Antitrust Law Daily Wrap Up, TOP STORY—8thCir: Equitable Estoppel Did Not Bar Retailers from Asserting Claims Against Grocery Wholesalers Based on Arbitration Agreements, (Feb 14, 2013)

By Jeffrey May, J.D.

In an antitrust action alleging that the two largest full-line grocery wholesalers—SuperValu, Inc. and C&S Wholesale Grocers, Inc.—conspired to allocate markets and customers, the wholesalers could not argue under the doctrine of equitable estoppel that complaining retailers were compelled to arbitrate their claims if they were non-signatories to the underlying arbitration agreement, a divided U.S. Court of Appeals in St. Louis has ruled. A district court's decision dismissing the retailers’ claims on the ground that equitable estoppel barred the retailers from bringing suit against the non-signatory wholesaler and allowing the non-signatory wholesaler to compel arbitration, was reversed (In re Wholesale Grocery Products Antitrust Litigation, February 13, 2013, Shepherd, B.).

Three complaining retailers had supply and arbitration agreements with SuperValu, and two had supply and arbitration agreements with C&S. The arbitration agreements accompanying the supply agreements generally specified that the signatories would arbitrate any disputes between them. In an effort to avoid arbitration, each retailer brought claims only against the wholesaler with whom they did not have a supply and arbitration agreement. Thus, the three retailers that did business only with SuperValu brought antitrust claims only against C&S. The other two, who had contracts and did business only with C&S, brought antitrust claims only against SuperValu.

The retailers alleged that an asset exchange agreement between C&S and SuperValu, in which they exchanged certain business assets, including some customer contracts, and agreed not to do business with or solicit any of the exchanged customers for a certain time period, violated the antitrust laws. They contended that the agreement artificially inflated prices and caused retailers to overpay for their wholesale grocery purchases.

The lower court dismissed these retailers' claims. It held that the non-signatory wholesaler could invoke equitable estoppel to compel the retailers to arbitrate their antitrust claims and that the arbitration agreements were enforceable. The retailers appealed.

The appellate court ruled that the retailers’ antitrust conspiracy claims did not “rely on” nor were they so "intertwined" with the agreement containing the arbitration clause that it would be unfair to allow the signatory to rely on the agreement in formulating its claims but to disavow availability of the arbitration clause of that same agreement. The claims did not involve violation of the terms of the contract, the face of the contract did not provide the basis for the alleged injuries, and there was no evidence that the contract anticipated the precise type of relationship giving rise to the claims.

The wholesalers had also argued they could enforce arbitration agreements as successors-in-interest because those agreements were exchanged as part of the asset exchange agreement. Since the district court did not address the successor-in-interest argument, it was to be considered on remand. An argument that the arbitration agreements were unenforceable for public policy reasons was also left to the district court if the district court were to find that SuperValu could enforce the arbitration agreement as a successor-in-interest.

Dissent

A dissenting opinion would have held that Minnesota equitable-estoppel law and the text of the arbitration agreements compelled arbitration. According to the dissent, the majority misread the arbitration agreement. The arbitration agreement was not tied solely to claims arising under a specific contract, in the dissent's view. Further, the majority purportedly incorrectly applied choice-of-law principles, thereby omitting an important component of equitable-estoppel doctrine in Minnesota.

The case is No. 11-3768.

Attorneys: W. Joseph Bruckner (Lockridge & Grindal) for King Cole Foods, Inc. Stephen P. Safranski (Robins, Kaplan, Miller & Ciresi, LLP) for SuperValu, Inc. Charles A. Loughlin (Baker Botts LLP) for C&S Wholesale Grocers, Inc.

Companies: C&S Wholesale Grocers, Inc.; SuperValu, Inc.

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