“Big Three” tuna companies lose appeal that would have halted price-fixing class-action suit
The “Big Three” U.S. tuna companies being sued by their customers for price-fixing have had an emergency appeal denied, which would have halted the civil case against them while they disputed the class certifications in the suit.
In a 2-1 decision on 15 June, a panel of judges from the U.S. Court of Appeals for the Ninth Circuit ruled against granting a stay in the proceedings requested by Bumble Bee Foods, StarKist, and Chicken of the Sea. The three circuit judges involved in the ruling unanimously agreed to expedite the appeal and made their ruling in an expedited manner.
The request from the tuna companies was previously denied by U.S. District Court for the Southern District of California Judge Janis L. Sammartino, who is presiding over the class-action lawsuit alleging price-fixing. Bumble Bee and StarKist previously pleaded guilty in criminal cases brought by the U.S. Department of Justice’s Antitrust Division, and Chicken of the Sea did not face charges because it served as the whistleblower. On Tuesday, 16 June, former Bumble Bee President and CEO Chris Lischewski was sentenced to 40 months in prison and given a USD 100,000 fine (EUR 88,000) after being found guilty by a jury for playing a leading role in the conspiracy.
The civil lawsuit was filed in 2015, and in July 2019, Sammartino approved the division of the lawsuit into four tracks: claims brought by the direct purchasers bringing their owns suits against the tuna companies, or so called “direct-action plaintiffs” (DAPs); direct purchasers pursuing a collective class action (DPPs); indirect purchasers moving forward as a putative class, or commercial food-preparers (CFPs); and individual consumers proceeding as a joint class, or end-payer plaintiffs (EPPs).
On 3 January, 2020, Sammartino ordered the DPP and EPP class representatives to cease efforts to notify potential members of their respective class. In May, Sammartino denied the DPP class’ request to lift the stay on the case, saying they had not shown they would suffer irreparable harm in waiting until the classes are finalized – a decision that is also being appealed.
With the Ninth Circuit Court’s denial of the appeal, the case has been placed back in Sammartino’s control to proceed.
In Lischewski’s 16 June sentencing hearing, several of the parties in the civil litigation took advantage of an opportunity to speak regarding their preferences for punishment in the case. Their comments offered a glimpse into the damages being sought and their desire to pursue separate civil suits seeking remuneration from Lischewski, despite his being dismissed from the existing civil case.
William Blechman, an attorney representing Safeway, of the DAP class, said canned tuna is used by his client and others in the supermarket business as a loss-leader, and that price promotions on canned tuna are used primarily to draw in customers, and not as products the supermarkets directly profit from selling. He said Safeway had overpaid Bumble Bee by “millions of dollars” as a result of the price-fixing.
“So the fact that the conspiracy had a muted effect on the promotions and actually increased the price had a ripple effect on other parts of what was sold in the stores,” he said. “Based on that and other information in the record, Safeway believes itself to be have been directly and proximately harmed by the conspiracy.”
Blaine Finley, representing the CFP class, said his clients’ losses as a result of the price-fixing were in excess of USD 100 million (EUR 89 million), including a trebling of funds owed to account for damages.
“The commercial food preparers class would like to point out the defendant’s apparent lack of remorse,” Finley said.
Finley said it was notable that the defendants in the civil case had not sought a summary judgment.
“We would take this as recognition that we were damaged by this conspiracy to some degree or at least that this conspiracy would apply to the commercial food preparer class,” he said.
He estimated the average harm suffered per restaurant in his class to be in the “hundreds of dollars” range, and said those funds are “significant to anyone, but especially small-business owners in this climate.”
Chris Lebsock, representing Olean Wholesale Grocery Cooperative, said Lischewski’s action had “had a direct impact” on his client. He said the conspiracy had particularly hurt the grocery business, “which has always been characterized by thin margins.”
“[A financial] analysis shows that all three of the major tuna packers – sold approximately 5 billion of packaged tuna products to direct purchasers [during the conspiracy],” he said. “Prices were approximately 10 percent higher than they should have been.”
In Olean’s case, its USD 2 million (EUR 1.8 million) of packaged tuna product purchases during the time of the conspiracy amounted to damages estimated at USD 200,000 (EUR 178,000).
Steve Six, representing Associated Wholesale Grocers of the DPP class, asked the judge sentencing Lischewski to create a fund from Lischewski’s criminal fine that would be used as a credit against civil fines levied against him.
“[We would] have Mr. Lischewski pay into court to protect the money against the storm of factors that are likely coming his way,” he said.
Six’s suggestion was disregarded by the judge in his sentencing.