Restaurant, catering group nears settlement with Chicken of the Sea on price-fixing suit

Published on
May 24, 2019

A group of restaurants and catering companies have reached a USD 6.5 million (EUR 5.8 million) agreement with San Diego, California, U.S.A.-based Chicken of the Sea and its parent company, Thai Union, to settle a lawsuit alleging price-fixing.

The lawsuit stems from a price-fixing scandal in the U.S. canned tuna market exposed by a U.S. Department of Justice (DOJ) investigation in which Chicken of the Sea served as the whistleblower. The scandal led to prosecution of Chicken of the Sea's primary co-conspirators, Bumble Bee Foods and StarKist. Both companies pleaded guilty to criminal charges in cases brought by the DOJ.

Chicken of the Sea's potential settlement with the restaurants and catering companies, proposed Friday, 24 May, still must be approved by U.S. District Court for the Southern District of California Judge Janis L. Sammartino, who has not yet formally certified the grouping of affected companies involved in the agreement as an official class in the lawsuit. The parties suing claim to represent companies that indirectly purchased packages of tuna in 40-ounce sizes or greater from DOT Foods, Sysco, US Foods, Sam’s Club, Walmart, or Costco from June 2011 through December 2016.

Parties in the so-called "commercial food preparers" class involved in the proposed settlement include Capitol Hill Supermarket, Janet Machen, Thyme Cafe & Market, Simon-Hindi LLC, LesGo Personal Chef, Maquoketa Care Center, A-1 Diner, Francis T. Enterprises d/b/a Erbert & Gerbert's, Harvesters Enterprises, LLC d/b/a Harvester's Seafood and Steakhouse, Dutch Village Restaurant, Painted Plate Catering, GlowFisch Hospitality d/b/a Five Loaves Cafe, Rushin Gold LLC d/b/a The Gold Rush, Erbert & Gerbert, Inc., Groucho's Deli of Raleigh, Sandee' s Catering, Groucho 's Deli of Five Points, and Confetti's Ice Cream Shoppe.

The suit would only apply to class members in 27 states, including Arizona, Arkansas, California, Florida, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, West Virginia, and Wisconsin.

Not included in the settlement are any claims made by direct purchasers of foodservice-size packaged tuna products; by public entities; purchasers of products other than foodservice-sized packages; and companies with claims involving breach of contract, false advertising, or fraud.

“This settlement will provide substantial relief to plaintiffs and the proposed class,” lawyers representing the plaintiffs wrote. “The USD 6,500,000 [EUR 5,799,000] value of the all-cash settlement represents a substantial portion of the total damages that plaintiffs would seek to recover from COSI at trial if the class were certified. The settlement is the result of years of litigation and arm’s length negotiations between the parties. Plaintiffs’ counsel have investigated the facts and laws at stake in the case and concluded that resolving the claims against these defendants … are fair, adequate, reasonable, and in the best interests of plaintiffs and the proposed class. Plaintiffs’ counsel, who have litigated numerous antitrust and other class action matters, recommend this settlement to the court.”

If approved, the settlement will be paid in three installments, beginning with a USD 2.5 million (EUR 2.2 million) payment within 60 days of preliminary approval of the settlement. A second payment of USD 2 million (EUR 1.8 million) must be paid before 15 January, 2020, or within 30 days after final approval of the settlement (whichever comes first), and the final USD 2 million payment must be paid within 30 days after the settlement’s final approval. All class members who make claims will receive the same reimbursement rate per unit of packaged tuna, according to the terms of the settlement.

"Chicken of the Sea takes its responsibilities very seriously in this case. Chicken of the Sea also values these customer relationships and we think it's important to come to reasonable and appropriate agreements with them and move forward in a way that meets the needs of our consumers," Chicken of the Sea International Vice President and General Counsel Christianna Reed told SeafoodSource.

Reed said she expects a decision from the judge on the case on certifying the three proposed classes of litigants "in the near-term."

If approved, the settlement represents a turning point in company's efforts to resolve claims made as a result of its involvement in the price-fixing scandal. Besides the commercial food preparers groups, two other parties – the direct plaintiffs and end-payer plaintiffs – are also awaiting certification as groups.

"We have come to setttlements with a really large number of the independent reatilers who brought their own lawsuits. This is a next step as we reach settlements with class groups," she said. "We think this group has been reasonable and appropriate in working with us in finding the right solution here. We hope and expect the other classes will work with us in a reasonable way to find the right outcome to meet the needs of everyone involved."

The attorneys pursuing the case are seeking between USD 2 million (EUR 1.8 million) and USD 3 million (EUR 2.7 million) for their work in litigating the case.

The plaintiffs’ lawyers, from the Washington, D.C.-based firm Cuneo, Gilbert & LaDuca, LLP, did not immediately respond to calls and emails from SeafoodSource requesting comment.

As a condition of the settlement, Chicken of the Sea must not engage in unfair competition, antitrust activity, or violation of consumer laws for two years from the date the agreement is approved. Additionally, Chicken of the Sea must abide by the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA), which requires it to share all relevant information relating to the case, including access to witness interviews and testimony, as the case continues to move forward with other class types.

“The settlement agreement is the product of a thorough assessment and evaluation of the strengths and weaknesses of plaintiffs’ case,” the plaintiffs’ attorneys wrote. “The parties have litigated important threshold issues in this case for several years. Defendants have produced hundreds of thousands of pages of discovery to plaintiffs. Dozens of depositions have proceeded.  Plaintiffs have engaged expert witnesses, and fully briefed and argued a motion for class certification. The settlement agreement reflects risks that plaintiffs must consider in continuing to litigate, including defending procedural and substantive pre-trial motions and the inherent risks of a jury trial should the case proceed that far. Weighing the stage of litigation against the risks that plaintiffs face in this litigation, there are no obvious deficiencies regarding the settlement. This factor also supports preliminary approval.”

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