Antitrust Law Daily Wrap Up, ANTITRUST—D. Ida.: Rule of reason applies to Kansas antitrust law counterclaim in potato price fixing litigation, (Jul 10, 2015)

By Linda O’Brien, J.D., LL.M.

In a class action by purchasers of potatoes against potato producers and a distributor for engaging in a conspiracy to fix prices, the rule of reason standard applies to a counterclaim, brought under Kansas antitrust law and filed by the defendant distributor against one of the purchasers, the federal district court in Boise has decided (In re Fresh and Process Potatoes Antitrust Litigation, July 8, 2015, Winmill, B.).

In April 2013, Wholesaler Associated Wholesale Grocers (AWG) and other direct purchasers of potatoes filed suit against several potato producers and a distributor, alleging a conspiracy by the defendants to reduce the supply of potatoes in order to raise prices, in violation of the Sherman Act and Kansas Restraint of Trade Act (KRTA). Specifically, the plaintiffs alleged that the producers formed cooperatives for the purpose of increasing the price of potatoes through supply management. Distributor Potandon Produce LLC filed a counterclaim under the KRTA against AWG. Before the court was the issue of whether the per se or rule of reason standard would apply to Potandon’s counterclaim.

The court found that the rule of reason standard applied to the counterclaim. Section 50-164 of the Kansas statutes provides that the rule of reason standard will apply in KRTA cases except causes of action pending before the statute’s effective date. AWG’s claim against Potandon and Potandon’s counterclaim against AWG are separate causes of action filed at different times. AWG’s claim had been filed before the legislation on retroactive application was enacted; thus, the rule of reason standard does not apply. However, Potandon’s counterclaim was not pending when the legislation was enacted; therefore, the rule of reason standard does apply.

Moreover, the application of the law does not cause a due process violation for Potandon. The court noted that whether a plaintiff has a vested right is primarily determined if the plaintiff has taken action to avail itself of that right. In this case, Potandon had no vested right prior to asserting its counterclaim. It had only an expectation that the per se standard would govern a lawsuit under the KRTA. There was no constitutional due process violation, since that expectation was not fulfilled.

Finally, under the three-factor test set forth in Resolution Trust Corp. v. Williams, 887 F.Supp. 1415 (1995), there was no due process violation. First, the application of a different evidentiary standard than the one that was expected did not affect a substantive legal right. Second, the retroactive amendment to the statute did not eliminate the counterclaim, since the counterclaim was likely to fail on the merits of the case, not the evidentiary standard. Third, by clarifying the applicable evidentiary standard to be applied to KRTA claims, the state legislature aligned the statute with federal law. Creating exceptions for any business actions taken before the amendment took effect would defeat the legislative purpose and the public interest in a uniform application of the law prospectively, the court concluded.

The case is No. 4:10-md-02186-BLW.

Attorneys: Aaron M. Sheanin (Pearson, Simon, Warshaw & Penny, LLP) for Brigiotta's Farmland Produce and Garden Center, Inc. Gregory P. Hansel (Preti Flaherty Beliveau & Pachios, LLP) for J R Mazzola, Inc. Daniel E. Williams (Thomas Williams & Park LLP) for Taul LLC. James J. Pizzirusso (Hausfeld LLP) for Direct Purchaser Plaintiffs. Steve Six (Stueve Siegel Hanson) for Associated Wholesale Grocers, Inc. Susan G. Kupfer (Glancy Prongay & Murray LLP) for Indirect Purchaser Plaintiffs. Amanda K. Brailsford (Andersen Banducci PLLC) for United Potato Growers of Idaho, Inc., United Potato Growers of America, Inc., United II Potato Growers of Idaho, Inc., Wada Farms Potatoes, Inc., and Wada-Van Orden Potatoes, Inc.

Companies: Brigiotta's Farmland Produce and Garden Center, Inc.; J R Mazzola, Inc.; Taul LLC; Associated Wholesale Grocers, Inc.; United Potato Growers of Idaho, Inc.; United Potato Growers of America, Inc.; United II Potato Growers of Idaho, Inc.; Wada Farms Potatoes, Inc.; Wada-Van Orden Potatoes, Inc.

Cases: Antitrust IdahoNews