Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Discovery requests denied in private challenge to brewer merger, (Aug 28, 2013)

By Edward L. Puzzo, J.D.

Litigants bringing a private antitrust action against the now-consummated merger of two major breweries were not entitled to Hart-Scott-Rodino documents or the depositions of company executives at this time, a federal district court in San Francisco has ruled (Edstrom v. Anheuser-Busch InBev SA/NV, August 26, 2013, Cousins, N.).

In a private antitrust action, the plaintiffs challenged the merger of brewers Anheuser-Busch InBev and Grupo Modelo under Section 7 of the Clayton Act and Section 1 of the Sherman Act. ABI’s global brands include Budweiser, Bud Light, Stella Artois, and Beck’s. Modelo’s Corona Extra brand is the top-selling import in the United States.

A Department of Justice Antitrust Division challenge to the merger had already been resolved. In April 2013, the parties in Justice Department action reached a settlement under which the companies were permitted to merge as long as Modelo's entire U.S. business was divested to Constellation Brands Inc. or an alternative purchaser.

In the private action, the plaintiffs' motion for a temporary restraining order was denied. During the pendency of this litigation, the merger transaction closed, so the plaintiffs added a request for divestiture and damages to their complaint. Later, after filing a second amended complaint, the plaintiffs asked for preliminary relief compelling defendants to hold their assets separate and maintain the status quo.

Plaintiffs further moved to compel production of the documents defendants had provided to the Department of Justice under the Hart-Scott-Rodino Act during the government's review of the merger, and further moved to compel the depositions of the CEOs of the companies involved in the merger.

In analyzing the request, the court noted that Anheuser-Busch InBev was the largest brewer in the United States, with 49 percent of the American market, and that the documents plaintiffs were requesting totaled approximately 8 million pages, or 1.5 terabytes of date. The court cautioned that, before authorizing the potentially enormous cost of discovery, it first had to determine whether the plaintiffs' allegations reached the level of suggesting a plausible claim for relief; that is, in the words of the U.S. Supreme Court's Bell Atlantic v. Twombly case, it must "...insist on some specificity in pleading before allowing a potentially massive factual controversy to proceed."

The court noted that a case management conference was set for October in the case, with discovery to open in late September. The potential prejudice to the plaintiffs of not having these documents and depositions at this moment was slight, the court opined, whereas the potential prejudice to the defendants from compelled early discovery was more significant. It would involve review of confidential business documents which may never need to be produced at all, and preparation of the executives for depositions. Therefore, the court ruled, plaintiffs' motions to compel the documents and depositions at this time were denied.

The case is Civil Action No. 13-cv-01309 MMC (NC).

Attorneys: Derek G. Howard (Minami Tamaki LLP) for Steven Edstrom. Allen Ruby (Skadden Arps Slate Meagher & Flom, LLP) for Anheuser-Busch InBev SA/NV. James A. Keyte (Skadden, Arps, Slate, Meacher & Flom) for Grupo Modelo S.A.B. de C.V. Margaret H Warner (McDermott Will Emery LLP) for Constellation Brands, Inc.

Companies: Anheuser-Busch InBev SA/NV; Grupo Modelo S.A.B. de C.V. ; Constellation Brands, Inc.

Cases: Antitrust CaliforniaNews