In re Packaged Seafood Prods. Antitrust Litig.

338 F.Supp.3d 1118

IN RE: PACKAGED SEAFOOD PRODUCTS ANTITRUST LITIGATION

Case No.: 15-MD-2670 JLS (MDD)

United States District Court, S.D. California.

Signed September 5, 2018

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS

(ECF Nos. 997, 999, 1248)

Hon. Janis L. Sammartino, United States District Judge

Presently before the Court are three motions to dismiss. First, Defendants Lion Capital LLP, Big Catch Cayman LP, and Lion Capital (Americas), Inc. (the "Lion Defendants," "Lion Entities," or "Defendants") filed a Motion to Dismiss the Cherokee Nation's Complaint, (ECF No. 997). Plaintiff the Cherokee Nation's filed an Opposition to, ("Nation Opp'n," ECF No. 1233), the Motion.

Second, the Lion Defendants filed a Motion to Dismiss the Bashas' Plaintiffs' Complaint, ("MTD," ECF No. 999).¹ Plaintiffs Bashas' Inc., Marc Glassman, Inc., and 99 Cents Only Stores LLC's ("Bashas Plaintiffs") filed an Opposition to, ("Bashas Opp'n," ECF No. 1247), the Motion. Defendants filed a Reply in Support of, (ECF No. 1275), their motions, which respond to both the Cherokee Nation's and the Bashas Plaintiffs' Opposition briefs.

Third, the Lion Defendants filed a Motion to Dismiss, ("Four Track MTD," ECF No. 1248), the operative complaints² filed by the Indirect Purchaser End Payer Plaintiffs ("EPPs"), the Commercial Food Preparer Plaintiffs ("CFPs"), the Direct Purchaser Class Plaintiffs ("DPPs"), and the Direct Action Plaintiffs ("DAPs"). Those Plaintiffs filed Responses in Opposition to the Motion, ("DAP Opp'n," ECF No. 1273; "EPP/CFP Opp'n," ECF No. 1279; "DPP Opp'n," ECF No. 1282), and Defendants filed a Reply in Support of, ("Four Track Reply," ECF No. 1295), their Motion.

The Court heard oral argument for all three motions on July 30, 2018. Having considered the parties arguments, the evidence, and the law, the Court rules as follows.

BACKGROUND

The case concerns an alleged conspiracy to fix the prices of packaged seafood throughout the United States. Plaintiffs Bashas' Inc., Marc Glassman, Inc., and 99 Cents Only Stores LLC are businesses that have purchased packaged seafood from the three largest domestic producers of packaged seafood products. ("Bashas Compl.," No. 17-CV-2487, ECF No. 1, ¶¶ 16–18.)³ Plaintiff the Cherokee Nation is a federally recognized sovereign Indian nation and brings this action in its proprietary capacity and under its parens patriae authority. (First Am. Compl. ("Nation FAC"), ECF No. 823, ¶¶ 11–12.)⁴ The remaining Plaintiffs have been divided into four tracks: (1) Direct Action Plaintiffs, who are direct purchasers proceeding against Defendants individually; (2) Direct Purchaser Plaintiffs, who are direct purchasers proceeding on behalf of a putative class; (3) Indirect Purchaser Commercial Food Preparer Plaintiffs ("CFPs"), who are indirect purchasers proceeding on behalf of a putative class; and (4) Indirect Purchaser End Payer Plaintiffs ("EPPs"), who are indirect purchasers proceeding on behalf of a putative class. The various civil actions relating to this conspiracy were consolidated in a multi-district litigation ("MDL") and centralized pretrial proceedings to this Court on December 9, 2015, (see Transfer Order, ECF No. 1).

This particular aspect of the MDL deals with three Defendants, who are specially appearing: Lion Capital LLP, Lion Capital (Americas), Inc., and Big Catch Cayman LP. Defendant Lion Capital LLP ("Lion Capital") is a British private equity firm organized under the laws of the United Kingdom ("U.K."). (Bashas Compl.

¶ 270; MTD 10.)⁵ Lion Capital contends it does not have any offices, employees, or operations in the United States and its only U.S.-based asset is Lion Capital (Americas), Inc.⁶ (Declaration of Simon Brown ("Brown Decl."), ECF No. 997-2, ¶ 6.)

Defendant Lion Capital (Americas), Inc. ("Lion Americas") is a Delaware corporation with its principal place of business in Santa Monica, California. (MTD 11.) Lion Americas moved its office from New York to Santa Monica in October 2012. Lion Americas provides investment advice regarding investments in North America to Lion Capital, which Lion Capital considers on behalf of the investment funds that it manages. (Id. )

Defendant Big Catch Cayman LP ("Big Catch") is a holding company organized under the laws of the Cayman Islands and has no offices or employees. (Bashas Compl. ¶ 272; MTD 11.) Big Catch's only assets are its interest in Bumble Bee Holdco SCA, a subsidiary and owner of Bumble Bee's equity, and its interest in an unrelated technology company. (MTD 11.) Plaintiffs allege that Lion Capital owns a majority share of Big Catch. (Bashas Compl. ¶ 272.)

I. Pre-Purchase Activities and Lion's Purchase of Bumble Bee

The Bashas Plaintiffs allege that Lion Capital purchased Bumble Bee in December 2010 from a private equity firm. Centre Partners Management LLC, for $980 million. (Id. ¶ 270.) Plaintiffs further allege on information and belief that Lion Capital had access to Bumble Bee's financial and other records in the course of due diligence that it conducted for the acquisition. This, along with access to Bumble Bee senior executives, allegedly caused Lion Capital to learn of the ongoing conspiracy.⁷ (Id. ¶ 277.) In November 2010, Lion Americas executive Eric Lindberg⁸ told Bumble Bee CEO Christopher Lischewski that he was going to Asia to meet with representatives of both Dongwon and Thai Union, who are also defendants in this MDL. (Id. ¶¶ 20, 38, 278.) Lischewski responded to Lindberg saying a [Redacted] (Id. (alteration in original).)

Lion Capital's purchase of Bumble Bee was through a leveraged buyout ("LBO") by taking out debt secured only by Bumble Bee's assets. (Id. ¶ 300.) Lion Capital structured the LBO by creating an acquisition company to borrow money to acquire the subsidiary. Bumble Bee, and then placed the debt on Bumble Bee's books. (Id. ) Thus, when Lion Capital completed the transaction, Bumble Bee had total liabilities of [Redacted] and total assets of [Redacted]. (Id. ¶ 301.) Plaintiffs allege that Lion Capital was aware of the conspiracy and therefore undercapitalized Bumble Bee so that Bumble Bee would be unable to satisfy any judgment against it in the event the conspiracy was ever detected. (Id. ¶ 300.) Plaintiffs allege that before the Lion acquisition. Bumble Bee had a debt to total capital ratio of approximately sixty percent. (Id. ¶ 304.) According to Plaintiffs, Lion intentionally undercapitalized Bumble Bee as evidenced by the fact that Bumble Bee has a debt to total capital ratio of nearly ninety percent after acquisition. (Id. ) Plaintiffs contend that but for the supra-competitive profits earned by Bumble Bee, it would not have been able to satisfy its debt obligations and would have instead defaulted by the end of 2011. (Id. ¶ 305.)

II. Post-Purchase Activities by Lion Entities

Plaintiffs claim that after purchasing Bumble Bee, Lion Capital team members became "intimately familiar with Bumble Bee's business" and demonstrated that knowledge by regularly reporting facts concerning Bumble Bee to investors as part of periodic portfolio reviews. (Id. ¶ 280.) And, according to Plaintiffs, Lion Capital's acquisition of Bumble Bee, while Bumble Bee was earning "supra-competitive profits," positioned Lion to realize an increase in Bumble Bee's market value and eventual sale price. (Id. ¶ 279.)

In addition to receiving information, Plaintiffs allege Lion Capital took an active role in the ongoing conspiracy after [Redacted] (Id. ¶¶ 283-84.) Lindberg also met with Thai Union's chief executive in January 2011, where Plaintiffs allege "they discussed the conspiracy." (Id. ¶ 284.) In the months following Lion's purchase of Bumble Bee and Lindberg's meetings, defendants Chicken of the Sea, Bumble Bee, and Del Monte/StarKist agreed to increase their prices in May 2011. (Id. ¶ 285.) By the fall 2011, Chicken of the Sea, Bumble Bee, and StarKist increased their efforts to police each other's promotional pricing. (Id. ) Lion allegedly took an active role in enforcement as evidenced by Lindberg deciding to meet again with senior at Dongwon. (Id. ¶ 286.) [Redacted]. (Id. )

Plaintiffs allege that Bumble Bee continued to keep the Lion entities informed of anticompetitive behavior; for example, [Redacted]. (Id. ¶ 287.) However, [Redacted]. (Id. ) Plaintiffs allege that [Redacted]. (Id. ¶ 287 n.10.) [Redacted]. (Id. ) Bumble Bee increased its prices on January 17, 2018. [Redacted]. (Id. ¶ 288.)

[Redacted]. (Id. ) [Redacted]. (Id. ) On February 3, 2012, Lindberg sent an email response to an executive at Thai Union, who had asked Lindberg if he had suggestions how they could "[Redacted]. (Id. ¶ 289.) Lindberg's email stated: [Redacted]." (Id. )

On [Redacted] as well as an agreement between the defendants not to label their packaged tuna as "FAD-free."⁹ (Id. ¶ 290.) [Redacted]. (Id. ¶ 291.)

Next, in March 2012, [Redacted]. (Id. ¶ 293.) According to Plaintiffs, [Redacted]. (Id. ) Nonetheless, Lindberg encouraged Lischewski to make a statement and said:

[Redacted].

(Id. (emphasis omitted).) [Redacted]. (Id. ¶ 294.) In addition to Mr. Lindberg's meetings and communications, [Redacted]. (Id. ¶ 296.)

In December 2014, Lion was able to report Bumble Bee's earnings (i.e., its earnings before interest, taxes, depreciation, and amortization or "EBITDA") were a "record-breaking $150 Million," based on revenue of $1 billion. (Id. ¶ 297.) Plaintiffs allege the "record-breaking" financial performance was due to the ongoing conspiracy. (Id. ) On or about December 18, 2014, Thai Union announced that it intended to acquire Bumble Bee. (Id. ¶ 84.) [Redacted]. (Id. ¶ 279.) As part of the acquisition process, Thai Union and Bumble Bee submitted their proposal to the Department of Justice ("DOJ"). The merger review apparently led to a criminal investigation.

III. Department of Justice Investigation

Since at least 2015, various defendants have been under criminal investigation for antitrust violations as evidenced by Thai Union...