Antitrust Law Daily Wrap Up, ANTITRUST—D. Me.: Labor union unable to halt supposedly anticompetitive sale of paper mill, (Jan 21, 2015)

By Greg Hammond, J.D.

A labor union and its members were unable to obtain a temporary restraining order (TRO) and preliminary injunction that would block an allegedly anticompetitive sale of a paper mill to an entity that does not intend to continue operating the mill. In denying the labor union’s motion for TRO and preliminary injunction, the federal district court in Bangor, Maine determined that although the labor union and its members had standing, they failed to demonstrate a likelihood of success on the merits of their antitrust claims (International Association of Machinists and Aerospace Workers, AFL-CIO, Local Lodge No. 1821 v. Verso Paper Corp., January 20, 2015, Woodcock, J.).

Background. As part of the Justice Department’s approval of a merger between Verso Paper Corp. and NewPage Holdings, Inc. for approximately $1.4 billion, Verso was required to divest certain paper mills to preserve competition for the provision of certain paper products. Around the same time, Verso closed its Bucksport, Maine paper mill, and agreed to sell the mill to AIM Development (USA) LLC—a leading metal recovery and recycling industry firm. International Association of Machinists and Aerospace Workers, AFL-CIO, Local Lodge No. 1821 (IAMAW) and its members filed suit against Verso, seeking a TRO and preliminary injunction to prevent Verso from selling the Bucksport mill to an entity that does not intend to continue operating the Bucksport mill as a paper mill. IAMAW alleged that Verso’s attempt to shut down the Bucksport mill and pending deal with AIM violates the Sherman and Clayton Acts, as well as Maine’s antitrust law, because it: 1. tends to create a monopoly; 2. creates a dangerous probability that Verso will achieve monopoly power and raise market prices, and constitutes a conspiracy to monopolize; and 3. constitutes concerted action in restraint of trade.

Standing. The court first determined whether IAMAW and its members had standing to bring their antitrust claims under federal and/or state law as consumers or indirect purchasers or as former employees and in connection with their status as consumers and suppliers of labor, and whether they could maintain their action for injunctive relief under Maine antitrust law.

First, the court concluded that the plaintiffs have standing as consumers or indirect purchasers, because they were not required to demonstrate actual injury, but only that a significant threat of injury existed. In this case, the plaintiffs alleged that buyers and downstream consumers of coated printing paper products will be injured because the deal will allegedly cause them to pay higher prices as a result of reduced productivity. However, the court found that the plaintiffs did not have standing to pursue injunctive relief on the basis of loss of employment under federal antitrust law, and they further could not seek injunctive relief under Maine’s antitrust laws, because only the state attorney general can seek injunctive relief.

Likelihood of success. To succeed on their motion for TRO or preliminary injunction, IAMAW was required to establish a likelihood of success on the merits of their Sherman Act and Clayton Act claims. The court first found that the plaintiffs failed to demonstrate that the effect of the acquisition would substantially lessen competition, or tend to create a monopoly, because nothing prevents AIM from selling the mill to a purchaser in the papermaking industry, and a fair reading of the evidence suggests that the merger would have occurred regardless of whether the mill shut down. Second, the attempted monopolization and conspiracy to monopolize claims failed, because: 1. the fact that the mill was shut down and sold below-market value does not—by itself—prove an attempt to monopolize, but could simply be an indicator of the market; 2. the plaintiffs’ reliance on a statement that Verso would not sell the mill to a competitor was unavailing, because it required the court to speculate; and 3. the plaintiffs conceded that a more accurate figure of Verso’s control in the North American market is somewhere between 35.8 percent and 38.2 percent, which is below the 50 percent substantial percentage mark.

In support of their restraint of trade claims, the plaintiffs argued: 1. Verso and NewPage are competitors and by joining forces they are attempting to reduce output by not offering the Mill for purchase to any other competitor; 2. Verso could not shut down the Bucksport mill without the written consent of NewPage; and 3. Verso and NewPage knew that reducing their market share by shutting down the Mill would improve their chances at gaining Justice Department approval, as demonstrated by NewPage agreeing to sell two of its paper mills. The court rejected these arguments, finding that the first two contentions are not supported by the record evidence, and the third contention is mere speculation. Because the plaintiffs failed to demonstrate a likelihood of success on the merits of any of their antitrust claims, the motion for TRO and preliminary injunction was denied.

The case number is 1:14-cv-00530-JAW.

Attorneys: Ishai Mooreville (Baker & Miller PLLC), Kimberly J. Ervin Tucker, and Dana F. Strout for International Association of Machinists and Aerospace Workers, AFL-CIO, Local Lodge No. 1821. Greta Louise Burkholder (Morgan, Lewis & Bockius LLP), David E. Barry (Pierce Atwood LLP), and David A. Strock (Fisher & Phillips, LLP) for Verso Paper Corp. Clifford Ruprecht (Roach Hewitt Ruprecht Sanchez & Bischoff, P.C.) for AIM Development USA, LLC.

Companies: International Association of Machinists and Aerospace Workers, AFL-CIO, Local Lodge No. 1821; Verso Paper Corp.; AIM Development USA, LLC

Cases: Antitrust AcquisitionsMergers MaineNews