu were competitors or potential competitors; (2) C&S and SuperValu entered into a conspiracy—specifically, the Unwritten Agreement—in which C&S agreed that it would not compete with Supervalu for new customers in certain territories or geographic areas; and (3) Plaintiffs were injured in their business or property because of the Unwritten Agreement."

The district court also asked the jury, on a special verdict form: "Did the Plaintiffs prove that C&S and SuperValu were competitors or potential competitors, and that they entered into an Unwritten Agreement to divide territories and customers along geographic lines which restricted competition more broadly than the Asset Exchange Agreement?"

D&G argued that the district court mistakenly required the plaintiffs to prove that C&S and SuperValu agreed to allocate both customers and territories, but that proof of an agreement to divide one or the other should have been sufficient to establish a per se violation of the Sherman Act.

D&G focused on the first sentence of the jury instruction, which referred to a claim that the wholesalers agreed "to allocate customers and territories along geographic lines." And D&G highlighted the question in the special verdict form asking whether the plaintiffs had proved an agreement "to divide territories and customers along geographic lines." D&G proposed different instructions and maintained that the district court should have used them instead. D&G asked for instructions on two different claims. The proposed instruction for "Claim 1—Allocation of Customers" would have required proof that "C&S agreed with Supervalu to divide up customers along geographic lines." The proposed instruction for "Claim 2—Allocation of Territories or Geographical Areas" asked whether the plaintiffs had proved that "C&S agreed that it would not compete with Supervalu in certain territories or geographic areas."

While it is true that an agreement to allocate either customers or territories could violate the Sherman Act, the Eighth Circuit opined that D&G’s theory in this case melded the two. D&G argued that C&S and SuperValu agreed to allocate customers in the Midwest and New England. However, the appellate court stated, there was no contention that C&S agreed to divide up customers outside those regions or to allocate those territories without allocating customers in them. It was therefore understandable and consistent with the evidence and arguments for the district court to instruct that D&G must prove that "C&S agreed that it would not compete with Supervalu for new customers in certain territories or geographic areas." Likewise, the reference in the verdict form to "an Unwritten Agreement to divide territories and customers along geographic lines" was consistent with D&G’s primary theory throughout the case—namely, that C&S and SuperValu agreed to allocate new customers in the Midwest to one company and new customers in New England to the other.

D&G complained that the instructions did not allow the jury adequately to consider its alternate theory that the defendants agreed to allocate a certain segment of the new customers in the two regions (i.e., independent grocery retailers) even if they did not divide up all new customers in the two territories. However, the appellate court found that the jury instruction was sufficient to accommodate the alternate theory. It did not require a finding that the defendants agreed to allocate all new customers. The instruction said that D&G must prove an agreement that C&S "would not compete with Supervalu for new customers in certain territories or geographic areas." If the jury was convinced that C&S agreed that it would not compete with SuperValu for new independent grocer customers in the Midwest, then there was ample room under the instructions to find liability, said the court.

D&G’s proposed instructions did not differ meaningfully from the final instruction on this issue, said the court. D&G proposed instructions asked whether "C&S agreed with Supervalu to divide up customers along geographic lines" or whether "C&S agreed that it would not compete with Supervalu in certain territories or geographic areas." Neither of these instructions parsed a distinction between all new customers and a subset of new customers, the court stated.

The court was not convinced by D&G’s contention that the reference in the verdict form to the defendants dividing "territories and customers along geographic lines" misled the jury. The jury was told that it "must find" liability if "C&S agreed that it would not compete with Supervalu for new customers in certain territories or geographic areas."

The court considered the instructions as a whole and evaluated the verdict form in light of the instructions. If the jury was persuaded that C&S agreed not to compete for new independent grocer customers in the Midwest, such that it was directed to find for the plaintiffs under the jury instruction, then it was not reasonably likely that any variation between the wording of the instruction and the verdict form caused the jury to believe that it must reject D&G’s claim. The Eighth Circuit thus concluded that the instructions fairly and adequately submitted the issues and therefore affirmed the district court’s judgment.

This case is No. 18-2121.

Attorneys: Elizabeth R. Odette (Lockridge Grindal Nauen PLLP) for D&G, Inc. d/b/a Gary’s Foods, Blue, Goose Super Market, Inc. and Nemecek Markets, Inc. David J. Lender (Weil Gotshal & Manges LLP) for C&S Wholesale Grocers, Inc.

Companies: D&G, Inc. d/b/a Gary’s Foods, Blue; Goose Super Market, Inc.; Nemecek Markets, Inc.; C&S Wholesale Grocers, Inc.

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