Antitrust Law Daily Wrap Up, TOP STORY—D. Del.: U.S. Sugar’s motion to transfer Clayton Act lawsuit denied, (Jan 12, 2022)

By Thomas K. Lauletta, J.D.

The government’s choice to litigate its Clayton Act challenge to U.S. Sugar’s proposed acquisition of a competitor in the U.S. district court in Delaware outweighed the defendant’s objections to this forum.

The federal district court in Wilmington, Delaware, denied a motion by defendant U.S. Sugar Co ...

By Thomas K. Lauletta, J.D.

The government’s choice to litigate its Clayton Act challenge to U.S. Sugar’s proposed acquisition of a competitor in the U.S. district court in Delaware outweighed the defendant’s objections to this forum.

The federal district court in Wilmington, Delaware, denied a motion by defendant U.S. Sugar Corporation to transfer the government’s Clayton Act challenge from the district court in Delaware to a district court in Georgia. Accordingly, the government’s action to block U.S. Sugar’s proposed merger with competitor Imperial Sugar could proceed in the Delaware district court. In so ruling, the court noted that, as the plaintiff, the government’s choice of the forum in which to litigate was paramount and was not overruled by the court’s analysis of the twelve factors for determining proper venue under the Jumara v. State Farm Ins. Co. decision (U.S. v. U.S. Sugar Corp., January 11, 2022, Noreika, M.).

The United States Sugar Corporation (“U.S. Sugar”) processes sugarcane grown by its farmers and sells that refined sugar through a member-owned agricultural cooperative (United Sugars). U.S. Sugar is a Delaware corporation with its principal place of business in Florida. The sugar processed by U.S. Sugar is sold and distributed in many states on the East coast of the United States, including Delaware.

Imperial Sugar, a Texas company with offices in Port Wentworth, Georgia and Sugar Land, Texas is a direct competitor to U.S. Sugar. On March 24, 2021, U.S. Sugar agreed to acquire all of Imperial Sugar’s assets – including the Port Wentworth facility. With U.S. Sugar’s acquisition of Imperial Sugar, only two major sugar producers (U. S. Sugar and Domino) would control about 75% of the sugar sales in the Southeastern United States.

On November 23, 2021, the federal government announced the filing of an antitrust complaint, under Section 7 of the Clayton Act, seeking to prevent U.S. Sugar from acquiring Imperial Sugar. The defendants are U.S. Sugar, United Sugars, Imperial Sugar and its owner Louis Dreyfus, a Delaware limited liability company. On December 3, 2021, the defendants filed a motion to transfer the government’s action to the Southern District of Georgia, where Imperial Sugar’s Port Wentworth refinery is located. The court utilized the twelve-factor criteria of Jumara v. State Farm Ins. Co. to determine whether transfer of venue should be granted under 28 U.S.C. 1404(a). The court analyzed each of the Jumara factors and denied a transfer of venue.

Plaintiff’s forum preference. The court noted that the plaintiff’s choice of forum is given paramount consideration and will not be overturned without strong reasons for doing so. The defendants argued that Delaware was “a forum far from the center of the alleged ‘acute harm’” and that the district court in Georgia, was a venue much closer to the focus of this case because Imperial Sugar’s main asset is located is located in Georgia.

The court rejected the defendants’ argument, noting that there were sound reasons for the government’s choice of the Delaware venue. First, the proposed acquisition of Imperial Sugar by U.S. Sugar is a transaction between two companies incorporated in Delaware – U.S. Sugar and Louis Dreyfus. Second, because United Sugars and Imperial Sugars are the two largest sugar sellers in Delaware, the proposed acquisition would result in United Sugars controlling most sugar sales in Delaware if allowed to proceed. Further, the court noted that the government’s Antitrust Division is headquartered in Washington, D.C., and Delaware is apparently the closest forum where venue and personal jurisdiction are proper for all the defendants. Accordingly, this factor weighs heavily in favor of the government’s choice of venue.

Defendant’s forum preference. As stated in their motion to transfer venue, this factor favors the defendant’s choice of venue.

Whether the claims arose elsewhere. To decide this question, the court evaluated when the proposed acquisition was negotiated, drafted, and executed. The Court stated that it could not determine that the claim arose in the Southern District of Georgia, which was the defendants’ preferred forum. The negotiations primarily occurred in Florida and New York – not Georgia or Delaware – and there is no evidence indicating where the agreement was drafted or executed. Similarly, none of the defendants have Georgia as its principal place of business. The court concluded that this factor was largely neutral.

Convenience of the parties. The defendants argued that the Southern District of Georgia is more convenient for them because none of the defendants has employees in Delaware, while Georgia has Imperial Sugar’s Port Wentworth’s facility and Georgia is closer to U.S. Sugar’s headquarters in Florida. The court rejected this argument, stating that although the Georgia venue may be more convenient for one out of several defendants, this did not mean that this factor favored transfer, particularly were all of the defendants had more than adequate financial resources to litigate in either forum. Further, the fact that defendants U.S Sugar and Louis Dreyfus are incorporated in Delaware undermined their argument that Delaware would be an inconvenient forum for them. Accordingly, the court ruled that this Jumara factor was neutral.

Convenience of the witnesses. Although the defendants stated that they intended to call witnesses from Georgia-area sugar companies to testify, the court noted that the defendants offered no evidence that Georgia would be more convenient than Delaware for any of them. Conversely, the government failed to offer evidence that customers in Delaware, Maryland, Virginia, and West Virginia would be relevant witnesses, and trial in Delaware would be more convenient for them. Accordingly, the court could not conclude that one forum would be more convenient that the other and ruled that this factor was neutral.

Location of books and records. The Jumara decision states that weight should be given to the location of books and records necessary to the case only “to the extent that the files [and other evidence] could not be produced in the alternative forum.” The defendants argued that all of their relevant books and records were in Georgia, Florida, and Texas. Even though that the current state of technology in litigation allows the production of documentary evidence electronically, the court concluded that this Jumara factor favored transfer, but only slightly.

Enforceability of judgment. This factor was neutral because judgments made by either of the proposed fora would be equally enforceable.

Practical considerations. The Jumara decision provides that a court must consider “practical considerations that could make the trial easy, expeditious, or inexpensive.” Here, the court held this factor was neutral because it could not conclude that there would be a broader public benefit to trial in the trial proceeding in Delaware or in Georgia.

Relative administrative difficulty/court congestion. The court held that this factor was neutral. Although there are differences between the Delaware and the Southern District Court in Georgia in length of time between filing and trial, these differences are moot in light of the fact that the Delaware court has set the time for trail of the case in April 2022 and that it is unknown when the fact would be tried if transferred to the Georgia district court.

Local interest to decide local controversies. The defendants stated that Imperial Sugar employs roughly 400 workers at its Port Wentworth, Georgia facility who would be directly affected by the proposed acquisition. Because of this, it argued that the case will most directly affect the Georgia District, the state, and the surrounding area. Allowing that proposed acquisition would affect a sugar refinery in Georgia, the court concluded that the case dealt with issues that went beyond Georgia. If U.S. Sugar were to acquire Imperial Sugar, there appears to be a real risk that reduced competition (and resulting economic harm) will follow in several East Coast states, including Delaware. Accordingly, the court held this factor to be neutral.

Public policies of each forum. The court held that this factor weighed against transfer, but only slightly, because several of the defendants are Delaware corporations and public policy encourages Delaware corporations to resolve disputes in Delaware courts. No similar argument was made for the Southern District of Georgia because no party is a Georgia company or a company with its principal place of business in Georgia.

Familiarity of the trial judge with the applicable state law in diversity cases. Both parties agreed that this factor was neutral because the claims brought by the government arise under federal antitrust laws and the familiarity of the respective districts with state law is not applicable.

Court action. The court denied the defendants’ motion to transfer venue, concluding that they failed to meet the burden of showing that the Jumara factors weighed strongly in favor of transfer. Eight of these factors were neutral; two factors weighed in favor of transfer (with one favoring transfer only slightly). Two factors weighed against transfer, including the government’s choice of forum, which is given paramount consideration.

The case is No. 1:21-cv-01644-MN.

Attorneys: Laura D. Hatcher, U.S. Attorney's Office, for the U.S. Brian P. Egan (Morris, Nichols, Arsht & Tunnell LLP) for U.S. Sugar Corp. Kelly E. Farnan (Richards, Layton & Finger, PA) for Imperial Sugar Co.

Companies: U.S. Sugar Corp.; Imperial Sugar Co.

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