A federal judge has ruled former Bumble Bee Foods owner Lion Capital can be held liable in a civil lawsuit alleging it was involved in a price-fixing conspiracy involving the so-called “big three” U.S. tuna companies – Bumble Bee, Starkist, and Chicken of the Sea.
The U.K.-based private equity firm purchased Bumble Bee in 2010 and operated it until it was sold out of bankruptcy to FCF Co. in 2019, following its guilty plea to a charge of price-fixing, forcing it to pay a USD 25 million (EUR 22.6 million) fine and millions more in civil damages.
Lion Capital had argued it could not be held liable in a class-action lawsuit brought by four classes of parties who have alleged they were harmed by the conspiracy – the so called direct purchaser class, the end-payer class, the commercial food preparer class, and direct action plaintiffs.
However, in an 18 August decision, Judge Dana Sabraw of the U.S. District Court for the Southern District of California ruled Lion Capital remains eligible to be sued and is eligible to stand trial in the case.
San Diego-based U.S. District Judge Dana Sabraw in an order on Friday rejected a claim by UK-based private equity firm Lion Capital that it could not be held liable for what it called "normal" investment activities. Sabraw issued a similar ruling that reinstated Lion Capital and its affiliate, Big Catch Cayman, as defendants in the case in March 2022.
While Lion Capital argued no evidence existed linking them to the price-fixing conspiracy, which impacted more than USD 600 million (EUR 552 million) in canned tuna sales in the U.S., Sabraw wrote in his recent ruling that Lion Capital turned "a blind eye to Bumble Bee's collusion.”
"As a private equity owner, Lion Capital exerted pressure on Bumble Bee management to increase its profitability," Sabraw wrote. "Lion Capital made clear at the first post-acquisition board meeting, that it intended to hold Bumble Bee to its promise of high returns."
Sabraw said meetings between Lion Capital Partner Eric Lindberg (pictured) and Dongwon Enterprise Chairman Jae Chul Kim, the head of Starkist’s ownership group, discussing pricing matters showed Lion Capital was aware of potentially extralegal behavior at Bumble Bee. Sabraw added conversations between Lindberg and then-Bumble Bee President and CEO Chris Lischewski, which discussed how StarKist had become a more “predictable” competitor and that the big three tuna companies “respected” each other’s markets, add to the evidence of Lion Capital's knowledge.
Lindberg and other Lion Capital partners were also allegedly aware of sharing of pricing materials and decisions on future pricing between Bumble Bee executives and their counterparts at Starkist and Chicken of the Sea.
Allegedly, Lischewski asked Lindberg to encourage Lion Capital to support Bumble Bee’s “rational market behavior” toward a competitor, and he provided guidance to Lindberg ahead of his first meeting with Kim that Bumble Bee was willing to communicate with its competitors about pricing.
Additionally, Sabraw cited a letter postmarked 31 January, 2012, sent to Lindberg by an anonymous Bumble Bee employee, charging several Bumble Bee executives of engaging in collusive or anticompetitive behavior, including Ken Worsham and Scott Cameron, who both pleaded guilty to criminal charges related to the conspiracy.
“We are extremely concerned about the capabilities and direction of the management team, [including] potential anticompetitive activity: emails, meetings, phone calls to competitors suggesting to raise prices,” the letter said. “Growth was obtained due to dysfunctional competitors. In time you will learn what everyone knows. You purchased a bad can of tuna ... Fire the bums now. We are totally mismanaged. Bring in a new team that everyone will respect.”
Lindberg allegedly reviewed the letter and dismissed some of its allegations, but forwarded it to Lischewski for his opinion. According to Sabraw, Lischewski responded without addressing the antitrust accusations in the letter but offered to speak to Lindberg. In his testimony in Chris Lischewski’s criminal trial, Lindberg said he spoke with Lischewski but could only recall Lischewski “responded that the letter was not credible and offered a verbal rebuttal.”
Following his conversation with Lischewski, Lindberg took no further action, did not try to identify the employee who sent the letter, and did not follow Lion Capital or Bumble Bee’s standard protocol, which would have required him to send it to Bumble Bee’s general counsel.
“The letter is offered as tending to show that Lindberg was put on notice of Bumble Bee’s collusion. It is undisputed that Lindberg read it at the relevant time,” Sabraw wrote. “The letter was consistent with numerous communications the [Lion Capital] Deal Team received from Bumble Bee management before the letter, suggesting that Bumble Bee knew of its competitors’ future price increases which were not publicly known and accusing competitors of ‘rampant cheating.’”
Lion Capital told Reuters said it was disappointed with Sabraw's order, saying it had “only engaged in normal investment activities as a private equity firm.”
"At trial, Lion Capital expects to prevail on these claims, and will demonstrate that it is not liable for any misconduct because it did nothing wrong," Lion Capital said in a statement.
However, Lion Capital won a victory in receiving summary judgment for Big Catch Cayman, meaning it need not stand trial for involvement in the price-fixing conspiracy.
“Plaintiffs [did] not articulate a theory showing that Lion Capital used Big Catch to perpetrate fraud or that holding Big Catch liable is necessary to achieve an equitable result in this case,” Sabraw wrote.
Attorneys for the plaintiffs in the case did not immediately respond to requests for comment from Reuters.
Two settlement conferences have taken place in August 2023 between the plantiffs’ attorneys and Lion Capital, but thus far a deal has not been reached. No trial date has been set in the case.
Photo courtesy of Eric Lindberg/LinkedIn
