Antitrust Law Daily Grocery chains’ claims against non-coop defendants in mushroom price fixing case fail
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Wednesday, January 9, 2019

Grocery chains’ claims against non-coop defendants in mushroom price fixing case fail

By Nicole D. Prysby, J.D.

Claims brought by Winn-Dixie Stores, Inc. and Bi-Lo Holdings, LLC, alleging that a cooperative, its members, and other defendants conspired to fix prices for mushrooms, failed against all defendants other than the cooperative, held a federal district court in Pennsylvania. The grocery store chains alleged that the mushroom cooperative’s members agreed to set increased minimum prices at which its members and nonmembers would sell fresh mushrooms. They also alleged that the defendants reduced mushroom supply by purchasing mushroom farms and then selling them to nonmember purchasers who agreed to place permanent deed restrictions on the properties prohibiting their use for any business related to mushroom growing. But the antitrust claims failed against all defendants other than the cooperative itself. Although the plaintiffs alleged specific facts with respect to the cooperative’s role in the alleged price fixing and supply control schemes, the complaint merely asserted that the other defendants also "participated in the improper conduct alleged." Common membership in a trade association is not sufficient to create a plausible inference of a conspiracy and the plaintiffs could not rely on its allegations that the cooperative undertook actions as an agent of its members, because it did not assert facts demonstrating an agency relationship. Therefore, the Sherman Act Section 1 and Clayton Act claims failed. Sherman Act Section 2 claims failed because the allegations regarding monopoly power only applied to the cooperative and the complaint failed to allege that any of the individual member defendants had a dangerous probability of achieving monopoly power. The court did find that the claims were timely, because they were tolled due to class action tolling and statutory tolling (Winn-Dixie Stores, Inc. v. Eastern Mushroom Marketing Cooperative, January 8, 2019, Schiller, B.).

Background. Winn-Dixie Stores, Inc. brought antitrust claims alleging that the Eastern Mushroom Marketing Cooperative ("EMMC"), its members, and certain non-member distributors acted in violation of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act by conspiring to set artificially-inflated prices for fresh Agaricus mushrooms and implementing a supply control scheme related to the production of mushrooms. They alleged that EMMC’s members agreed to set increased minimum prices at which its members and nonmembers would sell fresh mushrooms and that the agreed-upon minimum prices were higher than the prices prevailing in those regions prior to EMMC’s formation. It also alleged that EMMC members were able to pressure non-EMMC members to force independent growers to join EMMC or to refrain from selling mushrooms at lower prices that would undermine the agreed-upon anticompetitive prices, by threatening a group boycott in which they would not sell mushrooms to other growers who needed them to meet short-term supply needs. Winn-Dixie asserted that EMMC reduced mushroom supply by purchasing mushroom farms and then selling them to nonmember purchasers who agreed with EMMC to place permanent deed restrictions on the properties prohibiting their use for any business related to mushroom growing. It also alleged that the Department of Justice filed a complaint against EMMC in 2005 which eventually led to a judgment that required EMMC to eliminate the deed restrictions from all the properties it shut down.

Winn-Dixie had opted out of class action litigation making similar allegations against EMMC. As previously reported, that class action litigation settled in December 2018.

Sherman Act claims. As a preliminary matter, the court rejected Winn-Dixie’s assertion that the claims should go forward simply because the court deciding a similar motion in the class action litigation found that the claims withstood dismissal. Winn-Dixie may not opt out of the class litigation and simultaneously rely on the decisions made in that case.

Winn-Dixie’s Sherman Act Section 1 claims failed against all defendants other than EMMC. The allegations were specific with respect to the EMMC’s alleged role in the alleged price fixing and supply control schemes. However, for the other defendants, the complaint merely asserted that they also "participated in the improper conduct alleged." Essentially, Winn-Dixie argued that it made a plausible showing that each EMMC-member defendant participated in a Section 1 conspiracy because EMMC membership provided the opportunity for the defendants to exchange information or make an agreement, the trade association engaged in anticompetitive conduct, and the defendants knew of such conduct and acquiesced in it. But the court rejected that argument. Common membership in a trade association is not sufficient to create a plausible inference of a conspiracy. Winn-Dixie could not rely on its allegations that the EMMC undertook actions as an agent of its members, because it did not assert facts demonstrating an agency relationship. And Winn-Dixie failed to allege that a number of the defendants were EMMC members.

Winn-Dixie’s Sherman Act Section 2 claims against defendants other than EMMC also fail, for the same reasons similar claims failed in the class action litigation. The allegations regarding monopoly power only applied to EMMC and the complaint failed to allege that any of the individual member defendants had a dangerous probability of achieving monopoly power.

Clayton Act claims. Winn-Dixie’s Clayton Act claims against defendants other than EMMC failed. Winn-Dixie alleged that the EMMC was acting as an agent of its members, but did not present any factual allegations to show how the EMMC’s members directed or otherwise participated in the EMMC’s allegedly anticompetitive purchases. Nor did the complaint include other allegations in support of the alleged agency relationship.

Timeliness issues. The defendants argued that because Winn-Dixie did not file the complaint until 2015 (which was nearly nine years after the commencement of the class litigation based on nearly identical claims), the claims were time-barred. Winn-Dixie asserted that the limitations period should be tolled, because of class action tolling or fraudulent concealment, and that the continuing violation doctrine applies to the claims.

The court considered whether class action/American Pipe tolling should apply, given that Winn-Dixie filed its individual lawsuit before the class certification as decided. The issue of whether tolling should apply in that situation has not been decided by the Third Circuit, but the court was persuaded by logic adopted by the majority of Circuit courts considering the issue. Those courts have held that because putative class members may rely on class tolling if they opt out after a decision on class certification and subsequently file individual claims, the same should be true for those who make the same choice prior to a class certification decision. Therefore, Winn-Dixie’s claims against the EMMC are not time-barred.

Winn-Dixie also asserted that their claims are subject to all tolling that applied to the class plaintiffs, including tolling under 15 U.S.C. § 16(i) due to the DOJ’s action against the EMMC. The court agreed. Although the class complaint asserted violations of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act—whereas the DOJ complaint alleged violations of Section 1 only—all three violations in the class complaint arose, in part, from the alleged supply control campaign, which was the focus of the DOJ complaint. It is clear from the face of the two complaints that allegations in the class complaint are "based . . . in part" on the conspiracy at issue in the DOJ action, such that the statute of limitations was tolled for the class. Similarly, the inclusion of additional defendants beyond the EMMC in the private action does not alter the court’s analysis. Although the DOJ action was brought against only the EMMC, the Supreme Court has made clear that § 16(i) tolls claims brought against not only those defendants who were parties to the government action but all defendants in the related private action. Based on the same principles underlying the American Pipe doctrine, Winn-Dixie should be able to benefit from the same tolling regimes that the class plaintiffs could.

The court considered the timeliness of claims against defendants who were voluntarily dismissed from the class action and concluded that the statute of limitations must be treated as tolled for the pendency of claims against a defendant, even if the defendant is ultimately dismissed and the statute of limitations then begins running again. Therefore, because those defendants were dismissed from the class action on November 13, 2014, the statute of limitations was tolled only until that date for these three defendants. In the absence of another form of tolling, any amended claims filed against those defendants can accrue only on or after March 11, 2003, since Winn-Dixie concede that over one year passed from the date of dismissal until the date that they filed the complaint.

The case is No. 5:15-cv-06480-BMS.

Attorneys: Krishna B. Narine (Lauletta Birnbaum LLC) for Winn-Dixie Stores, Inc. and Bi-Lo Holdings, LLC. H. Laddie Montague, Jr. (Berger Montague PC) and William A. Destefano (Stevens & Lee) for Eastern Mushroom Marketing Cooperative, Inc., Brownstone Mushroom Farms, Inc. and To-Jo Fresh Mushrooms, Inc.

Companies: Winn-Dixie Stores, Inc.; Bi-Lo Holdings, LLC; Eastern Mushroom Marketing Cooperative, Inc.; Brownstone Mushroom Farms, Inc.; To-Jo Fresh Mushrooms, Inc.

MainStory: TopStory Antitrust PennsylvaniaNews

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