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From Antitrust Law Daily, June 22, 2015

Cap on antitrust damages for leniency application extends to RICO claims

By Jeffrey May, J.D.

Companies that obtain leniency from the Department of Justice Antitrust Division for cartel conduct are protected from related treble damages claims based on RICO violations, the federal district court in Sacramento, California, has decided. The Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (ACPERA) limits damages that private plaintiffs can recover in a civil action against a successful leniency applicant to “actual damages sustained by such claimant which is attributable to the commerce done by the applicant in the goods or services affected by the violation.” The court explained that the ACPERA does not restrict that limitation to the amount of damages for a Sherman Act violation alone (Morning Star Packing Co. v. SK Foods, L.P., June 18, 2015, Mueller, K.).

In 2008, Ingomar Packing Company and its president entered into a leniency agreement with the Antitrust Division regarding “possible price fixing, bid rigging, and market allocation, or other conduct violative of Section 1 of the Sherman Act, 15 U.S.C. § 1, in the processed tomato products industry in the United States.” Ingomar's leniency agreement was “conditional,” and the company's actual eligibility for ACPERA protection would be resolved at a later stage in the litigation. However, in a private civil damages action, Ingomar sought a determination that the actions underlying the plaintiff’s alleged RICO and other antitrust claims were committed “in connection with” those underlying the Sherman Act antitrust claims such that the ACPERA cap on damages applied to all claims. The plaintiffs—competitors in the processed tomato products business—asserted claims against Ingomar and others based on the Sherman Act, the Robinson-Patman Act, and the RICO statute, as well as a conspiracy to violate RICO.

Plain language of the ACPERA. The claims pled in the plaintiff’s second amended complaint were covered by the ACPERA’s damages limitation provisions as a matter of law, the court held. The plain language of the ACPERA provides that, in order for a leniency applicant to be eligible for the damages cap in a civil action, the civil action must allege a Sherman Act violation, based on conduct covered by a leniency agreement. It does not say the civil action must allege only a Sherman Act violation. It also does not exclude actions that include other antitrust claims as well, including RICO violations, the court explained.

Legislative intent. The court noted that the legislative history did not reflect a “clearly expressed legislative intention” contrary to the plain language of the statute. According to the legislative history, the ACPERA was intended to limit “a cooperating company’s civil liability to actual, rather than treble, damages in return for the company’s cooperation in both the resulting criminal case as well as any subsequent civil suit based on the same conduct.” The ACPERA should be read with the understanding it was enacted to incentivize stakeholders to report any anticompetitive behavior, and intended to prioritize criminal investigations and limit civil antitrust liability, in the court's view. In addition, the court pointed to the Antitrust Division's position that a leniency agreement “provides leniency from the Antitrust Division not only for a criminal antitrust violation, but also for other offenses committed in connection with antitrust violation.” The court determined that the alleged bribery, money laundering, violations of the Robinson-Patman Act, violations of the Travel Act, mail fraud and wire fraud, and conspiracy, all violations of RICO were committed in furtherance of anticompetitive behavior.

The case is No. 2:09-cv-00208-KJM-KJN.

Attorneys: Dale C. Campbell (Weintraub Tobin Chediak Coleman Grodin Law Corp.) for Morning Star Packing Company, LP, Liberty Packing Company, LLC, California Fruit & Tomato Kitchens, LLC, and Morning Star Co. Kathryn N. Richter (Schnader, Harrison, Segal & Lewis) for SK Foods, LP. Colin West (Morgan Lewis and Bockius LLP) for Ingomar Packing Co.

Companies: Morning Star Packing Company, LP; SK Foods, LP; Ingomar Packing Co.

MainStory: TopStory Antitrust RICO CaliforniaNews

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