Antitrust Law Daily Wrap Up, ANTITRUST—SDTex: Rancher Denied Right, Permission to Intervene in Suit Between Seller, Other Buyer of Pure-Bred Cattle, (Nov 2, 2012)

By E. Darius Sturmer, J.D.

A cattle rancher that produced Akaushi beef and also sold pure-bred Akaushi cattle was not entitled to intervene as a party-plaintiff in an antitrust suit brought against the self-proclaimed sole supplier of 100 % pure Akaushi cattle, beef, and semen by another buyer, the federal district court in Galveston, Texas, has ruled (Bear Ranch, LLC v. HeartBrand Beef, Inc., November 1, 2012, Costa, G). The motion to intervene, which was opposed both by the plaintiff and the defendants in the suit, was therefore denied.

The rancher seeking intervention, Twinwood Cattle Company, had both bought Akaushi cattle—a prized breed native to Japan whose meat “is renowned for its flavor, tenderness, and juiciness”—from defendant HeartBrand Beef, Inc., and sold some of that livestock to the plaintiff buyer, Bear Ranch, LLC. In seeking to intervene, however, Twinwood did not seek to have the purchaser obligations and restrictions within HeartBrand’s sales contracts invalidated as a violation of federal antitrust law, as the plaintiff Bear Ranch did. Rather, Twinwood requested only a declaratory judgment that the most favored nations clause in its own contract with HeartBrand entitled it to the same benefits that Bear Ranch had and would receive were it to prevail in its antitrust suit.

Twinwood had no right under Federal Rule of Civil Procedure 24(a)(2) to intervene in the suit, the court decided. Twinwood did not have a legally recognized interest in the property or transaction underlying the action. It did not allege any ownership interest in Bear Ranch’s cattle, and the contract between Bear Ranch and HeartBrand did not vest it with any rights. Instead, the sole interest was that the terms of its own contracts with HeartBrand would place it at a competitive disadvantage if it did not receive whatever benefits Bear Ranch already had or stood to gain from the disposition of the litigation. Thus, the relief Twinwood sought was not only purely economic, but also indirect and speculative.

Twinwood’s failure to satisfy Rule 24’s “direct, substantial, legally protectable interest” requirement was further demonstrated by its argument that the potential stare decisis implications of an adverse decision in Bear Ranch’s case established the requisite intent. “The potential precedential effects of a court ruling are the type of indirect economic interests that are insufficient to confer intervention as of right,” the court explained. Twinwood offered no support for the proposition that a party could intervene as a matter of right where a lawsuit might rule on the validity or interpretation of a contractual provision similar or identical to one binding the intervenor in a separate contract with one of the litigants.

Permissive intervention under Rule 24(b) also would have been inappropriate, the court determined, because Twinwood could not establish an independent basis for federal jurisdiction over its claim. As Twinwood also requested a declaration regarding its state-law contract claim, federal-question jurisdiction was missing. In addition, given that both Twinwood and Bear Ranch were citizens of Texas, diversity jurisdiction was similarly lacking.

Further, Twinwood was unable to demonstrate the presence of supplemental jurisdiction pursuant to 28 U.S.C. Sec. 1367(a)—which grants such jurisdiction over all other claims “so related” to those within a court’s original jurisdiction “that they form part of the same case or controversy”—because it could not show that its claim and the claims in the original action were derived from a common nucleus of operative fact. The nucleus of operative fact that gave rise to Bear Ranch’s claim, the court observed, consisted of the formation and performance of Bear Ranch’s contracts, as well as the allegedly illegal acts committed by the defendants. By contrast, the nucleus of fact underlying Twinwood’s claim consisted of the formation of the most favored nations clause contained in the Twinwood-HeartBrand contract. These were “different contracts between different parties entered into under different circumstances,” the court remarked. Thus, subject matter jurisdiction over Twinwood’s claim did not exist.

In closing, the court noted that even if Twinwood had met its jurisdictional prerequisite, the court would have still exercised its discretion to deny permissive intervention. Since the gravamen of Twinwood’s complaint was implicated only in the event that Bear Ranch prevailed on its claims, Twinwood’s intervention would not have produced the efficiency gains that justified intervention in the first place. Rather, Twinwood’s involvement would have only added a new chapter to the litigation raising distinct issues of contractual interpretation. Further, Twinwood suffered no prejudice from the denial of its intervention request. It remained free to file a separate suit to enforce a most favored nations clause after the resolution of the Bear Ranch-HeartBrand litigation.

The case is Civil Action No. 6-12-14.

Andrew R. Seger (McWhorter Cobb Johnson LLP) for Bear Ranch, LLC. James A. Reeder, Jr. (Vinson & Elkins LLP) for Heartbrand Beef, Inc.

Cases: Antitrust TexasNews