Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Seafood processor charged with conspiring to fix prices for Bluefin tuna, (Jan 5, 2015)

By Linda O’Brien, J.D., LL.M.

A seafood processor and a lending institution engaged in a conspiracy to restrain trade and fix prices for Bluefin tuna by acquiring the credit agreement and mortgages of a defaulting competitor in foreclosure and refusing to accept full payment of debt or the release of the competitor’s seized fishing vessels, according to a complaint filed in the federal district court of New York City (Maricultura del Norte, S. de R.L. de C.V. v. WorldBusiness Capital, Inc., December 29, 2014).

Maricultura del Norte, S. de R.L. de C.V. (Marnor) is a Mexican company engaged in fish farming and fishing operations off the coast of Baja California, Mexico. Servax Bleu, S. de R.L. de C.V. is a Mexican company engaged in extended-cycle fish farming and export operations. U.S. commercial finance company WorldBusiness Capital, Inc. (WBC) specializes in loans to foreign businesses engaged in international trade.

The complaint alleges that Marnor began farming Bluefin tuna in 1990. Its operations require the company to locate, catch, and tow Bluefin tuna to farm sites, operated by Servax, using highly specialized processes and techniques. Until 2012, Marnor’s exports focused exclusively on Japan. In 2012, Marnor and Servax, an affiliate of agricultural processor Grupo Altex, formed a joint venture to increase production and exports to the United States. Bluefin tuna capture operations are regulated by international standards that are set seasonally to preserve the species. Since forming the joint venture, Marnor and Servax have been responsible for 50 percent of the Mexican exports of Bluefin tuna to the United States. Marnor’s leading competitor, Umami Sustainable Seafood, Inc., exports the remaining 50 percent.

As part of the underwriting process for the joint venture, Servax contacted Amerra Capital Management, LLC to obtain a financing proposal and, relying on express assurances of confidentiality, provided Amerrra with detailed confidential legal, corporate, and marketing information regarding the joint venture. Although Servax considered the proposal, the company ultimately declined Amerra’s offer to finance the joint venture, the complaint states.

According to the complaint, Marnor entered into a credit agreement in 2005 with WBC in order to expand and operate its fish farming business. The loan was guaranteed by the Overseas Private Investment Corporation (OPIC), the U.S. government’s development finance institution, and secured by mortgages on Marnor’s vessels. Although Marnor continued to pay interest on the loan, it was in default under the agreement, owing WBC $5.2 million in principal. The joint venture with Servax was intended to provide Marnor the financial resources to pay off the loan from WBC.

Although Marnor advised WBC that the resolution of its default was a material term of the joint venture agreement, WBC initiated foreclosure proceedings in August 2012 to recover the debt. Under Mexican procedural rules, a Mexican court ordered the seizure of Marnor’s vessels for the duration of the proceedings. Under the credit agreement, WBC exercised absolute control over Marnor’s business, and refused to allow Marnor to operate its Bluefin tuna operation or engage in discussions with Marnor or Servax to cure the default. Moreover, despite acknowledging that Marnor has the right to repay the loan, WBC has refused to provide Marnor with a statement of its account, the complaint alleges.

In February 2013, WBC assigned the credit agreement and mortgages to Umami. WBC had actual or constructive knowledge that Umami competed directly with Marnor in its seafood operations and that the assignment would facilitate Umami’s ability to oust Marnor and Servax from the market. As part of an anticompetitive strategy, Umami had entered into a credit agreement with Amerra and received the confidential corporate, financial, and marketing information which Servax supplied to Amerra in the course of seeking proposed financing for its joint venture with Marnor. Amerra increased Umami’s line of credit in order to fund Umami’s acquisition of WBC’s rights and causes of action against Marnor, the complaint states.

The plan between Amerra and Umami allegedly had a goal of increasing the prices paid for Bluefin tuna and increasing the value of Amerra’s investment in Umami. Moreover, the increased line of credit was made pursuant to an illegal conspiracy in restraint of trade between Amerra and Umami for the purpose of gaining control over the price of Bluefin tuna by insulating Umami from competition by Marnor and Servax, the plaintiff claimed. Even though Marnor is willing to pay the entire balance of the debt in order to release its vessels, Umami has refused to accept payment under any circumstances. Furthermore, Umami has allowed most of the vessels to deteriorate, many to the point of obsolescence.

The plaintiffs assert claims for breach of contract, breach of the covenant of good faith and fair dealing, breach of confidentiality, tortious interference with contractual relations and/or prospective economic advantage, conversion, breach of fiduciary duty, fraudulent concealment, fraud, and violations of Section 1 of the Sherman Act. The action seeks declaratory relief, damages, pre- and post-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 1:14-cv-10143-CM.

Attorneys: Jacob C. Cohn and Ilan Rosenberg (Gordon & Ree LLP) and Peter Kohn (Faruqi & Faruqi, LLP) for Maricultura del Norte, S. de R.L. de C.V. and Servax Bleu, S. de R.L. de C.V.,

Companies: Maricultura del Norte, S. de R.L. de C.V.; Servax Bleu, S. de R.L. de C.V.; WorldBusiness Capital, Inc.; Overseas Private Investment Corporation; Umami Sustainable Seafood, Inc.; Amerra Capital Management, LLC

News: Antitrust NewYorkNews