On Thursday, 1 June, Pacific Seafood formally opened a surimi plant in Newport, Oregon, U.S.A. it purchased from Trident Seafoods in April. But the transaction continues to be dogged by allegations of improper dealings between the two companies.
Trident announced it had sold the plant, along with a nearby surimi and fishmeal plant, on 10 April. Trident had operated the plant since 1999, but said it decided to sell it because it “has been financially unprofitable.”
On 1 June, Pacific announced it had opened the plant for the season after updating its equipment and computer systems and hiring a combined 120 former and new employees to staff the facility.
“We’re thrilled to be able to start operations,” said Dan Occhipinti, a spokesman for Pacific Seafood. “We made a commitment to Newport fishermen to keep this facility open, and we’re excited to continue our partnership with the Newport community.”
But a lawsuit filed on 24 May against Pacific Seafood and Trident has cast doubt on the legitimacy of the transaction that allowed Pacific to become the dominant player on Newport’s waterfront, and local fishermen have also expressed concerns about a potential Pacific monopoly there.
The lawsuit, filed by the law firm Haglund Kelley on behalf of Innovation Marine Protein and Front St. Marine, two companies based in Oregon, asserts that Trident rejected a USD 1.8 million (EUR 1.6 million) offer for the Newport property and instead sold it to Pacific for USD 1.03 million (EUR 921,000).
“Defendants conspired to restrain trade by illegally transferring seafood processing assets to Pacific Seafood at below-market prices for the purpose of maintaining highly concentrated conditions in ex-vessel seafood markets on the West Coast for the mutual benefit of the co-conspirators,” the lawsuit claims.
Innovation Marine Protein is owned by Richard Carroll and Edward Backus. Carroll is the president and founder of Pacific Northwest Marine Products, which develops and operates fishmeal processing plants. Backus is the founder of Collaborative Fisheries Associates, a consultancy to seafood processors and other fishing-related businesses. Front St. Marine is owned by Stephen and Janet Webster, both local land developers in Newport. The groups are seeking USD 6 million (EUR 5.3 million) – triple the USD 2 million (EUR 1.8 million) in losses they estimate they accrued in “lost net profits in 2017” after being denied the opportunity to purchase and operate the whiting processing plant.
The lawsuit also alleges that the deal between Trident and Pacific creates a monopolistic situation in Oregon’s seafood sector.
“At stake in this litigation is the competitive future of the seafood processing sector on the central Oregon coast, which is concentrated in Newport,” it states. “If Pacific Seafood is not required to divest itself of the ...Trident assets it acquired pursuant to illegal anti-competitive conspiracies, Newport will become a ‘company town’ in the seafood markets for trawl-caught groundfish, onshore whiting and pink shrimp.”
In an interview with SeafoodSource, Occhipinti said Pacific denies all the allegations in the lawsuit.
“Yes, we deny them – 99 percent of the allegations in the lawsuit are completely false,” he said. “We’re confident that the court is going to see the case for what it is – that the allegations of conspiracy are laughable.”
Occhipinti said the lawsuit would not affect the plants’ operations in any way. In fact, he expects Pacific will hire another 30 or so employees as the whiting fishing picks up through the summer.
“We have a great relationship with the local fleet, and we think that will help bring in a consistent supply of whiting,” he said. “We’ve also got a number of experts in surimi production that we think will be able to increase the quality and quantity of the product we’re manufacturing. “
Trident chose to sell the plants to Pacific because the company was uniquely positioned to turn around the processing plant due to its existing presence in the industry,” Occhipinti said.
“The surimi business is challenging,” Occhipinti said. “Trident’s main focus is on Alaska, and this was the only operation that Trident had in the lower 48 [states]. But this is our backyard. It’s a product line extension for us, and we’ve got great sales folks and believe we’ll be able to open up markets both overseas and domestically and be able to make this plant successful.”
Trident CEO Joe Bundrant and General Counsel Joe Plesha did not respond to a request from SeafoodSource for comment on the lawsuit, but in a 10 April press release announcing the sale of the fishmeal plant, Bundrant explained why his company decided on Pacific.
“Trident believes Pacific has the best chance of successfully operating the plant because of its existing infrastructure in Newport and experience marketing products produced from Pacific whiting,” he said. “We wanted to do everything possible to make sure that the people who work at the plant have stable employment and our fishermen continue to have good markets for their catches. Pacific has agreed to offer jobs to all of Trident’s current employees and to purchase whiting from all our fishermen who want a market with them.”
Trident and Pacific have one more major hurdle to overcome before they return to business as usual. In what the Oregonian called a “highly unusual negotiation,” Pacific has engaged the Oregon Department of Justice in a correspondence regarding the terms of operation of the surimi plant. The entire correspondence has been seen by SeafoodSource, as it was included in the lawsuit against Pacific and Trident.
In a 7 May letter, Pacific Seafood requested immunity from any punishment for potential antitrust activity surrounding the acquisition of both Newport plants.
In an 11 May response, the ODOJ denied Pacific’s request, accusing the company of providing late and inadequate information about the transactions.
“Due to the late notice Pacific Seafood has provided on its Newport acquisitions, and Pacific Seafood’s general lack of cooperation with DOJ’s attempt to investigate the acquisitions’ underlying circumstances, DOJ is put in the unfortunate position of having to rely on the factual assertions of Pacific Seafood’s counsel without having the time or means to independently confirm those assertions,” the letter said. “As such, DOJ would consider itself free to revisit its enforcement decision in the event that any of the assertions in any of the letters provided to date in response to DOJ’s information request proved untrue.”
Nevertheless, the DOJ agreed not to undertake any enforcement action against Pacific so long as it committed to transparently marketing the properties for a 12-month period, operating the facilities consistent with Trident’s practices (including selling ice to fishermen and allowing them access to docks and offloading facilities), and running the plant for three seasons or making a fair effort to sell the property to a third-party buyer with the intentions of continuing to operate the facility as a surimi plant.
However, Occhipinti and Pacific responded on the following day, 12 May, offering amended terms to the DOJ. He stipulated that Pacific would commit to marketing the plant for a six-month period “to determine if…a legitimate, viable buyer emerges.” The letter also sought an amendment to the ODOJ’s stipulation that Pacific run the plant for three seasons, with Occhipinti requesting the option for the company to seek a buyer “if the business is not viable and we need to exit the surimi business before that time.”
The DOJ responded on 16 May, stating that its 11 May letter “was not an invitation to negotiate.”
“Your…response seems to assert that circumstances surrounding the acquisition of the surimi plant make it reasonable to modify the conditions DOJ outlined. You have not provided DOJ with any information, however, on which it could assess the reasonableness (or lack thereof) of the modifications you propose,” the DOJ’s letter said. “DOJ accordingly takes no view on your proposed modifications at this time, and stands by the conditions and assurances provided in its original correspondence.”
The ODOJ did not respond to a request for comment from SeafoodSource, but state lawyers have led two previous antitrust investigations into actions taken by Pacific, showing that the department has looked critically at the company’s past dealings. Complicating matters is the unseemly relationship between Trident CEO Joe Bundrant and Pacific CEO Frank Dulcich – they are brothers-in-law, according to The Oregonian.
Never one to back down from a fight, Pacific has applied its own pressure, appealing to local politicians to protect the jobs that Pacific is retaining through its operation of the surimi plant.
According to the Oregonian, one local politician, Rep. David Gomberg, said he had heard complaints about Pacific, but that preserving local jobs were of paramount importance to him and other local lawmakers.
"For the fishermen, I know it's better to have options," Gomberg told the newspaper. "But we're looking to preserve jobs and protect the local economy."
