Antitrust Law Daily Wrap Up, ANTITRUST—S.D. Ga.: Philip Morris evades tobacco price fixing claims, (Mar 23, 2015)

By Greg Hammond, J.D.

Tobacco company Philip Morris USA, Inc. defeated allegations that it engaged in a conspiracy to fix the prices of tobacco. The federal district court in Waycross, Georgia granted the company’s motion to dismiss, finding that a complaining tobacco grower failed to adequately state a claim for price fixing under the Sherman Act (Rigby v. Philip Morris USA, Inc., March 19, 2015, Wood, L.).

Background. Plaintiff Julian Rigby is a tobacco grower and owner of the Georgia/Florida Tobacco Exchange. He brought claims for price fixing, breach of contract, fraud, promissory estoppel, attorney fees, and punitive damages against Philip Morris. Specifically, Rigby alleged that Philip Morris would enter into “Growers Contracts” with tobacco growers, in which Philip Morris would agree to purchase a certain amount of flue-cured tobacco at designated prices for particular grades. Each December or January, Philip Morris allegedly published “price sheets,” stating what price it would pay for certain grades of tobacco produced during the following crop season. Shortly after publishing price sheets for the 2009 crop season, however, Philip Morris allegedly lowered the prices it would pay for tobacco and transmitted new price sheets. Subsequently, the company purchased only about half of the tobacco that it represented it would buy before the crop season, Rigby asserted. Philip Morris moved to dismiss the claims.

Price fixing. Philip Morris argued that Rigby failed to adequately state a claim for price fixing and, alternatively, that even if a plausible claim exists, the claim is barred by the statute of limitations. The court agreed with Philip Morris’ first argument, finding that Rigby’s amended complaint, stripped of its conclusory allegations, only alleged the following factual allegations: (1) Philip Morris published a price sheet in early 2009; (2) the company later re-issued a price sheet with lower prices; and (3) the new prices were “in line” with those offered by Philip Morris’ competitor, Universal Leaf.

The court determined that having prices “in line” with a competitor is nothing more than parallel conduct, which cannot—on its own—support a showing of conspiracy. Because Rigby failed to plead enough attendant facts concerning the second price sheet for the court to find that the switch suggested a plausible conspiracy or merely reflected Philip Morris’ rational reaction to market forces, the motion to dismiss the price fixing claim was granted.

Remaining claims. The court also granted Philip Morris’ motion to dismiss with regard to the promissory estoppel claim, as it was barred under Georgia law. However, the motion was denied with regard to the claims for fraud, promissory estoppel, attorney fees, and punitive damages.

The case number is CV 513-110.

Attorneys: Brent J. Savage (Savage & Turner, PC) for Julian Rigby and Georgia/Florida Tobacco Exchange, Inc. Gregory G. Holland (Smith Moore Leatherwood, LLP) for Philip Morris USA, Inc.

Companies: Georgia/Florida Tobacco Exchange, Inc.; Philip Morris USA, Inc.

Cases: Antitrust GeorgiaNews