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From Antitrust Law Daily, January 6, 2014

Settlement in tomato products price fixing class action gets preliminary approval

By Jeffrey May, J.D.

A proposed $6.4 million settlement of a consolidated class action brought on behalf of food products manufacturers against processed tomato products sellers for allegedly conspiring to fix prices has been given preliminary approval by the federal district court in Sacramento (Four in One Co. v. SK Foods, L.P., January 2, 2014, Mueller, K.).

The plaintiffs brought multiple actions in 2008 and 2009 against defendants SK Foods, L.P., Ingomar Packing Company, and Los Gatos Tomato Products, and related individuals. The plaintiffs alleged that they were overcharged for processed tomato products. The suits, which arose from a Department of Justice investigation into anticompetitive conduct in the processed tomato industry, were consolidated together in 2009.

The motion for preliminary approval of the settlement follows limited “document discovery” in the matter. The Justice Department was granted a limited stay of discovery in the case in light of the ongoing criminal proceedings. As a result, no depositions have been taken.

Settlement Class. For purposes of the settlement, the court certified a class of hundreds of direct purchasers of processed tomato products from defendants Ingomar, Los Gatos, or SK Foods between February 1, 2005 and December 31, 2008. The plaintiffs satisfied the requirements of Federal Rule of Civil Procedure 23(a) and the requirements of Rule 23(b)(3). With respect to the predominance inquiry of Rule 23(b)(3), the court noted that the major issues in the case stemmed from an alleged overarching conspiracy to raise and fix the prices of processed tomato products. The court also concluded that the class was narrowly defined; there was little suggestion there would be individual issues apart from the calculation of individualized damages; and the class action would promote efficiency by allowing a number of claims to be litigated simultaneously.

Moreover, a class action was superior to individual resolution of the antitrust claim. If each class member were to sue, each company would bring essentially the same claim for a relatively small amount of money and might have to expend significant individual costs to hire experts, the court explained.

Settlement Preliminary Approval. The proposed settlement was within the range of possible approval, the court decided. Thus, the court granted preliminary approval to the settlement. However, it noted that its “preliminary approval at this early stage is not without reservation.”

Under the proposed settlement, Ingomar agreed to pay $3,500,000, and Los Gatos agreed to pay $2,900,000 for release of all class members’ antitrust claims against the companies and their employees. The two proposed settlement agreements were substantially similar, except to the extent that the Los Gatos settlement agreement contained a “blowup provision” where if 25 percent of the class members opted out, then Los Gatos would have the opportunity to rescind the agreement.

The court noted that defendant Ingomar had been accepted into the U.S. Department of Justice’s amnesty program based on cooperation in the criminal investigation under the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (ACPERA). Thus, the plaintiffs could not recover treble damages from Ingomar or hold the company jointly and severally liable if the company cooperated under ACPERA.

SK Foods, which had declared bankruptcy, was not part of the proposed settlement agreements before the court. However, the plaintiffs might still be able to recover from SK Foods’ owner/chief executive officer separately from the proposed class settlements, through ongoing bankruptcy and criminal restitution proceedings, it was noted.

With respect to attorney fees, plaintiffs’ counsel did not plan to seek fees in excess of 25 percent of the recovery. The settlement agreement contained a “clear sailing” provision, in which the defendants agreed not to contest the class counsels’ application for attorney fees.

The court explained that, before it would consider granting final approval of the settlement, the parties would need to provide some additional information on class counsel’s experience in class action antitrust cases and on the bases for the settlement amounts. Among other things, the parties would need to explain how the monetary settlement terms related to the merits of the class members’ antitrust claims; to provide evidence concerning the mediation and negotiations of the proposed settlement agreements; and to provide information on other individual settlements. A hearing on the final approval of the settlement was set for June 6.

This is Case 2:08-cv-03017-KJM-EFB.

Attorneys: Arthur N. Bailey (Hausfeld LLP) and Steig Olson (Quinn Emanuel Urquhart & Sullivan LLP) for plaintiffs. Paul Robert Griffin (Winston & Strawn LLP) for SK Foods, LP. Colin West (Bingham McCutchen LLP) for Ingomar Packing Co. George A. Nicoud (Gibson, Dunn & Crutcher, LLP) for Los Gatos Tomato Products.

Companies: Four in One Co. Inc.; SK Foods, LP; Ingomar Packing Co.; Los Gatos Tomato Products

MainStory: TopStory Antitrust CaliforniaNews

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