Former Bumble Bee Foods owner Lion Capital and its affiliate, Big Catch Cayman, have been reinstated as defendants in a class-action lawsuit targeting the companies involved in a conspiracy to fix the prices of canned tuna in the United States.
On 23 March, 2022, Judge Dana Sabraw of the U.S. District Court for the Southern District of California reversed an earlier ruling made in January 2020 that had released the two British private equity funds from the case, which involves claims that Bumble Bee, StarKist, and Chicken of the Sea engaged in anti-competitive practices when setting the prices of canned tuna sold in the U.S. market between 2011 and 2013. Bumble Bee and StarKist pleaded guilty in 2017 and 2018, respectively, to criminal charges of price-fixing and were each fined tens of millions of dollars.
Sabraw ruled in favor of a motion from the direct-action plaintiffs in the case to reconsider Judge Janis L. Sammartino’s decision to release Lion Capital and Big Catch Cayman from the suit. Sammartino, who stepped away from handling the case in August 2021, said in her ruling there was insufficient evidence either firm had participated in the conspiracy.
In his ruling, Sabraw said more details have since emerged showing evidence Lion Capital Founder Lyndon Lea and Lion Capital employees Eric Lindberg, Jacob Capps, and Jeff Chang had knowledge of the conspiracy, and had potentially engaged in it.
“Lion Capital had access to Bumble Bee’s financial records and executives who are now known to have participated in the conspiracy. Specifically, Lion Capital inquired about the increase in Bumble Bee’s per-can profit margins since 2006, and learned it was the result of a price increase and the can downsize in 2008. It can reasonably be inferred that, as a ‘sophisticated investment firm’ and in keeping with its claims of expertise in the consumer sector and ‘granular knowledge’ of the companies it acquired, Lion Capital knew of the contemporaneous industry-wide downward pressure on product pricing due to the falling price of raw tuna and decreasing market demand for canned tuna,” Sabraw wrote. “In a competitive market canned tuna prices would have decreased. Bumble Bee prices increased.”
Sabraw said allegations that Lindberg was advised by then-Bumble Bee President and CEO Chris Lischewski to discuss “rational market behavior” with Dongwon Chairman Jae-chul Kim – who oversaw operations at StarKist – also led him to his decision.
“After the guilty pleas and Lischewski’s conviction, in the context of the pre-acquisition meetings with competitors, and in light of other allegations in the complaint which shed additional light on the issue, it can reasonably be inferred that ‘rational market behavior’ was a euphemism for collusive pricing agreements among Bumble Bee, StarKist, and [Chicken of the Sea],” Sabraw wreote. “Prior to the meeting, Lindberg reviewed the “talking points” with Lea and others at Lion Capital.”
Sabraw said allegations that Lion Capital was involved in policing compliance and enforcing collusive pricing agreements also contributed to his decision. He cited evidence Lindberg discussed working together “on the owner level” to help “improve” the industry with Thai Union President and CEO Thiraphong Chansiri, who oversaw Chicken of the Sea, as further evidence of Lion Capital’s involvement in the scheme.
“The court has already determined that the alleged email exchange supports a reasonable inference that [Thai Union] and Lion Capital sought to clamp down on what they perceived as ‘cheating’ on the pricing agreements,” Sabraw wrote. “In this instance, the court focuses on the fact that Chansiri reached out to Lindberg ‘on the owner level.’ Lindberg had previously held himself out as a representative of Bumble Bee’s owner, and in fact was a Lion Capital executive officer. It is therefore not surprising that he was contacted in that capacity. These specific allegations support a reasonable inference that Lindberg acted on behalf of Lion Capital when he engaged in the policing and enforcement of the collusive agreements.”
Lea himself was potentially involved in the conspiracy, Sabraw wrote, since Lea attended most Bumble Bee board meetings followed by off-the-record ‘executive sessions’ or private briefings that “included competitor information and developments which revealed collusive dealings with Bumble Bee’s competitors.”
“To the extent Lea did not himself directly communicate with Bumble Bee executives, Lindberg, Capps, and Chang provided reports,” Sabraw wrote. “For example, on 28 March, 2012, Chang reported to Lea about a board meeting the day before. His report included non-public information about StarKist and [Chicken of the Sea] profitability and plans for Bumble Bee to closely align its list pricing with them as of 1 April, 2012.”
Sabraw said the argument made by plaintiffs that Lion Capital had “sufficient material facts to support a reasonable inference that Lion Capital learned prior to completing the acquisition that Bumble Bee’s profits were the product of pricing actions which would be untenable in a competitive market and were in fact the product of anticompetitive agreements,” then following its purchase of Bumble Bee, set financial goals for Bumble Bee that were “untenable in the absence of collusion,” as further evidence compelling him to overturn Sammartino’s decision.
“As equitable owner with knowledge of Bumble Bee’s participation, Lion Capital could have directed Bumble Bee to disassociate itself from the conspiracy. Lion Capital’s role in knowingly encouraging Bumble Bee’s collusion was crucial to the continued viability of the conspiracy,” Sabraw wrote. “The allegations of Lion Capital’s involvement in the conspiracy are underscored by Bumble Bee’s Plea agreement, which suggests that Lion Capital was not merely passively involved but had meaningful information to contribute to the then-ongoing investigation.”
Partially as a result of the criminal fine and civil penalties it faced as a result of its involvement in the price-fixing conspiracy, Bumble Bee filed for chapter 11 bankruptcy in November 2019 and was soon after purchased by FCF Co. for USD 925 million (EUR 836 million).
