Southern District Of California Dismisses Price-Fixing Claims Against Owners Of Major Tuna Purveyor
On January 28, 2020, the United States District Court for the Southern District of California dismissed antitrust claims alleging that a private equity fund holding an ownership interest in Bumble Bee Foods LLC (“Bumble Bee”) participated in a conspiracy with major tuna companies to fix the prices of their packaged seafood products. Judge Janis L. Sammartino granted defendants’ motion to dismiss claims against Lion Capital LLP (“Lion Capital”) and Big Catch Cayman LP (“Big Catch”) under FRCP 12(b)(6) with prejudice, determining that plaintiffs failed to state plausible claims for relief against these defendants under §1 of the Sherman Act. In Re: Packaged Seafood Products Antitrust Litigation, 15-MD-2670 JLS (MDD) (S.D. Cal. Jan. 28, 2019).
Plaintiffs in this multidistrict litigation are comprised of groups of tuna purchasers. Defendants in this action were: Lion Capital, a British private equity firm that owns Bumble Bee; Lion Capital (Americas), Inc. (“Lion Americas”), a subsidiary that provides advice to Lion Capital regarding its North American investments; and Big Catch, a holding company that owns Bumble Bee on behalf of investors. Plaintiffs alleged that Bumble Bee engaged in a price-fixing scheme with two competitors, relying on, among other things, guilty pleas in a parallel Department of Justice investigation. Ruling on a prior motion to dismiss in 2018, the Court found that plaintiffs’ claims against Lion Capital and Big Catch were deficient because they failed to plausibly lead to an inference of conspiracy. However, the claims against Lion Americas survived the 2018 motion to dismiss. Plaintiffs filed an amended complaint seeking to revive their claims against Lion Capital and its corporate “alter-ego” Big Catch, which these defendants opposed in the motion at issue in this decision.
The Court found that plaintiffs did not put forth any direct evidence of an agreement between Lion Capital and other members of the alleged conspiracy. In the absence of direct evidence, the Court proceeded to analyze the new circumstantial evidence alleged in the amended complaint. Specifically, plaintiffs’ supplemental claims included evidence of correspondence from a director of Lion Americas to the managing partner of Lion Capital, indicating that Lion Capital was briefed on meetings and involved in conversations about “rational pricing” among the competitor tuna companies. Analyzing the pleading requirements under §1 of the Sherman Act and Twombly, the Court concluded that this new circumstantial evidence in plaintiffs’ amended complaint did little to “refute the Court’s prior holding that discussions of rational pricing [between competitors], without more, does not plausibly lead to an inference of a conspiracy.” The Court opined that none of the evidence suggested anything more than Lion Americas keeping Lion Capital apprised of the performance of its investment in the regular course of business. Citing Ninth Circuit precedent, the Court held that it “cannot . . . infer an anticompetitive agreement when factual allegations just as easily suggest rational, legal business behavior.”
Having determined that the amended complaint failed to tie Lion Capital or Big Catch to the alleged conspiracy through either direct or indirect evidence, the Court addressed whether Lion Capital or Big Catch could be vicariously liable for the actions of Lion Americas. Plaintiffs put forth two theories of vicarious liability. First, that Lion Capital is liable because of the actions of employees of Lion Americas, also known as agency liability. Second, that Lion Capital is liable for the actions of Lion Americas through the representative services doctrine. The Court did not find either argument persuasive.
Under a theory of agency liability, plaintiffs asserted that Lion Capital was accountable for the anticompetitive actions of certain Lion Americas employees. Plaintiffs argued that a Membership Agreement signed by employees of Lion Americas established that Lion Capital exerted day-to-day control over their actions on a granular level. Plaintiffs maintained that when these individuals carried out their duties related to management of the Bumble Bee investment, they were at all times acting primarily in the interest of Lion Capital. Defendants responded that Lion Capital merely had high-level oversight over the Lion Americas employees, and the Membership Agreement emphasized that employees should be devoted to the interests of the “LLP and its Associates,” including Lion Americas itself.
The Court agreed with defendants, holding that, under Supreme Court precedent in United States v. Bestfoods, 524 U.S. 51 (1998), “parent corporations are generally not liable for the actions of dual employees working nominally on behalf of a subsidiary” unless it is shown that the parent had “pervasive control” over the subsidiary. The Court found that plaintiffs did not plead requisite facts to show the employees were acting primarily in the interests of the parent entity, Lion Capital, when acting as dual agents of both companies. Accordingly, plaintiffs were unable to overcome the Bestfoods presumption that they were wearing their “subsidiary hats and not their parent hats” when performing duties within Lion Americas’ corporate function as an independent fund advisor to Lion Capital.
Next, plaintiffs asserted that Lion Capital should be liable for the actions of Lion Americas under the representative services doctrine. Plaintiffs argued that the representative services doctrine finds liability for a parent entity where the subsidiary “functions as the parent corporation’s representative in performing services that are sufficiently important that, if it (the parent entity) did not have a representative to perform them, the parent would undertake to perform on its own.” Here, relying on Supreme Court precedent in Daimler AG v. Bauman, 571 U.S. 117 (2014), the Court agreed with defendants’ argument that the representative services doctrine is likely unconstitutional as the test “stacks the deck” against defendants and “violates traditional notions of fair play.” In addition to the constitutional issues with the doctrine, the Court noted that the representative services doctrine deals with establishing personal jurisdiction not substantive liability. Accordingly, the Court “decline[d] to adopt Plaintiffs’ novel theory of liability under the representative service doctrine.”