Antitrust Law Daily Wrap Up, ANTITRUST—1stCir: Boycott claims against packaging manufacturers revived, (Jun 20, 2013)

By Jeffrey May, J.D.

Evergreen Partnering Group, Inc. adequately alleged that polystyrene packaging producers and trade groups conspired to boycott Evergreen's recycling business method for polystyrene food service products, the U.S. Court of Appeals in Boston has ruled. Judgment dismissing the complaint was vacated, and the matter was remanded for further proceedings (Evergreen Partnering Group, Inc. v. Pactiv Corp., June 19, 2013, Torruella, J.).

The appellate court ruled that the lower court improperly applied a heightened pleading standard and improperly occupied a factfinder role. The lower court chose among plausible alternative theories in interpreting the defending manufacturers' conduct and adopted as true the defendants' allegation in weighing the plausibility of the parties’ theories.

The court explained the pleading requirements for alleging an antitrust conspiracy. Where no direct evidence of an agreement is alleged, a plaintiff must “allege the general contours of when an agreement was made, supporting those allegations with a context that tends to make said agreement plausible.”

The court, however, cautioned against “placing too much significance on the presence or absence of 'plus factors' at the pleadings stage.” The court went on to say that, at the motion to dismiss stage, “allegations contextualizing agreement need not make any unlawful agreement more likely than independent action nor need they rule out the possibility of independent action.”

“While each of Evergreen's allegations of circumstantial agreement standing alone may not be sufficient to imply agreement, taken together, they provide a sufficient basis to plausibly contextualize the agreement necessary for pleading a § 1 claim,” the court ruled.

Evergreen developed a business model to recycle polystyrene products by using a post-consumer polystyrene resin (PC-PSR) to create trademark products known as “Poly-Sty-Recycle.” Evergreen's Poly-Sty-Recycle was the first recycled polystyrene product to be “food-grade” as deemed by the Food and Drug Administration (FDA).

The complaint named five polystyrene producer defendants—Pactiv Corporation, Genpak, LLC, Dart Container Corporation, Dolco Packaging, and Solo Cup Company—that allegedly controlled about 90 percent of the market for single-service polystyrene food service packaging and tableware. It also named the American Chemistry Council (ACC), a trade association, and the Plastics Food Service Packaging Group (PFPG), a group within the ACC of which all five polystyrene producer defendants were members.

The producer defendants maintained that their products were non-recyclable because production of recyclable polystyrene was not economically feasible.

According to Evergreen, the defending producers were “comfortable with the status quo because each of them was dominant in its respective niche of the polystyrene industry.”

Evergreen contended that it developed its business method in 2002 to simultaneously reduce costs for institutional consumers and to provide an environmentally-friendly alternative to non-recyclable polystyrene. According to Evergreen, it had early successes in entering into a number of partnerships and business ventures, including agreements with school districts, which are among the most significant consumers of single-service food-grade polystyrene products. Evergreen alleged, however, that following a 2005-2006 PFPG meeting, the defendants entered into a conpsiracy to prevent other polystyrene food service product manufacturers from “embracing the recycling of polystyrene products, and thereby forcing Evergreen from the market.”

Evergreen alleged facts concerning when the agreement occurred and providing circumstantial evidence to establish a setting to make an agreement plausible, the court ruled. The “allegations describe[d] proactive destructive conduct, aimed directly at the success of Evergreen and polystyrene recycling generally, which is difficult to explain outside the context of a conspiracy.”

The complaint also provided allegations setting forth circumstantial evidence to establish a context for plausible agreement in the form of industry information and facilitating practices, the court explained.

Thus, Evergreen alleged sufficient facts to adequately plead its § 1 claim.

The case is No. 12-1730.

Attorneys: Maxwell M. Blecher (Blecher & Collins, P.C.) for Evergreen Partnering Group, Inc. Richard A. Sawin, Jr. (Michienzie & Sawin LLC) for Pactiv Corp.

Companies: Evergreen Partnering Group, Inc.; Pactiv Corp.; , Genpak, LLC; Dart Container Corp.; Dolco Packaging; Solo Cup Co.

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