Antitrust Law Daily Wrap Up, ANTITRUST—D. Minn.: Conspiracy claims against wholesale grocers proceed, (Mar 17, 2015)

By Greg Hammond, J.D.

Retail grocery store operators could proceed with claims that two wholesalers conspired to allocate customers and territories through a September 2003 Asset Exchange Agreement (AEA). The wholesalers’ motion to dismiss was denied by the federal district court in Minneapolis, which found that the successor-in-interest doctrine did not apply to the wholesalers, as non-signatories to certain arbitration agreements (In re Wholesale Grocery Products Antitrust Litigation, March 16, 2015, Montgomery, A.).

Background. Plaintiff retail grocery store operators purchased wholesale grocery products and related services directly from defendant wholesalers, SuperValue, Inc. and C&S Wholesale Grocers, Inc. They alleged that the defendants conspired to allocate customers and territories through an AEA and that the defendants used the allocations to charge retailers supra-competitive prices, in violation of the Sherman Act. Under the AEA, the defendants exchanged certain business assets, including supply and arbitration agreements that defendants had with retail grocers. However, in an alleged attempt to avoid arbitration, each retailer brought claims only against the wholesaler with whom they did not have a supply and arbitration agreement.

The case was on remand from the Eighth Circuit for further proceedings on whether the defendants may, under the successor-in-interest doctrine, enforce arbitration agreements that they have assigned.

Successor-in-interest. Under Minnesota law, arbitration clauses are contractual and generally cannot be enforced by individuals that are not parties to the contract. However, there are three exceptions to this rule: equitable estoppel, agency, and third-party beneficiary. The defendants allege that the “close relationship,” or agency, theory applies in this case, because SuperValue and C&S are successors-in-interest with regard to the supply and arbitration agreements they exchanged in the AEA. They argued that allowing the plaintiffs to avoid arbitration by pleading their antitrust claims against the assignor, rather than the assignee, of the arbitration agreements would render those agreements meaningless.

The court concluded that the relationship between the defendants is not based on agency or related principles, because the defendants are competitors, they do not control each other, and they do not rely on one another to act. Their relationship, rather, was one of assignor and assignee because each wholesaler assigned their rights to an arbitration agreement to the other. In addition, the court found that the successor-in-interest argument failed because the nonsignatory defendants are “predecessors-in-interest,” not successors-in-interest, to the arbitration agreements.

Direct enforcement. The defendants also argued that the plaintiffs’ claims could be arbitrable under a terminated agreement if they involve “facts and occurrences that arose before expiration … where, under normal principles of contract interpretation, the disputed contractual right survives expiration of the remainder of the agreement.” The court rejected this argument, however, because the arbitration agreements in this case were assigned, not terminated. Consequently, the issue was not whether the right to arbitrate survives, but who is entitled to assert that right. The court ultimately concluded that the defendants are not entitled to assert rights under arbitration agreements they voluntarily and unconditionally transferred. The motion to dismiss was therefore denied.

The case number is 09-MD-2090 ADM/TNL.

Attorneys: W. Joseph Bruckner (Lockridge Grindal Nauen PLLP), Richard B. Drubel (Boies, Schiller & Flexner LLP), Daniel A. Kotchen (Kotchen & Low LLP), and Edward T. Dangel III (Dangel Dwyer, LLC) for plaintiffs. Stephen P. Safranski (Robins Kaplan LLP) for SuperValue, Inc. Todd A. Wind (Fredrikson & Byron, PA) and Charles A. Loughlin (Baker Botts LLP) for C&S Wholesale Grocers, Inc.

Companies: SuperValue, Inc.; C&S Wholesale Grocers, Inc.; JFM, Inc.; MJF, Inc.; Millennium Operations, Inc.

Cases: Antitrust MinnesotaNews