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In re Mushroom Direct Purchaser Antitrust Litigation

United States District Court, E.D. Pennsylvania

February 22, 2017

IN RE MUSHROOM DIRECT PURCHASER ANTITRUST LITIGATION THIS DOCUMENT RELATES TO: ALL ACTIONS

          ORDER

          O'NEILL, J.

         On November 22, 2016, in conjunction with my decision to certify a class in this long-running antitrust litigation, I granted certain defendants'[1] motion seeking summary judgment with respect to the claims of plaintiff Diversified Foods and Seasonings, Inc. See Dkt. No. 779 at 30-37 (discussion of Diversified motion in class certification opinion), Dkt. No. 780 (class certification order), Dkt. No. 791 (redacted class certification opinion and order). A group of plaintiffs who identify themselves as the “Direct Purchaser Class Plaintiffs”[2] now seek reconsideration of that decision pursuant to Local Rule 7.1(g). Before me are: plaintiffs' motion for reconsideration of the Court's dismissal of class representative Diversified Foods & Seasonings, Inc. (Dkt. No. 787), certain defendants' opposition to the motion for reconsideration (Dkt. No. 799) and plaintiffs' reply (Dkt. No. 803).[3] As is further set forth below, I find that plaintiffs have not met their burden on reconsideration and I will deny their motion.

         STANDARD OF REVIEW

         Local Civil Rule 7.1(g) allows parties to file motions for reconsideration. E.D. Pa. Loc.

R. 7.1(g). On a motion for reconsideration, a judgment may be altered or amended if the party seeking reconsideration shows at least one of the following grounds: (1) an intervening change in the controlling law; (2) the availability of new evidence that was not available when the court granted the motion for summary judgment; or (3) the need to correct a clear error of law or fact or to prevent manifest injustice.

Max's Seafood Cafe v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999), citing Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985). “[T]he burden is on the movant . . . .” Egervary v. Rooney, 80 F.Supp.2d 491, 506 (E.D. Pa. 2000) (citation omitted). A finding of clear error requires a “‘definite and firm conviction that a mistake has been committed.'” Johnson v. SmithKline Beecham Corp., 724 F.3d 337, 345 (3d Cir. 2013), quoting Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 855 (1982). “[A] motion for reconsideration addresses only factual and legal matters that the Court may have overlooked. [It is improper] to ‘ask the Court to rethink what [it] had already thought through - rightly or wrongly.'” Glendon Energy Co. v. Borough of Glendon, 836 F.Supp. 1109, 1122 (E.D. Pa. 1993) (citation omitted). “Because of the interest in finality . . . courts should grant motions for reconsideration sparingly.” Rottmund v. Cont'l Assurance Co., 813 F.Supp. 1104, 1107 (E.D. Pa. 1992).

         DISCUSSION[4]

          When I granted summary judgment in favor of certain defendants with respect to Diversified's claims, I found that plaintiffs had “not established that a genuine dispute remains with respect to the question of whether Diversified has antitrust standing under Illinois Brick.”[5]Dkt. No. 779 at 36. Pursuant to Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), there is a “general rule that only direct purchasers from antitrust violators may recover damages in antitrust suits.” Howard Hess Dental Labs., Inc. v. Dentsply Intern., Inc. (Hess I), 424 F.3d 363, 369 (3d Cir. 2005); see McCarthy v. Recordex Serv., Inc., 80 F.3d 842, 847-48 (3d Cir. 1996) (“[T]he [Illinois Brick] Court . . . enunciat[ed] a bright-line rule that only the purchaser immediately downstream from the alleged monopolist may bring an antitrust action . . . .”). “Illinois Brick's direct purchaser rule seeks to counteract ‘the difficulty of analyzing pricing decisions, the risk of multiple liability for defendants, and the weakening of private antitrust enforcement that might result from splitting damages for overcharges among direct and indirect purchasers.'” Wallach v. Eaton Corp., 837 F.3d 356, 365 (3d Cir. 2016), quoting Gulfstream III Assocs. v. Gulfstream Aerospace Corp., 995 F.2d 425, 439 (3d Cir. 1993) (Greenberg, J., concurring and speaking for the majority). In the Third Circuit, indirect or secondary purchasers may still sue under the antitrust laws if they can establish one of three possible exceptions to the Illinois Brick direct purchaser rule: (1) a “cost-plus” exception, which is not relevant here, (2) a “co-conspirator” exception and (3) an “owned or controlled” exception. See In re: Domestic Drywall Antitrust Litig., No. 13-2437, 2016 WL 3769680, at *4 (E.D. Pa. July 13, 2016), citing Merican, Inc. v. Caterpillar Tractor Co., 713 F.2d 958, 968 n.22 (3d Cir. 1983) and Howard Hess Dental Labs, Inc. v. Dentsply Int'l, Inc. (Hess II), 602 F.3d 237, 258-59 (3d Cir. 2010).

         On summary judgment, certain defendants argued that Diversified was “an indirect purchaser, rather than a direct purchaser of fresh agaricus mushrooms, having purchased all of its fresh agaricus mushrooms from one or more distributors of Defendant Southmill Mushroom Sales, Inc ..... ” Dkt. No. 441 at 10; see also id. at 24-25 (“Diversified purchased all of its fresh agaricus mushrooms from . . . South Mill of New Orleans.”). Plaintiffs responded that “[b]ecause Diversified was the first purchaser to purchase at a price fixed by the EMMC, its claims do not involve any proof of passed-on damages of the kind barred by Illinois Brick.” Dkt. No. 457 at 12. I held that I was “not persuaded that Illinois Brick does not apply to bar Diversified's claims simply because the EMMC fixed mushroom distribution prices instead of the prices for mushrooms sold by growers to distributors, ” Dkt. No. 779 at 31, and thus continued to consider whether any of the relevant exceptions to the Illinois Brick rule would permit Diversified's claims to proceed. I found that Diversified could not rely on the co-conspirator exception because South Mill of New Orleans is not named as a defendant in this litigation. Dkt. No. 779 at 32. I also found that “[o]n the record before me, a reasonable jury could not find that the owns or controls exception to Illinois Brick should apply to permit Diversified's claims to proceed, ” id. at 36, citing my previous determination that “Kaolin/South Mill and its distribution entities are separate decisionmakers pursuing separate economic interests as is evidenced by [a] suit between them, ” In re Mushroom, 54 F.Supp.3d 382, 389 (E.D. Pa. 2014); see Dkt. No. 441 at 25.

         On reconsideration, plaintiffs argue that “[b]ecause of the cursory briefing that the Illinois Brick issue received, [they] believe that the Court may have overlooked key Third Circuit precedent . . . .” Dkt. No. 797-1 at ECF p. 7. Specifically, plaintiffs argue that in dismissing Diversified's claim, the Court did not consider In re Lower Lake Erie Iron Ore Antitrust Litigation, 998 F.2d 1144 (3d Cir. 1993) or In re Modafinil Antitrust Litigation, 837 F.3d 238 (3d Cir. 2016). Dkt. No. 787-1 at ECF p. 4. Plaintiffs argue that Lower Lake Erie and Modafinil “make clear that when defendants' conduct limits the supply of goods or services to the market . . . the market participants that are most directly impacted by the conduct have a right to sue for damages even if they can be characterized as indirect purchasers.” Dkt. No. 787-1 at ECF p. 7. They also argue that Lower Lake Erie and Modafinil support “their argument that Illinois Brick does not operate to bar non-pass on damage theories.” Dkt. No. 787-1 at ECF p. 7.

         Certain defendants respond that they “and other defendants have raised Illinois Brick on numerous occasions, ” Dkt. No. 799 at ECF p. 8, and “that Plaintiffs have had multiple opportunities over the years to raise their arguments, ” leaving “the Court . . . well within its discretion to refuse Plaintiffs one more bite at the apple.” Id. at 9 (internal quotation omitted). They note that plaintiffs never previously cited either Lower Lake Erie, or Modafinil[6] to the Court and contend that neither decision “provides any reason to question the Court's decision” to grant summary judgment in their favor with respect to Diversified's claims. Dkt. No. 799 at ECF p. 5-6. They also argue that the Court's prior “analysis was in keeping with Third Circuit precedent declaring that Illinois Brick must be applied by looking to the ‘economic substance' or the ‘mechanics of the transactions' between the upstream and downstream entities.” Id. at ECF p. 6, citing Warren Gen. Hosp. v. Amgen, Inc., 643 F.3d 77, 88 (3d Cir. 2011).

         Even if I were to decide to “reconsider” an argument which was not squarely before me when I rendered my prior decision, neither Lower Lake Erie nor Modafinil persuade me that Diversified should be permitted to proceed with its claims in this litigation. Plaintiffs argue that Lower Lake Erie and Modafinil stand for the proposition that “the key question under the direct purchaser rule is who ‘bore the brunt of the increased costs.'” Dkt. No. 787-1 at ECF p. 9. They argue that the Court of Appeals has held that Illinois Brick does not “announc[e] a strict prohibition against recovery by indirect purchasers.” Dkt. No. 778-1 at ECF p. 8, quoting Lower Lake Erie, 998 F.2d at 1167 n.21. Plaintiffs contend that Lower Lake Erie and Modafinil show that “Illinois Brick is not about the nature of the distributors' ‘affiliations' [with the growers], ” but rather is “about the nature of the plaintiffs' damage claims and the party most directly injured by defendants' conduct.” Dkt. No. 787-1 at ECF p. 8. Plaintiffs argue that Diversified has antitrust standing because it “paid the fixed price set by the EMMC” and because “[n]o other entity in the distribution chain was more directly injured by the EMMC's conduct.” Dkt. No. 787-1 at ECF p. 10. In response, certain defendants argue that the “‘most directly injured' test . . . contradicts a wealth of Third Circuit case law consistently applying Illinois Brick as a bright line test that looks to the nature of the upstream transactions, not the downstream effect on the plaintiff.” Dkt. No. 799 at ECF p. 12. They argue that “Lower Lake Erie cannot be interpreted as an end-run around Illinois Brick's bright line rule.” Id. at ECF p. 10. Certain defendants also argue that Modafinil does not apply here because “it was not a price-fixing or a supply reduction case, but a ‘market exclusion' case.” Id. at ECF p. 14. For the following reasons I agree with certain defendants that neither of the cases cited by plaintiffs warrant reconsideration of my prior decision.

         As the Court of Appeals explained in Merican, Inc. v. Caterpillar Tractor Co., “[t]he issue [under Illinois Brick] is not whether Appellees have sustained injuries too remote to give them standing or whether they are they are the direct targets of an alleged conspiracy, but rather whether they are in the class of persons considered to be injured in their business or property under section 4 [of the Clayton Act] by an antitrust violation.” 713 F.2d 958, 966 (3d Cir. 1983). Under Illinois Brick, “a district court must focus on the possibility of duplicative recovery and the potential for overly-complex damage claims if a damage suit is allowed.” Id. In Kansas v. UtiliCorp United, Inc., the Supreme Court explained that

[t]he rationales underlying Hanover Shoe and Illinois Brick will not apply with equal force in all cases. We nonetheless believe that ample justification exists for our stated decision not to ‘carve out exceptions to the [direct purchaser] rule for particular types of markets.' . . . The possibility of allowing an ...

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