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From Antitrust Law Daily, August 3, 2016

Claims that polystyrene product makers boycotted recycling model fail

By Jeffrey May, J.D.

A conspiracy involving the five largest converters of polystyrene products and their trade association to boycott a recycling business model could not be reasonably inferred from the evidence presented by the complaining recycler, the U.S. Court of Appeals in Boston has ruled. Although the First Circuit had revived the antitrust claims of Evergreen Partnering Group, Inc., when it first addressed the case in 2013, it has now affirmed summary judgment in favor of the defendants (Evergreen Partnering Group, Inc. v. Pactiv Corp., August 2, 2016, Torruella, J.).

The appellate court, viewing in combination all of the admissible evidence and drawing all reasonable inferences in Evergreen’s favor, concluded that the recycler failed to provide evidence that sufficed to raise a reasonable inference of unlawful action. Evergreen, which has now ceased operations, claimed that the five main national polystyrene converters—Dart Container Corporation, Dolco Packaging, Genpak, LLC, Pactiv Corporation, and Solo Cup Company—working through the American Chemistry Council (ACC) engaged in a boycott.

Evergreen thought it could make a profit recycling polystyrene products into a recycled resin that could be sold to converters to create new polystyrene products. Under its business model, Evergreen intended to obtain revenue from three different sources: (1) charging an "environmental fee" to large end users, such as school districts that used polystyrene food trays in their cafeterias, for collecting their used polystyrene products; (2) selling recycled resin to polystyrene converters; and (3) charging converters a commission on the products sold containing its resin. Some of the converters initially appeared receptive to working with Evergreen; however, they were reluctant to pay royalties to use Evergreen’s recycled resin.

The crux of Evergreen’s claim, in the court's view, was that the defendants conspired to prevent its recycling model involving commission payments from becoming viable by universally rejecting any agreements that involved commissions and by blocking the recycler's access to other customers through the promotion of a rival. According to Evergreen, the converters, during a conference call for members of a subgroup of the ACC that focused on promoting plastic foodservice packaging, agreed that no individual converter would enter any deal with Evergreen that involved the payment of commissions. In addition, the converters purportedly decided to promote a "sham" competitor called Packaging Development Resources of California, LLC (PDR)—a California-based polystyrene recycler whose business model relied entirely on selling its recycled resin and had no commission component—to block Evergreen's access to polystyrene end users.

Direct evidence. At the outset, the appellate court rejected Evergreen's assertion that a deposition statement that the trade association's plastics foodservice packaging subgroup "wanted to pick a winner" during the conference call was direct evidence of a conspiracy. Evergreen contended that the statement, which was made by an employee of a member of the subgroup that was not a defendant in the case, could only be interpreted as meaning that the subgroup intended to promote PDR to Evergreen's detriment to deny Evergreen access to end users of polystyrene products.

The statement could not be interpreted as referring to winners and losers in "any kind of anticompetitive sense," the court explained. The court's interpretation that the subgroup simply wanted to support proposals that would be successful was not changed by other evidence that Evergreen suggested would support an inference of favoritism towards PDR. For instance, meeting minutes from the conference call stating that the ACC subgroup discussed whether or not to provide support to several polystyrene recyclers, including Evergreen, did not suggest that the members were considering sabotaging Evergreen.

Evergreen also offered evidence that the ACC subgroup introduced PDR to polystyrene users. However, the antitrust laws allow trade associations to make nonbinding recommendations about businesses and products, the court noted.

Inference of conspiracy. Without direct evidence of a conspiracy, Evergreen contended that other evidence, taken together, created a reasonable inference of conspiracy. Evergreen pointed to the converter defendants’ refusal to pay commissions on any products sold containing Evergreen's recycled resin. The defendants' decision to avoid paying more for recycled resin was understandable, according to the court, particularly in light of evidence that they each experienced significant quality problems with Evergreen's resin. Evergreen did not produce evidence that tended to exclude the possibility of independent action.

The appellate court agreed with the lower court there was substantial evidence inconsistent with conspiracy, such as the decision of several of the defendants to continue to purchase Evergreen's resin, despite their decision not to make commission payments. The resin purchases would be irrational if a conspiracy in fact existed, the court ruled.

The appellate court was looking for "traditional" conspiracy evidence of the type that helps to distinguish between conscious parallelism and collusion, such as communications between defendants. Evergreen claimed that representatives of the converter defendants were told not to deal with Evergreen. The court noted, however, that the statements were largely inadmissible hearsay or taken out of context. Moreover, the defendants' participation in a trade association did not create a triable issue. Lastly, the court rejected Evergreen's characterization of PDR as a sham, based on the plaintiff's allegations that the firm was not actually operational and landfilled the trays it collected.

The case is No. 15-1839.

Attorneys: Richard Wolfram (Law Office of Richard Wolfram, Esq.), Jan R. Schlichtmann, Orestes G. Brown, and Shaun Khan (Metaxas Brown Pidgeon LLP), Donald R. Pepperman (Blecher & Collins PC), Eric B. Goldberg (Wilchins Cosentino & Friend LLP) for Evergreen Partnering Group, Inc. John M. Faust (Law Office of John M. Faust, PLLC), William E. Lawler, III and Ralph C. Mayrell (Vinson & Elkins LLP) for Dart Container Corp. and Solo Cup Co. Steven M. Cowley (Duane Morris, LLP) for Dolco Packaging. Richard A. Sawin, Jr. and Richard E. Bennett (Michienzie & Sawin LLC) for Pactiv Corp. Ralph T. Lepore, III, Michael T. Maroney, Benjamin M. McGovern, and Scott A. Moore (Holland & Knight LLP) for American Chemistry Council.

Companies: American Chemistry Council, Inc.; Evergreen Partnering Group, Inc.; Pactiv Corp.; Solo Cup Co.; Dolco Packaging Co.; Dart Container Corp.

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